In a recent landmark decision, the Hon’ble Ranchi Bench of the Income Tax Appellate Tribunal (ITAT) addressed a critical question regarding the applicability of Sections 271A and 271B. The case of Rakesh Kumar Jha Vs ITO, Appeal Number: I.T.A. No. 72/Ran/2022, delivered on 15/05/2023, sheds light on whether these provisions are distinct or interconnected.
Hon’ble Ranchi Bench held that section 271A and 271B are totally separate distinct provisions and the are applicable separately and relying upon the Hon’ble MP HIGH COURT decision in Bharat Construction Co. v. ITO reported in [1999] 106 Taxman 460 (MP), wherein, the Assessing Officer had earlier levied penalty u/s 271A of the Act for non-maintenance of books, thereafter the Assessing Officer issued another notice for levy of penalty u/s 271B of the Act for not getting the books of accounts audited. The assessee challenged the levy of penalty u/s271B of the Act on the ground that the same was barred by limitation. The Hon’ble Madhya Pradesh High Court has held that the defaults contemplated by section 271A and section 271B are separate and distinct. Under the latter provision, if the assessee fails to get his accounts audited u/s 44AB, he is liable to penalty. The object is to geta clear picture of the assessee’s accounts whose turnover exceeds the prescribed limit. The rates envisaging two types of defaults are also different. The Hon’ble High Court also took notice the fact that earlier penalty levied by the Assessing Officer only for non-maintenance of accounts by the assessee and not for its failure to have its accounts audited u/s 44AB of the Act. Therefore, the Hon’ble High Court held that the earlier penalty levied by the Assessing Officer u/s 271A of the Act was only for non-maintenance of books of account and the same did not cover the penalty for not getting the books audited u/s 271B of the Act and that the second notice issued by the Assessing Officer for levy of penalty u/s 271B of the Act was not barred by limitation by reckoning the limitation period from the date of issue of earlier notice for levy of penalty u/s 271A of the Act.
Therefore the Hon’ble Bench concurring with the view of Hon’ble MP HIGH COURT has rejected the plea of appellant counsel that where the appellant has not maintained the books of accounts and filed return on estimated basis then question of imposing penalty for non auditing the books does not arise.
That the said finding of Hon’ble Bench calls for a fair debate since the majority of ITAT Benches including the Kolkata Bench in my own case file SMT MUKTI ROY VS ITO, BURDWAN has followed the settled judgement of Hon’ble ALLAHABAD HIGH COURT in CIT vs. Bisauli Tractors reported in (2007) 165 taxman 000 wherein the Hon’ble HC clearly held that both 271A and 271B are mutually exclusive and interlinked, therefore no penalty can be imposed u/s 271B where books of account is not maintainted u/s 44AA. The same view has been followed by Hon’ble DELHI ITAT in MOHIT GARG VS ITO, WARD 63(3), NEWDELHI fully concurring with the Hon’ble ALLAHABAD HC view on imposition of penalty u/s 271B. Inspite of Ld. DR citation of MP HIGH COURT said order Hon’ble BENCH relied upon the Hon’ble Gauhati HC order in S.P . Todi Vs CIT 226 ITR 691 (Gau.) held, “that maintenance of accounts is envisaged under section 44AAand on failure to do so the assessee shall be guilty and liable to be penalized under section 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 o f account audited by an accountant. But when a person commits an offence by not maintaining the books o f accounts as contemplated by Section 44AA the offence is complete. After that there can be no possibility of any offence as contemplated by Section 44AB and, therefore , in our opinion, the imposition o f penalty under section 271B is erroneous. The Tribunal has overlooked this aspect o f the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of accounts as required under section 44AA and for that penalty is prescribed under section 271A” and Hon’ble ALLAHABAD order in CIT Vs S.K. Gupta and Co . 322 ITR 86 (All .) held, “the submission (of counsel for revenue ) is misconceived for the reason that the requirement o f getting the books of accounts audited could arise only where the books of accounts are maintained. If for some reason the assessee has not maintained the books of accounts the appropriate provision under which penalty proceedings can be initiated under section 271A o f the Act which recourse has also been taken by the assessee as would appear from the order o f the Tribunal.”
Conclusion: Now from aforesaid citations it is crystal clear that majority of HC and ITAT has fully approved the view that offence u/s 271B does not lie where the appellant has not maintained the books. Both the sections are interdependent and consequential and in view of Hon’ble Apex Court settled law in VEGETABLE PRODUCTS VS CIT, that in case of conflicting views of different HIGH COURTS the majority High courts view be followed. So in my humble estimation Hon’ble Ranchi Bench order is against the letter and spirit of Apex court settled law.
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