Kopperla Patan Anwar Hussain Vs ITO (ITAT Hyderabad)
Hyderabad ITAT: Kachha Arhtia’s Turnover Is Only Commission; Penalties under Sections 271A & 271B Cannot Be Sustained Without Statutory Basis
The Hyderabad ITAT granted relief to a commission agent engaged in facilitating the sale of agricultural produce, holding that the Revenue had erred in levying penalties under sections 271A and 271B. As regards section 271A, the Tribunal observed that while the Assessing Officer had imposed penalty on the premise that the assessee’s gross receipts exceeded the threshold for maintaining books of account, the CIT(A) sustained the penalty on an entirely different ground by referring to the assessee’s income in one of the preceding years. Since neither the assessment nor the penalty order examined the statutory conditions under section 44AA(2) with reference to the three immediately preceding previous years, the Tribunal restored the matter to the Assessing Officer for fresh examination after granting due opportunity to the assessee. In respect of section 271B, the Tribunal held that once the assessee had been accepted as a kachha arhtia (commission agent), only the commission income, and not the entire sale proceeds handled on behalf of farmers, constituted his turnover in view of CBDT Circular No. 452 dated 17.03.1986. Since the commission income was below the audit threshold prescribed under section 44AB, no audit obligation arose. The Tribunal further held that where the Revenue itself alleged failure to maintain books and had initiated penalty under section 271A, it could not simultaneously levy penalty under section 271B for failure to audit such non-existent books, relying on the decisions of the Gauhati and Allahabad High Courts. Accordingly, the penalty under section 271B was deleted, while the penalty under section 271A was remanded for fresh adjudication.
