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TMI Blog2024 (5) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Member And Shri Yogesh Kumar U.S., Judicial Member For the Appellant : Sh. Nitish Gupta, CA For the Respondent : Sh. A. S. Rana, Sr. DR ORDER PER YOGESH KUMAR U.S., JM: The assessee challenged the orders dated 10/08/2022 of the Income Tax Department/National Faceless Appeal Centre ( NFAC for short), for the Assessment Years 2011-12, 2012-13 and 2013-14 respectively, wherein the Ld. CIT(A)/NFAC confirmed the penalty orders passed by the A.O. u/s 271B of the Income Tax Act, 1961 ( Act for short). Since the common issues are involved, the Appeals of the assessee have been heard together and disposed-off by this common order. For the sake of convenience the Grounds of Appeal of the assessee for Assessment Year 2011-12 are reproduced as under:- 1. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opening balance of the financial year 2010-11 cannot be verified. No auditor will audit the accounts of a subsequent year without having the audited accounts of the preceding assessment year. Therefore, the assessee without the audit of the accounts for A.Y. 2010-11 the audit of the accounts for A.Y. 2011-12 could not have been done. 7. Our view is fortified by the decision of the Hon'ble Gauhati High Court in case of Rajmal Parsuram Todi wherein it was held that when a person commits an offence by not maintaining the books of accounts as contemplated under section 44AA, the offence is complete and after that, there can be no possibility of any offence as contemplated under section 44AB and therefore, the imposition of penalty under section 271B is erroneous. 8. Therefore, considering the above facts and circumstances of the case, where no books of accounts were maintained by the assessee u/s 44AA of the Act, penalty u/s 271B cannot be fastened on the assessee and accordingly, the appeal of the assessee may please be allowed. 9. Reliance has been placed on the following judgments:) a) Income Tax Appellate Tribunal - Jaipur in case of Shri Nirmal Kumar Joshi vs Income Tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71B is erroneous. e) Hon'ble ITAT, Kolkata in a recent judgment dated 01/01/2020, in case of Smt. Mukti Roy. Kolkata vs I.T.O., Ward-2(4), Kolkata. The judgment is attached herewith as Annexure A5 . Finding-Here also the judgment given by the ITAT Kolkata was that since the assessee was not maintaining books of account so the question of whether the audit was done or not does not hold any relevance and so the imposition of penalty u/s 271B. ITAT Kolkata had placed reliance over the judgment given in the case of Nirmal Kumar Jain Vs. ITO in Delhi Tribunal while passing the judgment. The relevant extract of the judgment given in the case of Smt. Mukti Roy, Kolkata vs. I.T.E is given below: We have heard rival submissions and gone through the facts and circumstances of the case. At the outset itself, we note that the AO in the assessment order dated 25.03.2015 at para 6 has found that assessee is not maintaining any books of account. In such a scenario penalty u/s. 271A of the Act in contravention of sec. 44AA can be only levied and not u/s 271B of the Act. f) Hon'ble ITAT, Delhi in a judgment, in case of Nirmal Kumar Jain, vs DCIT, Circle 39(1) New Delhi, Ward-2(4). The judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty u/s 271B is not valid to be levied on the appellant. (ii) A S Sarma Vs. UOI 175 ITR 524(AP) This case law is regarding the importance of the audit and concluding that the Income- tax practitioners and auditors cannot be considered on par with chartered accountants regarding expertise and excellence in audit. The copy of the judgment is attached as Annexure A9 . This judgment is not applicable in the case of the appellant. In the present case, the question of audit does not arise as there were no books of account maintained by the appellant for audit to be conducted by a Chartered Accountant. This fact that the assessee does not maintain books of accounts has been observed and noted in the assessment order by the assessing officer at Point No. 4 Page No. 2 of the Order where it reads as under- the assessee is not showing its correct turnover as he is not maintaining books of accounts properly and showing his profit in compliance of section 44AD and showing 7.99% of the total turnover. The copy of the assessment order is attached as an Annexure A10 . (iii) Surajmal ParasuramTodi Vs. CIT (1996) 222 ITR 691,693(Gauh). This judgment observed that even after maintenance of boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operly and shown his profit u/s 44AB , the penalty proceedings have been initiated u/s 271B of the Act which deals with the case where if any person fails to get his accounts audited in respect of any report of such audit as required u/s 44AB of the Act. Further submitted that, since admittedly as observed by the A.O., the assessee was not maintaining the books of accounts properly, the question of auditing the same/uploading the same does not arise and there is a different provision to impose penalty on an assessee for not maintaining the books of account, therefore, submitted that invocation of provision of Section 271B against the assessee is illegal and arbitrary, therefore sought for deletion of the penalty. 4. The Assessee's Representative relied on following Judgments: a. Order dated 27/03/2018 in ITA No. 73/JP/2018 (A.Y 2011- 12) by ITAT Jaipur Bench Nirmal Kumar Joshi Vs. ITO, Ward No-1. b. Order dated 31/05/2016 in ITA No. 2087/PN/2014 (A.Y 2008-09) by ITAT Pune Bench Maxpro Associates Vs. ACIT, Panvel Circle, Panvel. c. Order dated 18th May, 2007 in the case of CIT Vs. Bisauli Tractors reported in (2008) 299 ITR 219 All passed by Allahabad High Court , Allahabad. d. