2018 (5) TMI 1432 - AT - Income Tax

Failure to produce the books of account and audit report u/s 44AB - penalty proceedings u/s 271B - Held that - P & L A/c filed by the assessee with return indicates that he was liable to get his books of account audited u/s 44AB - assessee deliberately did not get his books of account audited - the contentions of the assessee that since no books of account have been prepared, therefore could not be audited is not accepted - hence assessee is liable to penalty u/s 271B - Decided against the assessee.

Summary

Issues:
Levy of penalty under section 271B of the I.T. Act, 1961 for failure to produce books of account and audit report under section 44AB.

Analysis:
The appeal was filed against the penalty imposed under section 271B of the I.T. Act, 1961 for not producing books of account and audit report under section 44AB. The assessee, engaged in the sale/purchase of Paints and Sanitary Wares, filed a return of income showing a total income of ?4,62,460 for the A.Y. 2010-2011. However, during assessment proceedings, it was found that the audit report submitted by the assessee was fabricated, and the Chartered Accountant who signed the report admitted to not examining the books of account. The Assessing Officer (A.O.) concluded that the assessee violated section 44AB and imposed a penalty of ?1 lakh.

The assessee contended before the Ld. CIT(A) that the inflated turnover shown in the audit report was to secure a loan of ?2 crores from the bank. However, the Ld. CIT(A) upheld the penalty, noting that the assessee failed to prove the actual turnover and that the audit report was not genuine. The appellant's reliance on a High Court decision was dismissed as the circumstances were different. The appellant's failure to substantiate the claimed turnover led to the confirmation of the penalty.

During the appeal, the assessee argued that since no books of account were maintained, there was no requirement for an audit. However, it was observed that the books of account were not produced, and the audit report was not submitted as per section 44AB. The Chartered Accountant denied preparing the tax audit report, highlighting fabrication. The authorities found the penalty justified as the provisions of Section 271B were clearly attracted. The appellant's explanation for the inflated turnover and failure to get accounts audited was deemed unacceptable, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the penalty under section 271B, emphasizing that the failure to comply with the audit requirements under section 44AB warranted the penalty. The appellant's actions of fabricating documents and failing to substantiate turnover led to the dismissal of the appeal.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the reasoning behind upholding the penalty under section 271B of the I.T. Act, 1961.