2014 (11) TMI 1264 - AT - Income Tax

Penalty u/s 271B - not maintaining the books of account in respect of investments made - sales of Future and Options had been made by the assessee, which were business receipts but not included and shown by the assessee and no tax audit report had been submitted by the assessee of these business receipts - default u/s 44AB - HELD THAT - As per section 44AB the assessee is required to get his accounts audited if the particular criteria as prescribed in the section is fulfilled. Once the accounts are audited u/s 44AB, in any view of the matter, merely because a particular item of income has not been included in the said tax audit report, it cannot be held that there was default of not getting the accounts audited. In the present case, admittedly the assessee did not claim loss on share transactions in its return of income on account of bona fide belief that the transactions with India Bulls Securities Ltd. were investment transactions. The assessee was under bona fide belief that it was not in share trading business because his main business was advertising etc., as is evident from the tax audit report. Under such circumstances, we are of the opinion that the penalty is not exigible in the present set of facts. Accordingly, we cancel the penalty levied u/s 271B. - Decided in favour of assessee.

Summary

Issues:
Penalty imposed under section 271B of the I.T. Act, 1961 for non-disclosure of transactions in the return of income.

Analysis:

1. The appeal was filed against the order confirming a penalty of Rs. 1,00,000/- imposed by the Assessing Officer (AO) under section 271B of the I.T. Act, 1961 for the assessment year 2007-08. The AO observed that the assessee, engaged in wall painting, banners, hoarding business, and share trading, did not disclose certain transactions in the return of income based on information received from AIR. The transactions included contractual receipts, payments to CITI Bank Credit card, and share transactions with M/s India Bulls Securities Ltd.

2. The AO found that the assessee had made business receipts from sales of Future and Options amounting to Rs. 4,56,10,252.40, which were not included in the return of income. The AO initiated penalty proceedings under section 271B due to the default under section 44AB for not submitting a tax audit report for these business receipts. The penalty was levied as the assessee did not file any reply, and the CIT(A) confirmed it.

3. The assessee contended that the transactions with India Bulls Securities Ltd. were investment transactions, not business transactions, and thus, not claimed as business loss. The counsel referred to relevant case laws to support the argument that the penalty was not justified. The assessee had obtained a tax audit report for the year under appeal, which did not include the losses from share transactions.

4. The Tribunal considered the submissions and held that the penalty under section 271B was not applicable in the present case. It was noted that the assessee did not claim loss on share transactions in the return of income due to a bona fide belief that these were investment transactions. The Tribunal observed that the accounts were audited under section 44AB, and the penalty cannot be imposed merely because a specific income item was not included in the tax audit report.

5. Therefore, the Tribunal allowed the appeal, canceling the penalty levied under section 271B. The decision was based on the assessee's genuine belief regarding the nature of transactions with India Bulls Securities Ltd. and the audited accounts under section 44AB. The judgment was pronounced on 14-11-2014.