2017 (11) TMI 678 - AT - Income Tax

Penalty u/s 271AAB - non maintaining books of accounts u/s 44AA for his commodities transactions - intention of the assessee to evade payment of tax - Held that - It is not in dispute that the assessee s case falls within the ambit of 271AAB(1)(a) of the Act as admittedly the assessee had satisfied the cumulative conditions prescribed thereon. We are not inclined to accept arguments of the assessee that he is not required to maintain books of accounts u/s 44AA of the Act for his commodities transactions, in view of the fact that the assessee himself had considered his case to be eligible for tax audit and had accordingly, filed the return of income u/s 139(1) of the Act on 30.09.2013 for the assessment year 2013-14. It is not in dispute that the due date for filing return of income for non-tax audit assessees is 31.07.2013 for the assessment year 2013-14. In the instant case, the assessee himself had accepted the fact that he is engaged in commodities trading business and accordingly, he is mandated to maintain books of accounts u/s 44AA of the Act. It is not in dispute that as on date of search i.e. 01.08.2012, the assessee had not entered the commodities transaction in its books of accounts. Hence, as per the definition of undisclosed income given in Explanation C to Section 271AAB of the Act, the additional income disclosed by the assessee indeed takes the character of undisclosed income. Even assuming that the mistake lies on the part of the Accountant by not entering the entries in the books of accounts regarding the commodities transaction, which might tantamount to reasonable cause, the assessee would still be exigible for levy of penalty as no immunity could be claimed in terms of Section 273B of the Act. We find that the Ld. CIT(A) had looked into irrelevant circumstances for deleting the levy of penalty in the instant case forgetting the fact that the levy of penalty u/s 271AAB of the Act is automatic in nature as per the plain reading of the provisions of the Act. Hence, we hold that the Ld. AO had rightly levied penalty at 10% of undisclosed income amounting to ₹ 30lakhs in the instant case. - Decided against assessee.

Summary

Issues:
Penalty under Section 271AAB of the Income Tax Act, 1961.

Analysis:
The appeals were filed by the Revenue against the appellate orders passed by the Ld. Commissioner of Income Tax (Appeals) regarding the penalty imposed under Section 271AAB of the Act for the assessment year 2013-14. The key issue was whether the Ld. CIT(A) was justified in deleting the penalty. The case involved the search & seizure operation conducted under Section 132 of the Act, where the assessee disclosed an income of ?3 crores towards undisclosed income. The Ld. AO initiated penalty proceedings under Section 271AAB based on the undisclosed income. The Ld. AO observed that the conditions for penalty under Section 271AAB were met, leading to the imposition of a penalty amounting to ?30 lakhs. However, the Ld. CIT(A) deleted the penalty, emphasizing that the absence of entries in the regular books of accounts was a bona fide mistake and did not indicate an intention to conceal income. The Revenue appealed, arguing that the penalty under Section 271AAB was mandatory and the Ld. CIT(A) misinterpreted the provisions.

The Tribunal found that the assessee's case fell within the ambit of Section 271AAB(1)(a) as the conditions were satisfied. The Tribunal rejected the assessee's argument that maintaining books of accounts under Section 44AA was not required for commodities transactions, as the assessee had considered the case eligible for tax audit and filed the return accordingly. The Tribunal noted that the undisclosed income disclosed by the assessee took the character of undisclosed income as per Explanation C to Section 271AAB. The Tribunal also highlighted that Section 271AAB was not included in the provisions of Section 273B, indicating no immunity for reasonable cause. Even if the mistake was on the part of the Accountant, the Tribunal held that the penalty was justified as no immunity could be claimed. The Tribunal concluded that the Ld. CIT(A) had erred in deleting the penalty, as the levy of penalty under Section 271AAB was automatic. Therefore, the Tribunal allowed the Revenue's appeal, upholding the penalty of ?30 lakhs.

The decision applied to all three assessees involved in the appeals, and the Tribunal pronounced that all appeals of the Revenue were allowed on 10.11.2017.