High Court of Allahabad

Commissioner of Income-tax, Bareilly v. Bisauli Tractors

Section 271B, read with section 44AB, of the Income-tax, 1961 – Penalty – For failure to get accounts audited – Assessment years 1987-88 to 1989-90 – Whether section 271B is not attracted in a case where no account has been maintained and instead recourse under section 271A can be taken – Held, yes

Facts

For the assessment years 1987-88 to 1989-90, the assessee filed its returns of income without attaching the trading account, profit and loss account and balance sheet. Since the turnover of the assessee exceeded Rs. 40 lakhs in each case, penalty under section 271B was levied. On appeal, the Commissioner (Appeals) cancelled the penalty on the ground that there were no books of account with the assessee for the assessment years in question and when there were no books of account, the question of their auditing did not arise. On revenue’s appeal, the Tribunal confirmed the order of the Commissioner (Appeals).

On reference :

Held

Separate penalty has been provided for non-maintenance of accounts, i.e., under section 271A and for not getting the accounts audited and not furnishing the audit report, i.e., under section 271B. In the instant case, the Assessing Officer did not impose penalty under section 271A and instead proceeded to impose penalty under section 271B. If a person has not maintained the accounts book or any accounts, the question of its audit does not arise. In such an event, the imposition of penalty under the provision contained in section 271A for the alleged non-compliance of section 44AA may arise but the provisions of section 44AB do not get violated in a case where the accounts have not been maintained at all and, therefore, penal provisions of section 271B would not apply. In a case where the returns are not being filed, there is unanimous judicial view that no penalty can be imposed for concealment of income and that is why the Parliament had to make suitable amendment in the penalty provision by inserting Explanation 3 to section 271 and Explanation 3 to section 18 of the Wealth-tax Act, 1957. [Para 7]

Section 271B is not attracted in a case where no account has been maintained and instead recourse under section 271A can be taken. [Para 14]

Thus, the Tribunal was justified in holding that question did not arise of getting the accounts audited as the assessee was not maintaining any books of account.