2023 (11) TMI 695 - AT - Income Tax

Penalty u/s. 271B - Assessee not getting the books of account audited as per requirement of law - HELD THAT - As decided in the case of Hindustan Steel Ltd. 1969 (8) TMI 31 - SUPREME COURT liability to pay penalty does not arise merely upon proof of default and that penalty cannot be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. In the present case, the assessee offered its explanation in the penalty proceedings stating the delay for getting the books audited for want of letter from Buldhana Urban Credit Co-op. Society, Buldhana and the books were audited immediately after the letter received from the said society. Further, books were audited on 01-02-2010 and were available for examination during the assessment proceedings which was completed on 20-12-2011 u/s. 143(3) of the Act. Therefore, it was a mere technical breach as the books were not audited before specified time as provided by the statute, in our opinion that the delay as explained by the assessee flows from bonafide belief and no penalty could be imposed for a mere technical or venial breach of the provisions of the Act. Thus, penalty imposed by the AO and confirmed by the CIT(A) u/s. 271B of the Act is not justified and it is set aside. Decided in favour of assessee. Disallowance of payments made to sub-contractors - HELD THAT - We find the AO after examining the record asked the assessee to furnish the list of sub-contractors to whom sub-contract has been allotted with PAN, ledger accounts of the said contractors with identity proof. On perusal of the assessment order, we note that the assessee failed to prove the identity furnishing of PAN of the said sub-contractors. Accordingly,CIT(A) correctly confirmed an amount(partly) as no evidence whatsoever furnished in support of remaining four sub-contractors regarding identity, ledger, PAN and Aadhar Card. Decided against assessee.

Summary

Issues:
- ITA No. 464/NAG/2016 for A.Y. 2009-10:
- Whether the CIT(A) was justified in confirming the penalty imposed by the AO u/s. 271B of the Act.

Judgment Details:
1. The appellant, a firm and civil contractor, challenged a penalty imposed under section 271B of the Act for not auditing its books of account as required by law due to delays related to toll collections.
2. The appellant explained the delay in book audit was due to awaiting a letter from a specific society, and the audit was completed promptly once the letter was received.
3. The Tribunal noted that the appellant's delay was a technical breach rather than deliberate defiance of the law, as the books were eventually audited and available for examination during the assessment proceedings.
4. Citing legal precedents, the Tribunal held that no penalty should be imposed for a mere technical or venial breach of the Act, especially when the delay was due to a bonafide belief.
5. Consequently, the penalty imposed by the AO and confirmed by the CIT(A) was deemed unjustified and set aside, with the appellant's grounds being allowed.

ITA No. 468/NAG/2016 for A.Y. 2009-10:
- Whether the CIT(A) was justified in restricting the disallowance to an extent of Rs. 4,55,470/-.

1. The appellant faced a disallowance by the AO for failing to provide proof of identity for sub-contractors to whom work was allotted, resulting in a partial disallowance of claimed expenditure.
2. Despite submitting details for some contractors, the appellant could not provide evidence for all sub-contractors regarding identity, PAN, and other required documents.
3. The CIT(A) allowed expenditure for verified contractors but confirmed the disallowance for those lacking proper documentation.
4. The Tribunal found no fault in the CIT(A)'s decision, as the appellant failed to substantiate the identity of all sub-contractors as requested by the AO.
5. Consequently, the grounds raised by the appellant were dismissed, and the appeal in ITA No. 468/NAG/2016 was ultimately dismissed.

Conclusion:
- The appeal in ITA No. 464/NAG/2016 was allowed, while the appeal in ITA No. 468/NAG/2016 was dismissed, with the respective judgments pronounced on 5th September 2023.