The officer penalised my client Rs 25,000 under s.271A for not keeping books and then another Rs 1,50,000 under s.271B for not getting them audited. Can he do both for the same year?
No. Having levied the s.271A penalty for not maintaining books under s.44AA, the officer ought not to have levied a s.271B penalty as well — if no books were kept there was nothing to audit, so s.44AB was not violated. The Tribunal deleted the s.271B penalty and left the s.271A penalty standing.
Decided by the ITAT (Shri Aby T. Varkey, Judicial Member and Shri S.R. Raghunatha, Accountant Member) on 2024-04-30, reported as ITA No. 1428/Chny/2023 (ITAT Chennai 'B' Bench); AY 2015-16. It bears on section 271B, section 271A, section 44AB, section 44AA, section 144, section 148 of the Income Tax Act 1961, in Penalty matters.
This is one of the most winnable points in the whole audit-penalty area and it comes up constantly in ex parte s.144 assessments on contractors and traders, where the officer routinely fires off both penalties from the same assessment order. The Tribunal candidly records that the authorities are split — there are decisions of High Courts both ways — and resolves the split by applying CIT v. Vegetable Products Ltd., that where a penal provision is capable of more than one meaning the construction favouring the assessee is adopted. That matters for how you argue it: you are not asserting a settled rule, you are asking a bench to prefer the taxpayer-favouring construction of a penalty provision, and you should cite the split yourself rather than let the Departmental Representative produce it. Note what the case does not do — it does not touch the s.271A penalty, which stood. The realistic outcome is that the client pays Rs 25,000 rather than Rs 1,75,000.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, an individual, did not file a return for AY 2015-16. The Assessing Officer reopened the assessment by notice dated 26 March 2021 under s.148 and passed an ex parte order under s.144, adding Rs 33,25,741 as deemed profit computed at 8 per cent of the total contractual receipts for the year. It was admitted that the assessee had received total contract receipts of more than Rs 4 crore and that he had neither maintained books of account under s.44AA nor got his accounts audited under s.44AB. The officer first levied a penalty of Rs 25,000 under s.271A for not maintaining books, and then, by a separate order dated 21 September 2022, a penalty of Rs 1,50,000 under s.271B for failure to get the accounts audited. The CIT(A) confirmed the s.271B penalty, citing the Ranchi Bench decision in Rakesh Kumar Jha v. ITO (ITA No. 72/Ran/2022, dated 17 May 2023) and the Madhya Pradesh High Court decision in Bharat Construction Co. v. ITO. Only the s.271B penalty was in appeal before the Tribunal.
The appeal was allowed and the s.271B penalty of Rs 1,50,000 deleted. Since the Assessing Officer had already levied a penalty of Rs 25,000 under s.271A, he ought not to have levied a penalty under s.271B as well (para 6). The s.271A penalty was not disturbed.
The Tribunal accepted the assessee's submission that on the precise question — whether s.271B may be levied where s.271A has already been levied — there are decisions of High Courts in favour of the assessee and decisions in favour of the Revenue, and that in such a situation the rule in CIT v. Vegetable Products Ltd. requires the interpretation favouring the assessee to be adopted, the provision being penal (para 4). It set out the authorities relied on: Surajmal Parsuram Todi v. CIT (Gauhati), holding that maintenance of accounts is envisaged under s.44AA and on failure to do so the assessee is liable to be penalised under s.271A; CIT v. S.K. Gupta & Co. (Allahabad), holding that the requirement of getting books audited can arise only where books are maintained, and that where they are not, the appropriate provision is s.271A; and the Tribunal's own earlier order in Shanthilal D Jain, which had deleted seventeen such penalties on the same footing (paras 4 and 28.2 to 28.3 as reproduced). It then set out at length the Allahabad High Court's judgment in CIT v. Bisauli Tractors, in which that Court held that separate penalties are provided for non-maintenance of accounts and for failure to audit, that if a person has not maintained any accounts the question of their audit does not arise, that s.44AB is therefore not violated where no accounts have been maintained at all, and that s.271B is not attracted in such a case, recourse lying instead under s.271A (para 5, quoting Bisauli Tractors paras 7 and 14). Applying that reasoning to the admitted facts, and noting that the s.271A penalty had in fact been levied, the Tribunal directed deletion of the s.271B penalty (para 6).
