Case Law Details
Kartick Das Bairagya Vs ITO (ITAT Kolkata)
The case of Kartick Das Bairagya Vs ITO, brought before the Income Tax Appellate Tribunal (ITAT) Kolkata, provides significant insights into the implications of Section 271B of the Income Tax Act. The case demonstrates how reasonable cause for failing to furnish an audit record can result in no penalty under this section.
The appellant, engaged in the retail business of building materials on a commission basis, was penalised Rs. 1,50,000/- under section 271B for failing to audit and furnish a report as per section 44AB of the Act. This happened due to a loss incurred from share transactions, which brought the income from share trading below 8% of the total turnover.
Kartick Das Bairagya claimed he was unaware of these share dealings performed by the broker, making him unable to ascertain the loss and the necessity for auditing. Moreover, the appellant argued that the assessing officer did not provide sufficient time to audit the share dealings and prepare a report.
During the ITAT proceedings, the assessee provided an affidavit explaining the reasons for not getting the accounts audited, arguing that the impugned year was the first time his turnover exceeded Rs. 1 Cr. due to share dealings, for which he was unaware of the requirement to get audited as per Section 44AB.
In view of these arguments, the Tribunal considered the appellant’s situation as a reasonable cause under Section 273B of the Act, which safeguards from penalties under specific situations, including a failure under Section 271B if a reasonable cause can be proven. Given this reasonable cause, the ITAT ruled in favor of the appellant, and the imposed penalty was deleted.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assesseeis against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide Order No. ITBA/NFAC/S/250/2022-23/ 1049267122(1) dated 31.01.2023 against the penalty order of ITO, Ward-1(1), Burdwan u/s. 271B of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 19.04.2018 for AY 2015-16.
2. Assessee is in appeal before the Tribunal against the order passed u/s. 271B of the Act imposing penalty of Rs. 1,50,000/- for failure to get accounts audited and to furnish a report of such audit as required u/s. 44AB of the Act.
3. Brief facts of the case are that assessee is in the business of retail dealings in building material on commission basis. Assessee filed his return of income on 14.09.2015, reporting total income of Rs.2,60,678/-. During the course of assessment, Ld. AO noted that assessee has done share transactions through broker Kripa Securities Pvt. Ltd. in which assessee had suffered a loss of Rs.4,38,446/-. Ld. AO noted that assessee entered into intra-day share trading and suffered this loss. Since the income from share trading is below 8% of the total turnover, Ld. AO was of the view that assessee should have got his accounts audited u/s. 44AB of the Act and furnished a report of such audit. Since assessee failed on this count, Ld. AO initiated the proceedings of penalty u/s. 271B of the Act.
3.1. In the course of penalty proceedings, assessee submitted that he was completely unaware of the share dealings done by the broker. Assessee had not done any such share dealings in the past and that he was not informed by the broker for the said share dealings which otherwise would have led the assessee to ascertain the quantum of loss in share dealings and arrive at short term or long term gain or loss on this account. In the course of hearing, assessee collected Form No. 10DB from the broker which showed the loss in the share dealings. It was contended that Ld. AO did not allow sufficient time to get the audit done in respect of the share dealings and furnish a report thereon. Assessee also submitted that in the course of assessment, the income was assessed at Rs.2,74,000/- in respect of income from business as reported in the return filed by the assessee. However, disregarding the submissions made by the assessee, Ld. AO imposed penalty of Rs. 1,50,000/- u/s. 271B of the Act. Aggrieved, assessee went in appeal before the Ld. CIT(A), who confirmed the penalty so imposed. Aggrieved, assessee is in appeal before the Tribunal.
4. Before us, Ld. Counsel for the assessee reiterated the submissions made before the authorities below. An affidavit dated 10.02.2023 is also placed on record deposing the facts and circumstances of the case which led to the failure on the part of the assessee to get the accounts audited and furnish a report of such audit. Ld. Counsel further submitted that delay in preparing the audit report occurred since impugned year is the first year where the turnover of the assessee exceeded Rs. 1 Cr. on share dealings for which the assessee was not aware of, to get the accounts audited u/s. 44AB of the Act. Assessee got the accounts audited u/s. 44AB and obtained the audit report for the same.Ld. Counsel emphasized that assessee was under this bona fide belief owing to the fact that turnover in share dealings had exceeded Rs. 1 Cr. for the first time and would be subjected to audit, failure of which would lead to penalty u/s. 27 1B of the Act. Ld. Counsel submitted that assessee is eligible to the protection provided in sec. 273B of the Act since he was under a bona fide belief that provisions of sec. 44AB were not applicable to him. According to him, explanation offered by the assessee constitutes reasonable cause as there was no wilful default on the part of the
5. Per contra, Ld. CIT DR placed reliance on the orders of the authorities below to emphasize that penalty has been rightly imposed and should be confirmed.
6. We have heard the rival submissions and perused the material available on record. Section 271 B of the Act provides that if any person fails to get his accounts audited in respect of an assessment year or furnish a report of such audit as requiredu/s. 44AB, the AO may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, or a sum of Rs. 1,50,000/-, whichever is less. However, no penalty shall be imposable on the person if he proves that there was a reasonable cause for the failure, as provided u/s. 273B of the Act.
6.1. Before us, it is submitted that assessee is dealing in retail trading of building material on commission basis. The impugned year is the first year wherein his gross receipts/turnover exceeded the threshold prescribed u/s. 44AB of the Act and was under a bonafide belief that there was no requirement of any audit in this respect. Subsequently, assessee got the accounts audited in respect of his share transaction and obtained the report as required u/s. 44AB of the Act. Further, assessee has furnished an affidavit to state that he was not in the knowledge of the share transactions in his name as the same was done by his broker. Considering the facts and circumstances of the case and explanation offered by the assessee which constitutes a reasonable cause as envisaged u/s. 273B of the Act, we hold that impugned penalty is not sustainable and is hereby deleted. Grounds taken by the assessee are allowed.
7. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 30th May, 2023.
