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2023 (9) TMI 1311 - ITAT COCHINPenalty levied u/s 271(1)(c) - assessee returning a lower income/under reporting of income - whether Defective notice u/s 274 issued? - assessee income was in the absence of audit, liable to be assessed u/s. 44AD at 8% of the turnover, but Assessment was accordingly made, i.e., as against the returned income @ 5% - HELD THAT:- The law, per Explanation 1 to s. 271(1)(c), shifts the onus on the assessee to satisfactorily explain his conduct in returning a lower income, as indeed his bona fides, failing which he is deemed to have concealed particulars of his income. The assessee failing to furnish any explanation, either before the authority levying penalty, before whom it is in law to be, or even the first appellate authority, as to why he did not, in the absence of audit of his accounts, return income, as statutorily mandated, at a net profit rate of 8 percent of the turnover, or, in the alternative, got them audited, returning income on the basis of the audited accounts, on which either side his case on facts would ordinarily lie, it is not open for him – on facts, to contend that the notice did not specify the ‘default’, which essentially is the under-reporting of income w.r.t. to the amount that the law deems as his income in case of non-audit of books of account in a given set of facts. Audit of accounts, of which requirement the assessee is well aware, cannot be regarded as a mere formality, even as sought to be explained by the Hon’ble jurisdictional High Court, as in Peroorkkada Service Cooperative Bank Ltd. [2020 (1) TMI 624 - KERALA HIGH COURT] and in the context of s. 271B of the Act;the law thereby allowing due credence to the expert opinion of the Auditor, places reliance on the assessee’s accounts. An assessee choosing not to get his accounts audited, cannot avoid the legal consequence/s thereof, and does so only at his own peril. Penalty u/s. 271(1)(c) is one such consequence, saved of course u/s. 273B on proving a reasonable cause, which is a reiteration of the principle that though a strict civil liability, penalty is yet not automatic and gets excluded where the assessee-defaulter was constrained to act in the manner he does, i.e., in the facts and circumstances of his case, the onus to prove which, raising the said plea, is though only on him. No such plea has been made in the instant case. Non-strike off of the appropriate limb of the notice u/s. 274 - Assessee’s explanation in the given set of facts and circumstances could and, rather, ought to have, centred around the reason/s for the non-audit of his accounts for the relevant year which would have, where found reasonable, and despite the application of the statutorily presumed profit rate of 8% of the turnover in assessment, saved penalty. It may here also be relevant to state that the assessee’s return was even not accompanied by a statement to the effect that income from his business was being disclosed at lower than the said rate, i.e., based on his unaudited accounts, also stating the reason/s for the same. To a unanimous and clear verdict that the said notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should be not done. A mistake or a mere non-strike off of the inapplicable portion would not invalidate the notice. The entire factual background would fall for consideration in the matter and no one aspect would be decisive. These decisions, it would be seen, are consistent with the law as explained, inter alia, in Vankata Narayana & Sons [1966 (10) TMI 50 - SUPREME COURT], T.A. Abdul Khader [2006 (10) TMI 78 - KERALA HIGH COURT], Maharaj Krishna [2000 (7) TMI 37 - DELHI HIGH COURT], and Hajarilal Kishorilal [1966 (9) TMI 5 - MADHYA PRADESH HIGH COURT] all, save the first, being only in the context of a penalty notice, while that by the Apex Court was in respect of notice u/s. 148, a jurisdictional notice, while that u/s. 274 is admittedly not. And, further, validates the analysis carried out at para 4.1 of this order. In view of the fore-going, we find no merit in the assessee’s case,
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