Taxpayer Can't Be Penalised For Failure To Get Its Books Of Accounts Audited If There Exists Reasonable Cause For Such Failure: Jaipur ITAT
While allowing the appeal against the order passed u/s 271B of the Income tax Act, the Jaipur ITAT held that provision of section 273B gives power to the taxing authority not to impose the penalty if the assessee proves that there was a reasonable cause for failure to get the books of accounts audited and directed the AO to delete such addition.The Bench of the ITAT comprising of Sandeep...
While allowing the appeal against the order passed u/s 271B of the Income tax Act, the Jaipur ITAT held that provision of section 273B gives power to the taxing authority not to impose the penalty if the assessee proves that there was a reasonable cause for failure to get the books of accounts audited and directed the AO to delete such addition.
The Bench of the ITAT comprising of Sandeep Gosain (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) observed that, “Merely because the assessee has not challenged the finding of the CIT(A) in quantum in the penalty proceeding the assessee cannot be called upon to pay the penalty as failure to get the books of accounts audited and failure file the audit report. The reasons advanced by the assessee this he has offered the income under the head capital and under that head though the income / receipt 1 Cr there is no requirement to get the books of accounts audited and therefore, this being the reasonable cause for the assessee. The provision of section 273B gives power to the taxing authority not to impose the penalty if the assessee proves that there was a reasonable cause for such failure.” (Para 7)
As per the brief facts of the case, the Assessee's return was selected for scrutiny, wherein AO found that the total turnover/gross receipts of the assessee were at Rs.1,29,00,787/-. Therefore, the assessee was required to get his accounts audited by an accountant but as per the records the accounts of the assessee were not got audited. Based on these observation order of levying penalty u/s. 271B was passed by the NeFAC.
The CIT(A) confirmed the levy of the penalty holding that the reasons advanced by are not covered under the any reasonable clause and since the assessee has not complied the statutory provisions, the action of levy of penalty by the AO was confirmed.
The Bench noted that the AO has changed the head of income from capital gain to business income.
The bench also noted that the revenue could not controvert the fact that the assessee submitted that this is only solitary transactions which cannot be termed as business income.
The Bench explained the section 273B by plain reading of the provision that no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.
Therefore, on finding the assessee was prevented by sufficient cause, ITAT allowed the assessee's appeal.
Counsel for Appellant/Taxpayer: Dev Arora
Counsel for Respondent/Department: Monisha Choudhary
Case Title: Manphool Singh verses Income Tax Officer
Case Number: ITA No. 748/JPR/2023