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties perused the material available on record. In all the above Assessment Years i.e. A.Y 2011-12, 2012- 13 2013-14, the gross turnover of the assessee are more than one crore as per the ITR filed by the assessee. It is claimed by the assessee that the assessee was not liable for audit u/s 44AB and the assessee was liable for maintaining the books of account u/s 44AB of the Act. Admittedly, the assessee has not filed statutory audit report in Form 3CB/3CD for all the Assessment Years as required u/s 44AB of the Act despite having turnover more than threshold limit mentioned in Section 44AB of the Act. As observed in the assessment orders itself, the assessee is not showing its correct turnover as the assessee is not maintaining books of account properly and showing his profit incompliance of Section 44AD at 7.99% of total turnover credited in his Form 26AS on which tax has been deducted at source. It is specifically found by the A.O. during the assessment proceedings that the assessee showing his turnover on the basis of bank receipts and cash receipts but has not added the amount which was deducted by several deductors as TDS. Further found that the assessee claimed the TDS a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. The penalty provisions are contained in Sections 271A and 271B of the Act which are reproduced below: 271 A. Failure to keep, maintain or retain books of account, documents, etc. Without prejudice to the provisions of Section 271, if any person fails to keep and maintain any such books of account and other documents as required by Section 44AA or the Rules made there under, in respect of any previous year or to retain such books of account and other documents for the period specified in the said rules, the assessing officer or the Commissioner (Appeals) may direct that such person shall pay by way of penalty a sum of twenty five thousand rupees. 271B. Failure to get accounts audited. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under Section 44AB the assessing officer may direct that such person shall pay, by way of penalty, a sum equal to one half per cent of the total sales, turnover or gross receipts, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 15A(1) of the U.P. Sales Tax Act has held as follows: In our opinion, Clause (b) of Section 15A(1) is attracted as soon as it is shown that the assessee has concealed the particulars of its turnover or deliberately furnished inaccurate particulars of such turnover in the return filed under Section 7 of the Act. It is manifest that from the grammatical point of view the words 'inaccurate particulars of such turnover' in Clause (b) of Section 15A(1) refer back to Clause (a) where the return under Section 7 is specified. In other words, Clause (b) refers to default in respect of a return furnished under Section 7 and cannot possibly refer to any default in respect of anything done by the assessee in a proceeding under Section 21. As there is no question of furnishing a return of a turnover in a proceeding under Section 21, the assessee cannot be guilty of concealing particulars of its turnover from, or of furnishing inaccurate particulars in a proceeding under Section 21. The concealment or furnishing inaccurate particulars must be in the return furnished under Section 7. Clause (a) of Section 15A(1) deals with the failure of the assessee to furnish the return of the turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 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 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me for which wealth no penalty under Clause (1) of Sub-section (c) of Section 18 of the Act is exigible. 14. Therefore, Section 27IB of the Act is not attracted in a case where no account has been maintained and instead recourse under Section 271A can be taken. 8. The Hon'ble High Court of Gauhati in the case of Surajmal Parsuram Todi Vs. CIT (supra), vide order dated 06/08/1996 held that, even after maintenance of books of account, the obligation of assessee does not come to an end, he 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 of the Act, the offence is complete. After that, there can be no possibility of any offence as contemplated u/s Section 44AB of the Act and, therefore, the imposition of penalty u/s 271B of the Act is erroneous. The relevant portion of the observation of the Gauhati High Court are as under:- 4. Heard Mr. R.K. Joshi, learned counsel appearing for the assessee, and Dr. A.K. Saraf, learned special counsel appearing on behalf of the respondent/Income-tax Department. 5. Mr. R.K. Joshi submits that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount audited. The Hon'ble Gauhati High Court in Suraj Mal Parasuram Todi vs. CIT (1996) 222 ITR 691 (Gau.), has held that where no books of account are maintained, penalty should be imposed for non- maintenance of books of account u/s 271A and no penalty can be imposed u/s 271B for violation of section 44AB requiring audit of accounts. Similar view has been taken by the Hon'ble Allahabad High Court in CIT vs. Bisauli Tractors (2008) 299 ITR 219 (All). The Hon'ble Allahabad High Court reiterated the similar view in CIT and Anr. Vs. S.K. Gupta and Co. (2010) 322 ITR 86 (All) by holding that requirement of getting the books of account audited can arise only where the books of account are maintained. In the absence of the maintenance of books of account, there can be no penalty u/s 271B of the Act. In view of the foregoing legal position emanating from the judgments of the two Hon'ble High Courts, we 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 pen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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