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2023 (4) TMI 459 - AT - Income TaxPenalty u/s 271B - violation of provisions of section 44AB and 44AA - assessee has failed to produce books of accounts and bills/vouchers for verification of purchases and other expenditures claimed in the Profit Loss account - assessee was not found to have maintained the books of account - HELD THAT - Assessee from the day one had been submitting before the Revenue authorities that the assessee had suffered huge losses and was booked in various cases under RBI Act for cheque dishonor and since the assessee could not settle his liabilities in due time, therefore, he was absconding from Jaipur and in this regard an FIR has already been registered against the assessee. Apart from this, assessee also had categorically mentioned that he was not maintaining any books of accounts and even the Tax Consultants of the assessee filed his ITR by collecting information available with him i.e. sales, purchases and bank book. But the said Tax Consultants has refused to sign the Tax Audit Report mainly on the ground that no books of accounts were maintained by the assessee. When assessee did not maintain regular books of accounts, then the question of getting the books of account audited does not arise at all - since there is a violation of provisions of section 44AA of the Act and the said violation cannot be extended to section 44AB of the Act. The provisions of section 44AB of the Act can only be invoked when the assessee had first complied with the provisions of section 44AA of the Act. Therefore, in my view the violation of section 44AA of the Act cannot continue because once it is found that assessee did not maintain the regular books of account then the said violation cannot travel beyond the provisions of section 44AA and hence cannot be held as further violation of section 44AB - See case of CIT vs. Bisauli Tractors 2007 (5) TMI 181 - ALLAHABAD HIGH COURT As decided in the case of Suraj Mal Parasuram Todi 1996 (8) TMI 102 - GAUHATI HIGH COURT wherein it was held that where no books of account are maintained, penalty should be imposed for non maintenance of books of account u/s 271A of the Act and in such circumstances no penalty can be imposed under section 271B for violation of section 44AB of the Act - Appeal of the assessee is allowed.
Issues Involved:
1. Imposition of penalty under section 271B of the Income Tax Act, 1961. 2. Maintenance of books of accounts under section 44AA. 3. Compliance with section 44AB regarding audit of accounts. Issue-Wise Detailed Analysis: 1. Imposition of Penalty under Section 271B: The primary issue is whether the penalty imposed under section 271B for Rs. 75,297/- was justified. The assessee argued that due to significant losses and legal issues, he was unable to maintain proper books of accounts, leading to the inability to get them audited. The Tribunal noted that the assessee had indeed failed to maintain books of accounts, as confirmed by the Assessing Officer (AO). The Tribunal referenced multiple High Court rulings, including CIT vs. Bisauli Tractors and Surajmal Parsuram Todi vs. CIT, which held that if no books are maintained, penalty under section 271B for not getting accounts audited cannot be imposed. Instead, penalty under section 271A for not maintaining books of accounts should be considered. 2. Maintenance of Books of Accounts under Section 44AA: The Tribunal examined whether the assessee had complied with section 44AA, which mandates the maintenance of books of accounts. It was established that the assessee did not maintain the required books. The Tribunal cited the Allahabad High Court's decision in CIT vs. Bisauli Tractors, which clarified that the violation of section 44AA does not extend to section 44AB, meaning that if books are not maintained, the requirement to get them audited under section 44AB does not arise. 3. Compliance with Section 44AB Regarding Audit of Accounts: The Tribunal analyzed whether the assessee's failure to get the accounts audited under section 44AB was justifiable. Given that the assessee did not maintain books, the Tribunal concluded that the requirement for an audit under section 44AB was not applicable. The Tribunal referenced judgments from the Gauhati and Allahabad High Courts, which supported the view that penalty under section 271B cannot be imposed if no books are maintained. The Tribunal also noted that the AO had acknowledged the absence of books, further reinforcing that the penalty under section 271B was not applicable. Conclusion: The Tribunal allowed the appeal, directing the AO to delete the penalty imposed under section 271B. The Tribunal emphasized that the penalty for not maintaining books of accounts should be considered under section 271A, not section 271B. The decision was based on established legal precedents and the specific circumstances of the case, where the assessee had not maintained the required books of accounts. Order Pronouncement: The order was pronounced in the open court on 15/2/2023, allowing the appeal of the assessee and directing the deletion of the penalty levied under section 271B.
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