2022 (6) TMI 1510 - AT - Income Tax

Penalty u/s 271B for failure to get accounts audited - assessee s turnover exceeds Rs. One crore the assessee was liable to get his books of account audited - HELD THAT - In the instant case, it is proved that all the goods viz. the milk products and the vegetables belongs to the principle Mother Dairy . The assessee sells goods on behalf of the principle Mother Dairy on commission basis. The senior Manager of Mother Dairy has also confirmed these facts. The receipts are sent back to the Mother Dairy through ECS on regular intervals. What the assessee gets in this case is only the Commission income. The rate of commission is also determined by the Mother Dairy fruit and vegetable Pvt. Ltd. The assessee increased the product value as per the distributor margin indicated by the Mother Dairy from time to time and as per shop to shop based on the locality. Revenue has wrongly considered the gross turnover as the sale of the assessee instead of the commission/margin amount earned by the assessee. Hence, keeping in view, the peculiar facts in the instant case and the provisions of 271B and 273B, we hold that the penalty levied be obliterated. Decided in favour of assessee.

Summary

Issues:
1. Appeal against order of CIT(A)-15, New Delhi for AY 2015-16.
2. Maintenance of books of account and presumptive taxation provisions.
3. Assessment of turnover exceeding threshold limit u/s 44AB.
4. Penalty u/s 271B for failure to get accounts audited.
5. Consideration of turnover for penalty calculation.
6. Interpretation of provisions of section 271B and 273B.
7. Commission income vs. gross turnover calculation.

Analysis:
The appeal was filed against the order of the CIT(A)-15, New Delhi for AY 2015-16. The assessee, a distributor of Mother Dairy Packed Milk and products, declared income under presumptive taxation provisions as books of account were not maintained. The AO determined the turnover exceeding the threshold limit u/s 44AB, leading to a penalty u/s 271B for failure to get accounts audited. The CIT(A) upheld the penalty, citing the turnover as the basis for calculation. The provisions of section 271B and 273B were discussed, emphasizing the penalty for failure to comply unless reasonable cause is proven.

The Tribunal analyzed that the assessee operated on a commission basis for Mother Dairy, with goods belonging to the principal. The receipts were sent back to Mother Dairy through ECS, and the assessee earned commission income based on distributor margins. The Tribunal clarified that the gross turnover should not be considered as the assessee's sales but the commission/margin earned. Therefore, considering the peculiar facts and relevant provisions, the penalty levied under section 271B was deemed unjustified, leading to the allowance of the assessee's appeal.

In conclusion, the Tribunal set aside the penalty, highlighting the distinction between commission income and gross turnover. The judgment emphasized the correct interpretation of turnover for penalty calculation under section 271B, ultimately ruling in favor of the assessee.