Income Tax Appellate Tribunal - Delhi
Trilok Goyal, New Delhi vs Ito, Ward-31(4), New Delhi on 14 December, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "H" DELHI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER
&
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
I.T.A. No.6064/DEL/2019
Assessment Year 2012-13
Trilok Goel, Vs. ITO,
C/o CA S.K. Goel, Ward-31(4),
19/10, East Punjabi Bagh, New Delhi.
New Delhi.
TAN/PAN: AFIPG7839N
(Appellant) (Respondent)
Appellant by: None
Respondent by: Shri Gireesh Kumar Kohli, Sr.DR
Date of hearing: 06 12 2022
Date of pronouncement: 14 12 2022
ORDER
PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-XI, New Delhi ['CIT(A)' in short] dated 13.05.2019 arising from the assessment order dated 31.12.2016 passed by the Assessing Officer (AO) under Section 148 r.w. Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2012-13.
2. The grounds of appeal raised by the assessee read as under:
"1. That the order of the CIT (A) in confirming penalty of Rs. 1,50,000/- made by the AO u/s. 271B is totally wrong, bad in law and needs to be quashed.
2. That the CIT(A) has not considered the statement recorded u/s 131(1A) of the Income Tax Act. In that statement it was noted that the assessee was giving / providing accommodation entry and getting gross commission at the rate of 0.40% to 0.45% on the amount of entry provided. The amount of entry provided I.T.A. No.6064/Del/2019 2 cannot be considered as turnover as in the case of commission agent / arhatias, only commission is considered as turnover for the purpose of tax audit (Circular No.452 dated 17.03.1986). Similarly in case of advertisement business. The CIT(A) confirmed ex-parte penalty order passed by the AO by taking whole amount of entry provided as turnover which is totally wrong and has no basis. Moreover, providing of accommodation entry is not a lawful business. Hence, the action of CIT(A) confirming penalty of Rs. 1,50,000/- u/s 271B is totally wrong, bad in law and needs to be quashed.
3. That the Assessing Officer as well as the CIT(A) ignored all the judgments quoted by the AR of the assessee where in similar case and on the same facts penalty was deleted by the higher authorities i.e., Tribunal and Courts."
3. As per its grounds of appeal, the assessee has challenged the imposition of penalty under Section 271B for not furnishing tax audit report enjoined by Section 44AB of the Act.
4. When the matter was called for hearing, none appeared for the assessee. Accordingly, the matter was proceeded ex-parte.
5. The Assessing Officer while passing the assessment order relevant to Assessment Year 2005-06 in question, inter alia alleged failure of the assessee to get its account audited under Section 44AB of the Act despite huge turnover/receipts and consequently imposed penalty of Rs.1,50,000/- by invoking Section 271B of the Act.
6. Aggrieved, the assessee preferred appeal before the CIT(A). However, the CIT(A) did not agree with the submissions made on behalf of the assessee for non applicability of Section 44AB of the Act. The CIT(A) accordingly sustained the penalty imposed by the Assessing Officer. The relevant operative paragraph of the CIT(A) is reproduced hereunder:
I.T.A. No.6064/Del/2019 3"5.1 In this case assessment was completed u/s. 148/143(3) of the I.T. Act on 31.12.2016 at an income of Rs.1,05,10„280/-. AO observed that DD1T(Inv.), Unit-II(2), New Delhi conducted Suspicious Transactions Report (FR) enquiry in respect of Sh. Trilok Goel Prop. M/s Kalka Udyog and the allegation in the STR was that there were multiple deposits of cash in the case of M/s Kalka Udyog, proprietary firm of Sh. Trilok Goel and STR also mentioned two other bank account in Oriental Bank of Commerce where high value cash deposits had taken place. During the course of STR enquiry before the DDIT(lnv.), Unit- I1(2) the assessee filed a copy of rough revised ITR for F.Y. 2011-12 showing gross receipt of Rs.42„04,11,241/- as against the amount of Rs.18,97,340/- declared in the original return of income. AO initiated penalty proceedings u/s 271B r.w.s. 274 as the turnover of appellant's business was more than auditable limit of Rs.1 Cr. but he failed to get his accounts audited u/s 44AB. In absence of any explanation by assessee, AO held that assessee failed to get the accounts audited as per the provisions of section 44AB of the Act and therefore, was liable for penalty u/s 271B of the Act. Accordingly, she imposed a penalty of Rs.1,50,000/- u/s 271B of the Act. Assessee is in appeal against the same.
