Penalty Can’t be Imposed for not Getting Books of Account Audited if No Books are Maintained as per Sec. 44AA | ITAT

Case Details: Lokesh Kumar Sharma v. Income-tax Officer - [2023] 152 taxmann.com 130 (Jaipur-Trib.)

Judiciary and Counsel Details

• • Sandeep Gosain, Judicial Member
  • Ms Suhani Meharwal, CA for the Appellant.
  • Ms Monisha Choudhary, (JCIT) for the Respondent.

Facts of the Case

Assessee, an individual, filed the return of income for the relevant assessment year declaring income from business activities. Assessee was not maintaining any books of account, and even tax consultants of assessee refused to sign tax audit report on the ground that assessee maintained no books of account.

During the assessment, Assessing Officer (AO) imposed penalty upon the assessee under section 271B for violation of provisions of section 44AB.

On appeal, the CIT (A) upheld the imposition of the penalty. Aggrieved by the order, the assessee filed an appeal to the Jaipur Tribunal.

ITAT Held

The Tribunal held that the assessee had mentioned that he filed his return of income by collecting information available to him, i.e., sales and purchases. The assessee had also categorically mentioned that he failed to produce books of account and bills/vouchers for verification of purchases and other expenditures claimed in the Profit & Loss account; hence, the assessee’s net profit was not verifiable.

When the assessee did not maintain regular books of account, the question of auditing the books of account does not arise. There was a violation of provisions of section 44AA and said violation could not be extended to section 44AB. The provisions of section 44AB can only be invoked when the assessee has first complied with the provisions of section 44AA.

Therefore, the violation of section 44AA cannot continue because once it is found that the assessee did not maintain the regular books of account, the said violation cannot travel beyond the provisions of section 44AA. Hence, it cannot be held as a further violation of section 44AB.

Since the assessee was not found to have maintained the books of account, no penalty can be imposed for not getting the books of account audited as prescribed under section 271B for violation of section 44AB.

List of Cases Reviewed

• • CIT v. Bisauli Tractors [2007] 165 Taxman 1 [2008] 299 ITR 219 (All.)
  • Surajmal Parsuram Todi v. CIT [1996] 222 ITR 691 (Gauhati)
  • Nirmal Kumar Jain v. ITO [IT Appeal Nos. 6696 and 6645 (Delhi) of 2014, dated 2-3-2016
  • Shahnaz Khanam v. ITO [IT Appeal No. 38 (JP.) of 2018, dated 30-5-2018 (para 6.1) followed.

List of Cases Referred to

• • CIT v. Bisauli Tractors [2007] 165 Taxman 1 [2008] 299 ITR 219 (All.) (para 6.1)
  • Surajmal Parsuram Todi v. CIT [1996] 222 ITR 691 (Gauhati) (para 6.1)
  • Nirmal Kumar Jain v. ITO [IT Appeal Nos. 6696 and 6645 (Delhi) of 2014, dated 2-3-2016 (para 6.1)
  • Shahnaz Khanam v. ITO [IT Appeal No. 38 (JP) of 2018, dated 30-5-2018] (para 6.1).