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2019 (7) TMI 1368 - AT - Income TaxPenalty imposed u/s 271B - delayed audit of accounts - reasonable cause - misguided by his accountant - HELD THAT - It has not been shown that the assessee s sales at any time in the past exceeded the threshold monetary limit required for tax audit. An assessee would normally heed to the advice by his counsel, who, it is stated, failed to advise him in the matter. Surely, ignorance of law is no excuse, but, then, it needs to be borne in mind that we are here concerned with penalty proceedings, in which the conduct is of essence This is the 1st year of business operation of the assessee, and assessee was misguided by his accountant, hence penalty should not be imposed. Therefore, respectfully following the judgment of the Coordinate Bench, on the similar facts, in the case of Ramesh Kumar 2018 (5) TMI 1907 - ITAT AMRITSAR we are of the view that it is not a fit case to levy penalty u/s 271B of the Act and therefore we delete the penalty - Decided in favour of assessee.
Issues Involved:
1. Imposition of penalty under Section 271B of the Income Tax Act, 1961. 2. Applicability of Section 44AB regarding audit of books of accounts. 3. Reasonable cause for non-compliance with Section 44AB. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 271B: The primary issue in the appeal was the imposition of a penalty of ?73,070 under Section 271B of the Income Tax Act, 1961. The penalty was levied because the assessee failed to get his books of accounts audited within the specified time as mandated by Section 44AB of the Act. The assessee argued that he was unaware of the requirement to get his books audited as his turnover exceeded ?40 lakh, which was the threshold for mandatory audit under Section 44AB. 2. Applicability of Section 44AB Regarding Audit of Books of Accounts: The assessee's turnover for the financial year 2008-09 was ?1,46,14,105, which exceeded the threshold limit of ?40 lakh as per Section 44AB of the Act. Consequently, the assessee was required to get his books of accounts audited and submit the tax audit report by the due date, which he failed to do. The assessee contended that this was his first year of business, and he was not professionally literate about the legal requirements, including the audit requirement under Section 44AB. 3. Reasonable Cause for Non-Compliance with Section 44AB: The assessee claimed that his failure to comply with Section 44AB was due to a bona fide belief and lack of proper advice from his accountant. He maintained that there was no willful attempt to evade the audit requirement. The Tribunal noted that the assessee was not professionally literate and was misled by his accountant, who advised that an audit was not necessary. The Tribunal referenced the Supreme Court judgment in Hindustan Steel Ltd. vs. State of Orissa, which stated that penalty should not be imposed if the failure to comply with a statutory obligation was not deliberate or intentional. The Tribunal also considered a similar case (Ramesh Kumar vs. ITO) where the penalty was deleted due to the assessee's bona fide belief and lack of proper advice. The Tribunal observed that the imposition of penalty is a quasi-criminal proceeding and should not be imposed unless the non-compliance was deliberate or in conscious disregard of the law. Conclusion: The Tribunal concluded that the assessee had a reasonable cause for not getting his books audited within the stipulated time, as it was his first year of business and he was misled by his accountant. The Tribunal held that the penalty under Section 271B should not be imposed in this case and directed the deletion of the penalty of ?73,070. The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the Court on 24.07.2019.
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