2004 (6) TMI 292 - AT - Income Tax

Summary

Issues:
Appeal against penalty under section 271B for failure to maintain books of account when turnover exceeds Rs. 40 lakhs.

Analysis:
The appeal before the Appellate Tribunal ITAT Jabalpur stemmed from the order of the CIT(A) Gwalior concerning the assessment year 1995-96 under section 271B of the Income Tax Act, 1961. The sole ground of appeal was the cancellation of the penalty under section 271B by the CIT(A), prompting the Revenue to challenge this decision before the Tribunal.

The penalty was imposed by the assessing officer due to the assessee's failure to get the accounts audited under section 44AB, as the turnover exceeded Rs. 40 lakhs. However, the CIT(A) found that the net receipts for the relevant period were below Rs. 40 lakhs, thereby concluding that the audit was not mandatory under section 44AB. Consequently, the CIT(A) deemed the penalty levy as unjust and canceled it.

During the proceedings, the Departmental Representative argued that the penalty was rightfully imposed as the assessee, a railway contractor, did not maintain books of account despite showing an 8% net profit in the gross receipts. Conversely, the Authorised Representative of the assessee highlighted that the income declared was below Rs. 40 lakhs, and as per section 44AB, maintaining books of account was not obligatory if 8% of the gross receipt was declared.

After considering the arguments and reviewing the evidence, the Tribunal upheld the CIT(A)'s decision to cancel the penalty, emphasizing that there was no flaw in the CIT(A)'s order. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the cancellation of the penalty.

In conclusion, the Tribunal's judgment favored the assessee by dismissing the appeal of the Revenue, thereby upholding the cancellation of the penalty under section 271B based on the interpretation of the turnover and audit requirements under section 44AB.