Smt. Alkaben S. Donga, Rajkot V. The ITO, Ward-1 (1) (4), Rajkot

ITA 188/RJT/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0729 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-09-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Bonafide belief; Reasonable cause; Revised return
• Section: 147; 148; 273B; 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Smt. Alkaben S. Donga “Shivam”, Block No. B-57, 2-New Mayani Nagar, Mavdi Nagar, Rajkot PAN No: AJFPD7893J (Appellant) Vs The ITO, Ward- 1(1)(4), Rajkot (Respondent) Appellant by : Shri Mehul Ranpura, A.R. Respondent by : Shri B. D. Gupta, D.R. Date of hearing : 21-09-2022 Date of pronouncement : 14-10-2022 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These two appeals are filed by the Assessee against separate orders dated 04.06.2019 passed by the Commissioner of Income Tax (Appeals)-1, Rajkot, confirming the levy of penalty u/s. 271B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2010-11 & 2011-12. ITA Nos. 188 & 189/Rjt/2019 Assessment Years. 2010-11 & 2011-12 I.T.A Nos. 188 & 189/Rjt/2019 A.Ys. 2010-11 & 2011-12 Page No Smt. Alkaben S. Donga vs. ITO 2 2. The brief facts of the case is that the assessee is an individual and engaged in tailoring work and also doing transactions in shares and securities. The assessee has not filed her Return of Income for the Assessment Years 2010-11 & 2011-12, and also not maintained the books of accounts as required u/s. 44AB of the Act. Notices u/s. 148 was issued on 31.03.2016. In response, the assessee filed her Return of Income declaring losses for the Assessment Years 2010-11& 2011-12 on 21.12.2016 and 23.12.2016 respectively. The assessing officer completed the assessment accepting the Returned losses, thereafter initiated penalty proceedings u/s. 271B for failure to furnish Audit Report as required u/s. 44AB of the Act. The assessee submitted that she has not maintained any books of account and income from the tailoring business is very minimum and she has not maintained records for her transactions in shares and securities and the entire turnover was much below the limit prescribed u/s. 44AB of the Act. When the assessee does not maintain the books of account, it was not impossible to ask the Auditor to audit the books of account and give his report. The Assessing Officer held that the total turnover of the Assessee exceeds Rs. 60 lakhs during the assessment years, it is obligatory on the assessee to gets its account audited and file the Audit Report in prescribed Performa before the due date of return as per Section 44AB of the Act. As the assessee violated the above provisions penalty of Rs. 1,50,000/- each are levied for both the Assessment Years 2010-11 & 2011-12. 3. Aggrieved against the same, the assessee filed appeals before the Ld. Commissioner of Income Tax(Appeals)-1, Rajkot. The assessee I.T.A Nos. 188 & 189/Rjt/2019 A.Ys. 2010-11 & 2011-12 Page No Smt. Alkaben S. Donga vs. ITO 3 pleaded that she has not maintained any books of account and therefore there was no question of getting books of account audited. The Ld. CIT(A) held that the assessee failed to establish that she did not maintain books of account, neither from the assessment order nor from the penalty order. Therefore the plea of the assessee that it did not maintain the books of account is not tenable and therefore dismissed the appeals filed by the assessee. 4. Aggrieved against the same, the assesse is in appeal before us challenging the penalty levied u/s. 271B of the Act. The Ld. Counsel for the assessee submitted that when the assessee has not maintained the books of account, there is no question of getting the books audited by Chartered Accountant and therefore the levy of penalty u/s. 271B is unjustifiable and requested to cancel the same and relied upon various case laws. 5. Per contra, the Ld. D.R. Mr. B.D. Gupta appearing for the Revenue supported the orders passed by the Lower Authorities and pleaded to confirm the same and thereby dismiss the assessee appeals. 6. We have heard both sides arguments and perused the materials available on record including the Paper Book and Case Laws filed by the assessee. Very recently this same Bench of this Tribunal in ITA No. 106/Rjt/2021 vide order dated 28.09.2022 in similar u/s. 271B penalty matter held as follows: “7. .......... The assessee vide its reply letter dated 08.12.2018 brought to the attention of the A.O., CBDT Circular No. 6/2016 which clarified the tax payers to choose whether the gains or losses from sale of listed I.T.A Nos. 188 & 189/Rjt/2019 A.Ys. 2010-11 & 2011-12 Page No Smt. Alkaben S. Donga vs. ITO 4 shares/securities either should be treated as Business Income or Capital Gains. Further the assessee is of the bonafide belief that the net result in the trading of shares, cash and commodity shall be considered as “turnover” as per the Guidance Note issued by the Institute of Chartered Accountants of India (ICAI). Thus the total turnover from Derivatives, Equity Shares and Mutual Fund is Rs. 48,43,374/- which does not exceed Rs. 1 crore specified u/s. 44AB of the Act for the present Assessment Year 2016-17. Therefore the assessee is not liable to get his books audited and furnish audited report u/s. 44AB of the Act and consequently penalty cannot be levied u/s. 271B of the Act. The imposition of penalty under section 271B of the Act is not mandatory, rather it is discretionary, because if the assessee proves that there was a “reasonable cause” for the said failure, then the Assessing Officer ought to have considered the same and then proceed with levying penalty. For better understanding, Section 271B is extracted as follows: 271B. 