2019 (8) TMI 1116 - AT - Income Tax

Penalty u/s 271B - non-audit of books of account within the prescribed time limit provided - AY 2004-2005 - the penalty order was barred by limitation - HELD THAT - The assessee got his books of accounts audited on 28/03/2014 which was made available to the AO and no prejudice has been caused to the Revenue. Now the short question that arises is whether in this scenario, penalty u/s. 271B can be levied or not. In our considered opinion, the assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the AO before the completion of the assessment proceedings. Assessment Year 2008-2009 - It was held by the Hon ble High Court in the case of Bisauli Tractors 2007 (5) TMI 181 - ALLAHABAD HIGH COURT that the if a person has not maintained the accounts book or any accounts the question of its audit does not arise and in such an event the imposition of penalty is under the provision contained in section 271A. Therefore, it was concluded by the Hon ble Allahabad High Court that the penalty proceedings u/s 271B would not apply. No contrary judgment of the Hon ble jurisdictional High Court has been brought to our notice, hence, by following the judgment of the Hon ble Allahabad High Court in the case of Bisauli Tractors (supra) , we delete the penalty imposed u/s 271B in respect of assessment year 2008-2009. It is ordered accordingly. AY 2009-2010 - The search and seizure in assessee s case was conducted on 06. 01. 2009. The assessee had obtained the copy of all the seized records. The demise of the Chartered Accountant in the year 2016 cannot be a reason for not auditing the books of account for assessment year 2009-2010.Therefore, there was no reasonable cause as mandated u/s 273B for deletion of the penalty imposed u/s 271B for this AY.

Summary

Issues:
- Imposition of penalty u/s 271B of the I.T. Act for assessment years 2004-2005, 2008-2009, and 2009-2010.
- Barred by limitation under section 275(1)(c) of the I.T. Act.
- Technical breach in filing audit report and return of income.
- Non-maintenance of books of account for assessment year 2008-2009.
- Reasonable cause for non-filing of audit report for assessment year 2009-2010.

Analysis:

Imposition of Penalty u/s 271B:
- The appeals were against the CIT(A)'s order confirming the penalty imposed u/s 271B of the I.T. Act for the mentioned assessment years.
- The common contention raised by the assessee was that the penalty orders were passed after the limitation period specified in section 275(1)(c) of the I.T. Act.
- The Tribunal rejected this contention, stating that the limitation law as per the proviso to section 275(1)(a) would apply, not section 275(1)(c).
- The Tribunal proceeded to consider the sustenance of the penalty for each assessment year.

Assessment Year 2004-2005:
- The due date for filing the audit report was missed by 5 months, but the audit report was filed before the assessment order was completed.
- Citing a previous Tribunal decision, the penalty was deleted as the technical breach did not cause any loss to the exchequer.
- Following the precedent, the penalty imposed u/s 271B of the I.T. Act was deleted for this assessment year.

Assessment Year 2008-2009:
- The assessee did not maintain books of account for this year, and it was argued that penalty u/s 271B of the I.T. Act could not be imposed.
- Relying on a judgment of the Allahabad High Court, the Tribunal deleted the penalty, as separate penalty proceedings are provided for non-maintenance of accounts under section 271A.
- Consequently, the penalty for assessment year 2008-2009 was deleted.

Assessment Year 2009-2010:
- No audit report was filed for this year, with the assessee citing reasonable cause due to a search and seizure operation and the illness and subsequent demise of the Chartered Accountant.
- The Tribunal found no reasonable cause for not auditing the books of account, leading to the dismissal of the appeal for this assessment year.

Conclusion:
- The appeals for assessment years 2004-2005 and 2008-2009 were allowed, while the appeal for assessment year 2009-2010 was dismissed.
- The penalty imposed u/s 271B of the I.T. Act was deleted for 2004-2005 and 2008-2009 due to technical breaches and non-maintenance of accounts, respectively, but sustained for 2009-2010 due to the lack of a reasonable cause for not filing the audit report.