2024 (6) TMI 1201 - AT - Income Tax

Penalty u/s 271B - not getting books of accounts audited as per the provisions of section 44AB - Assessee submitted that the assessee has not written up the books of accounts till the date of finalization of audit within the due date specified u/s 44AB , accordingly, there was no possibility of getting accounted u/s 44AB HELD THAT - The undisputed fact is this that the assessee did not file any return of income under the provisions of section 139(1) of the Act. The return was filed in response to the notice issued under section 148 of the Act on account of income escaping assessment. Thus, there remains no ambiguity that the books of accounts of the assessee were not written up before the due date of filing the return of income as specified u/s 139(1) of the Act. This fact can be verified from the penalty order framed by the AO under section 271B of the Act. Once it is established that the books of accounts were not written up within the due date of filing the return of income, the question of getting them audited to comply the provision of section 44AB of the Act, does not arise. As such the first default of the assessee on stand-alone basis is non-maintenance of books of account u/s 44AA of the Act which is complete offence. Therefore, such default i.e. non-maintenance of the books of accounts is subject to the penalty under the provisions of section 271A . As decided in BISAULI TRACTORS 2007 (5) TMI 181 - ALLAHABAD HIGH COURT as separate penalty has been provided for non-maintenance of accounts, i.e., under section 271A and for not getting the accounts audited and not furnishing the audit report i.e., under section 271B - If a person has not maintained the accounts book or any accounts the question of its audit does not arise. In such an event the imposition of penalty under the provision contained in section 271A of the Act for the alleged non-compliance of section 44AA of the Act may arise but the provisions of section 44AB of the Act does not get violated in case where the accounts have not been maintained at all and, therefore, penal provisions of section 271B of the Act would not apply. Also see SURAJMAL PARSURAM TODI VERSUS COMMISSIONER OF INCOME-TAX 1996 (8) TMI 102 - GAUHATI HIGH COURT Therefore, the assessee can get the immunity from the penalty specified u/s 271B of the Act. Contention of the Ld. DR that the assessee has written up the books of accounts is misplaced. Indeed, the assessee has written up books of account but on a later date. As such, the Ld. DR has not brought any concrete evidence justifying that the books of accounts of the assessee were written up before the due date of filing return of income as specified under section 139 of the Act and therefore the assessee has contravened the provisions of section 44AB. We hold that the assessee did not maintain the books of accounts within the due date specified u/s 139(1) of the Act, so as to comply the provisions of section 44AB of the Act. Accordingly, the assessee cannot be visited to the penalty for the offence committed by the assessee for not getting accounts audited. Decided in favour of assessee.

Summary

Issues:
Appeals against penalty order under section 271B of the Income Tax Act, 1961 for Assessment Years 2011-2012 & 2012-13.

Analysis:
1. The first appeal, ITA No. 57/RJT/2023, challenged the penalty imposed under section 271B for AY 2009-10. The assessee contended that non-maintenance of books of accounts under section 44AA precludes penalty under section 44AB. The Revenue argued that the assessee submitted accounts during assessment, thus differentiating the case from precedents. The Revenue cited case laws to support penalty imposition.
2. The tribunal noted that the assessee didn't file a return under section 139(1) but after a notice under section 148, indicating non-maintenance of accounts before the due date. The tribunal referenced the Guwahati High Court's ruling that failure to maintain accounts under section 44AA precludes section 44AB penalties. Similarly, the Allahabad High Court held that penalty under section 271B doesn't apply if accounts weren't maintained, focusing on section 271A4. The tribunal concluded that the penalty couldn't be imposed due to non-compliance with section 44AB.
3. In the second appeal, ITA No. 58/RJT/2023 for AY 2012-13, the issue mirrored the first appeal. The tribunal applied the findings from the earlier appeal, leading to the allowance of the second appeal.
4. The tribunal ruled in favor of the assessee in both appeals, emphasizing the non-maintenance of accounts before the due date as the crucial factor in determining penalty applicability under section 271B. The judgments of the Guwahati and Allahabad High Courts were pivotal in establishing the assessee's immunity from penalty due to non-compliance with section 44AB.

This detailed analysis of the judgment highlights the key legal arguments, precedents, and the tribunal's reasoning in deciding the appeals against the penalty orders.