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Laveti Chinasimhachalam and Laveti Venkateswara Rao, Rajahmundry Versus ITO, Ward-3, Visakhapatnam

2016 (6) TMI 55 - ITAT VISAKHAPATNAM

Penalty u/s 271B - failure to get accounts audited u/s 44AB - Held that:- We find force in the arguments of the assessee for the reason that the requirement of audit u/s 44AB of the Act applies, when the turnover as per the books of accounts exceeds ₹ 40 lakhs. In the present case on hand, on perusal of the facts available on record, we find that the total turnover as per books of accounts of the assessee is less than ₹ 40 lakhs. Therefore the A.O. was not correct in levying the pena .....

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n hand, the A.O. has estimated the gross profit on unaccounted turnover and also made additions towards unexplained investments in building on estimation basis. The assessee has admitted the additional income during the course of survey proceedings and paid the taxes. The assessee also explained the reasons before the A.O. and requested for immunity from the penalty proceedings. Therefore, when the addition is made on estimation basis and assessee has admitted the additional income to buy peace .....

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os.323&324/Vizag/2013, I.T.A.No.325/Vizag/2013 - Dated:- 29-4-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri K. Ravi, DR ORDER PER G. MANJUNATHA, Accountant Member: These appeals filed by the different assessee s are directed against the separate, but identical orders of CIT(A)-11, Mumbai, camp office at Visakhapatnam, dated 22.2.2013 and 15.3.2013 and pertains to the assessment year 2008-09. .....

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was noticed that the assessee is not disclosing his true sale in the books of accounts. It was further noticed that the total sales as on the date of survey, is at ₹ 41,77,097/-, as against this, he had disclosed less turnover in the books of accounts. Therefore, the assessee has been asked to explain the reasons for under admission of sales and also asked to furnish the particulars of total sales for the period from 10.1.2008 to 31.3.2008. In response to the same, the assessee vide lette .....

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has been completed under section 143(3) and determined total income of ₹ 4,34,364/-. 3. The Assessing Officer issued a show cause notice u/s 271B of the Act and proposed to levy penalty for failure to get accounts audited u/s 44AB of the Act. The A.O. issued a show cause notice for the reason that the assessee has failed to get his accounts audited u/s 44AB of the Act, though his turnover exceeds ₹ 40 lakhs. Therefore, asked to explain why penalty u/s 271B of the Act shall not be le .....

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the Act. The A.O. further held that the assessee turnover for the year under consideration is above ₹ 40 lakhs, which was confirmed by the assessee during the course of assessment proceedings, therefore, the contention of the assessee that the turnover for the year under consideration is less than ₹ 40 lakhs has not been accepted. Since, the assessee failed to get is accounts audited u/s 44AB of the Act, invoked the provisions of section 271B of the Act and levied penalty of ₹ .....

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s. When the turnover as per the books of accounts is less than ₹ 40 lakhs, the requirement of audit u/s 44AB of the Act does not arise. The CIT(A) after considering the explanations furnished by the assessee confirmed the penalty levied by the A.O. The CIT(A) held that admittedly, the turnover of the assessee exceeds ₹ 40 lakhs and hence, provisions of section 44AB of the Act attracted. Since the assessee has not filed the audit report as per law, penalty u/s 44AB of the Act attracte .....

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er exceeds ₹ 40 lacs as per books of accounts. Since, the turnover is less than ₹ 40 lacs as per books, audit report is not obtained from an accountant. Therefore, the A.O. was not correct in levying penalty u/s 271B of the Act. On the other hand, the Ld. D.R. strongly supported the order of the CIT(A). 6. We have heard both the parties and perused the materials available on record. The A.O. levied penalty u/s 271B of the Act for failure to get accounts audited u/s 44AB of the Act. T .....

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nto total turnover exceeds ₹ 40 lakhs, the same has not been recorded in the books of accounts in the absence of necessary sales bills and hence the question of audit u/s 44AB of the Act does not arise. We find force in the arguments of the assessee for the reason that the requirement of audit u/s 44AB of the Act applies, when the turnover as per the books of accounts exceeds ₹ 40 lakhs. In the present case on hand, on perusal of the facts available on record, we find that the total .....

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hat the assessee Sri L. Chinasimhachalam is engaged in the business of trading in textiles. The assessee has filed his return of income for the assessment year 2008-09 on 7.9.2009 declaring total income of ₹ 93,890/-. A survey operation u/s 133A of the Act was conducted in the business premises of the assessee on 9.1.2008. During the course of survey operation, the assessee has admitted unaccounted turnover of ₹ 9,76,056/- and also admitted additional income of 12.5% on such unaccoun .....

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ditional income of ₹ 6,66,000/- towards unexplained investment towards cost of construction. Subsequently, the case has been selected for scrutiny assessment. After due consideration of explanation filed by the assessee, the A.O. has completed the assessment u/s 143(3) of the Act and made additions of ₹ 1,22,007/- towards 12.5% gross profit on unaccounted turnover, unexplained investments of ₹ 6,66,000/- and cash gift of ₹ 2 lakhs. 9. The A.O. initiated penalty proceeding .....

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levied the penalty u/s 271(1)(c) of the Act towards additions made on account of unaccounted sales and cash gift, however not levied any penalty towards unexplained investments in construction of building. 10. Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee submitted that at the time of survey, there was a deficit stock of ₹ 7 lakhs and he has agreed to offer income of 7% on the deficit stock. However, the A.O. has arrived .....

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onstruction of building and towards cash gift. The assessee further submitted that the additions made on account of estimation of turnover and estimated cost of construction does not amounts to concealment of income. Though he had admitted the lapses during the course of assessment proceedings, the same has been accepted with a request to not to levy penalty for concealment of income. Therefore, requested to delete the penalty levied by the assessing officer. 11. During the course of appellate p .....

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sessee filed his written submission and contended that he has admitted additional income of ₹ 6,66,000/- towards unexplained investment in construction of building and the source for the investment is explained before the A.O. The assessee further submitted that he has admitted additional income during the course of survey, with an honest understanding that no penalty will be levied. The assessment was made on compromised basis. He had accepted all the additions made by the A.O. to buy pea .....

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y and directed the A.O. to levy penalty in respect of unexplained investment in construction of building. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 12. The Ld. A.R. submitted that the CIT(A) was erred in enhancing the penalty u/s 271(1)(c) of the Act. The Ld. A.R. further submitted that the A.O. has made additions on estimation basis. All the 3 additions are made on estimation basis, therefore, this is not a case of concealment of income or furnishing inaccurate particu .....

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rs of income. The A.O. was of the opinion that the assessee has concealed the turnover and also made unexplained investment in construction of building. The A.O. further opined that the assessee has not disclosed cash gift of ₹ 2 lakhs given to his brother. Therefore, opined that it is a fit case for levy of penalty u/s 271(1)(c) of the Act. It is the contention of the assessee that he has neither concealed the particulars of income nor furnished inaccurate particulars of income, as the A. .....

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