2023 (2) TMI 1221 - AT - Income Tax

Penalty u/s 271B - assessee not getting the books of account audited u/s 44AB - reasonable cause u/s 273B - assessee is an individual and is engaged in the business of mobile recharging and earns income from commission from sale of such recharge coupons of Idea Cellular - AO took basis of cash deposited in the bank account treating it as sales turnover - HELD THAT - As considering the fact that assessee is receiving commission income and tax is deducted at source by the Telecom company treating the cash deposits as amount collected on behalf of the Telecom company from various customers and deposited in the bank account and commission on such deposits is given by the Telecom company. The reasons cited by assessee prima facie found to be reasonable because the assessee was under bonafide belief that he was not liable to get the books of accounts audited as the commission income was below the threshold limit and this was the first year of the business venture taken up by the assessee and thus assessee s case is covered u/s 273B. Since the assessee has a reasonable cause for not getting the books of account audited, he should not be visited by penalty u/s 271B of the Act - Appeal of the assessee is allowed.

Summary

Issues Involved:
Delay in filing the appeal before the Tribunal, Justification of penalty under section 271B of the Income Tax Act for not getting books of account audited under section 44AB.

Analysis:

1. Delay in filing the appeal before the Tribunal:
The appeal was filed with a delay of one day, and the assessee submitted a petition for condonation of delay. The Tribunal, after reviewing the reasons for delay, found that the assessee had sufficient cause for the delay and thus condoned the delay, admitting the appeal.

2. Justification of penalty under section 271B:
The main issue in consideration was whether the penalty under section 271B of the Income Tax Act, amounting to Rs.1,36,214, was justified. The penalty was imposed for not getting the books of account audited under section 44AB of the Act. The assessee, engaged in the business of mobile recharging, earned income from commission on sale of recharge coupons. The Assessing Officer observed a significant cash deposit in the bank account during assessment proceedings, treating it as sales turnover. The assessee contended that the cash deposits were collected on behalf of the Telecom company and not sales turnover, as the income was only from commission. It was argued that the assessee was under a bonafide belief that audit was not required due to the income being below the threshold limit and it being the first year of business.

3. Tribunal's Decision:
The Tribunal found merit in the assessee's argument, considering that the commission income was subject to TDS by the Telecom company and the cash deposits were collected on behalf of the company. The Tribunal referred to Section 273B of the Act, which states that no penalty shall be imposed if there was a reasonable cause for the failure. As the assessee had a reasonable cause for not getting the books audited, the penalty under section 271B was deleted, and the appeal of the assessee was allowed.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal and deleting the penalty imposed under section 271B of the Income Tax Act for not getting the books of account audited under section 44AB. The decision was based on the assessee's reasonable cause for the failure, as outlined in Section 273B of the Act.