INCOME TAX ACT, 1961

Section 271B

Penalty under section 271B - Leviability - Replacement of net profit rate declared by assessee without alleging any difficulty in doing assessment in absence of audit report -

Assessee disclosed turnover of Rs. 39,78,709 and offered income under section 44AB @ of 8% as net profit. Since turnover was less than Rs. 40 lakh, assessee did not get accounts audited under section 44AB. AO replaced net profit rate of 8% by 11.50% and also, AO examined the return filed by assessee in light of Form No. 26AS - statement tax deducted at source by various persons for amounts paid to assessee. After examining Form No. 26AS, AO noticed that gross turnover of assessee for the year was Rs. 55,01,093 which exceeded prescribed limit of Rs. 40 lakhs and thus AO held assessee as liable for levy of penalty under section 271B for not getting accounts audited under section 44AB. Held: Main purpose of audit under section 44AB is to assist AO in assessment proceedings under section 143(3), etc., AO simply replaced net profit rate of 8% by 11.50% and completed assessment, but nowhere in assessment order, AO mentioned that he got any difficulty in doing assessment in absence of audit report. Accordingly, further, unaccounted sales could not be regarded as turnover for the purpose of section 44AB because documents relied upon by AO were neither part of books of account nor could substitute books of account or constitute books of account of assessee regularly maintained. Therefore, no penalty could be levied under section 271B on assessee for not getting accounts audited under section 44AB as turnover did not exceed Rs. 40 lakhs.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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