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January 6, 2023

ITAT removes the Section 271B fine levied against the commission agency by the AO

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

ITAT removes the Section 271B fine levied against the commission agency by the AO

Fact and Issue of the case

Briefly, the facts of the case are that the appellant is an individual. The return of income for the assessment year 2010-11 was filed on 29.06.2010 declaring total income of Rs.1,73,260/-. During the course of assessment proceedings, the Assessing Officer found that the appellant had deposited cash in the bank account amounting to Rs.1,48,43,428/-. According to the Assessing Officer, said cash deposit represents the business receipts of the appellant which was not disclosed in the Return of Income. The Assessing Officer accordingly formed an opinion that the cash deposits amounting to Rs.1,48,43,428/- had escaped to the tax and, therefore, issued notice u/s 148 of the Income Tax Act, 1961 (‘the Act’) on 29.03.2017 after recording the reasons. Thereafter, assessment was completed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act dated 28.12.2018 at total income @ 8% of the cash deposits made by the appellant. Subsequently, the appellant was show-caused as to why a penalty u/s 271B should not be levied on 29.12.2018. In response to the show-cause notice, it was contended that the appellant is only a commission agent for one Mr. Dinanath Gupta and he was only purchasing fruits for the said Mr. Dinanath Gupta and selling them to traders as per instruction of said person for the purpose of computing the turnover, annual commission alone has to be reckoned as the gross receipts. Rejecting the above contentions, the Assessing Officer levied penalty of Rs.74,210/- u/s 271B of the Act vide order dated 28.06.2019 for failure of assessee to get accounts audited as stipulated under the provisions of section 44AB of Act.

Being aggrieved by the order of penalty, an appeal was preferred before the ld. CIT(A), who vide impugned order confirmed the levy of penalty. Being aggrieved, the appellant is in appeal before us in the present appeal.

Observation of the Court

Having heard the rival submissions and perused the material on record, tribunal is of the considered opinion that it is not fit case for levy of penalty u/s 271B merely because the appellant was unable to substantiate the submission that the appellant is only commission agent because there is no obligation on the part of the assessee to get the accounts audited as he was under the bona-fide belief that it is only commission receipt, which can be considered as turnover for the purpose of section 44AB of the Act. Accordingly, we direct the Assessing Officer to delete the penalty u/s 271B of the Act.

In the result, the appeal of the assessee in ITA No.677/PUN/2021 stands allowed. Since the facts and issues involved in the above appeal in ITA No.680/PUN/2021 for A.Y. 2012-13 are identical, therefore, our decision in ITA No.677/PUN/2021 for A.Y. 2010-11 shall apply mutatis mutandis to the appeal of the assessee in ITA No.680/PUN/2021 for A.Y. 2012-13 respectively. Accordingly, the appeal of the assessee in ITA No.680/PUN/2021 for A.Y. 2012-13 stands allowed.

Conclusion

The Tribunal ruled in favour of the assessee and ordered the AO to delete the penalty u/s 271B of the Act.

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