2017 (6) TMI 1042 - AT - Income Tax

Penalty u/s 271B - not getting the books of account audited as required U/s 44AB - Compulsory Tax Audit - Held that - CIT(A) confirmed the penalty by relying on the decision of S.J. Agarwal & co. Vs. ITO (2007 (2) TMI 285 - ITAT PUNE ) wherein the assessee filed trading account and P&L account showing figures and decimals while in assessee s case return was filed U/s 44AB of the Act and no trading and P&L account and balance sheet was filed. Further in the case of S.J. Agarwal & co. Vs. ITO (supra), the Assessing Officer gave a finding that the assessee was maintaining books of account, which were not got audited and in that case no penalty U/s 271A for not maintaining the books of account were levied. Thus, the case law relied by the ld CIT(A) is distinguishable on the facts itself. Therefore, the reliance of the ld. CIT(A) for sustaining the penalty is not justified. - Decided in favour of asessee.

Summary

Issues:
Confirmation of penalty under Section 271B for failure to maintain and audit books of account as required by Section 44AB of the Income Tax Act, 1961.

Analysis:
The appeal before the ITAT Jaipur concerned the confirmation of a penalty of ?1,00,000 under Section 271B of the Income Tax Act, 1961, for the failure to maintain and audit books of account as required by Section 44AB for the Assessment Year 2011-12. The Assessing Officer had initiated the penalty under Sections 271A and 271B for not maintaining books of account and not getting them audited, respectively. The assessee, a retail supplier of milk, argued that since the Assessing Officer concluded that the books of account were not maintained, there was no requirement for them to be audited. The assessee relied on various court decisions to support their argument, including the Gauhati High Court and Allahabad High Court judgments. The ITAT noted that the Assessing Officer had levied penalties under both Sections 271A and 271B on the same date, but the CIT(A) had confirmed the penalty based on a different case law. The ITAT referred to the Gauhati High Court and Allahabad High Court judgments, which emphasized that if an assessee fails to maintain books of account, the penalty under Section 271B cannot be imposed. Consequently, the ITAT directed the deletion of the penalty, following the principles established by the High Court judgments.

In conclusion, the ITAT allowed the appeal of the assessee, emphasizing that the penalty under Section 271B for failure to audit books of account cannot be imposed if the assessee has not maintained the books of account as required by Section 44AA. The ITAT relied on the strict interpretation of penalty provisions in taxing statutes and the specific legal requirements outlined in Sections 44AA and 44AB of the Income Tax Act, 1961. The ITAT's decision was based on the precedents set by the Gauhati High Court and Allahabad High Court, which highlighted that penalties should only be imposed when the conditions specified in the relevant sections are met.