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TMI Blog2023 (3) TMI 1521X X X X Extracts X X X X X X X X Extracts X X X X ..... shal Gupta (C.A.). For the Revenue : Smt. Monisha Choudhary (Addl. CIT). ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 24/11/2022 [here in after (NFAC)/ ld. CIT(A)] for assessment year 2015-16 which in turn arise from the order of the penalty passed u/s. 271B of the Act dated 18.05.2018 by the Income Tax Officer, Ward 4(1), Jaipur [here in after the ld. AO.] 2. In this appeal, the assessee has raised following grounds: - 1. On the facts and circumstances of the case, the ld. CIT (A) has grossly erred in law by approving action of Ld. AO of levying penalty for not getting the books of accounts audited by the assessee ignoring the facts that no books of accounts have been maintained by the assessee. It is hereby prayed for deleting the said penalty. 2. On the facts and circumstances of the case and without prejudice to other grounds of appeal, the Ld CIT (A) has grossly erred in law and facts by approving the action of the Ld. AO of imposing penalty also on the turnover which was declared by the assessee under Section 44AD of the act. The penalty thus imposed is in alternat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings and show cause notice was issued on 25.11.2017 13.4.2018. In response to these notices the assessee filed a detailed reply dated 11.05.2018 which the ld. AO considered but not found acceptable. Finally on 18.05.2018 ld. AO levied the penalty of Rs. 53,518/-. 3.3 Aggrieved from the order of the assessing officer the assessee has preferred an appeal before the ld. CIT(A). The ld. CIT (A) confirmed the levy of the penalty holding that the assessee is not covered under the any reasonable clause and since the assessee has not complied with the statutory provisions, the action of levy of penalty by the AO was confirmed by ld. CIT(A). 4. As the assessee did not get any favour from the appeal filed before the ld. CIT (A) moved this appeal before this tribunal. challenging the levy of penalty on the grounds as raised in para 2 above. 5. To support the various grounds so raised the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; The assessee is an individual and was engaged in the business of trading of bangles and other artificial accessories along with trading in securities and derivatives. The assessee file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound No. 1 On the facts and circumstances of the case, The Ld. CIT (A) has erred in law by approving the action of Ld. A.O of levying penalty for not getting books of accounts audited by the assessee ignoring the fact that no books of accounts have been maintained by the assessee. It is hereby prayed for deleting the said penalty. 1.. As per section 271B of the act, 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 the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less . 2. Thus, the default mentioned in this penal provision is not getting the accounts audited by the assessee. Once it has been established that assessee has not maintained any books of accounts, the question of invoking penal provisions under section 271B does not arise. We draw the attention of Ld. Appellate auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard Sri A.N. Mahajan, learned standing counsel for the Revenue and Sri R.R. Kapoor, learned counsel appearing for the respondent assessee. Sri Mahajan contended that the Tribunal has erred in law while upholding order of the CIT (A) cancelling the penalty in as much as the assessee had failed to get its books of account audited. The submission of Sri Mahajan is misconceived for the reason that the requirement of getting the books of account audited could arise only where the books of accounts are maintained. If for some reason the assessee has not maintained the books of account the appropriate provision under which penalty proceedings can be initiated is under s. 271A of the Act which recourse has also been taken by the assessee as would appear from the order of the Tribunal. The Tribunal was, therefore, justified in upholding the order of the CIT (A) cancelling the penalty imposed under s. 271B of the Act . We further place our reliance on the decision delivered in the case of CIT Bareilly v Bisauli Tractors (2008) 299 ITR 219, the H ble Allahabad High Court held that: 14. Therefore, Section 27IB of the Act is not attracted in a case where no account has been maintained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We further rely on the judgement passed by coordinate bench in Appeal No. ITA No. 262/JP/2019 in the case of Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur wherein it was held that Since the issue in question is covered by the decision of the ITAT Coordinate Bench in the case of Roshni Devi vs ITO (supra), therefore, respectfully following the decision of this Bench on the issue of deleting the penalty u/s 271B of the Act, we direct the AO to delete the penalty of Rs. 1,50,000/- confirmed by the ld. CIT(A). Thus the solitary ground of the assessee is allowed . We further submit that this explanation for not imposing penalty was also submitted before the Ld. A.O as well as the Ld. CIT (A) but they did not consider same