2018 (4) TMI 1470 - AT - Income Tax

Imposition of penalty u/s 271A - assessee failed to maintain books of account as per the provisions of section 44AA - Held that - So far as the case of Contractor is concerned, there is no scope for imposing penalty under section 271A of the Act. We, therefore, respectfully following the Third Member decision of Chennai Bench of the Tribunal in the case ACIT vs. Aggarwal Construction Co. (2007 (1) TMI 203 - ITAT CHANDIGARH-B) order deletion of penalty levied under section 271A of the Act. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under section 271A of the Income Tax Act.

Analysis:
The appeal before the Appellate Tribunal ITAT Lucknow stemmed from the order of the ld. CIT(A), Faizabad, concerning the imposition of a penalty under section 271A of the Act. The assessee, a contractor, received a notice under section 148 of the Act, leading to an assessment of income at &8377; 10,78,290/-. Penalty proceedings under section 271A were initiated due to non-compliance with the notice. The Assessing Officer imposed a penalty of &8377; 25,000/- under section 271A based on the available material. The ld. CIT(A) upheld this penalty relying on a decision of the High Court. The assessee, dissatisfied, appealed to the Tribunal, arguing that the cited case law was not applicable to their situation. The Tribunal noted the divergence in business activities between the cited case and the assessee's case, emphasizing the unique circumstances of the contractor.

The Tribunal referenced a Third Member decision of the Chennai Bench, which highlighted that penalties under section 271A are not applicable in cases of contractors. This decision was based on the provisions of section 44AA of the Act and the requirement for maintaining proper books of account. It was established that the assessee had maintained the necessary records enabling the Assessing Officer to determine income. As no default under section 44AA was found, the Tribunal concluded that no penalty under section 271A could be imposed. The Tribunal further noted that similar decisions had been made by various Benches at Chandigarh, indicating a consistent judicial stance on penalties for contractors. Consequently, the Tribunal, in line with the Chennai Bench decision, ordered the deletion of the penalty levied under section 271A, allowing the appeal of the assessee.

In conclusion, the Tribunal's detailed analysis focused on the specific circumstances of the contractor, highlighting the importance of maintaining proper records as per statutory requirements. By considering relevant legal provisions and precedents, the Tribunal concluded that penalties under section 271A were not applicable to the assessee, leading to the allowance of the appeal and the deletion of the imposed penalty.