The Tax Publishers2022 TaxPub(DT) 6950 (Rkt-Trib)

INCOME TAX ACT, 1961

Section 271B

Where assessee's explanation in respect of contravention of section 44AB was ignored by Lower Authorities as well as they had failed to exercise discretion available under section 273B, then penalty levied under section 271B was deleted.

Penalty under section 271B - Contravention of section 44AB - Reasonable cause -

Assessee filed Return of Income declaring total income of Rs. 6,11,880. Scrutiny assessment under section 143(3) was completed by AO assessing total income at Rs.24,09,640. AO initiated penalty proceedings under section 271B on alleged ground that assessee had turnover of Rs. 4,79,20,728 which exceeded limit as per provisions of section 44AB. He issued a show cause notice for levying penalty under section 271B. Assessee submitted that AO himself had accepted that assessee had derived commission income of 2% from “FIPL” worth of Rs. 75,15,450 and assessee was providing huge accommodation entries and earned 2% commission on such transaction. Though AO had not accepted explanation, however levied penalty of Rs. 1,50,000 under section 271B. Aggrieved against same, assessee filed appeal before CIT(A). Assessee submitted before him that regular books of account were maintained which had been confirmed by AO as well. As per books of accounts, assessee's turnover was Rs. 40,88,466. Assessee in order to avoid long-term litigation and to buy peace of mind, accepted unaccounted income of Rs. 7,26,336 and paid due tax thereon. CIT(A) considered above submissions and held that section 44AB(a) talks of total sales, turnover or gross receipts and does not distinguish between disclosed or undisclosed turnover. CIT(A) dismissed appeal filed by assessee and confirmed levy of penalty under section 271B. Hence this appeal. Held: Imposition of penalty under section 271B is not mandatory, rather it is discretionary, because if assessee proves that there was a “reasonable cause” for said failure, then AO ought to have considered same and then proceed with levying penalty. Parliament has used words “may” and not “shall”, thereby making their intention clear, in as much as that levy of penalty is discretionary and not automatic. Said conclusion is further justified by section 273B of Act, namely “penalty not to be imposed in certain cases”. A careful reading of section 273B encompasses that certain penalties “shall” be imposed in cases where “reasonable cause” is successfully pleaded. It is seen that penalty imposable under section 271B is also included therein. By said provisions, Parliament has unambiguously made it clear that no penalty “shall be” imposed, if assessee “proves that there was a reasonable cause for the said failure”. As noticed, if the statutory provision shows that the word “shall” has been used in section 271B, then imposition of penalty would have been mandatory. Section 271B as extracted above further throws light on legislative intent as it specifically provides that no penalty “shall' be imposed if assessee proves “that there was reasonable cause for the said failure”. In the facts of present case, it was seen that explanations offered by assessee have been ignored by AO as well as CIT(A) and AO levied penalty under section 271B. Discretion available under section 273B was not exercised by Lower Authorities. For reasons stated hereinabove, penalty levied under section 271B was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16



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