2015 (7) TMI 975 - AT - Income Tax

Tax Audit - Determination of turnover for the purpose of section 44AB - Penalty u/s 271B - Held that - The sale of stamp papers by licensed vendors is a government assigned function to facilitate the stamp sales at various locations. The government appoints licensed agents which are remunerated at a prescribed fee scale/commission, which is mentioned in the written submissions and the stamp rules. The stamps are sold by the assessee on behalf of the government, which is further reflected by the fact that if the license is cancelled for any reason, all the unsold stamp, stamp papers, seals etc. are to be returned to the treasury which are reimbursed, thus the government retains over all control over the stamps. - assessee was having bona fide belief that his case is not liable to audit of the books as the value of stamp is not his turnover and has a role of commission agent. Under these facts and circumstances, I hold that the assessee was under a bona fide belief of being not liable for audit of accounts u/s 44AB; therefore, the penalty imposed u/s 271B is deleted. - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalty under Section 271B for non-conducting of tax audit under Section 44AB for A.Y. 2008-09 by the Assessing Officer.

Analysis:
1. The appeal was filed by the assessee against the order of the CIT(A)-II, Jaipur regarding the imposition of a penalty under Section 271B for not conducting a tax audit under Section 44AB. The sole ground of appeal was that the penalty should be deleted as the assessee, a licensed stamp vendor, only received commission on stamp sales and not the full value of stamps, thus not constituting his turnover for audit purposes under Section 44AB.

2. The assessee argued that as per the Stamp Act, he was entitled only to commission on stamp sales, and the relationship with the government was not that of a seller and purchaser. The Assessing Officer contended that the total value of stamps constituted the assessee's turnover, making him liable for audit under Section 44AB. The dispute arose from whether the assessee acted as a commission agent or a seller of stamps, determining the applicability of the audit requirement.

3. The CIT(A) confirmed the penalty, stating that the assessee, although mainly earning commission income, also bore risks in the business, indicating a seller role as per the Stamp Act. The CIT(A) held that the nature of the business appeared to be that of a seller (Pacca Arahtia), justifying the penalty under Section 271B for non-compliance with the audit requirement under Section 44AB.

4. The assessee appealed the decision, arguing that in past and subsequent assessments, Section 44AB was not held applicable. The assessee presented arguments based on the Stamp Act provisions, CBDT circulars, and ICAI guidance notes to support the contention that the turnover should only include commission income and not the full value of stamps.

5. After considering the submissions and material on record, the ITAT Jaipur held that the sale of stamp papers by licensed vendors was a government-assigned function, and the assessee, acting as a commission agent, was not liable for audit under Section 44AB. The ITAT concluded that the assessee was under a bona fide belief that his case did not require audit, leading to the deletion of the penalty imposed under Section 271B.

6. In the final judgment, the ITAT allowed the assessee's appeal, emphasizing that the government retained control over the stamps, and the assessee's role was that of a commission agent. The ITAT ruled in favor of the assessee, stating that he was not liable for the audit of accounts under Section 44AB, thereby deleting the penalty imposed under Section 271B.

This detailed analysis of the judgment highlights the key arguments, legal interpretations, and the final decision made by the ITAT Jaipur regarding the imposition of a penalty under Section 271B for non-conducting a tax audit under Section 44AB for the relevant assessment year.