ITAT eliminates the penalty for failing to have an account audited in the absence of a determination of turnover
Facts and issues of the case
The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)XXXIII, New Delhi (‘CIT(A)’ in short) dated 22.03.2019 in relation to penalty proceedings initiated under Section 271B of the Income Tax Act, 1961 (the Act) concerning AY 2011-12.As per the grounds of appeal, the assessee has challenged the imposition of penalty of Rs.77,462/- under Section 271B of the Act for alleged violation of Section 44AB of the Act.
When the matter was called for hearing, the ld. counsel for the assessee pointed out that the assessee has declared a total turnover of Rs.58,42,500/-, and therefore, being a small businessman was not obliged to keep the accounts..
The return was filed under Section 44AD of the Act and consequently provisions of Section 44AB were not applicable to the assessee per se. The Assessing Officer however proceeded on the basis that cash deposits in the nature of advances amounting to Rs.1,54,92,400/- forms part of the turnover of the assessee, and therefore, case of the assessee is covered under Section 44AB of the Act. The ld. counsel submitted that the additions made towards cash deposits of Rs.1,54,92,400/- has since been settled under ‘Vivad se Vishwas Scheme, 2020’ ( VSV). Under the circumstances, the ld. counsel for the assessee submitted that the action of the Assessing Officer in imposing penalty under Section 271B of the Act assuming the cash deposits in the nature turnover for the purposes of Section 44AB of the Act is wholly unjustified.
Observation by the court
The Ld. DR for the Revenue relied upon the orders of the authorities below.In the light of the submissions made on behalf of the assessee, court found that reasonable cause exists for failure of the assessee to get his account audited in respect of previous year relevant to Assessment Year 2011-12 in question. The assessee has claimed turnover in business to the tune of Rs.58,42,500/- which is below the threshold of Rs.60 lac applicable at the relevant time. The assessee has filed a return taking shelter of Section 44AD of the Act and declared 8% on the turnover on estimated basis as provided under the presumptive taxation scheme of Section 44AD of the Act. The Assessing Officer in the course of assessment has displaced the turnover declared by the assessee by including the cash deposits reflected as liability by the assessee in the relevant assessment year. Thus, when seen with the fact that the quantum litigation has come to an end under ‘Vivad se Vishwas Scheme, 2020’ ( VSV) and there is no final judicial finding available regarding the correctness of turnover declared by the assessee, the benefit of doubt must go to the assessee. The income has been assessed and the tax has been collected without protracted litigation. Hence, the stale cause in the form of penalty under Section 271B should be shunned in the peculiar circumstances.The court set aside the order of the CIT(A) and reverse the action of the Assessing Officer.
The appeal of the assessee is allowed by the court.Yuvraj-Singh-Vs-ITO-ITAT-Delhi