2019 (12) TMI 1307 - AT - Income Tax

Penalty levied u/s 271A - absence of maintenance of books of accounts as prescribed u/s.44AA - Whether CIT(A) has erred in confirming the penalty levied u/s.271A by the AO without rejecting the books of accounts of the assessee u/s.145(3) ? - HELD THAT - On perusal of the penalty order dated 30.09.2016 for the assessment year 2013-2014 the AO has mentioned that the Auditor in the Audit Report has certified in Form 3CD that the assessee maintains various books of account viz. cash book ledger. In the assessment order also the AO noted that the authorised representative of the assessee appeared and produced audit report copy of acknowledgement of e-Return filed copies of bank account details Vakalatanama copy of Service Tax Return. Only dispute raised by both the authorities below that the assessee has not produced books of account whereas the AO has himself admitted that the return of income filed was accompanied by audit report and other documents. The assessee has produced the tax audit report which has been accepted by the AO. The auditor has also certified that the various books have been maintained. The revenue has not brought any cogent material on record so as to establish that the assessee has not maintained books and such documents as required u/s.44AA of the Act or the rules made thereunder. Therefore the penalty levied u/s.271A for both the assessment years under consideration cannot be sustained on the facts and circumstances of the present case. On further perusal of the assessment as well as appellate order we find that both the authorities below have only pointed out that the assessee has failed to produce books of accounts before the AO. In this regard the assessee has explained with reasonable cause for non-production of the same before the AO stating accountant of the assessee was asked about the books of account. The accountant replied that the books of account are with the auditor but when the assessee inquired with the auditor about the books of account the auditor replied that it was returned back immediately after the audit was over. As the books of account are misplaced and are not traceable at present it is difficult on the part of the assessee to produce the books of account. For this reason also the assessee gets immunity from the provisions of Section 273B - CIT(A) was not justified in sustaining the penalty imposed by the AO under Section 271A - Decided in favour of assessee.

Summary

Issues involved:
Confirmation of penalty levied u/s.271A of the Act for the assessment years 2012-2013 & 2013-2014.

Analysis:

Issue 1: Confirmation of Penalty under Section 271A of the Act
The primary contention in the appeals was the confirmation of the penalty levied under section 271A of the Act for both assessment years. The Assessing Officer (AO) had estimated the total income of the assessee due to the absence of filed books of account. The penalty proceedings were initiated under section 271A, and the penalty was imposed accordingly. The CIT(A) dismissed the appeals, upholding the penalty, stating that without maintaining books of accounts as per section 44AA of the Act, accurate income computation was not possible. The assessee argued that it had submitted bank accounts, work bill statements, and other ledger accounts for income determination. The assessee also contended that specific books of account for contract work business were not prescribed under section 44AA of the Act. The Income Tax Appellate Tribunal examined the arguments and documents presented by both sides. The Tribunal noted that the AO and CIT(A) emphasized the non-production of books of accounts by the assessee. However, the Tribunal observed that the assessee had provided the tax audit report, accepted by the AO, certifying the maintenance of various books of account. The revenue failed to establish that the assessee did not maintain required books of account under section 44AA of the Act. Consequently, the penalty under section 271A for both assessment years was deemed unsustainable in the absence of concrete evidence against the maintenance of books of account.

Issue 2: Failure to Produce Books of Accounts
The authorities below highlighted the failure of the assessee to produce books of accounts before the AO. However, the assessee explained the reasonable cause for non-production, stating that the books were with the auditor and were returned after the audit. The Tribunal considered this explanation as valid, providing the assessee immunity under Section 273B of the Act. The Tribunal concluded that the CIT(A) was unjustified in upholding the penalty under section 271A for both assessment years, given the circumstances and explanations provided by the assessee. Consequently, the Tribunal set aside the CIT(A)'s order and canceled the penalty imposed for the assessment years 2012-2013 & 2013-2014.

In conclusion, the Income Tax Appellate Tribunal allowed both appeals of the assessee, emphasizing the importance of maintaining books of accounts under the Income-tax Act and ruling in favor of the assessee based on the presented evidence and explanations.

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