I would like to discuss through the article, more on the controversial issue of non imposition of penalty under Section 271A and 271B if no books of accounts are prescribed under section 44AA with a recent case law.
Before we go deep into the topic it would be apposite to brush up 44AA, 44AB, 271A and 271B of the Act.
44AA-
Books prescribed for persons engaged in legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or film artist or authorized representative if gross receipts exceeded Rs.150000 in each of the three years preceding the financial year.
Other professions: if income from business or profession exceeds one lakh twenty thousand rupees or total sales, turnover or gross receipts, in business or profession exceeds ten lakh rupees in any one of the three years immediately preceding the previous year.
44AB
(a) Any person carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceeds One crore rupees or
(b) Any person carrying on profession shall, if his gross receipts in profession exceeds twenty five lakh rupees.
271A
If any person fails to keep and maintain any such books of account and other documents as required by section 44AA or the rules made thereunder, in respect of any previous year or to retain such books of account and other documents for the period specified, the Assessing Officer or the Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum of twenty-five thousand rupees.
271B
If any person fails to get his accounts audited in respect of any previous year or furnish a report of such audit as required under section 44AB, a penalty may be imposed: a sum equal to one-half per cent of the total sales, in business, or of the gross receipts in profession, or one lakh rupees, whichever is less.
Now the question that came up was whether penalty u/s 271B could be levied if no books were prescribed. The recent case law is K.V. Ramachandran vs CIT. IT Appeal No. 208 (Coch.) of 2012. Date of Pronouncement – 28.03.2013
In the instant case, the appellant was a civil contractor. According to his counsel, the appellant is not maintaining any books of accounts as no books were prescribed by the CBDT in respect of civil contractor. Therefore, the taxpayer cannot be blamed for non maintenance of the books of account. The CIT(A) had already deleted the penalty u/s 271A. He contended that once the books of accounts were not maintained, there is no question of audit and hence no levy of penalty under Section 271B.
The respondent’s counsel contended that since total receipts of the taxpayer during the year under consideration exceeded the limits prescribed u/s 44AB of the Act, the taxpayer was required to obtain the audit report.
The Tribunal after analyzing section 44A and rule 6F of IT Rules, 1962 said that a civil contractor was not mandated to maintain books as per 44AA and it is not an intentional omission on the part of the authorities (CBDT) to not include a civil contractor.
The tribunal also opined that when the books of accounts were not maintained and the penalty levied u/s 271A was deleted, there is no justification for levying penalty u/s 271B of the Act for not getting the books of account audited.
The appeal of the tax payer stands allowed.
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