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Validity of Penalty u/s 271B if Bogus audit report furnished for getting a bank loan showing fake turnover
Where assessee, in order to get a bank loan, submitted a bogus audit report from CA and showed fake turnover in his return of income, imposition of penalty under section 271B for non-compliance of section 44AB was justified.
In order to get a loan from bank, assessee got a bogus audit report from a CA and showed fake turnover in his return for the relevant assessment year. AO imposed penalty under section 271B for failure to produce books of account and audit report under section 44AB. Assessee contended that he did not maintain books of account etc. and, therefore, imposition of penalty under section 271B for failure to get books of account audited was not justified.
It was held that the statement of assessee was contradicted and controverted by the CA in his statement, who stated that he had not examined the books of account. The facts revealed blatant and brazen defiance of law and Section 44AB. Assessee’s contention was unacceptable because he contradicted his own earlier version that the books of account were misplaced. Even otherwise, failure to maintain books of account was a lapse and a failure to comply with statutory provisions.
Decision: Against the assessee.
IN THE DELHI HIGH COURT
SANJIV KHANNA & CHANDER SHEKHAR JJ.
Brij Gopal Chauhan v. ITO
ITA No. 847/2018
10 August, 2018
Appellant by: K.R. Manjani, Advocate
Respondent by: Ashok Manchanda, Senior Standing Counsel
The appellant, Brij Gopal Chauhan, impugns Order, dt. 22-5-2018 passed by the Income Tax Appellate Tribunal (Tribunal, for short) upholding levy of penalty under section 271B of the Income Tax Act, 1961(Act, for short).
2. Appellant, an individual, deals in sale/purchase of paints and sanitary ware.
3. Return of income for assessment year 2010-11 was filed by the appellant on 11-6-2010 declaring a total income of Rs. 4,62,460. Return was taken up for scrutiny assessment by issue of notice.
4. In the course of the assessment proceedings the appellant assessee had professed that, in order to get a loan of Rs. 2 crore from a bank, he had got prepared a bogus audit report and had shown pseudo turnover of Rs. 9,50,01,256 in his return for the assessment year 2010-2011.
5. Assessing officer, vide notice dated 30-3-2013, initiated penalty proceedings under section 271B of the Act as the appellant failed to produce books of account and audit report under section 44AB of the Act.
6. In response to the penalty notice, the appellant placed on record the tax audit report dt. 6-6-2010.
7. Assessing officer observed that the report was admittedly fabricated. He referred to statement of the Chartered Accountant accepting that the report was prepared without examining the books of account. Assessing officer imposed and levied penalty of Rs. 1,00,000 as the appellant-assessee had violated provisions of section 44AB of the Act.
8. On appeal, the Commissioner (Appeals) (Commissioner (Appeals), for short), vide Order, dt. 9-2-2015 observed that the onus was on the appellant-assessee to show that the actual sales were below Rs. 40,00,000, to prove and establish that provisions of section 44AB of the Act were not attracted. The Commissioner (Appeals) upheld the penalty order under section 271B of the Act, rejecting the plea that the actual sales in the year were Rs. 35,39,740.
9. Tribunal, vide Order, dt. 22-5-2018upholding the penalty order has observed as under:–
“6. We have considered the submissions of the learned Counsel for the Assessee and perused the material on record. The assessee filed return of income showing the gross receipts/turnover of Rs. 9.50 crores. Substantial loans and capital have also been shown. Shri Sundeep Kumar, C.A. attended the proceedings before assessing officer time to time but books of account have not been produced. The assessee vide Letter, dt. 11-12-2012 submitted before assessing officer that books of account could not be produced because the same are misplaced. The audit report was also not made available under section 44AB of the Income Tax Act before assessing officer learned Counsel for the Assessee submitted that this reply is filed by the C.A. of the assessee. This is no ground to challenge the authority of counsel for Assessee. Learned Counsel for the Assessee submitted that Shri Sundeep Kumar, C.A. was duly authorised by the assessee to appear before assessing officer at assessment stage.
Therefore, whatever reply is filed at assessment stage, has been filed on behalf of the assessee which specifically states that books of account could not be produced as the same have misplaced, It would, therefore, show that assessee maintained books of account but same have not been produced before assessing officer No audit report was filed or produced before assessing officer as required under section 44AB of the Income Tax Act. The statement of Shri Sundeep Kumar, C.A. was also recorded in which he has denied to have prepared tax audit report under section 44AB of the Income Tax Act for assessment year under appeal. When he was confronted that the tax audit report under section 44AB of the Income Tax Act is prepared, he has replied that he has signed audit report without examining of the books of account. The assessing officer, therefore, correctly noted that assessee has fabricated the documents which were produced at assessment stage. The assessing officer also correctly noted that no tax audit in terms of section 44AB was carried out and whatever documents have been produced before assessing officer were not genuine documents. The authorities below, therefore, correctly noted that provisions of section 271B are clearly attracted in this case. Learned Counsel for the Assessee admitted that assessee obtained loan of Rs. 2 crores from the Bank during assessment year under appeal on the basis of the documents prepared by the same Chartered Accountant. Whenever any benefit is to be obtained, assessee owned acts of his Chartered Accountant, however, when some liability is put upon assessee, assessee denies the role of his Chartered Accountant. Such explanation of assessee cannot be accepted. The assessee further explained before learned Commissioner (Appeals) that his turnover is below the prescribed limit.
However, nothing substantial material have been produced before authorities below in support of the above contention. In this case, profit & loss account filed by the assessee with return indicates that assessee was liable to get his books of account audited as per provisions of section 44AB of the Income Tax Act. However, the assessee deliberately did not get his books of account audited as required under section 44AB of the Income Tax Act. Whatever report was produced is clearly manipulated and fabricated and was not based upon any evidence or material on record. Since the assessee failed to get his accounts audited as per section 44AB of the Income Tax Act, therefore, assessee is liable to penalty under section 271B of the Income Tax Act. The contentions of the assessee would not disclose any reasonable cause for failure to comply with the provisions of law. The contention of assessee that since no books of account have been prepared, therefore, accounts could not be audited, cannot be accepted in the facts and circumstances of the case because assessee admitted before assessing officer that books of account cannot be produced on the pretext being misplaced. In view of the above, the appeal of assessee has no merit and the same is accordingly dismissed.”
10. Impugned order records that appellant-assessee, in the return of income for the assessment year 2010-2011, had declared a turnover of Rs. 9.50 crores. Substantial loans and capital had been introduced. However, the appellant-assessee contends that these figures were incorrect and wrong and false declaration on oath were made in the income tax return on advice given by a Chartered Accountant. This was contradicted and controverted by the Chartered Accountant in his statement, who had stated that he had not examined books of accounts. Reasoning given by the Tribunal is plausible and cogent, and is not required to be repeated. The facts reveal blatant and brazen defiance of law and section 44AB of the Act. The contention of the appellant-assessee that he had not maintained books of accounts etc. and, therefore, penalty under section 271B of the Act for failure to get books of accounts audited, is unacceptable. Appellant-assessee, in making this submission, contradicts his earlier version that the books of accounts had been misplaced. Even otherwise, failure to maintain the books of accounts was a lapse and a failure to comply with statutory provisions. This argument in the context of the present case must be rejected.
11. We therefore find no reason or ground to issue notice in the present appeal questioning levy of penalty under section 271B of the Act. Appeal has no merit and is accordingly dismissed. No costs.