2018 (8) TMI 1370 - HC - Income Tax

Penalty u/s 271B - AO observed that, assessee had got prepared a bogus / fabricated audit report - AO initiated penalty proceedings under Section 271B of the Act as the appellant failed to produce books of account and audit report under Section 44AB of the Act. - Held that - The statement of assessee was contradicted and controverted by the Chartered Accountant in his statement, who had stated that he had not examined books of accounts - The facts reveal blatant and brazen defiance of law and Section 44AB of the Act. The contention of the appellant-assessee that he had not maintained books of accounts etc. and, therefore, penalty under Section 271B of the Act for failure to get books of accounts audited, is unacceptable. Appellant-assessee, in making this submission, contradicts his earlier version that the books of accounts had been misplaced. Even otherwise, failure to maintain the books of accounts was a lapse and a failure to comply with statutory provisions. - Levy of penalty confirmed - Decided against the assessee.

Summary

Issues:
- Impugning order upholding penalty under Section 271B of the Income Tax Act, 1961
- Fabricated audit report to obtain a bank loan
- Failure to produce books of account and audit report under Section 44AB of the Act
- Upholding penalty order by Commissioner of Income Tax (Appeals) and Tribunal
- Contradictory statements by Chartered Accountant
- Defiance of law and Section 44AB of the Act
- Failure to maintain books of accounts

Analysis:
The appellant challenged the order upholding the penalty under Section 271B of the Income Tax Act, 1961, passed by the Income Tax Appellate Tribunal. The appellant, engaged in the sale/purchase of paints and sanitary ware, filed a return of income for the assessment year 2010-11, declaring a total income. During assessment proceedings, it was revealed that a bogus audit report was prepared to secure a bank loan, showing a pseudo turnover. The Assessing Officer initiated penalty proceedings under Section 271B as the appellant failed to produce books of account and audit report under Section 44AB. The penalty was imposed as the appellant violated Section 44AB. The Commissioner of Income Tax (Appeals) upheld the penalty order, rejecting the plea regarding actual sales figures. The Tribunal upheld the penalty order, emphasizing that the appellant failed to produce genuine documents and get the accounts audited as required by law.

The Tribunal noted that the appellant filed a return showing gross receipts/turnover, introduced substantial loans and capital, but failed to produce books of account and audit report as required. The Chartered Accountant's statement revealed that the audit report was fabricated without examining the books of account. The appellant's claim of misplaced books of account was contradicted by the Chartered Accountant's denial of examining the books. The Tribunal found the appellant's actions as blatant defiance of the law and Section 44AB. The appellant's argument of not maintaining books of accounts was deemed a failure to comply with statutory provisions, leading to the dismissal of the appeal against the penalty under Section 271B.

In conclusion, the Tribunal upheld the penalty under Section 271B, emphasizing the appellant's failure to comply with the statutory requirement of maintaining genuine books of accounts and obtaining a proper audit report. The appellant's contradictory statements and fabricated documents led to the dismissal of the appeal, highlighting the importance of adhering to legal provisions and maintaining accurate financial records as mandated by law.