2018 (1) TMI 886 - AT - Income Tax

Penalty U/s 271B - assessee failed to keep its account audited - Held that - As AR submitted that a consolidated audit of all the shops to whom license was granted by the Excise department, was carried out at Udaipur by the Chartered Accountant and a consolidated audit report was furnished by him in the name of AOP M/s Umrao Singh & Party (Kota Bundi) group, Udaipur and the consolidated audit report was prepared after taking into account all relevant factors of the assessee as well as of other license holders. The consolidated report in the name of AOP M/s Umrao Singh and party of which the assessee is one of the member. Once the assessment in the hands of AOP has been made then the assessment of the same income in the individual capacity tantamount to double assessment of the same income, which is impermissible in the eyes of law. Thus the Bench direct to delete the penalty levied U/s 271B of the Act. - Decided in favour of assessee

Summary

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

Detailed Analysis:
1. Facts of the Case: The assessee filed the return of income for A.Y. 2009-10, declaring total income and agricultural income. The assessee was involved in a liquor business as a member of an AOP. The Assessing Officer initiated penalty proceedings under Section 271B as the assessee failed to get the accounts audited as required by law.

2. Decision of CIT(A): The CIT(A) upheld the penalty, stating that the turnover of the liquor business should have been declared in the assessee's return of income. The CIT(A) found the assessee in violation of Section 44AB of the Act and justified the penalty imposition.

3. Arguments Before ITAT: The assessee appealed to the ITAT, arguing that the assessment of the liquor business income had already been done in the hands of the AOP, and assessing the same income individually would lead to double taxation. The assessee provided details of the AOP agreement and the audit conducted for the AOP.

4. ITAT's Decision: After considering the submissions and case laws cited by the assessee, the ITAT directed to delete the penalty levied under Section 271B. The ITAT agreed that assessing the same income in individual capacity after AOP assessment amounted to double taxation, which is impermissible under the law.

5. Precedents and Legal Arguments: The assessee relied on various judgments emphasizing that income should be assessed only once, either individually or in the AOP's hands, to avoid double taxation. References were made to cases like Durga Madira Sangh vs. CIT and Baru Ram Milkhi Ram vs. ITO, supporting the assessee's contention against individual assessment of the liquor business income.

6. Conclusion: The ITAT allowed the appeal of the assessee, emphasizing that once the assessment in the AOP's hands had been completed, individual assessment of the same income would lead to impermissible double taxation. The ITAT directed to delete the penalty imposed under Section 271B of the Income Tax Act.

This detailed analysis covers the facts, decisions, arguments, legal precedents, and the final judgment of the ITAT regarding the penalty under Section 271B of the Income Tax Act in this case.