Re: Penalties levied u/s 271A (44AA) & 271B (44AB)
Penalties have been levied on my client u/s 271A for not maintaining books of accounts u/s 44AA & also u/s 271B for not getting the said books of accounts audited u/s 44AB for the same assessment year. These proceedings have been initiated under separate notices issued under separate sections and as such are two different penalty proceedings. I wish to settle Penalty u/s 271A but continue to contest penalty u/s 271B. Is it possible to do so without impacting or influencing the outcome of the future proceedings u/s 271B due to acceptance and settlement of penalty u/s 271A.
As we understand, there are two separate penalty appeals. As per explanation to Section 5 of VSVA, a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a party in appeal or writ petition or special leave petition to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute. Please refer Circular no 9 /2020 dt 22-04 2020 Q. No 52 which reads as under : Will the result of this Vivad se Vishwas be applied to same issues pending before AO?
Answer : NO, only the issues covered in the declaration are settled in the dispute without any prejudice to same issues pending in other cases. It has been Clarified that making a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the Income -tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute. In UCO Bank v. CIT (1990) 237 ITR 889/ 104 Taxman 547/ 154 CTR 88 (SC) the Apex Court held that , the Circular is binding on the revenue. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities. Accordingly the settlement of dispute should not impact the outcome of the other penalty proceedings.
Penalty under section 271B can not be levied in the case where penalty u/s 271A has been levied for non maintenance of books. There are number of case laws in favour. The logic is – if the books are not maintained the question of their audit does not arise.
Hence your settling of dispute wrt penalty u/s 271A would further strengthen your case in penalty proceedings u/s 271B. Books have not been maintained -dispute settled. Issue of audit of non existent books does not arise.
Hence quite possible to contest penalty u/s 271B independently while settling the dispute of penalty u/s 271A. Rather this is the wisest course of action in the case.
Wef AY 203-14 furnishing of audit report 3CD within due date 139(1) if not defaulter and attracts 271B…
Maintenance of books of accounts to arrive total income which help the AO to arrive taxable income…if not maintained then AO faces difficulty to arrive in finalisation of assessment and for such non compliance 271A attracts , it is not linked to compulsory audit …when assessee claims business income without claim presumptive tax scheme…then he should maintain…there is no mandatory to get audit…
So both penalties 271A and 271B runs on different footing