Case Law Details
Rcube Amalgamations Vs DCIT (ITAT Chennai)
No Double Penalty for Same Default: ITAT Chennai Deletes Section 271B Penalty Where Penalty under Section 271A Already Levied
The Chennai Bench of the ITAT allowed the assessee’s appeal for AY 2017-18 and deleted the penalty of ₹1.50 lakh levied under section 271B for failure to furnish audit report under section 44AB. The Tribunal held that once penalty had already been imposed under section 271A for non-maintenance of books of account, a further penalty under section 271B could not be sustained.
The assessee explained that books of account could not be maintained during the relevant year due to a genuine hardship, as the accountant met with a serious accident. The Assessing Officer accepted the fact of non-maintenance of books and levied penalty under section 271A. However, the AO additionally levied penalty under section 271B for non-furnishing of audit report, which was confirmed by the CIT(A), NFAC.
The ITAT relied on settled judicial principles laid down by multiple High Courts, including Gauhati High Court in Surajmal Parsuram Todi, Allahabad High Court in CIT v. S.K. Gupta & Co. and Madhya Pradesh High Court in Bharat Construction Co., and followed the coordinate Chennai Bench decision in Shanthilal D. Jain v. DCIT. It was reiterated that the obligation to get accounts audited under section 44AB arises only if books of account are maintained. Where the offence of non-maintenance is complete and penalised under section 271A, there can be no further default attracting section 271B.
Accordingly, the Tribunal held that levy of penalty under section 271B amounted to double penalisation for the same default, which is impermissible in law. The penalty was deleted in full and the assessee’s appeal was allowed
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 07.10.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The order of the CIT(A)-NFAC arises out of the order of the AO imposing penalty u/s.271B of the Act amounting to Rs.1,50,000/-. The relevant Assessment Year is 2017-18.
2. The Ld.AR submitted that in the instant case the assessee had not maintained the books of accounts since during the relevant assessment year, the assessee’s accountant met with an accident and was seriously injured. It was further submitted by the Ld.AR that for non-maintenance of books of accounts, the assessee was imposed penalty u/s.271A of the Act. It was submitted that if penalty has been imposed u/s.271A of the Act for non-maintenance of books of accounts, no penalty u/s.271B of the Act can be imposed for non-furnishing of audit report u/s.44AB of the Act. In this context, the Ld.AR relied on the Chennai Bench order of the Tribunal in the case of Shri Shanthilal D Jain vs. DCIT in ITA Nos.2396 to 2402/CHNY/2019 (order dated 20.05.2022).
3. The Ld.DR supported the order of the AO and the First Appellate Authority.
4. We have heard rival submissions and perused the material on record. Admittedly, in the instant case, assessee for the relevant assessment year had not maintained the books of accounts. For non-maintenance of books of accounts, penalty u/s.271A of the Act was imposed. The Chennai Bench of the Tribunal in the case of Shri Shanthilal D Jain, (supra) after considering the judicial pronouncements on the subject had held that once penalty has been imposed u/s.271A of the Act for non-maintenance of books of accounts, again penalty u/s.271B of the Act cannot be imposed for non-furnishing of audit report u/s.44AB of the Act. The relevant finding of the Chennai Bench of the Tribunal in the case of Shri Shanthilal D Jain, (supra)reads as follows:-
“28.1 Coming to penalties levied u/s.271B of the Act, in the above 17 appeals in regard to not filing audit report u/s.44AB of the Act. The AO levied penalty u/s.271B of the Act for not producing audit report or not filing audit report u/s.44AB of the Act. The AO levied penalty u/s.271B of the Act and the CIT(A) confirmed the same. Aggrieved, now assessees are in appeal before the Tribunal.
28.2 Before us, ld. counsel for the assessee made only one statement that the Hon’ble Allahabad High Court in the case of CIT vs. S.K. Gupta & Co., (2010) 322 ITR 86, Hon’ble Madhya Pradesh High Court in the case of Bharat Construction Co. vs. ITO, (1999) 153 CTR 414 and Hon’ble Gauhati High Court in the case of Surajmal Parsuram Todi vs. CIT, (1996) 222 ITR 691 has categorically held that once books of account are not maintained and consequently penalty u/s.271A of the Act is levied and confirmed, no penalty u/s.271B of the Act for failure to get the accounts audited u/s.44AB of the Act be levied. The Hon’ble Gauhati High Court in the case of Surajmal Parsuram Todi, supra, held as under:-
We have gone through the provisions of ss. 44AA, 44AB, 271A and 271B of the Act. Maintenance of accounts is envisaged under s. 44AA and on failure to do so the assessee shall be guilty and liable to be penalised under s. 271A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by s. 44AA the offence is complete. After that there can be no possibility of any offence as contemplated by s. 44AB and, therefore, in our opinion, the imposition of penalty under s. 271B is erroneous. The Tribunal has overlooked this aspect of the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of account as required under s. 44AA and for that penalty is prescribed under s. 271A. It is for the Tribunal to take action in accordance with law.
Similarly, the Hon’ble Allahabad High Court in the case of S.K. Gupta & Co, supra, held as under:-
“The submission of Sri Mahajan is misconceived for the reason that the requirement of getting the books of account audited could arise only where the books of accounts are maintained. If for some reason the assessee has not maintained the books of account the appropriate provision under which penalty proceedings can be initiated is under section 271A of the Act which recourse has also been taken by the assessee as would appear from the order of the Tribunal.
The Tribunal was, therefore, justified in upholding the order of the Commissioner of Income-tax (Appeals) cancelling the penalty imposed under section 271B of the Act.”
28.3 As the issue is squarely covered in favour of assessee and no contrary decision pointed out by Revenue, respectfully following the decision of these High Courts, we delete the penalty and reverse the orders of lower authorities. Similar are the facts in all these 16 appeals, hence taking a consistent view, all these 17 appeals relating to levy of penalty u/s.271B of the Act are allowed in favour of the assessee.”
5. In light of the Co-ordinate Bench order of the Tribunal, which has considered the judicial pronouncements on the issue, we delete the penalty levied u/s.271B of the Act. It is ordered accordingly.
6. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 22nd January, 2026 at Chennai.
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