Without the need for bookkeeping, Section 271B does not impose penalties for non-audits

Fact and issue of the case

This appeal by the Assessee is directed against the order of Commissioner of Income Tax (Appeals)-34, New Delhi vide order dated 17.09.2019 for Assessment Year 2015-16. The Assessee has raised the following grounds of appeal:

That the Learned Assessing Officer has failed to appreciate the legal & factual position involed in the appellant’s case.

That the assessment order is replete with prejuidicial observations which are either unfounded or not suncepitble to any adverse conclusion.

That the authority below has failed to appreciate the legal and factual position involved in the Appellant’s case.

That no opportunity was afforded to the appellant to lead evidence on the issues involved.

That the provisions of section 271B are not attracted in the facts and circumstances of this case.

That the order is against law and facts of the case and merits to be cancelled.”

At the time of hearing, no one attended the proceeding. It is seen from the record that no one attended the hearing. The notices sent by the Registry have been duly served and the acknowledgment due has been placed on record. Under these facts, the appeal is taken up for hearing in the absence of assessee and materials available on records.

Apropos to the grounds of appeal, however, it is seen from the record that a letter dated 24.03.2023 has been placed on record.

On the other hand Ld. DR supported the orders of the authorities below.

Observation of the court

We have heard the Ld. DR and perused the material available on record. The contention of the assessee is that the assessment was framed on returned income ignoring the capital loss of Rs. 45,38,988/- it was not claimed by the assessee in his return of income. The Assessing Officer initiated the penalty proceedings U/s 271A of Income Tax Act, 1961 (hereinafter referred to as “the Act”) for non maintaining the books of accounts, as well as U/s 271B of the Act for not complying with the provisions of section 44AB of the Act. After considering the submissions of the assessee, the penalty proceedings initiated U/s 271A of the Act was dropped but the penalty U/s 271B of the Act was imposed and same was sustained by the Ld. CIT(A). It is further submitted that the appellant was not treated in default U/s 271A of the Act for non- maintenance of books of accounts, than how the provision of Section 271B of the Act would be attracted in the absence of books of accounts.

We have given our thoughtful consideration to the present appeal, admittedly, the penalty was initiated U/s 271A of the Act for non-maintenance of books of accounts as well as U/s 271B for not complying with the provisions of section 44AB of the Act regarding the auditing of the account. The penalty for non-maintenance on books of accounts was dropped but the penalty for not getting the accounts audited is sustained. We find merits into the contentions of the assessee that if he was not guilty of non maintaining of books of accounts, the presumption would be that he shall not required to maintain the books of accounts. Under these undisputed facts, imposing penalty for non auditing of books of accounts is not justified. Therefore, we hereby direct the Assessing authority to delete the penalty.

In the result, the appeal of the Assessee is allowed.

Order pronounced in the open court on 20th June, 2023.