2020 (1) TMI 814 - AT - Income Tax

Penalty u/s 271B - failure to get books of accounts audited u/s. 44AB - assessee did not maintain her books account as well as not got the books of account audited as per the provision of section 44AB - HELD THAT - As during the course of assessment proceedings assessee prepared her books of account and got audited from accountant under the provision of section 44AB. The books of accounts, which were subsequently audited, prepared by the assessee during the assessment proceedings were accepted by the AO therefore no penalty was levied under section 271A AO levied the penalty for not furnishing the audited report in form 3CD in time under section 271B. Never the less, it is important to note that admittedly there was the loss from the transactions of purchase and sale of shares and there was the substantial compliance on the part of the assessee for getting the accounts audited. More so, the plea of the assessee that her son has carried out the sale purchase transaction of shares has not been proved wrong. It is also important to note that there was no infirmity in such report was pointed out by the AO. Therefore, assessee under the bonafide belief failed to get the accounts audited and in such facts and circumstances the penalty under section 271B is not warranted. With the above observations, the orders of lower authorities are set aside and the penalty levied u/s 271B is deleted. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty order under section 271B of the Income Tax Act, 1961 for Assessment Year 2014-15.

Analysis:
1. Grounds of Appeal: The assessee challenged the penalty imposed under section 271B for non-audit of books of accounts under section 44AB. The key contention was the lack of proper appreciation by the AO of the facts and penalty reply submitted by the appellant.

2. Assessee's Transactions: The assessee, an Individual, engaged in significant share transactions resulting in a loss of ?6,416. However, the capital gain transactions were not declared in the income tax return, only reporting interest income of ?16,42,070, which was accepted by the AO under section 143(3) of the Act.

3. Non-Maintenance of Books: The AO observed that the assessee did not maintain books of account, profit and loss accounts, or get accounts audited under section 44AB despite exceeding the turnover threshold due to share transactions. The AO issued a show cause notice for penalty under section 271B.

4. Assessee's Defense: The assessee claimed she was unaware of the requirement to maintain audited accounts for share transactions as they were conducted by her son. Subsequently, the assessee got the accounts audited under section 44AB, but the AO still imposed the penalty.

5. Appellate Proceedings: The CIT-A upheld the penalty, stating the failure to audit accounts under section 44AB. The assessee appealed, arguing substantial compliance and a bona fide belief in not furnishing the audit report due to the loss incurred.

6. Tribunal Decision: The Tribunal noted the assessee's efforts to rectify the non-compliance by auditing accounts and found no infirmity in the audit report. Considering the bona fide belief and substantial compliance, the Tribunal set aside the penalty under section 271B, leading to the appeal being allowed.

7. Conclusion: The Tribunal's decision highlighted the importance of substantial compliance, the assessee's good faith efforts to rectify the audit requirement, and the lack of evidence to disprove the son's involvement in share transactions. Consequently, the penalty under section 271B was deemed unwarranted, and the appeal was allowed on 02/12/2019 at Ahmedabad.