TMI Blog2023 (4) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... thus vacated. Appeal of the assessee is allowed. - ITA. No. 330/JP/2022 - - - Dated:- 6-3-2023 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri Vishal Gupta (C.A.) For the Revenue : Smt Monisha Choudhary (Addl. CIT) ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 29/06/2022 [here in after (NFAC)/ ld. CIT(A) ] for assessment year 2012-13 which in turn arise from the order of the penalty passed u/s. 271B of the Act dated 06.01.2022 by the National Faceless Center, Delhi [ here in after the ld. AO. ] 2. In this appeal, the assessee has raised following grounds: - 1. On the facts and circumstances of the case, the ld. CIT(A) has erred in law and facts by confirming the action of the Ld. AO of imposing penalty under section 217B for not getting the books audited when it was admitted and undisputed fact that the assessee did not maintain any books of accounts. The penalty is thus against the provisions of law and hereby prayed for being deleted. 2. On the facts and circumstances of the case, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on 13/3/2019 to the assessee for verification of filing of ITR and discloser of above transactions gains/loss thereof but the assessee has not furnished any reply/details. Thus, the then Assessing Officer has reasons to believe that the income to the extent of Rs. 1467932400/- has escaped assessment within the meaning of Section 147 of the Income Tax Act 1961 and recorded reasons u/s 147 found it a fit case for issue of notice u/s 148 of the Act. After recording satisfaction on the reasons u/s 147 and finding it a fit case for initiating proceedings u/s 148 and granting approval by the Pr. CIT-II, Jaipur on 25/03/2019, the AO has issued and delivered notice u/s 148 of the Act on 29/03/2019 for service upon the assessee at the given address through the postal authority vide receipt dated 30/03/2019 requiring the assessee to deliver within 30 days from the service of the notice a return in the prescribed format manner online for the said assessment year. In response to the notice u/s 148, the assessee has not filed elTR. for AY 2012-13 within the time allowed. However, he has filed elTR u/s 148 on 16/12/2019 income of Rs.1,50,000/- for AY 2012-13 and accordingly, notice u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med. 4. Aggrieved from the order of the ld. CIT(A) the assessee has preferred this appeal before the tribunal challenging the levy of penalty on the grounds as raised in para 2 above. 5. To support the various grounds so raised the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; The assessee is an individual and was engaged in trading of securities for the year under consideration. He also earned income in the form of salary amounting to Rs 150000.00, interest on saving bank deposits of Rs 291.00 and in addition to this he suffered short term capital loss on sale of securities of Rs 6928.00. He also suffered loss from commodity trading amounting to Rs 3999567.00 and loss from F O trading amounting to Rs 22548.00. As the income of assessee was below the maximum amount not chargeable to tax, he did not filed any return of income. The Ld. A.O reopened the case of assessee under Section 148 and in response to notice issue under Section 148, the assesse filed his return of income on 16.12.2019 with details of income as mentioned above. The Ld. A.O concluded the assessment proceedings vide order dated 19.12.2019 (Paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less . 2. Thus, the default mentioned in this penal provision is not getting the accounts audited by the assessee. Once it has been established that assesse has not maintained any books of accounts, the question of invoking penal provisions under section 271B does not arise. We draw the attention of Ld. Appellate authority to definition of books of accounts (Section 2(12A) as per the act which clearly stipulates as follows: books or books of account includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device ; In the present case, the assessee was maintaining neither of these documents. The only information which the Ld. A.O was having for assessment was the statement of share broker i.e a third party which he has obtained directly from the broker. The fact that assessee did not maintained any books of accounts can be confirmed with Page 7 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT Bareilly v Bisauli Tractors (2008) 299 ITR 219, the H ble Allahabad High Court held that: 14. Therefore, Section 27IB of the Act is not attracted in a case where no account has been maintained and instead recourse under Section 271A can be taken. 