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2022 (1) TMI 139 - AT - Income TaxLevy of penalty u/s 271B - not getting books of account audited u/s 44AB - HELD THAT - We note that the assessee is a retired employee and files regular return of income. For the year under appeal though the assessee has filed income tax return but he has not disclosed the transaction of purchase/sale of equity shares neither under the head of business and profession nor capital gain. Assessee is maintaining share trading account with Nirmal Bang Securities Pvt. Ltd. Total sales made on delivery based transaction - Assessee has not disputed this figure of sale turnover of share trading of delivery based transaction but only claimed before AO that these transaction were in the nature of purchase and sale of shares held for less than 12 months and there was short term capital loss which was not disclosed in the income tax return. AO has given categorically finding that the assessee had made frequent transaction in both delivery as well as non-delivery based segment of shares and volume and quantity of buying and selling of shares was also found to be substantially high which are sufficient to prove that transactions of share trading carried out by the assessee during the year are in the nature of business. This plea of the assessee that he was ignorant about the provision of getting books of account audited, find no merit as ignorance of law is no excuse and carrying out the transactions of the magnitude in itself leaves no room for the assessee to make an excuse for not getting books of account audited u/s 44AB - Decided against assessee.
Issues Involved:
1. Justification of penalty under Section 271B of the Income Tax Act, 1961. 2. Requirement and maintenance of books of account under Section 44AA and 44AB. 3. Ignorance of law as a defense. Issue-wise Detailed Analysis: 1. Justification of Penalty under Section 271B: The core issue in this case is whether the penalty of ?1,50,000 under Section 271B of the Income Tax Act, 1961, was justified. The Assessee, a retired employee, filed the return of income for the Assessment Year 2014-15 but did not get the books of account audited despite having a turnover exceeding ?1 crore from share trading activities. The Assessing Officer (AO) initiated penalty proceedings and levied the penalty, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. 2. Requirement and Maintenance of Books of Account under Section 44AA and 44AB: The Assessee argued that he did not maintain books of account and was unaware of the requirement to get them audited. However, the Tribunal noted that the Assessee engaged in frequent and substantial share trading transactions, indicating the nature of business activities. The Tribunal emphasized that ignorance of law is not an excuse and that the magnitude of transactions necessitated compliance with Section 44AB. The CIT(A) also held that the Assessee was liable to maintain books of account under Section 44AA and get them audited under Section 44AB, as the turnover exceeded ?1 crore. 3. Ignorance of Law as a Defense: The Assessee's plea of ignorance regarding the mandatory provision of getting the books of account audited was dismissed. The Tribunal cited the principle that ignorance of law is no excuse. The CIT(A) referred to judicial pronouncements, including the case of Anahaita Nalin Shah v. Deputy Commissioner of Income Tax, where the imposition of penalty under Section 271B was justified when the turnover exceeded the prescribed limit, and the Assessee failed to get the books audited. Detailed Analysis: The Tribunal examined the facts and records, noting that the Assessee had not disclosed the share trading transactions in the income tax return. The AO found that the Assessee's share trading activities were substantial and frequent, qualifying as business transactions. The Tribunal agreed with the AO's finding that the Assessee's plea of ignorance was not tenable, given the significant turnover of ?3,13,81,410. The CIT(A) examined the issue in detail and upheld the penalty, stating that the Assessee, being an educated retired pensioner involved in daily share transactions, could not claim ignorance of the provisions of Sections 44AA and 44AB. The CIT(A) also distinguished the case laws cited by the Assessee, noting that the Assessee was liable to maintain books of account and get them audited, and the records maintained by the broker were sufficient to compute the total income. The Tribunal concluded that the CIT(A) had rightly confirmed the penalty, as the Assessee failed to prove any reasonable cause for not getting the books of account audited. The Tribunal dismissed the Assessee's appeal, finding no inconsistency in the CIT(A)'s findings. Conclusion: The Tribunal upheld the penalty of ?1,50,000 under Section 271B, confirming that the Assessee was required to maintain and audit the books of account due to the substantial turnover from share trading activities. The plea of ignorance of law was rejected, and the appeal was dismissed.
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