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When a person commits an offence by not maintaining the books of account u/s 44AA, the offence is complete and the penalty for non audit cannot be imposed.
Not maintaining the books of accounts is better than maintaining the books of accounts and not getting them audited. Yes, you are right. There is no penalty for non audit if the assessee is not marinating the books of accounts and penalty for non maintenance is imposed.
There is an interesting observation by Gauhati High Court which is worth reading.
Gauhati HC in (1996) 222 ITR 691 has held that if the penalty u/s 271A has been levied on an assessee for non maintenance of books of accounts then thereafter no penalty shall be levied u/s 271B for not getting the books of accounts audited. It’s an interesting observation by the Gauhati HC and the complete case is produced hereunder for the benefit of the readers. It may be recalled here that the non maintenance of books of accounts is liable for lesser penalty as compared to not getting them audited. Can it be said that by committing the lower level of error, the assessee get free from higher level of penalty? Not maintaining the books of accounts is better than maintaining the books of accounts and not getting them audited.
Gauhati High Court
Surajmal Parsuram Todi vs Commissioner Of Income-Tax on 6 August, 1996
Equivalent citations: 1996 222 ITR 691 Gauhati
Bench: D Baruah, S B Roy
- At the instance of the assessee, the following question has been referred by the Income-tax Appellate Tribunal under Section 256(1) of the Income-tax Act, 1961 (for short, “the Act”), for opinion of this court :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the levy of penalty on the assessee under Section 271B of the Income-tax Act, 1961 ?”
- The facts for answering the question may be stated as follows ;
- The Income-tax Officer after completion of the assessment of the assessee initiated penalty proceedings under Section 271B of the Act for not getting the books of account audited under Section 44AB of the Act. The assessee contended that because of the nature of work it carried on the books of account could not be maintained. The admitted fact is that the assessee had not maintained the books of account for several years. Against that an appeal was preferred before the Commissioner of Income-tax (Appeals) who turned down the contentions of the assessee. Then the assessee preferred an appeal before the Income-tax Appellate Tribunal. However, the Tribunal affirmed the penalty. The assessee requested the Tribunal to refer six questions to this court for its opinion as mentioned in paragraphs 1 and 2 of the paper book. However, the Tribunal referred only one question as stated above.
- Heard Mr. R.K. Joshi, learned counsel appearing for the assessee, and Dr. A.K. Saraf, learned special counsel appearing on behalf of the respondent/Income-tax Department.
- Mr. R.K. Joshi submits that it is an admitted fact that the assessee did not maintain any books of account and, therefore, the question of the books of account being audited as per the provisions of Section 44AB docs not arise. Therefore, the Tribunal erred in law in holding that the assessee was guilty of penalty under Section 27113 of the Act. On the other hand, Dr. Saraf, learned special counsel appearing on behalf of the Revenue, submits that maintenance of hooks of account is one of the conditions as contemplated by Section 44AA and Section 44AB contemplates audit of account and penalty is provided under Sections 271A and 27113 of the Act,
- 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 he 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 that there can be no possibility of any offence as contemplated by Section 44AB and, therefore, in our opinion, the imposition of penalty under Section 271B is erroneous. The Tribunal has overlooked this aspect of the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of account as required under Section 44AA and for that penalty is prescribed under Section 271A. It is for the Tribunal to take action in accordance with law.
- In view of the above observations, we answer the question in the negative and in favour of the assessee.