15. In view of the foregoing discussions we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the revenue. There will be no order as to costs . We also rely upon the judgement of Hon ble Gauhati High Court in case of Surajmal Parsuram Todi vs. CIT 222 ITR 691 where it was held by the court that We have gone through the provisions of sections 44AA, 44AB, 271A and 271B of the Act. Maintenance of accounts is envisaged under section 44AA and on failure to do so the assessee shall be guilty and liable to be penalised under section 271A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by section 44AA the offence is complete. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted before the Ld. A.O but he did not considered same while passing the penalty order. We thus hereby pray the Ld. authority to allow this ground raised by the assesse. Ground No. 2 On the facts and circumstances of the case, the Ld. A.O grossly erred in assuming jurisdiction and hence imposing penalty upon the assessee on the basis of an invalid show cause notice dated 01.04.2021 which even did not specify the actual charge upon the assessee. Similarly, there was an alleged show cause notice dated 19.12.2019 which was never served upon the assessee on portal or otherwise. Hence, it is hereby prayed that in absence of proper jurisdictional notice, proceedings in pursuance thereof may kindly be declared void. We hereby draw the attention of the Ld. members to Page No. 15 of paper book where we have attached the screen shot of portal where it can be clearly seen that no notice was uploaded on portal. Further, no manual notice was even served upon the assessee. A show cause notice was issued on 01.04.2021 but it simply referred to notice dated 19.12.019 and did not contain any charges against the assessee as such. The copy of said notice dated 01.04.2021 is enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 has held that if the penalty notice is vague, then the penalty order is also bad in the eyes of law. This decision of Karnataka High Court was challenged by the Revenue before the Hon'ble Apex Court, and the Hon'ble Supreme Court has dismissed the SLP. Therefore, applying the ratio-dicedenti in SSA's Emerald Meadows M/s. Parkinson (supra), we are of the view that the notice issued by AO before levying penalty u/s. 271B of the Act is bad in law . We further reply upon the decision of Hon ble Apex Court in case of CIT vs. SSA s Emerald Meadows (2016) 73 com248 (SC) where dismissing the SLP filed by the Revenue quashing the penalty by the Tribunal as well as Hon ble High Court on ground of unspecified notice has held as under:- Section 274, read with section 271(1)(c), of the Income-tax Act, 1961 Penalty Procedure for imposition of (Conditions precedent) Assessment year 2009-10 Tribunal, relying on decision of Division Bench of Karnataka High Court rendered in case of CIT v. Manjunatha Cotton Ginning Factory [2013] 359 1TR 565/218 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings has been done without application of mind which resulted into issuing a completely vague jurisdictional notice u/s 274 and the jurisdictional notice being vague, the consequent levy of penalty is illegal and deserves to be deleted in full. 8. In view of above facts and circumstances, the initiation of penalty proceeding is void ab initio. For this purpose, reliance may be placed on the decision of Jaipur Bench of ITAT in the case of Shri Subhash Sharma Vs DCIT in ITA No.205/JP/2020 vide order dated 21.07.2020, wherein it was held as under: 5 ..the notice issued by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 is bad in law in as much as it did not specify in which limb of section 271(1)(c) of the Income Tax Act, 1961 the penalty proceedings has been initiated, i.e. whether for concealment of income or furnishing of inaccurate particulars of income. 5.1. It is pertinent to note that in the notice, AO has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. The AO in assessment order or penalty notices did not specify the limb under which the penalty was initiated and simply issued a pre-print ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed. Ground No. 4 On the facts and circumstances of the case, the Ld. CIT(A) has erred in passing order without considering the adjournment application of the assessee and on the basis of assumption that assessee has filed his reply whereas he did not. Thus, the order of Ld. CIT(A) was vague in itself and hence prayed for being quashed. This ground of appeal is not pressed by the appellant. Ground No. 5 On the facts and circumstances of the case, the LD. A.O has disregarded and misinterpreted the basic accounting principles for calculation of turnover. Thus, it is hereby prayed to allow the relief to the assessee by calculating turnover as per basic accounting principles. 