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TMI Blog2023 (4) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... When assessee did not maintain regular books of accounts, then the question of getting the books of account audited does not arise at all - since there is a violation of provisions of section 44AA of the Act and the said violation cannot be extended to section 44AB of the Act. The provisions of section 44AB of the Act can only be invoked when the assessee had first complied with the provisions of section 44AA of the Act. Therefore, in my view the violation of section 44AA of the Act cannot continue because once it is found that assessee did not maintain the regular books of account then the said violation cannot travel beyond the provisions of section 44AA and hence cannot be held as further violation of section 44AB - See case of CIT vs. Bisauli Tractors [ 2007 (5) TMI 181 - ALLAHABAD HIGH COURT] As decided in the case of Suraj Mal Parasuram Todi [ 1996 (8) TMI 102 - GAUHATI HIGH COURT] wherein it was held that where no books of account are maintained, penalty should be imposed for non maintenance of books of account u/s 271A of the Act and in such circumstances no penalty can be imposed under section 271B for violation of section 44AB of the Act - Appeal of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness, the assessment was completed u/s 143(3)/147 of IT Act 1961considering income as 226620/-. AO initiated penalty u/s 271B in his order and thereafter Ld.AO passed the order u/s 271B imposing penalty for Rs. 75297/- on dated 27/01/2022 aggrieved by the AO order assessee file appeal with CIT(A) where Ld.CIT(A) dismissed the appeal. Ground of appeal: - On the facts and in the circumstances of the case Ld AO impose the penalty of rs 75297 on account of sec 271B without considering the facts available with the AO which is unjustified and liable to be quashed Your honour it is worthy to note that assesse during the year suffered from huge losses and various cases under RBI Act for cheque dishonored were filed against the assessee, he could not settle his liabilities in due time that s why he absconding from Jaipur for a year copy of FIR already submitted with AO at the time of assessment proceedings. Your honour s AO himself accepted the truth of not maintaining proper books of accounts and not producing such books of accounts for the year under consideration which can be easily verified from the assessment order passed by Ld.AO (page no 4 of AO order) reproduced here un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished no return at all before the Income-tax Officer, it should be presumed for the purposes of section 28(1)(b) that he has furnished a return of his income intimating the Income-tax Officer that his income is nil. It seems to me that the language of section 28(1) does not admit of any such construction since the clear requirement of the provisions of this sub-section is that an assessee on whom a penalty is proposed to be imposed under section 28(1)(b) should have in the first instance furnished his return. That, in my opinion, is the ordinary and grammatical meaning of the words occurring in the Act. To interpret the language of this provision in the manner suggested by the learned Government Pleader would, in my opinion, be too artificial and too far-fetched to commend itself for acceptance. Although it is true that the provisions of a statute like those contained in section 28(1)(b) have to receive to construction so as to promote the object of the statute, it is clear that when we interpret a penal provision like that contained in section 28(1)(b), the interpretation we should place upon it must accord with reason and justice and must be in accordance with the plain ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty under clause (1) of sub-section (c) of section 18 of the Act is exigible. 14. Therefore, section 271B of the Act is not attracted in a case where no account has been maintained and instead recourse under section 271A can be taken. 7. A similar view has been taken by the Hon ble Gauhati High Court in case of Surajmal Parsuram Todi vs. CIT (supra) and held in para 6 as under: - 6. We have gone through the provisions of sections 44AA, 44AB, 271A and 271B of the Act. Maintenance of accounts is envisaged under section 44AA and on failure to do so the assessee shall be guilty and liable to be penalised under section 271A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by section 44AA the offence is complete. After that there can be no possibility of any offence as contemplated by section 44AB and, therefore, in our opinion, the imposition of penalty under section 271B is erroneous. The Tribunal has overlooked this aspect of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in deleting penalty u/s 271(1)(c) which was