while passing the respective orders. It is also pertinent to note here that the assessee has not appealed against the order under Section 271A which may also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faults: i) failed to get accounts audited or ii) failed to furnish a report of such audit as required u/s. 44AB of the Act Thus, we note that the AO has given a show cause notice, which is per-se vague. Thus, we note that the AO by issuing penalty notice u/s. 271B has not spelt out what was the fault for which the assessee is being proceeded against for levy of penalty. Since the AO has not struck down the irrelevant portion/fault which is not applicable in the facts and circumstances of the case, the notice reproduced (supra) is vague and therefore, bad in law as held by the Co-ordinate Bench of the Tribunal in the case of Parkinson Electrical Corprn (supra). We are of the opinion that notice proposing penalty should clearly spell out the fault/charge for which the assessee is put on notice, so that he can defend the charge properly. The issue of bad/vague penalty notice was adjudicated by the Hon'ble Karnataka High Court [though in a different context i.e notice issued u/s. 274 read with section 271(1)(c) of the Act] in the case of CIT vs. SSA's Emerald Meadows in ITA No. 380 of 2015 dated 23.11.2015 wherein the Hon'ble High Court following its own decision in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 274 r.w.s 271 of the Act, which is a statutory jurisdictional notice. The intent and purpose of this notice is to inform the assessee as to for which specific charge he has been show caused. 7. In the present case, from the notice u/s 274 dated 27.12.2011, neither the assessee nor anyone else could make out as to 'for what precise charge, the assessee was asked to show cause viz. whether the charge is for furnishing inaccurate particulars of income or concealment of particulars of such income. It is further important to note that, in notice, under the point which is intended towards proposed penalty u/s 271(1)(c), the word OR has been used between the charge of concealment of income and furnishing inaccurate particulars of income. These facts and circumstances make it abundantly clear that in the case of assessee, penalty notice is completely vague and ambiguous. The AO simply issued a preprinted notice without striking off the unnecessary charge and not mentioning the precise charge. The above act of the AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind which resulted into issuing a completely vague jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iption of document Page No. Filed/Available before Ld. AO/Ld. CIT(A)/Both 1 Quantum assessment order dated 25.11.2017 passed by the ld. AO 1-2 Both 2 Show cause notice dated 25.11.2017 3 Both 3 Show cause notice dated 18.05.2018 4 Both 4 Reply to show cause notice filed by the assessee. 5-6 Both 5 Order under section 271A dated 18.05.2018 7-11 Both 6 Order under section 271B dated 18.05.2018 12-17 Both 7 Form 35 filed by the assessee 18-21 Ld. CIT(A) 8 Written submission filed by the assessee before ld. CIT (A) 21-31 Ld. CIT(A) 9 Order dated 24.11.2022 passed by ld. CIT (A) 32-43 Ld.CIT(A) 7. The ld. AR of the assessee in addition to the written submission and paper book filed to support the contentions so raised, also filed a compilation of evidences relied upon. Based on these evidences placed on record drawn our attention to the fact that the department has already levied and confirmed the penalty u/s 271A, being the penalty for failure to keep /maintain or retain books of accounts, documents etc. if so then the levy of penalty u/s 271B is incorrect. Since, the assessee has already been held that he failed to maintain the books of accounts then again, he cannot hold to get the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not arise. Once, there is a violation of provisions of section 44AA of the Act the said violation cannot be extended to section 44AB of the Act. The provisions of Section 44AB of the Act can be invoked only when the assessee has complied with the provisions of Section 44AA of the Act. Therefore, the violation of Section 44AA of the Act cannot continue because once it is found that the assessee did not maintain the regular books of account the said violation cannot travel beyond the provisions of Section 44AA and hence, cannot be held as a further violation of Section 44AB of the Act. The Hon ble Allahabad High Court in case of CIT Vs. Bisauli Tractors (supra) while dealing with this issue as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone. 13. This Court in CWT v. Yadu Raj Narain Singh [2006] 286 ITR 564 also taken the same view. It has held as follows : Thus 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. 7. A similar view has been taken by the Hon ble Gauhati High Court in case of Surajmal Parsuram Todi vs. CIT (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng legal position emanating from the judgment 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. 1. 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/Del/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 inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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