1.. As per section 44AB, Every person, (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or (b) carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or (c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139. The said limit during the relevant year for carrying out audit was Rs 60 Lakhs. We would like to draw the attention of the Ld. Appellate authority that assessee was carrying on the business of trading in securities i.e F O and commodity trading. The turnover for the same is calculated as per guidance note issued by ICAI which is a very well settled principle. In case of delivery based transactions, the sale amount is treated as turnover whereas in case of intra day transactions, the summation of positive and negative differences (absolute value) is treated as turnover. The relevant extract of the said guidance note in respect of intra day transactions is as follows: A speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. Thus, in a speculative transaction, the contract for sale or purchase which is entered into is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Filed/Available before Ld. AO/Ld. CIT(A)/Both 1 Quantum assessment order dated 19.12.2019 passed by the ld. AO 1-14 Both 2 Screenshot of portal where alleged show cause notice dated 20.12.2019 for imposing penalty under section 271B is being claimed to have been uploaded. 15 Both 3 Show cause notice dated 01.04.2021 16-17 Both 4 Reply to show cause notice filed by the assessee. 18 Both 5 Order under section 271A dated 06.01.2022 19-20 Both 6 Order under section 271B dated 06.01.2022 21-23 Both 7 Form 35 filed by the assessee 24-30 Ld. CIT(A) 8 Order dated 29.06.2022 passed by ld. CIT(A) 31-34 Ld. CIT(A) 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khanan, Jhalawar Vs. ITO in ITA No. 38/JP/2018 held that : 6. Having considered the rival submissions as well as relevant material on record we note that the assessee has committed the default for not maintaining the regular books of accounts as required U/s 44AA of the Act. The Assessing Officer has already imposed the penalty U/s 271A for violation of the provisions of Section 44AA of the Act. The AO has also imposed the penalty U/s 271B for not getting the books of accounts audited. It is pertinent to note that when the assessee did not maintain the regular books of account then the question of getting of books of accounts audited does not arise. Once, there is a violation of provisions of section 44AA of the Act the said violation cannot be extended to section 44AB of the Act. The provisions of Section 44AB of the Act can be invoked only when the assessee has complied with the provisions of Section 44AA of the Act. Therefore, the violation of Section 44AA of the Act cannot continue because once it is found that the assessee did not maintain the regular books of account the said violation cannot travel beyond the provisions of Section 44AA and hence, cannot be held as a fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to section 28(1)(c ), it deals specifically with the concealment of particulars of income or the deliberate furnishing of inaccurate particulars of income. In the setting in which this subsection finds place it is impossible to construe section 28(1)(c) except as relating to a case where a return has been filed but from which return particulars of income have been omitted or any particulars have been deliberately inaccurately furnished. The use of the expression particulars of his income and particulars of such income would be wholly inapposite in a case where no return has at all been filed; such a case would clearly come within the scope of section 28(1)(a) alone. 13. This Court in CWT v. Yadu Raj Narain Singh [2006] 286 ITR 564 also taken the same view. It has held as follows : Thus applying the strict construction of penalty provisions contained in clause (1) of sub-section (c) of section 18 of the Act, we find that prior to the amendment in Explanation 3 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989 in a case where the person who has previously been assessed under the Act does not file any return in response to the notice or even whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, penalty should be imposed for non- maintenance of books of account u/s 271A and no penalty can be imposed u/s 271B for violation of section 44AB requiring ITA Nos.6696 6645/Del/2014 audit of accounts. Similar view has been taken by the Hon'ble Allahabad High Court in CIT vs. Bisauli Tractors (2008) 299 ITR 219 (All). The Hon'ble Aliahabad High Court reiterated the similar view in CIT and Anr. Vs. S.K. Gupta and Co. (2010) 322 ITR 86 (All) by holding that requirement of getting the books of account audited can arise only where the books of account are maintained. In the absence of the maintenance of books of account, there Can be no penalty u/s 271B of the Act. In view of the foregoing legal position emanating from the judgment of the two Hon ble High Courts, we are convinced that penalty u/s 271B ought not to have been levied because the assessee admittedly did not maintain any books of account as has been recorded in the assessment order itself. We, therefore, order for the deletion of penalty. 1. As regards the imposition of penalty u/s 271(1)(c) of the Act on the addition of Rs.7.5o lac, we find that this addition has resulted on estimation of income at 5% on e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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