2023 (5) TMI 1211 - AT - Income Tax

Penalty u/s 271B - failure to get his books of account audited by a qualified Chartered Accountant, thereby violating the provisions of section 44AB - as explained that the assessee is engaged in the business of supply of milk (Amul) on behalf of Gujarat Co.op Milk Marketing Federation Ltd. known as Amul Milk in the assigned area - HELD THAT - During assessment proceedings as also before the Ld. CIT(A) in penalty proceedings the assessee explained, inter alia that it was his first year of business and that he was under the bonafide belief that the provisions of section 44AB as inapplicable to him as he was only a commission agent supplying milk on behalf of Amul Milk in the assigned area and was entitled to fixed commission only. In our opinion, the explanation offered by the assessee constitutes reasonable cause and the assessee is eligible to the protection envisaged under section 273B. It is an admitted position that during the course of assessment proceedings, the assessee got the tax audit done and submitted the tax audit report before the Ld. AO when he was made aware that initial receipts having been deposited by him in the bank account maintained by him necessitated tax audit as per the provisions of section 44AB. This factual position has altogether been ignored by the Ld. AO/CIT(A) and the impugned penalty has been levied/confirmed. As during the course of assessment proceedings, the assessee got the tax audit done and submitted the tax audit report before the Ld. AO when he was made aware that initial receipts having been deposited by him in the bank account maintained by him necessitated tax audit as per the provisions of section 44AB. This factual position has altogether been ignored by the AO/CIT(A) and the impugned penalty has been levied/confirmed. The contention of the assessee before the AO/CIT(A) has been that the assessee is only an agent of Amul. The assessment order passed on 28.12.2019 reveals that the assessee explained in detail the modus operandi of his business which after examination has been accepted by the Ld. AO. The explanation offered by the assessee has been discarded by the Ld. CIT(A) without any valid and cogent reasons. As following the decision in Mohd. Javed s case 2023 (3) TMI 1364 - ITAT DELHI we hold that the impugned penalty is not sustainable which we hereby vacate. Decided in favour of assessee.

Summary

Issues involved:
The appeal challenges the penalty imposed under section 271B of the Income Tax Act, 1961 for the Assessment Year 2017-18 by the National Faceless Assessment Centre, Delhi.

Summary:
1. Assessee's Grounds: The assessee, engaged in retail trading of Amul Dairy Products, challenged the penalty, arguing that he was not liable for Tax Audit and that the services provided were only as a courier, not falling under section 44AB of the Income Tax Act, 1961.

2. Assessment Proceedings: The Assessing Officer completed the assessment accepting the income declared by the assessee but initiated penalty proceedings for failure to get accounts audited under section 44AB.

3. Penalty Imposition: The penalty of Rs. 1,50,000 was imposed for non-compliance with show cause notices, leading to the appeal before the NFAC, Delhi.

4. Appellate Proceedings: The CIT(A) confirmed the penalty, rejecting the assessee's arguments regarding being an agent of Amul and the first year of business ignorance of section 44AB provisions.

5. Tribunal Decision: The Tribunal considered the reasonable cause for failure under section 273B, accepting the assessee's explanation as eligible for protection, vacating the imposed penalty. The Tribunal found the penalty unsustainable based on the facts and circumstances of the case.

In conclusion, the Tribunal allowed the appeal, vacating the penalty imposed under section 271B of the Income Tax Act, 1961 for the Assessment Year 2017-18.