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2020 (1) TMI 865 - AT - Income TaxPenalty u/s 271B - failure to get the books of accounts audited u/s 44AB - additions towards unaccounted sales - computation of turnover - HELD THAT - As decided in VINAY AGRAWAL VERSUS ITO-1 (2) UJJAIN 2019 (11) TMI 97 - ITAT INDORE relying on ATYA PRAKASH MUNDRA VERSUS INCOME TAX OFFICER, KISHANGARH. 2019 (2) TMI 157 - ITAT JAIPUR held that addition made by the Assessing Officer during the assessment proceedings on the basis of unaccounted sale cannot be regarded as the turnover for the purpose of Section 44AB of the act because the documents relied upon by the A.O. are neither the part of books of account nor would substitute the books of account or constitute the books of account of the assessee regularly maintained. Books of account maintained by the assessee in regular course of business cannot be substituted by the material gathered by the Assessing Officer in the course of some survey in the case of third party though the said material may be relevant evidence for making the addition to the income of the assessee. Hence, in view of the facts and circumstances and following the earlier decision of this Tribunal, the penalty levied U/s 271B of the Act is deleted. - Decided in favour of assessee.
Issues Involved:
1. Whether the penalty imposed under Section 271B of the Income Tax Act, 1961, was barred by limitation. 2. Whether there was a reasonable cause for the assessee's failure to get the accounts audited under Section 44AB. 3. Whether the default in not getting the accounts audited was merely technical and venial, causing no loss to the revenue. Issue-wise Detailed Analysis: 1. Penalty Barred by Limitation: The appellant argued that the penalty order dated 30.01.2017 was barred by limitation as per Section 275(1) of the Income Tax Act. The penalty proceedings were initiated on 24.02.2016, and as per the "Later Part" of Section 275(1), the penalty order should have been passed within six months from the end of the month in which the action was initiated, i.e., by 30.08.2016. Therefore, the order passed on 30.01.2017 was beyond the prescribed period and thus invalid. 2. Reasonable Cause for Failure to Audit Accounts: The appellant contended that there was a genuine mistake in Form No. 26AS, which led them to believe that their gross receipts were below ?40 lakhs, thus not requiring an audit under Section 44AB. The main purpose of the audit is to assist the Assessing Officer in assessment proceedings, and in this case, the Assessing Officer did not face any difficulty due to the absence of the audit report. The appellant argued that this constituted a reasonable cause under Section 273B, which should exempt them from the penalty. 3. Technical and Venial Default: The appellant argued that the failure to get the accounts audited was a technical and venial default, causing no loss to the revenue. The Assessing Officer merely replaced the net profit rate from 8% to 11.50% without mentioning any difficulty in the assessment due to the absence of an audit report. The appellant relied on several judicial decisions to support the claim that penalties should not be sustained in such cases. Tribunal's Findings: The Tribunal observed that the issue of penalty under Section 271B was covered in favor of the assessee by the decision of the Coordinate Bench, Indore, in the case of Vinay Agrawal vs. ITO. The Tribunal noted that the appellant had disclosed a turnover of ?39,78,709 in the return of income and offered income under Section 44AB at 8% as net profit. Since the turnover was below ?40 lakhs, the appellant did not get the accounts audited. However, during assessment proceedings, the Assessing Officer found the gross turnover to be ?55,01,093 based on Form No. 26AS, which exceeded the prescribed limit, leading to the penalty. The Tribunal referred to similar cases where penalties were deleted due to the bona fide belief of the assessee regarding the turnover limit and the technical nature of the default. The Tribunal concluded that the penalty of ?27,505 under Section 271B should be deleted, setting aside the findings of the CIT(A). The appeal was allowed, and the penalty was directed to be deleted. Conclusion: The Tribunal allowed the appeal, holding that the penalty under Section 271B was not justified due to the reasonable cause and technical nature of the default, and directed the revenue authorities to delete the penalty of ?27,505.
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