2020 (6) TMI 292 - AT - Income Tax

Penalty u/s.271A - non complying the provisions of Section 44AA - CIT(A) upheld the action of AO observing that non-maintenance of books of account by the assessee enabled the AO to levy penalty u/s.271A - AO did not accept the book results shown by the assessee for computing the taxable income and he rejected the profits shown by the assessee in the return of income and he applied Section 145(3) of the Act and computed the profit after applying 4% of the turnover shown by the assessee - HELD THAT - If the income of the taxpayer falls above the prescribed limit, then he should have to maintain books of accounts u/s.44AA and he should produce the same as and when required by the AO enabling him to calculate correct taxable income of the assessee, which is lack in this case. As noted from the assessment order and submissions of the assessee that there is no any specific date or nearby date when the books of accounts were got damaged by the white ant which came to the notice of the assessee that on a particular date the books of accounts have been damaged by the white ant and there is also no date as to when the hard disks were corrupted. Assessee could not show any reasonable cause under which he may get relief u/s.273B of the Act. Therefore, the AO was justified in imposing the penalty u/s.271A of the Act for non-maintenance of the books of accounts. Accordingly, we do not see any reason to interfere in the order of the CIT(A) in upholding the penalty levied - Decided against assessee.

Summary

Issues:
1. Penalty levied under Section 271A for non-maintenance of books of accounts.
2. Consideration of mens rea as an essential ingredient of an offense.
3. Justification for penalty imposition despite maintaining audited books of accounts.
4. Reduction in assessed income leading to a refund and its impact on penalty excisability.

Issue 1: Penalty under Section 271A for non-maintenance of books of accounts:
The appellant challenged the penalty imposed under Section 271A by the Assessing Officer (AO) and upheld by the CIT(A), arguing that the penalty was illegal, uncalled for, and not supported by the facts on record. The AO imposed the penalty due to the non-maintenance of books of accounts as required by Section 44AA of the Income Tax Act. The CIT(A) confirmed this penalty, emphasizing that the absence of proper books of accounts hindered accurate income computation. The Tribunal upheld the penalty, citing the statutory requirement to maintain books of accounts for income computation purposes, and dismissed the appeal.

Issue 2: Consideration of mens rea as an essential ingredient of an offense:
The appellant contended that mens rea, the mental element of intent or knowledge, was essential for penal liability and had not been considered by the authorities. However, the Tribunal focused on the statutory provisions of Section 271A, which mandate penalties for failure to maintain books of accounts, without requiring proof of intent. The absence of mens rea was not considered a defense against the penalty under Section 271A.

Issue 3: Justification for penalty imposition despite maintaining audited books of accounts:
The appellant argued that despite maintaining audited books of accounts, the penalty was unjustified. The AO rejected the books of accounts due to the inability to produce physical copies damaged by white ants and corrupted computer hard disks. The Tribunal emphasized the statutory obligation to maintain books of accounts for accurate income computation, regardless of audit status. The penalty under Section 271A was upheld based on the failure to comply with the provisions of maintaining books of accounts, leading to the dismissal of the appeal.

Issue 4: Reduction in assessed income leading to a refund and its impact on penalty excisability:
The appellant highlighted the substantial reduction in assessed income resulting in a refund, arguing against the excisability of the penalty. However, the Tribunal maintained that the penalty under Section 271A was imposed for the failure to maintain books of accounts, irrespective of the final income assessment. The penalty was upheld based on the statutory requirement to keep proper books of accounts for income computation, leading to the dismissal of the appeal.

In conclusion, the Tribunal affirmed the penalty under Section 271A for non-maintenance of books of accounts, emphasizing the statutory obligation to keep accurate records for income computation purposes. The absence of mens rea was not considered a defense against the penalty, and the reduction in assessed income leading to a refund did not affect the excisability of the penalty. The appeal was dismissed, upholding the penalty imposed by the AO and confirmed by the CIT(A).