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TMI Blog2018 (3) TMI 1523X X X X Extracts X X X X X X X X Extracts X X X X ..... Sundar Marbles. In the original return of income, the assessee has disclosed a turnover of Rs. 48,98,269/- and has reported a net profit of Rs. 3,96,243/- in terms of section 44AD of the Act. A survey u/s 133A was conducted by the Investigation wing, Jaipur at the business premises of Shri Abhishek Kumawat on 18.01.2011. During the course of survey, it was noticed that Shri Abhishek Kumawat was maintaining bank accounts with PNB, Kishangarh where huge deposits have been found deposited. In the statement recorded during the survey operation, Shri Abhishek Kumawat stated that the amount credited in these bank accounts does not belong to him. He stated that many marble traders at Kishangarh are affecting sales of marble without recording the same in their books of accounts. This is being done either by selling the marbles totally without bills or by under invoicing. The sales consideration for such sales is received in cash which is not being recorded in their books of accounts. These traders have devised method of collecting cash through bank accounts of Shri Abhishek Kumawat. The cash used to be deposited at different stations of India in the bank account of Shri Abhishek Kumawat a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that during this period the monitory limit was Rs. 60 lacs and receipts were less than this amount. It was further submitted that the income was estimated on the basis of third party statement and records and the same cannot be basis for levy of penalty. Further, reliance was placed on the decision in case of Ram Prakash C. Puri vs. CIT (2001) 117 Taxman 154 (Pune) and CIT vs. Bisauli Tractors (2007) 165 Taxman 1 (All) for the proposition that no penalty u/s 271B can be levied where no books of accounts are maintained. The submissions so filed by the assessee were not found acceptable by the Assessing Officer. As per the Assessing Officer, on the basis of investigations carried out by the department and confronted to the assessee, it was noticed and accepted by the assessee that he was involved in the business of unaccounted sales through Shri Abhishek Kumawat the quantum of which works out to Rs. 4334064/- for the year under consideration apart from sales of Rs. 48,98,269/- declared in the return of income. It was held that the total receipts were more than Rs. 60 lacs and as per the provisions of section 44AB, the assessee has to get his accounts audited by Chartered Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied date. In the written submission filed by the appellant, the assessee could not furnish any reasonable cause for not getting his accounts audited u/s 44AB. Hence, I am of the considered view that the AO was fully justified in levying penalty of Rs. 46,162/- u/s 271B of the I.T. Act. Accordingly, the penalty levied by the AO is hereby confirmed." 7. During the course of hearing, the ld. AR submitted that conditions precedent for invoking of Penalty is not met in the instant case. It is submitted that for levying of penalty u/s 271B for not getting the accounts audited, as per settled judicial pronouncement as has been discussed later on, the following two basic conditions which must be met: a. The assessee must have maintained the books of accounts as per section 44AA of the Act and b. The assessee must be required to get such accounts audited u/s 44AB of the Act If any one of such conditions is not met, then penalty u/s 271B of the Act cannot be levied. However, in the present case, both these conditions are not met as has been discussed below. 7.1 Assessee Declared Income u/s 44AD of the Act - Books of Accounts Not Required to be Maintained - Not Required to be Audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me are as under: (a) The scheme is applicable to individuals, HUFs and partnership firms excluding Limited liability partnership firms. It is also not be applicable to an assessee who is availing deductions under sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading "C.-Deductions in respect of certain incomes" in the relevant assessment year. (b) The scheme is applicable for any business (excluding a business already covered under section 44AE) which has a maximum gross turnover/gross receipts of 40 lakhs. (c) The presumptive rate of income is prescribed at 8% of gross turnover/gross receipts. (d) An assessee opting for the above scheme is exempted from payment of advance tax related to such business under the current provisions of the Income-tax Act. (e) An assessee opting for the above scheme is exempted from maintenance of books of accounts related to such business as required under section 44AA of the Income-tax Act. (f) An assessee with turnover below Rs. 40 lakhs, who shows an income below the presumptive rate prescribed under these provisions, in case his total income exceeds the taxable limit, required to maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness "-----(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,- ------------------------- (i) if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or (ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or (iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AE or section 44BB or section 44BBB, as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year; or (iv) where the profits and gains from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and therefore, penalty u/s 271B could not be invoked. In such circumstances, there is impossibility to treat the same as books of accounts and even further get them audited as per provisions of section 44AB of the Act. 7.6 Independent Penalty Prescribed for Violation of Section 44AA & Section 44AB of the Act: We may submit that for violation of provisions of section 44AA of the Act, penalty is prescribed u/s 271A of the Act whereas for violation of section 44AB of the Act, penalty can be levied u/s 271B of the Act. But it is to be seen that section 44AB is dependent on section 44AA of the Act in so far as unless books of accounts are maintained as per provisions of section 44AA, question of audit of the same u/s 44AB would not arise. 7.7 Books of Accounts Not Maintained - Penalty Could be Levied u/s 271A of the Act - Section 271B Cannot Be Invoked: in view of the foregoing submission, we may submit that even if the assessee did not maintain any books of accounts with regard to its turnover then still a maximum penalty could be levied u/s 271A of the Act and there was no occasion to levy penalty u/s 271B of the Act and obvious reason for the same is that where there a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a conclusion that since the combined receipts exceed the prescribed threshold of Rs. 60 lacs, the assessee has failed to get his books of accounts audited. We find that by accepting the income offered under section 44AD(1), the AO has thus accepted the assessee's eligibility for presumptive basis of taxation under section 44AD. Once the said eligibility is accepted, if we read the provisions of section 44AD and in particular sub-section (5), it clearly provides that an eligible assessee who claims his income from the eligible business is below the presumptive rate of 8% of total turnover or gross receipts, he shall be required to maintain books of accounts and also get them audited and furnish a report as required under section 44AB of the Act. Therefore, only in a scenario, where such a claim is made by the assessee whereby he claims that his income to be lower than 8% of total turnover or gross receipts, he will be required to maintain books of accounts and get them audited. Corresponding provisions are provided in section 44AA(2)(iv) of the Act as well. In the instant case, the assessee has not made any such claim in his return of income. Further, the Revenue has accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act. However, under s. 34 of the Indian Evidence Act, 1872, sanctity is attached to the books of accounts, if the books are indeed "account books", i.e., in original if they show on their face, that they are kept in the 'regular course of business'. So, the accounts under s. 34 of Indian Evidence Act means accounts which are maintained in the regular course of business. Accordingly we are satisfied that the record carrying entries from which the appellant admits of additional sales are not the accounts as referred to under s. 44AB of the Act. On that basis it was not open to the AO to hold that the sales of the assessee as referred in s. 44AB of the Act have exceeded to Rs. 40 lakhs and by not getting such accounts audited from an accountant, the appellant has committed a default. Such a finding arrived at by the AO is reversed." 10. In light of above discussions and in the entirety of facts and circumstances of the case, the penalty levied under section 271B is hereby deleted. In the result, the appeal of the assessee is allowed. 11. In ITA No. 73/JP/18, Admittedly, the facts and circumstances in this case are similar. Our findings and directions contained in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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