2023 (8) TMI 1444 - AT - Income Tax

Levy of penalty u/s. 271B - violation of Section 44AB - As alleged assessee has failed to submit the report of the auditors and has not got the accounts audited, therefore, there was a contravention of Section 44AB and accordingly, penalty u/s. 271 B was initiated - assessee submitted that he has done all the investment considering himself as an investor and not as a trader - HELD THAT - For violation of non maintenance of books of account u/s 44AA, there is a separate penal provision for levying penalty for non-maintaining of books of accounts prescribed u/s. 271A and therefore if at all penalty should have been levied under this section. The Hon ble Allahabad High Court in the case of CIT vs. Bisauli Tractors 2007 (5) TMI 181 - ALLAHABAD HIGH COURT had held that Section 271B of the Act is not attracted in the case where no account has been maintained and instead recourse u/s.271A can be taken. This principle has again been reiterated by the Hon ble Allahabad High Court in the case of CIT vs. S.K Gupta 2009 (9) TMI 231 - ALLAHABAD HIGH COURT . Similar view has been taken in the case of CIT vs. Surajmal Parsuram Todi 1996 (8) TMI 102 - GAUHATI HIGH COURT . Accordingly, we hold that no penalty u/s.271B is leviable when assessee has not maintained the books of accounts. Accordingly, penalty is deleted. Decided in favour of assessee.

Summary

Issues involved:
The issue involves the levy of penalty under section 271B for the assessment year 2015-16 due to the failure of the assessee to get the accounts audited as required by Section 44AB.

Summary:

Issue 1: Levy of penalty under section 271B
The assessee filed an appeal against the penalty imposed under section 271B amounting to Rs.1,50,000. The Assessing Officer treated the short term capital loss declared by the assessee as a business loss due to the nature of trading activities. The turnover from future and option transactions exceeded the limit prescribed in Section 44AB, leading to the initiation of penalty proceedings. The assessee contended that the investments were made as an investor, not a trader, but failed to provide a plausible reason for not auditing the accounts, resulting in the confirmation of the penalty by the CIT (A).

Issue 2: Maintenance of books of accounts and penalty imposition
The counsel for the assessee argued that since the assessee did not maintain any books of accounts, there was no requirement to get the accounts audited, and therefore, penalty under section 271B should not apply. Citing relevant court decisions, it was highlighted that when no accounts are maintained, the penalty under section 271A for non-maintenance of books of accounts should be applied instead of section 271B. The tribunal concurred, stating that the penalty under section 271B is not attracted when no books of accounts are maintained, and the penalty was deleted based on the precedents set by the Allahabad and Guwahati High Courts.

In conclusion, the tribunal allowed the appeal of the assessee, and the penalty under section 271B was deleted based on the non-maintenance of books of accounts.