Ajit Tripathi, Allahabad V. CIT (A), Delhi

ITA 39/ALLD/2022

AI Insights

The case involves Ajit Tripathi, an individual from Allahabad, who appealed against a penalty imposed by the Income Tax Officer under section 271A for not maintaining books of accounts as required under section 44AA of the Income Tax Act. The penalty was based on the assessment that included a portion of the assessee's agricultural income as business income, leading to a deemed requirement to maintain books of accounts. The Tribunal examined whether the penalty was justified given the actual income and turnover of the assessee's business activities, which were below the statutory thresholds.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124532 (ITAT-ALLAHABAD)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 11-12-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Reasonable cause; Corroborative evidences
• Section: 144; 139; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, ALLAHABAD BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA No.39/ALLD/2022 Assessment Year: 2017-18 Ajit Tripathi, Village Pandor, Jasra, Allahabad, U.P. v. Income Tax Officer, Ward-1(1), Allahabad PAN:AKNPT9902B (Appellant) (Respondent) Appellant by: Shri. S.K. Yogeshwar, Adv Respondent by: Shri A. K. Singh, Sr. D.R. Date of hearing: 14 02 2023 Date of pronouncement: 16 02 2023 O R D E R VIJAY PAL RAO, J.M.: This appeal by the assessee is directed against the order dated 31.10.2022 of the ld. CIT(A), NFAC, New Delhi arising from penalty order passed under section 271A of the Income Tax Act for the Assessment Year 2017-18. 2. The assessee has raised the following grounds of appeal:- “i. That the authority below was not justified in imposing penalty under section 271 A at Rs. 25,000/- ii. That on estimate basis income was estimated Rs. 4,59,800/- as against Rs. 31,177/- shown. iii. That the authority below was not justified in imposing penalty u/s 271A to a petty dairy income. iv. That however assessed tax has also been paid.” 3. The assessee is an individual and did not file any return of income under section 139 of the Income Tax Act for the year under consideration. Since there were deposits in the bank accounts of the assessee during the year under consideration to the tune of Rs. 5,19,42,482/-, therefore, the AO issued notice ITA No.39/Alld/2022 Ajit Tripathi 2 under section 142(1) on 02.01.2018 calling the assessee to file the return of income on or before 01.02.2018. The assesee did not respond to the notice issued under section 142(1) nor filed any return of income. Ultimately, the assessee responded to the notices issued by the AO under section 142(1) and filed manual return of income for the year under consideration declaring total income of Rs. 31,177/- and net agriculture income of Rs. 15,70,200/-. The assessee explained the source of deposits in the bank account which includes the amount received from his uncle Shri. Pradeep Kumar Tripathi, remitted from Muscat, Oman and produced the supporting evidence of the said transfer of funds by his uncle. The AO accepted the said explanation of Rs. 2,58,52,121/- received by the assessee from his uncle. However, the explanation of the assessee regarding agriculture income of Rs. 15,70,200/- was partly accepted by the AO to the extent of Rs. 11,10,200/- and the balance amount of Rs. 4,59,800/- was treated as income from business of Dairy products. Accordingly, the AO completed the assessment at the total income of Rs. 6,55,570/-. The AO initiated the penalty proceedings under section 271A of the Income Tax Act for default of not maintaining the books of accounts by the assessee and levied a penalty of Rs. 25,000/-, vide order dated 30.12.2021. The assessee challenged the action of the AO levying the penalty under section 271A of the Income Tax Act by filing the appeal before the CIT(A) and contended that the assessee is not required to maintain the books of accounts under section 44AA as the turnover of the assessee as well as income from business was not more than the minimum limit provided under the said provision. The assessee submitted that the income from Dairy business was only Rs. 31,177/- and the balance was agriculture income of Rs. 15,70,000/-. The AO accepted the agriculture income at Rs. ITA No.39/Alld/2022 Ajit Tripathi 3 11,10,200/- for want of proof of the balance agriculture income. Hence, the difference was added by the AO to the income from Dairy business. The assessee pleaded that the penalty levied by the AO may be deleted. The CIT(A) was not impressed with the reply of the assessee and confirmed the penalty levied by the AO under section 271A of the Income Tax Act. 4. Before the Tribunal, the learned AR of the assessee has submitted that the business income of the assessee was only Rs. 31,177/- and that agriculture income was of Rs. 15,70,200/- as declared by the assessee in the manual return filed. He has further submitted that the AO has made an addition to the business income from the agriculture income declared by the assessee. Thus, its estimation made by the AO by treating the agriculture income to the extent of Rs. 4,59,800/- as business income which cannot be a basis of levy of penalty under section 271A of the Income Tax Act. He has contended that when the business income as well as the turnover of the business is less than the limit provided under section 44AA of the Income Tax Act then the penalty levied under section 271A is not justified. Hence, he has pleaded that the penalty levied by the AO of Rs. 25,000/- under section 271A may be deleted. 5. On the other hand, learned DR has submitted that as per the provisions of section 44AA(2) if the business income of the assessee is more than Rs. 1,20,000/- or the turnover of the assessee is more than Rs. 10,00,000/-, then the assessee who is carrying on the business or profession shall keep and maintain such books of accounts and other documents as may enable the AO to compute his total income in accordance with the provisions of this Act. Thus, the learned DR has contended that when the business income of the assessee determined by the AO at Rs. ITA No.39/Alld/2022 Ajit Tripathi 4 4,59,800/-, then the provisions of section 44AA(2)(i) are attracted and assessee is required to maintain the books of accounts. He has relied upon the orders of the authorities below. 