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2020 (2) TMI 77 - AT - Income TaxPenalty u/s 271B - failure of getting the books of accounts audited u/s 44AB - HELD THAT -There is a reasonable cause on the part of the assessee in not getting the books of accounts audited since it adopted the percentage completion method and that the advance received from customers is not part of turnover but in the shape of liability which can be crystallized to the sale turnover only when the project is completed and the possession is handed over along with registered sale deed to the customer. Therefore in our view the assessee succeeds on two counts firstly that it was not required to get books of accounts audited and if for sake of discussion if the alleged advance received from customers is presumed to be turnover then also the assessee will succeed on account of Section 273B of the Act which provides for penalty not to be imposed in certain cases where the assessee proves that there was a reasonable cause for the said failure and thus covers the situation of the assessee too. We, thus delete the penalty levied u/s 271B of the Act at ₹ 1,50,000/- each for Assessment Year 2010-11 to 2012-13 and allow all three appeals raised by the assessee.
Issues Involved:
1. Confirmation of penalty under Section 271B of the Income Tax Act, 1961. 2. Alleged failure to get books of account audited under Section 44AB of the Income Tax Act, 1961. 3. Whether the turnover exceeded the prescribed limit under Section 44AB. 4. Reasonable cause for failure to comply with Section 44AB. 5. Application of Section 273B for penalty waiver. Detailed Analysis: 1. Confirmation of Penalty under Section 271B: The assessee challenged the confirmation of the penalty order passed under Section 271B of the Income Tax Act, 1961, by the CIT(A), claiming it was arbitrary, erroneous, and unjustified. The CIT(A) confirmed the penalty, observing that the assessee failed to get its books of accounts audited despite the turnover exceeding the prescribed limit under Section 44AB for the relevant assessment years. 2. Alleged Failure to Get Books of Account Audited under Section 44AB: The assessee contended that the turnover did not exceed the prescribed limit under Section 44AB, as the amounts received were advances from customers, not revenue receipts. The CIT(A) disagreed, stating that the amounts received from customers were revenue receipts, irrespective of their treatment in the books of accounts, and thus, the assessee was required to get its accounts audited. 3. Whether the Turnover Exceeded the Prescribed Limit: The CIT(A) noted that the assessee's receipts from customers exceeded the prescribed limit under Section 44AB for the relevant assessment years. The assessee argued that it followed the project completion method, and the amounts received were advances, not turnover. The CIT(A) held that the receipts were revenue in nature and should have been audited. 4. Reasonable Cause for Failure to Comply with Section 44AB: The assessee claimed that it had a reasonable cause for not getting its accounts audited, as it believed the advances were not part of the turnover. The CIT(A) rejected this argument, stating that the assessee knowingly did not get its accounts audited and that the project completion method was an afterthought to avoid penalties. 5. Application of Section 273B for Penalty Waiver: The tribunal considered whether the assessee had a reasonable cause under Section 273B, which provides for penalty waiver in certain cases. The tribunal observed that the assessee followed the project completion method and disclosed the turnover in the year of project completion. It referred to the case of Esque Finmark (P) Ltd., where the tribunal held that advances received by a builder were not turnover until the project was completed. Based on this precedent, the tribunal concluded that the assessee had a reasonable cause for not getting the accounts audited and deleted the penalty under Section 271B. Conclusion: The tribunal allowed the assessee's appeals for the assessment years 2010-11 to 2012-13, deleting the penalties levied under Section 271B. The tribunal held that the assessee had a reasonable cause for not getting the accounts audited, as it followed the project completion method and the advances received were not part of the turnover until the project was completed. The order was pronounced in the open court on 29.01.2020.
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