2023 (6) TMI 398 - AT - Income Tax

Penalty u/s 271B - Addition of total sales/turnover/gross receipts of the assessee which belongs to the Principal Dealer - assessee s contention that the assessee was merely working as a commission agent for M/s. Anika Bajaj and have made bookings for the principal outlet - HELD THAT - It is for the AO or CIT (A) to make adequate inquiries from the Principal Outlet M/s. Anika Bajaj to find out whether the assessee was working as an agent for it or not. Once the assessee had categorically stated that the assessee was working for the main outlet on commission, then the consideration received for sale cannot be considered as turnover of the assessee or receipt of the assessment. Assessee has filed supporting document like form 26AS (which shows assessee was regularly receiving commission payment from the Principal Outlet and Letter of appointment issued appointing assessee as commission agent in M/s. Anika Bajaj which clearly shows that the assessee was carrying its agency business for and on behalf of M/s. Anika Bajaj). Since the gross turnover for the period under consideration was less than Rs. 1.00 crore, hence the accounts are not required to be audited as per section 44AB - Hence penalty imposed by the lower authorities was without any basis. Appeal of assessee allowed.

Summary

Issues involved:
The judgment deals with the confirmation of penalty under section 271B of the I.T. Act, 1961, and the dismissal of the appeal without providing a reasonable opportunity to the appellant. The case also involves the consideration of turnover and applicability of section 44AB of the I.T. Act, 1961, in the context of commission agents, arahtias, etc.

Confirmation of Penalty under Section 271B:
The appellant challenged the penalty amounting to Rs. 1,11,065/- imposed under section 271B of the I.T. Act, 1961. The appellant contended that the penalty was unjust as the turnover considered for penalty belonged to the Principal Dealer, M/s. Anika Bajaj, and not the appellant. The appellant argued that the penalty was against the law as the appellant's turnover did not exceed the threshold limit specified in section 44AB of the Act. The appellant further claimed that the provisions of section 271B were initiated without considering the CBDT Circular No.452 dated 17th March, 1986, which outlines the applicability of section 44AB in cases of commission agents, arahtias, etc. The appellant asserted that the penalty order should be quashed based on these grounds.

Applicability of Section 44AB and Turnover Consideration:
The case involved the appellant, an individual running agency business on behalf of M/s. Anika Bajaj, a dealer of Hero Vehicles. The appellant's total bank deposits during the relevant period were scrutinized by the Assessing Officer, leading to the imposition of the penalty. The appellant argued that the turnover, including commission income, was below the threshold limit for audit as per CBDT Circular No. 452 dated 17th March, 1986. The appellant maintained that only the gross commission receipts should be considered for the purpose of section 44AB, not the total turnover. The appellant also highlighted that the sales were made on behalf of the Principal Dealer, M/s. Anika Bajaj, and invoices were issued by the principal, not the appellant. Despite these contentions, the Assessing Officer and the CIT(A) levied the penalty, disregarding the appellant's submissions and supporting documents.

Decision and Ruling:
Upon hearing both sides and examining the evidence, the tribunal found that the appellant was working as a commission agent for M/s. Anika Bajaj based on supporting documents like form 26AS and the appointment letter from the principal. The tribunal noted that the appellant's gross turnover was below the audit threshold specified in section 44AB. Therefore, the tribunal concluded that the penalty imposed by the lower authorities lacked a basis and was unjustified. Consequently, the tribunal allowed the appeal filed by the appellant, ruling in favor of the appellant and deleting the penalty.

This summary provides a detailed breakdown of the issues involved in the legal judgment, outlining the arguments presented by the appellant, the considerations regarding penalty imposition and turnover, and the final decision of the tribunal in favor of the appellant.