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2014 (1) TMI 1582 - AT - Income TaxPenalty u/s 271B - Tax Audit - The assessee failed to furnish bonafide reasons for not getting the books of accounts audited either before the AO or the FAA - Held that - The assessee s total turnover of the business in transacting shares was higher than the prescribed limit u/s 44AB - It does not differentiate between commodities sold under the head speculative business or normal business - The provision of section 271B of the Act is an enabling provision empowering the AO to direct payment of penalty for non-compliance with the provisions of section 44AB. Section 271B has to be read with provisions of section 44AB of the Act - Decided against assessee.
Issues Involved:
1. Levying of penalty u/s. 271B of the Income-tax Act, 1961. 2. Confirmation of penalty by CIT(A). 3. Allegation that the order is against the principle of natural justice. 4. Allegation that the order is based on surmises and conjectures. Detailed Analysis: 1. Levying of Penalty u/s. 271B of the Income-tax Act, 1961: The Assessee filed her return of income on 01.11.2004 declaring a total income of Rs. 77.43 lakhs. The Assessing Officer (AO) finalized the assessment u/s. 143(3) on 04.12.2006, determining the total income at Rs. 1,00,76,850/-. During the assessment proceedings, the AO found that the Assessee had shown speculative business profit of Rs. 17.14 lakhs, with the gross turnover running into Crores of rupees. The total profit/loss exceeded Rs. 40 lakhs, and the Assessee had not submitted a Tax Audit Report as required u/s. 44AB. Consequently, the AO initiated penalty proceedings u/s. 271B and issued a notice on 04.12.2006. After considering the Assessee's submissions, the AO levied a penalty of Rs. 1 lakh u/s. 271B for failing to get her accounts audited. 2. Confirmation of Penalty by CIT(A): The Assessee appealed before the First Appellate Authority (FAA), who upheld the AO's penalty order. The FAA held that even if the Assessee's contention that speculative profit on non-delivery and F&O Trading amounted to Rs. 17.47 lakhs was accepted, the Assessee could not explain why the turnover pertaining to business income of Rs. 23.55 lakhs, shown as Short Term Capital Gain (STCG), should not be treated as turnover for section 44AB. The FAA agreed with the AO that the Assessee was required to get her accounts audited and upheld the penalty. 3. Allegation that the Order is Against the Principle of Natural Justice: The Assessee argued that the order was against the principle of natural justice. However, the tribunal found that the Assessee had been given sufficient opportunity to explain her position but failed to provide a reasonable cause for not getting the accounts audited. The tribunal emphasized the importance of tax audits for proper maintenance of accounts and detection of fraudulent practices, as outlined in sections 44AB and 271B. 4. Allegation that the Order is Based on Surmises and Conjectures: The Assessee contended that the order was based on surmises and conjectures. The tribunal, however, concluded that the AO and FAA had based their decisions on concrete facts and the legislative intent behind sections 44AB and 271B. The tribunal cited various judicial precedents and principles governing the imposition of penalties under section 271B, emphasizing that the Assessee's failure to get the accounts audited without reasonable cause justified the penalty. Conclusion: The tribunal confirmed the penalty imposed by the AO and upheld by the FAA. It concluded that the Assessee had entered into speculative business transactions exceeding the prescribed monetary limit under section 44AB and failed to provide a bona fide reason for not getting the accounts audited. The tribunal found that the Assessee's arguments were not relevant to the facts of the case and that the legislative intent and judicial principles supported the imposition of the penalty. Consequently, the appeal filed by the Assessee was dismissed. Order Pronounced: The order was pronounced in the open court on 29th January, 2014.
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