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2021 (10) TMI 1192 - AT - Income TaxLevy of penalty u/s 271B - violation of section 44AB - assessee has failed to maintain the books of accounts - assessee is a Civil Contractor - Proof of reasonable cause within the scope of section 273B - A.O has completed the assessment u/s. 143(3) by disallowing 5% of the expenses on the ground that non submissions of bills and vouchers - HELD THAT - In this case, the assessee has not maintained any books of accounts and the assessee has offered an income on estimate basis and the same is accepted by the A.O. Keeping in view of the case of CIT v. Bisuali Tractors 2007 (5) TMI 181 - ALLAHABAD HIGH COURT penalty u/s. 271B imposed by the A.O in this case cannot be sustained. Therefore, the penalty imposed by the A.O and confirmed by the Ld. CIT(A) is cancelled. Thus, the appeal filed by the assessee is allowed.
Issues Involved:
1. Legality of the penalty imposed under Section 271B for non-compliance with Section 44AB of the Income Tax Act. 2. Obligation to maintain books of accounts under Section 44AA. 3. Applicability of penalty under Section 271A versus Section 271B. 4. Relevance of judicial precedents in the context of penalty provisions. Issue-wise Detailed Analysis: 1. Legality of the Penalty Imposed under Section 271B for Non-compliance with Section 44AB: The assessee, a Civil Contractor, filed his return of income on an estimate basis but did not maintain books of accounts. The Assessing Officer (A.O.) completed the assessment and imposed a penalty under Section 271B for failing to comply with Section 44AB, which mandates auditing of accounts if turnover exceeds a specified limit. The assessee argued that since no books of accounts were maintained, the question of auditing does not arise, referencing the judgment in CIT v. Bisuali Tractors (299 ITR 219 (All.)). 2. Obligation to Maintain Books of Accounts under Section 44AA: The Tribunal acknowledged that the maintenance of books of accounts is obligatory under Section 44AA. The assessee admitted to not maintaining books of accounts due to the nature of his business and his educational background. The A.O. disallowed 5% of the expenses due to non-submission of bills and vouchers and initiated penalty proceedings under Section 271B. 3. Applicability of Penalty under Section 271A versus Section 271B: The Tribunal emphasized that the penalty for non-maintenance of books of accounts should be under Section 271A, not Section 271B. Citing CIT v. Bisuali Tractors, the Tribunal noted that if accounts are not maintained, auditing under Section 44AB does not arise, and hence, penalty under Section 271B is not applicable. The Tribunal stated, "If a person has not maintained the accounts book or any accounts the question of its audit does not arise." 4. Relevance of Judicial Precedents in the Context of Penalty Provisions: The Tribunal referred extensively to the judgment in CIT v. Bisuali Tractors, which delineates the distinction between penalties under Sections 271A and 271B. The Tribunal noted that the Department did not provide any contrary judgment from the jurisdictional High Court or the Supreme Court. The Tribunal concluded that the penalty under Section 271B could not be sustained as the assessee did not maintain books of accounts, and thus, the penalty provisions under Section 271A would be more appropriate. Conclusion: The Tribunal allowed the appeal, canceling the penalty imposed by the A.O. under Section 271B. The Tribunal reiterated that the penalty for non-maintenance of books of accounts should be under Section 271A, not Section 271B, aligning with the precedent set by the Allahabad High Court in CIT v. Bisuali Tractors. The order was pronounced on 06th October 2021 in Chennai.
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