Due to the availability of presumptive taxes up to Rs. 2 crores, penalties under Section 271B are not enforceable
Fact and issue of the case
This appeal is filed by the assessee aggrieved from the order of the National Faceless Appeal Centre (NFAC), Delhi [ Here in after referred as (NFAC) ] for the assessment year 2017-18 dated 13.02.2023, which in turn arises from the order passed by the Assessing Officer passed under Section 271 B of the Income tax Act, 1961 (in short ‘the Act’) dated 22.12.2021.
The assessee has marched this appeal on the following grounds:- “1. That Ld. AO had erred in levying penalty for failure to get the books of accounts audited as no books of accounts were maintained by the assessee.
That Ld. AO had erred in levying penalty u/s 271B when the assessment order has been passed on presumptive basis.
That the appellant craves the right to add, amend or alter any grounds of appeal either before or at the time of hearing of appeal.”
The fact as culled out from the records is that in this case return of income for A. Y. 2017-18 declaring income of Rs. 5,89,190/- filed on 28.03.201 8. The assessee has declared income from business or profession for the year under consideration. The case was selected through CASS under scrutiny with remarks “
(i) cash deposit during the year”. Notice u/s 143(2) of the I.T. Act, 1961 was issued on 14.08.2018 fixing the case for hearing on 29.08.2018. Further notice u/s 142(1) was issued on 22.04.2019 along with query letter fixing the case for hearing on 07.05.201 9. No compliance made by the assessee. Further notice u/s 142(1) was issued on 30.05.2019 fixing the case for hearing on 07.06.2019. Online written reply received on 07.05.2019 along with copy of ITR and computation of income and copy of bank statements. Thereafter notice u/s 142(1) was issued on 25.09.2019 along with query letter fixing the case for hearing on 10.10.2019. In compliance to this notice the assessee has furnished documents, details and produced relevant documents which were examined on test check basis and replies filed were placed on record. Assessee is engaged in the business of wholesale trading of vegetables during the year under consideration.
The ld. AO on completion of assessment proceedings-initiated issued notice for penalty proceedings u/s 271 B for failure to file audit report as per provision of section 44AB of the Income Tax Act, as the turn over as declared in the return of income is exceeding to Rs. 1 cr. Based on these the ld. AO passed an order u/s 271 B of the Act levying penalty of Rs. 90,874/- being 0.5% of turnover Rs. 1,81,74,825/- is levied on the assessee company u/s 271 B of the Income Tax Act, 1961 holding that the assessee has committed default and has not shown reasonable cause for such default and therefore, the penalty u/s 271 B of the Act levied from the assessee.
Aggrieved from the order of the Assessing Officer levying penalty of Rs. 90,874/-, assessee preferred an appeal before the ld. CIT(A)/NFAC is reiterated here in below: “The grounds of appeal are decided as under:-
Ground No. 1 :
That the ld. AO had erred in levying penalty u/s 271B during pendency of appeal against quantum assessment order. In this case the assessee has himself declared the turnover to be Rs. 1,10,47,462/- in his return of income which was above Rs. 1 crore and therefore, there was no role of the appellate proceedings on the penalty proceedings u/s 271B of the Act. Further, there are certain limitations provided in section 275 of the Act, beyond which penalty cannot be imposed but there is no bar in completing the penalty proceedings u/s 271 B of the Act during pendency of first appeal. However, it has been found that on request of the appellant that the penalty proceedings should be kept in abeyance till the decision of quantum appeal. The assessee was to given an opportunity to file his submission vide notice dated 27.12.2022 which was after the decision in the quantum appeal dated 22.11.2022 passed by the CIT(Appeal), NFAC. The appellant did not filed any reply in this case. I find that the turnover which was worked out as Rs. 1,81,74,825/- by the Assessing Officer during the assessment proceedings has been reduced to Rs. 1,74,59,825/- after decision in the quantum appeal. However, the turnover remains above Rs. 1 crore and the appellant was therefore require to get his account audited as per provisions of section 44AB of the Act. As the appellant neither got the account audited before the due date nor furnished any reasonable cause for failure to do so, the provisions of section 271 B of the Act are clearly attracted. Therefore the penalty of Rs. 90,874/- imposed by the Assessing Officer u./s 271 B has rightly been imposed. However, as the turnover has been reduced to Rs. 1,74,59,825/- by the CIT(Appeal), the penalty is reduced to Rs. 87,299/-(being 0.5% of Rs. 1,74,59,825/-). Therefore, the ground of appeal is partly allowed as discussed above.”
Observation ofthe court
Considering over all the fact and provisions of law has discussed herein below. We are of the considered view that the assessee has not controverted the provisions of section 44AB of the Act and since turnover is not exceeding the revised limit of Rs. 2 crores. The levy of penalty by the lower authority is against the provisions of law and therefore, the same is deleted based on these observations. Thus, the grounds of appeal raised by the assessee are allowed. In the result the appeal of the assessee is allowed.
Order pronounced in the open Court on 12/09/2023
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from hereSubhash-Chand-Saini-Vs-ITO-ITAT-Jaipur2