6. I have considered the rival submissions as well as relevant material on record. The ACIT while passing the order under section 271A of the Income Tax Act has given the reasons for levy of penalty in para 3 to 5 as under:- “3. The issue against which penalty proceedings u/s 271A was initiated during the assessment proceedings is discussed as under.- The assessee has not filed return of income u/s 139 for AY 2017-18. During the assessment proceedings, the assessee has filed manual return of income declaring total income at Rs. 31,177/- and net agriculture income of Rs. 15,70,200/-. The manual return submitted by the assessee was treated as Invalid return. During the assessment proceedings, it was noticed from the Bank statement that the assessee has deposited Rs. 5,19,42,482/- in his six (6) bank accounts. Further, it was seen that the assessee has made withdrawal of Rs. 132,20,000/- from his six bank accounts. After considering the reply and submission of the assessee assessment order was passed u/s 144 on 26.12.2019, assessing total income of Rs. 6,55,570/-. Penalty u/s 271A was initiated for not maintaining books of account even though the deposit of Rs. 5,19,42,482/- was the account. 4. As per section 44AA of turnover/sales/gross receipts of the assessee exceeds Rs. 10 lakhs or business income exceeds Rs.1,20,000/- in the previous year, the assessee is required to keep and maintain books of accounts and other documents as per provisions of the Act. In the instant case, Assessment Order u/s. 144 of the Act, the turnover was considered at Rs., 5,19,42,482/- on account of deposits made in the bank accounts, which exceeds the monetary limit fixed for keeping and maintaining books of accounts for the Assessment Year under consideration. During assessment proceedings for Assessment Year under consideration, the assessee could not produce books of accounts and other documents required to be maintained as per section 44AA of the Act despite affording several opportunities. Considering the above facts of the case and in law, it is held that the assessee has no valid reasons for non- maintenance of books of accounts and other documents ITA No.39/Alld/2022 Ajit Tripathi 5 required to be maintained as per section 44AA of the Act. The assessee has not furnished any reasonable cause which prevented him from doing so. Thus, the assessee has defaulted in maintaining books of accounts and other documents as per section 44AA of the Act for the Assessment Year under consideration and hence, liable for penalty u/s. 271A of the IT Act. 5. In view of the above facts, it is held that this is a fit case for levy of penalty u/s.271A of the Act. Accordingly, penalty u/s 271A of Rs. 25,000/- is hereby levied. Demand notice is issued accordingly.” 7. Thus, the ACIT has taken the total income assessed at Rs. 6,55,570/- while passing the assessment order under section 144 and as well as deposit of Rs. 5,19,42,482/- in the bank as the basis for initiating the penalty under section 271A. The ACIT has referred to the provisions of section 44AA of the Income Tax Act regarding the limits of the turnover/ sales / gross receipts or the business income in the previous year. The ACIT who has passed the penalty order under section 271A has observed that in the assessment order under section 144 of the Act, the turnover was considered at Rs. 5,19,42,482/- on account of deposits made in the bank accounts which exceeds the monitory limit fixed for keeping and maintaining the books of accounts. This observation of the ACIT as recorded in para 4 of the impugned order is contrary to the facts as the AO has accepted the deposits in the bank account as non business receipts except treating the agriculture income to the extent of Rs. 4,59,800/- as business income of the assessee from Dairy business activity. Further when the assessee has explained before the AO in the manual return of income that its business income from Dairy business is Rs. 31,177/- and net agriculture income is Rs. 15,70,200/- out of which the AO accepted the agriculture income of Rs. 11,10,200/- as the assessee filed the supporting evidence to that extent. Since, the assessee did not file any supporting ITA No.39/Alld/2022 Ajit Tripathi 6 evidence for the remaining amount of Rs. 4,59,800/-, the same was treated as business income instead of agriculture income claimed by the assessee. In these facts and circumstances, when the assessee has claimed the agriculture income of Rs. 15,70,200/- and business income of Rs. 31,177/-, the assessee was under bona fide belief that he was not required to maintain the books of accounts as per the provisions of section 44AA(2)(i) of the Income Tax Act. Only in consequence of the assessment order, the business income of the assessee was assessed at Rs. 4,59,800/- instead of agriculture income claimed by the assessee would not ipso facto lead to the conclusion that the assessee was very well aware about the requirement of keeping and maintaining the books of accounts. Accordingly, when the very basis of levying the penalty by the ACIT is contrary to the assessment framed by the AO and even business income of the assessee prior to the assessment order was not above the limit prescribed under section 44AA(2)(i) for keeping and maintaining the books of accounts then the case falls in the ambit of reasonable cause for the said failure as provided under section 273B of the Income Tax Act. Hence, the penalty levied by the ACIT under section 271A of the Income Tax Act of Rs. 25,000/- is deleted. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 16/02/2023 at Allahabad, U.P. Sd/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED:16/02/2023 Sh ITA No.39/Alld/2022 Ajit Tripathi 7 Copy forwarded to: 1. Appellant-Ajit Tripathi 2. Respondent-CIT(A), Delhi 3. CIT(A) 4. CIT 5. DR