5.2 During the course of appellate proceedings, it has been submitted that he has declared gross total income of Rs.4,93,921/- on a total turnover of Rs.18,97,340/- from running of a small Atta Chakki and doing purchase & sale of flour. Further, it has been submitted that as his turnover from the proprietary concern M/s Kalka. Udhyog was Rs.18,97,340/- he was not required to get his accounts audited as his turnover was below the prescribed limit u/s 44AB. It has also been submitted that he is an accommodation entry provider and therefore, penalty u/s 271B has been wrongly charged as the act of accommodation entry provider is neither a business nor a profession.
5.3 I have carefully considered the observations of AO, submissions of appellant and case laws relied on by appellant. There is no dispute that appellant has entered into transaction of Rs.42,04,11,241/- during the year which is more than the auditable limit of Rs.1 Cr. Therefore, appellant is liable to get his accounts audited. Hon'ble ITAT Mumbai in the case of Shri Mukesh Choksi vs. ACIT (OSD)-2 CR 7 in ITA No.2299/M/2010 for Assessment Year 2002-03, ITA No.2300/M/2010 for Assessment Year 2006-07 ITA No.2301/M/2010 assessment Year 2007-08 dated 11.02.2011 have held that as the transaction was on principle to principle basis and not as agent, gross amounts I.T.A. No.6064/Del/2019 4 received in connection with entry business have to be considered for the purposes of ceiling under section 44AB. It is also seen that the case laws relied on by appellant are on different set of facts and therefore, not applicable to appellant's case.
5.4 Keeping in view the totality of the facts and circumstances as discussed above, submissions made, ratio of various judicial pronouncements, as discussed supra, I am of the view that penalty provisions are attracted in the case of appellant as appellant had turnover of more than Rs.40 lacs for which appellant was liable to get his accounts audited. Accordingly, penalty of Rs.1,50,000/- u/s. 271B is sustained."
7. Further aggrieved, the assessee preferred appeal before the Tribunal.
8. We have heard the submissions made on behalf of the Revenue and also perused the penalty order passed under Section 271B of the Act dated 23.06.2017 as well as the first appellate order. During the year under consideration, the assessee e-filed its original return of income declaring total income at Rs.4,83,920/- and the gross receipt was shown at Rs.18,97,340/-. The Department thereafter conducted Suspicious Transaction Report (STR) enquiry and found multiple deposit of cash in different bank account aggregating to Rs.42,67,78,338/-. Consequently, an amount of Rs.42,67,78,338/- in the form of cash deposit was found to be not declared nor accounted by the assessee in the return of income. The Assessing Officer in the assessment treated 2.5% thereof as estimated commission earned on the accommodation entries provided by the assessee which worked out to Rs.1,05,10,281/-. The assessee on the other hand claimed to be providing accommodation entries ranging from 0.40% to 0.45%.
I.T.A. No.6064/Del/2019 59. In this factual backdrop, we straightaway take notice of Circular No.452 dated 17 t h March, 1986 issued by the CBDT wherein the question of applicability of Section 44AB in the case of commission agents/arhatias was addressed. The Board has clarified that the turnover does not include the sales affected on behalf of the principals and only the gross commission has to be considered for the purposes of section 44AB where the agents act only as an agent of his constituent and never acts as a principal. In the instant case also, it is an admitted position that the assessee is only acting as a commission agent on behalf of the constituent. In view of such clarification, only the commission income is required to be reckoned for the purposes of determination of his obligation under Section 44AA of the Act as well as Section 44AB of the Act.
10. The commission being turnover/receipt for the purposes of 44AB, which is far below the threshold limit of Rs.1 crore prescribed for the relevant assessment year, when the commission income is estimated at 0.40% to 0.45% as claimed by the assessee and consequently the assessee cannot be treated as assessee in default under Section 271B of the Act. The Assessing Officer has estimated the commission income at 2.5% whereby the commission income exceeds the threshold limit. However, the determination of commission is in the realm of estimation for which benefit of doubt should go to the assessee. In the instant case, the accommodation entries and consequent commission thereon are estimated outside the accounts of the assessee. Thus reasonable cause exists insofar as non compliance Section 44AB is concerned. Consequently penalty I.T.A. No.6064/Del/2019 6 under Section 271B for default in compliance of Section 44AB of the Act is liable to be deleted in the factual matrix. Hence, the penalty imposed under Section 271B of the Act is quashed.
13. In the result, the appeal of the assessee is allowed ex- parte.
Order pronounced in the open Court on 14/12/2022.
Sd/- Sd/-
[SAKTIJIT DEY] [PRADIP KUMAR KEDIA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED: /12/2022
Prabhat