Case Law Details
Sh. Nikki Tyagi Vs ITO (ITAT Delhi)
The case of Sh. Nikki Tyagi vs. Income Tax Officer (ITO) addressed a penalty imposed under Section 271B of the Income Tax Act due to a turnover exceeding the threshold requiring an audit. Tyagi, a distributor for Mother Dairy, filed a return under presumptive taxation, declaring income from commission-based transactions without maintaining formal books. The Assessing Officer (AO) determined Tyagi’s total turnover as ₹3.19 crore, which exceeded ₹1 crore, and hence required an audit under Section 44AB. The AO levied a penalty of ₹1.5 lakh for non-audit compliance, a decision upheld by the CIT (Appeals) based on the law that ignorance of audit requirements is not a valid defense. However, upon appeal to the ITAT Delhi, Tyagi argued that the AO incorrectly treated the gross receipts as turnover rather than considering it as commission income derived from sales made on behalf of Mother Dairy. ITAT accepted Tyagi’s stance, noting that the income comprised only commission on sales, not ownership of goods, thus negating the turnover basis for audit. In light of Section 273B, which provides relief from penalties if there is reasonable cause, ITAT concluded that Tyagi’s situation met these grounds and ordered the penalty annulled, upholding the appeal in favor of the assessee.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been filed by the assessee against the order of the ld. CIT( A)-15 , New Delhi, dated 08.05.2019 , relating to AY 2015-16.
2. Brief facts of the case are that the assessee has declared income from the business being the distributor of Mother Dairy Packed Milk and milk Before the AO, the assessee submitted that the assessee does not maintain the books of account and return is filed as per the presumptive taxation provisions. The assessee deposits the security with Mother Dairy against which he receives the milk products to be delivered. He receives cash on daily basis against milk products and deposits the same in his current account. Thereafter he makes ECS payment to mother dairy. The assessee increases the product value as per the distributor margin indicated by the mother dairy from time to time and he may decrease the margin as per shop to shop.
3. Amount available to the assessee is the net margin to the assessee as disclosed in the return of income. The returned income of Rs.2 ,49, 210/-.
4. The assessee maintains bank accounts with the State Bank of India, Vikas Puri, New Delhi (Current Account) & Oriental Bank of Commerce, Vikas Puri, New Delhi ( Saving Account) Copies of bank statements have also been Information u/ s 133(6) of the Income tax Act was also called for from the Mother dairy. The Senior Manager, Mother Dairy has forwarded the ledger account of the assessee as appearing in the books of Mother Dairy Fruit & Vegetable Pvt. Ltd.
5. The AO held that total turnover of the assessee works out to 3 ,19,09 ,663/- which was received by the Mother Dairy through assessee’s bank accounts. It was held that since, the assessee’ s turnover exceeds Rs. One crore the assessee was liable to get his books of account audited. Owing to non- audited of books of accounts after having exceeded threshold limit specified u/s 44AB, penalty u/s 271B has been levied.
6. The CIT( A) confirmed the addition.
7. For the sake of ready reference and completeness of the entire order of the CIT(A) is reproduced hereunder:-
The AO has levied the penalty on account of failure of the assessee in getting her accounts audited as the turnover of the business exceeded the threshold limit specified u/ s 44 AB. During the course of appellate proceedings, The AR of the appellant has contended that, “…. That it is an admitted fact that the appellant has not maintained any books of account. Even in Para 4 of Assessment Order on page 2 it is duly mentioned that the assessee has not maintained the books of account and return is f i led as per presumptive taxation basis..’
The contention of the Appellant has been considered and the order of AO has also been perused. It is seen that the assessee has achieved a total turnover of Rs, 3 , 19 , 00 , 663 /- in her business. This turnover figure has already been confirmed by Mother Dairy. The contention of the appellant that the return of income is filed on presumptive taxation basis is not applicable to this turnover figure,
It has been held in the case of CIT Vs S. C. Naregal ( Kar) 329 ITR 615 that Ignorance of law is no excuse and accordingly the Levy of penalty u/ s 27 IB was upheld. The AO has given detailed reason on page 2 of his order for levying the penalty. Therefore, considering the facts and circumstances of the case, I am of the considered opinion that the whole of the turnover is to be taken for the purpose of calculating the Gross turnover of the business. Therefore, the action of the A. O, in levying the penalty of Rs. 1 , 50 , 000 /- u/ s 271 B is justified and the action of the A. O. is confirmed accordingly.
8. We have gone through the facts on The provisions of section 271B are as under:-
“271B. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under section 44AB, the Assessing Officer 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, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.”
9. Provisions of section 273B are as under:-
“ Notwithstanding anything contained in the provisions of….. section 271B…….., No penalty shall be imposable on the person or the assessee, as the case may be, for any failure refer to in the said provisions if he proves that there was reasonable cause for the said failure.”
10. In the instant case, it is proved that all the goods the milk products and the vegetables belongs to the principle “Mother Dairy”. The assessee sells goods on behalf of the principle Mother Dairy on commission basis. The senior Manager of Mother Dairy has also confirmed these facts. The receipts are sent back to the Mother Dairy through ECS on regular intervals. What the assessee gets in this case is only the Commission income. The rate of commission is also determined by the “Mother Dairy fruit and vegetable Pvt. Ltd.” The assessee increased the product value as per the distributor margin indicated by the Mother Dairy from time to time and as per shop to shop based on the locality. Revenue has wrongly considered the gross turnover as the sale of the assessee instead of the commission/margin amount earned by the assessee. Hence, keeping in view, the peculiar facts in the instant case and the provisions of 271B and 273B, we hold that the penalty levied be obliterated.
11. In the result, the appeal of the assessee is Order pronounced in the open court on 30/06/2022.
Author Bio
