2023 (8) TMI 961 - AT - Income Tax

Penalty u/s. 271B - AO observed that the assessee had, without reasonable cause, failed to get his accounts audited and furnished a tax audit report within the stipulated period as required u/s 44AB - HELD THAT - Because the gross turnover/sales of the assessee on which he had disclosed presumptive profit u/s. 44AD of the Act, i.e., @8.02% was substantially less than the threshold limit of two crore rupees as envisaged in the 3rd proviso to Section 44AB therefore, we concur with the claim of the Ld. AR that no obligation was cast upon him to get his accounts audited as per the mandate of the aforesaid statutory provision. We, thus, in terms of our observations above, are unable to persuade ourselves to subscribe to the penalty imposed by the A.O. u/s. 271B - Decided in favour of assessee.

Summary

Issues involved:
The sustainability of the penalty imposed u/s. 271B of the Income-tax Act, 1961.

Controversy:
The controversy in the present appeal revolves around the penalty of Rs. 61,365/- imposed by the Assessing Officer (A.O) u/s. 271B of the Act, which was upheld by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC).

Assessee's Background:
The assessee, engaged in retail trading of diamond and gold/silver ornaments and a partner in a firm, filed the return of income for A.Y. 2017-18, declaring an income of Rs. 19,13,000/-.

Assessment and Penalty Imposition:
The A.O. assessed the income at Rs. 27,48,520/- and initiated penalty proceedings u/s. 271B of the Act, as the assessee failed to get his accounts audited and furnish a tax audit report within the stipulated period under Sec. 44AB of the Act.

CIT(Appeals) Decision:
The CIT(Appeals) upheld the penalty, stating that the assessee failed to comply with the provisions of Section 44AB of the Act by not getting the accounts audited within the due date as required by law. The penalty was deemed justified as per the provisions of the Act.

Appellate Tribunal's Decision:
The Authorized Representative for the assessee argued that the assessee was not obligated to get the accounts audited as the total turnover did not exceed the threshold limit of Rs. 2 crore as per the "3rd proviso" to Section 44AB of the Act. The Tribunal concurred with this argument and vacated the penalty of Rs. 61,365/- imposed by the A.O. u/s. 271B of the Act.

Conclusion:
The Appellate Tribunal allowed the assessee's appeal, setting aside the penalty imposed by the A.O. and upheld by the CIT(Appeals) based on the interpretation of the statutory provisions regarding the audit requirement under Section 44AB of the Act.