Case Law Details
Mohammad Daud Vs ITO (ITAT Delhi)
ITAT Delhi held that imposition of penalty under section 271B of the Income Tax Act unsustainable as reasonable cause shown for non-submission of audit report.
Facts- The assessee is an individual engaged in retail trading of Amul Dairy Products like milk, paneer, ghee, curd, etc. on day to day basis. This is the first year of his business. He did not file his return u/s. 139(1) of the Act and even after initial issue of notice under section 142(1) of the Act through system on the ground that he had no knowledge of accounting and book writing. However, in response to notice u/s. 142(1) issued during the course of assessment proceedings, the assessee filed his return for AY 2017-18 on 23.10.2019 declaring income of Rs. 3,74,020/-. A copy of tax audit report dated 10.10.2019 was also submitted. Perusal thereof and details filed revealed that the assessee has declared turnover of Rs. 6.51 crores. AO completed the assessment vide order dated 29.12.2019 u/s. 144 of the Act accepting the income declared by the assessee in the return and initiating the penalty proceedings u/s. 271B of the Act for his failure to get his books of account audited by a qualified Chartered Accountant, thereby violating the provisions of section 44AB of the Act.
During penalty proceedings, show cause notices remain uncomplied with. Hence, the penalty of Rs. 1,50,000/- was imposed vide order dated 21.12.2021 under section 271B of the Act against which the assessee filed appeal before the NFAC, Delhi, wherein, the imposition of penalty was upheld.
Conclusion- Held that it was his first year of business and that he was under the bonafide belief that the provisions of section 44AB of the Act was inapplicable to him as he was only a commission agent supplying milk on behalf of “Amul Milk” in the assigned area and was entitled to fixed commission only. In our opinion, the explanation offered by the assessee constitutes ‘reasonable cause’ and the assessee is eligible to the protection envisaged under section 273B of the Act.
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