2018 (2) TMI 170 - AT - Income Tax

Penalty proceeding u/s 271A - assessee has not maintained any books of accounts and filed his return of income by declaring the income u/s 44AD - reasonable cause - Held that - We find that the assessee is earning the income by selling of milk though basically the assessee is an agriculturist having agricultural land. The assessee is having its own cows and Buffalos and thereafter, the sale of milk is not a regular business in true. The assessee has explained the reasons for not maintaining the books of accounts as assessee is basically an agriculturist and carrying out agricultural operations apart from the selling milk from the animal kept by the assessee. We find that the explanation of the assessee though may not be accepted as per the strict provisions of law however, the AO has not found the explanation of the assessee as untrue or malafide. The explanation furnished by the assessee clearly proves that there was a reasonable cause for not maintaining the books of accounts. Nature of the activity carried out by the assessee and in view of the provisions of section 273B of the Act we find that the assessee has explained a reasonable cause and consequently no penalty can be imposed. In view of the facts and circumstances of the case we delete the penalty of levy u/s 271A - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty under section 271A of the Income Tax Act by the CIT (A).
2. Failure to maintain books of accounts by the assessee.
3. Applicability of penalty under section 271A considering the nature of income earned by selling milk.

Detailed Analysis:
1. The appeal was against the confirmation of a penalty of ?25,000 under section 271A of the Income Tax Act by the CIT (A). The assessee contended that the penalty was factually and legally erroneous, emphasizing the ignorance of legal obligations due to being a villager and agriculturist. The appellant argued that the penalty should be deleted based on the circumstances and the explanation provided during the appeal proceedings.

2. The assessee, primarily an agriculturist, had income from selling milk but did not maintain books of accounts. The AO initiated penalty proceedings under section 271A due to the lack of maintained records. The appellant explained that selling milk was a part-time activity to supplement income, and being unaware of legal obligations, books were not kept. The appellant's contention was that the penalty imposition was unjustified given the nature of the activity and the appellant's ignorance of legal requirements.

3. The Tribunal considered the nature of the assessee's income from selling milk, emphasizing that it was not a regular business activity. Despite the strict provisions of the law, the Tribunal noted that the appellant's explanation for not maintaining books of accounts was reasonable. The Tribunal found that the appellant had a valid cause for not keeping records, considering the background and nature of the activity. Referring to section 273B of the Act, which allows for reasonable causes for failure to maintain books, the Tribunal concluded that no penalty could be imposed. Consequently, the penalty under section 271A was deleted based on the explanation provided by the assessee and the circumstances of the case.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the reasonable cause for not maintaining books of accounts and the nature of the income earned from selling milk, leading to the deletion of the penalty imposed under section 271A of the Income Tax Act.