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], [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.] 7.1. A perusal of the above provision shows that the Parliament has used the words "may" and not "shall", thereby making their intention clear in as much as that levy of penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Act namely “penalty not to be imposed in certain cases”. A careful reading of Section 273B encompasses that certain penalties "shall" be imposed in cases where "reasonable cause" is successfully pleaded. It is seen that penalty imposable u/s 271B is also included therein. By the said provisions, the Parliament has unambiguously made it clear that no penalty "shall be" imposed, if the assessee "proves that there was a reasonable cause for the said failure". As noticed, if the statutory provision shows that the word "shall" has been used in Section 271B, then the imposition of penalty would have been mandatory. Section 271B as extracted above further throws light on the legislative intent as it specifically provides that no penalty "shall’ be imposed if the assessee proves "that there was reasonable cause for the said failure". 7.2. Further the Hon’ble Supreme Court in the case of Punjab Stainless Steel Industries (cited supra) recognize the Guidance Note issued by ICAI. The Jurisdictional High Court in the case of Sachinam Trust (cited supra) also held that the appropriate expression to be considered for deciding the applicability of the provisions of section 44AB would be the term 'gross receipts', the assessee, carrying on the business of financing, bona fidely believed that gross receipts of interest, and not gross amount of advances, I.T.A Nos. 188 & 189/Rjt/2019 A.Ys. 2010-11 & 2011-12 Page No Smt. Alkaben S. Donga vs. ITO 5 would constitute the basis for ascertaining the limit of Rs. 40 lakhs so as to attract section 44AB, the assessee could be said to have a reasonable cause for not getting its accounts audited under section 44AB, and as such no penalty could be imposed on the assessee. 7.3. In the facts of the present case, it is seen that the explanations offered by the assessee have been ignored by the Assessing Officer as well as Ld. CIT(A) on the ground that the Guidance Note issued by the ICAI is not binding on the Income Tax Authorities whereas the Hon’ble Supreme Court and Co-ordinate Bench of the Tribunal recognizes the same and applicable in the case of the assessee. 7.4. For the above reasons, we have no hesitation in deleting the penalty levied u/s. 271B of the Act. 6.1. The Co-ordinate Bench of this Tribunal in ITA Nos. 359 & 455/Rjt/2014 dated 15.02.2018 in the case of Shri Rajeshbhai Hirabhai Patel vs. ITO wherein held as follows: “It is undisputed facts that that in the original return of income the assessee has declared total income of Rs. 1,47,590/- and agricultural income of Rs. 1,87,400/-. During the course of assessment proceedings, the assessing officer had detected that there was cash deposit in the undisclosed bank a/c of the assessee as elaborated supra in this order., Thereafter, the assessee has filed revised return of income on 10th August, 2011 disclosing net profit after taking into account the undisclosed cash deposit found in the ICICI bank a/c. The income disclosed in the revised financial statement during the course of scrutiny assessment was not disclosed in the regular books of accounts. It is also undisputed fact that assessee has not maintained account in its books of accounts pertaining to share transactions carried out during the year under consideration. He has also not disclosed jot work income in the books of accounts. After considering the above facts and circumstances, we observe that separate penalty has been provided as per the provisions of section 271A for failure to keep, maintain or retain books of account, documents, etc. as required by section 44AA of the act. In view of the above, the assessee has violated the provision of section 44AA by not maintaining books of accounts and the assessing officer has not initiated any penalty as prescribed u/s. 271A of the act. We observe that section 271B is not attracted in a case where no account has been maintained and instead an recourse u/s. 271A can be taken. Therefore, we consider that in the case of the assessee the imposition of penalty u/s. 271B is not justified. Accordingly, the appeal of the assessee is allowed.” I.T.A Nos. 188 & 189/Rjt/2019 A.Ys. 2010-11 & 2011-12 Page No Smt. Alkaben S. Donga vs. ITO 6 6.2. Respectfully following the above rulings of the Co-ordinate Bench and in the present cases before us though the assessment was reopened u/s. 147 the returned losses filed by the assessee were accepted and no addition being made by the Assessing Officer. The assessee further submitted that the turnover from tailoring work was much below the limit prescribed u/s. 44AB of the Act and not maintained any books of accounts. For the above reasons, we have no hesitation in deleting the penalty levied u/s. 271B of the Act and allow the Grounds raised by the assessee. 7. In the result, the appeals are allowed in favour of the Assessee. Order pronounced in the open court on 14-10-2022 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 14/10/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, राजकोट