imposed on the basis of addition made by the AO on estimated profit. Similar view has been taken in a series of judgments including the Hon'ble Punjab Haryana High Court in CIT vs. Dhillon Rice Mills (2002) 256 ITR 447 (P H). In this case also, the Hon'ble Punjab Haryana High Court approved the view taken by the Tribunal in deleting the penalty u/s 271(1)(c) which was based on an estimate of income made by the AO. In view of the foregoing decisions, it is clear that the penalty so confirmed in the instant case cannot be sustained because it was imposed by the AO on the estimate of income made by him. We, therefore, order for the deletion of penalty. Also, your honour I want to rely on case of ITAT Jaipur Shahnaz Khanam vs. The ITO, Ward, Jhalawar ITA No. 38/JP/2018. Hence, that when the assessee has not maintained the regular books of account and the penalty then no penalty can be levied for violation of Section 44AB of the Act. I therefore request you to drop the penalty and oblige us. 5. On the other hand, the ld. D/R appearing on behalf of the Department relied on the orders of the Revenue authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly be invoked when the assessee had first complied with the provisions of section 44AA of the Act. Therefore, in my view the violation of section 44AA of the Act cannot continue because once it is found that assessee did not maintain the regular books of account then the said violation cannot travel beyond the provisions of section 44AA and hence cannot be held as further violation of section 44AB of the Act. In this regard, the Hon ble Allahabad High Court in the case of CIT vs. Bisauli Tractors, 299 ITR 219 (All.) has held in paras 11 to 14 as under :- 11. In the case of S. Narayanappa Bros. v. CIT [1961] 41 ITR 125 the Mysore High Court has held as follows : What was urged before us was that in a case where an assessee has furnished no return at all before the Income-tax Officer, it should be presumed for the purposes of section 28(1)(b) that he has furnished a return of his income intimating the Income-tax Officer that his income is nil. It seems to me that the language of section 28(1) does not admit of any such construction since the clear requirement of the provisions of this sub-section is that an assessee on whom a penalty is proposed to be imposed under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying the strict construction of penalty provisions contained in clause (1) of sub-section (c) of section 18 of the Act, we find that prior to the amendment in Explanation 3 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989 in a case where the person who has previously been assessed under the Act does not file any return in response to the notice or even where time for filing the return has expired has not filed any return there cannot be any concealment for which penalty provision can be imposed. In view of the foregoing discussions, we are of the considered opinion that in the present case the respondent assessee has not concealed the particulars of his income for which wealth no penalty under clause (1) of sub-section (c) of section 18 of the Act is exigible. 14. Therefore, section 271B of the Act is not attracted in a case where no account has been maintained and instead recourse under section 271A can be taken. A similar view has been taken by the Hon ble Gauhati High Court in the case of Surajmal Parsuram Todi vs. CIT, 222 ITR 691 (Gauhati) and has held in para 6 as under :- 6. We have gone through the provisions of sections 44AA, 44AB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are convinced that penalty u/s 271B ought not to have been levied because the assessee admittedly did not maintain any books of account as has been recorded in the assessment order itself. We, therefore, order for the deletion of penalty. 4. As regards the imposition of penalty u/s 271(1)(c) of the Act on the addition of Rs.7.5o lac, we find that this addition has resulted on estimation of income at 5% on estimated sales ITA Nos.6696 6645/De1/2014 of Rs.1.50 crore. Except that there is no other basis for imposition of penalty. The Hon'ble Delhi High Court in CIT vs. Aero Traders P. Ltd. (2010) 322 ITR 316 (Del) has upheld the view taken by the Tribunal in deleting penalty u/s 271(1)(c) which was imposed on the basis of addition made by the AO on estimated profit. Similar view has been taken in a series of judgments including the Hon'ble Punjab Haryana High Court in CIT vs. Dhillon Rice Mills (2002) 256 ITR 447 (P H). In this case also, the Hon'ble Punjab Haryana High Court approved the view taken by the Tribunal in deleting the penalty u/s 271(1)(c) which was based on an estimate of income made by the AO. In view of the foregoing decisions, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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