2023 (5) TMI 704 - AT - Income Tax

Penalty u/s 271B - Tax audit - failure to get books of accounts audited u/s 44AB - assessee did not maintain books of account u/s 44AA - HELD THAT - An person covered u/s 44AB is of course also covered u/s 44AA of the Act but not the vice-versa may not be true. The penalty u/s 271A is levied for non-compliance of the provisions of section 44AA of the Act, whereas, the penalty u/s 271B is levied for non-compliance of the provisions of section 44AB of the Act. Neither section 44AA and 44AB are in substitution of each other and nor the penalty levied u/s 271A and 271AB are in alternate or in substitution to each other. The separate and distinct provisions of section 44AA and 44AB of the Act not only apply on different class of persons but also on the different threshold of income/sales turnover. The object of requiring the assessee to get his books of accounts audited u/s 44AB is to get a clear picture of the assessee's accounts so as to enable the Income Tax Authorities to assess true and correct income of the assessee. The penalty u/s 271B is attracted for failure of the assessee to get the books of account audited. - Decision in the case of BHARAT CONSTRUCTION COMPANY VERSUS INCOME TAX OFFICER 1998 (12) TMI 614 - MADHYA PRADESH HIGH COURT followed. Since, the case in hand, the assessee did not get his books of account audited, therefore, as per the provisions of section 44AB read with section 271B AO rightly levied the penalty u/s 271B of the Act. We, therefore, do not find any merit in the appeal of the assessee and the same is accordingly dismissed.

Summary

Issues Involved:
1. Whether penalty under section 271B can be levied when books of account are not maintained.
2. Distinction between sections 44AA and 44AB of the Income Tax Act.
3. Applicability of the decision in CIT vs. Bisauli Tractors.
4. Separate and distinct nature of penalties under sections 271A and 271B.

Issue 1: Penalty under Section 271B
The assessee argued that penalty under section 271B could not be levied for failure to get books of account audited when the books were not maintained at all. The assessee relied on the decision in CIT vs. Bisauli Tractors. However, the Tribunal found that the case was one of rejection of books of account, not non-maintenance. Thus, the cited decision was not applicable.

Issue 2: Distinction between Sections 44AA and 44AB
The Tribunal explained that sections 44AA and 44AB are separate and distinct provisions. Section 44AA mandates maintenance of books for specified professions and businesses exceeding certain turnover limits, while section 44AB requires audit of accounts for businesses exceeding higher turnover limits. Penalties for non-compliance with these sections are also distinct, with section 271A for non-maintenance and section 271B for non-audit.

Issue 3: Applicability of CIT vs. Bisauli Tractors
The Tribunal noted that the decision in CIT vs. Bisauli Tractors was not applicable because the present case involved rejection of books, not non-maintenance. The Tribunal emphasized that allowing a person to escape penalty for non-maintenance by claiming non-audit would be unjust.

Issue 4: Separate and Distinct Penalties under Sections 271A and 271B
The Tribunal referred to the decision in Bharat Construction Co. v. ITO, which held that defaults under sections 271A and 271B are separate and distinct. The Tribunal reiterated that penalties under these sections are not interchangeable, and a person failing to maintain books and get them audited can be penalized under both sections.

Conclusion
The Tribunal upheld the penalty under section 271B, stating that the assessee's failure to get books audited attracted the penalty. The appeal was dismissed.