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2023 (1) TMI 650 - AT - Income TaxPenalty u/s 271B - no tax audit conducted u/s 44AB - bonafide belief - Appellant contends that in absence of any Sale to customers provisions of tax audit u/s 44AB of ITA 1961 are not applicable for A.Y 2015-16 - HELD THAT - It is an admitted fact that the assessee is in the business of builder and developer. The assessee has not got its books of account audited for the year under consideration. It is also admitted fact that the assessee was maintaining books. The only reason submitted by the assessee is that the assessee was under bonafide belief as according to the assessee there was no sale and assessee had only received advances from customers against the bookings. However it is an admitted fact that the assessee follows Percentage completion method of accounting accordingly in the Profit and Loss account. It is mandatory for an assessee whose Total Sales Turnover or Gross receipts exceeds Rs.1 crores to get books of accounts audited. Thus as per the provision of the Act either Turnover Sales or Gross receipts shall exceed Rs. 1 crores. The legislature has used three words Sales Turnover Gross receipts. So while analyzing the business of the assessee the AO has to find out whether the Sale Gross Receipt or turnover is more than Rs. 1 crores then provisions of Section 44AB will be applicable. Therefore if any one of Sale Turnover or gross receipts is more than prescribed limit the provision of Section 44AB will be applicable. When Gross profit is more than Rs.4 crores it means the Gross Receipts were definitely more than Rs.1 crores - Assessee in the case has receipts more than Rs.1 crores. Therefore the assessee was under obligation to audit the books of account as per section 44AB of the Act. Admittedly the assessee failed to do so. There is penalty prescribed in the Section 271B of the Act for failure to comply provisions of Section 44AB. In the case under consideration the assessee has merely stated that it was under bonafide belief. This explanation is not acceptable as the assessee is a builder having advice of professionals like CA. Therefore the explanation seems to be mere eye wash. The assessee has got its Balance Sheet prepared Profit and Loss Account prepared from professionals and these are duly signed by CA. Therefore the explanation of the assessee is not acceptable. AO has levied minimum penalty of Rs.1, 50, 000/-. - any amount above Rs.1 crores will attract minimum penalty of Rs.1, 50, 000/-. Therefore on the facts and circumstances of the case the penalty levied by the AO u/s 271B is upheld. Accordingly grounds of appeal of the assessee are dismissed.
Issues Involved:
1. Penalty under Section 271B of the Income Tax Act, 1961. 2. Applicability of Section 44AB of the Income Tax Act, 1961. 3. Assessee's bonafide belief regarding non-applicability of Section 44AB. 4. Reasonable cause under Section 273B of the Income Tax Act, 1961. Detailed Analysis: 1. Penalty under Section 271B of the Income Tax Act, 1961: The primary issue is whether the penalty levied under Section 271B for failing to get accounts audited as mandated by Section 44AB is justified. The Assessing Officer (AO) levied the penalty, and the Commissioner of Income Tax (Appeals) [CIT(A)] confirmed it. The Tribunal upheld the penalty, emphasizing that the assessee's gross receipts exceeded the prescribed limit of Rs.1 crore, making the audit mandatory. 2. Applicability of Section 44AB of the Income Tax Act, 1961: Section 44AB mandates that every person carrying on business must get their accounts audited if their total sales, turnover, or gross receipts exceed Rs.1 crore in any previous year. The Tribunal noted that the assessee, a builder and developer, followed the Percentage Completion Method of Accounting. The assessee's gross receipts, including advances from customers and work in progress, exceeded Rs.1 crore, thus triggering the audit requirement under Section 44AB. 3. Assessee's Bonafide Belief Regarding Non-Applicability of Section 44AB: The assessee argued that they were under a bonafide belief that an audit was not required as there were only advances from customers and no complete sales during the year. The Tribunal rejected this argument, stating that the assessee, being a builder and developer, should have been aware of the audit requirements, especially with professional advice from a Chartered Accountant (CA). The Tribunal emphasized that gross receipts, including advances, exceeded Rs.1 crore, making the audit mandatory. 4. Reasonable Cause under Section 273B of the Income Tax Act, 1961: Section 273B provides that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the failure. The assessee contended that their bonafide belief constituted a reasonable cause. However, the Tribunal found this explanation unacceptable, highlighting that the assessee had professional advice and had prepared financial statements with the help of a CA. The Tribunal concluded that the explanation was merely an eye wash and did not constitute a reasonable cause under Section 273B. Conclusion: The Tribunal upheld the penalty of Rs.1,50,000 levied by the AO under Section 271B, stating that the assessee failed to comply with the mandatory audit requirement under Section 44AB. The Tribunal dismissed the appeal, emphasizing that the assessee's gross receipts exceeded Rs.1 crore and that the explanation provided did not constitute a reasonable cause for the failure to get the accounts audited. Order Pronouncement: The appeal of the assessee was dismissed, and the order was pronounced in the open court on 22nd December, 2022.
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