In the light of the afore said discussion and judicial precedents cited (supra), and since in the present case, the AO had levied penalty of Rs.25,000/- u/s.271A of the Act, the AO ought not to have levied penalty u/s271B of the Act.
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Handle my notice → Ask a CA on WhatsAppNo. Having levied the s.271A penalty for not maintaining books under s.44AA, the officer ought not to have levied a s.271B penalty as well — if no books were kept there was nothing to audit, so s.44AB was not violated. The Tribunal deleted the s.271B penalty and left the s.271A penalty standing. This was decided by the ITAT (Shri Aby T. Varkey, Judicial Member and Shri S.R. Raghunatha, Accountant Member) and bears on section 271B, section 271A, section 44AB, section 44AA, section 144, section 148 of the Income Tax Act 1961. It is reported as ITA No. 1428/Chny/2023 (ITAT Chennai 'B' Bench); AY 2015-16. This is one of the most winnable points in the whole audit-penalty area and it comes up constantly in ex parte s.144 assessments on contractors and traders, where the officer routinely fires off both penalties from the same assessment order. The Tribunal candidly records that the authorities are split — there are decisions of High Courts both ways — and resolves the split by applying CIT v. Vegetable Products Ltd., that where a penal provision is capable of more than one meaning the construction favouring the assessee is adopted. That matters for how you argue it: you are not asserting a settled rule, you are asking a bench to prefer the taxpayer-favouring construction of a penalty provision, and you should cite the split yourself rather than let the Departmental Representative produce it. Note what the case does not do — it does not touch the s.271A penalty, which stood. The realistic outcome is that the client pays Rs 25,000 rather than Rs 1,75,000. If it applies to you, the first step is this: Read the assessment order for the finding that no books were maintained; that finding, made by the officer himself, is the foundation of the argument and he cannot disown it in the penalty proceeding.
The assessee, an individual, did not file a return for AY 2015-16. The Assessing Officer reopened the assessment by notice dated 26 March 2021 under s.148 and passed an ex parte order under s.144, adding Rs 33,25,741 as deemed profit computed at 8 per cent of the total contractual receipts for the year. It was admitted that the assessee had received total contract receipts of more than Rs 4 crore and that he had neither maintained books of account under s.44AA nor got his accounts audited under s.44AB. The officer first levied a penalty of Rs 25,000 under s.271A for not maintaining books, and then, by a separate order dated 21 September 2022, a penalty of Rs 1,50,000 under s.271B for failure to get the accounts audited. The CIT(A) confirmed the s.271B penalty, citing the Ranchi Bench decision in Rakesh Kumar Jha v. ITO (ITA No. 72/Ran/2022, dated 17 May 2023) and the Madhya Pradesh High Court decision in Bharat Construction Co. v. ITO. Only the s.271B penalty was in appeal before the Tribunal. The matter was decided on 2024-04-30 by the ITAT (Shri Aby T. Varkey, Judicial Member and Shri S.R. Raghunatha, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed and the s.271B penalty of Rs 1,50,000 deleted. Since the Assessing Officer had already levied a penalty of Rs 25,000 under s.271A, he ought not to have levied a penalty under s.271B as well (para 6). The s.271A penalty was not disturbed.
The Tribunal accepted the assessee's submission that on the precise question — whether s.271B may be levied where s.271A has already been levied — there are decisions of High Courts in favour of the assessee and decisions in favour of the Revenue, and that in such a situation the rule in CIT v. Vegetable Products Ltd. requires the interpretation favouring the assessee to be adopted, the provision being penal (para 4). It set out the authorities relied on: Surajmal Parsuram Todi v. CIT (Gauhati), holding that maintenance of accounts is envisaged under s.44AA and on failure to do so the assessee is liable to be penalised under s.271A; CIT v. S.K. Gupta & Co. (Allahabad), holding that the requirement of getting books audited can arise only where books are maintained, and that where they are not, the appropriate provision is s.271A; and the Tribunal's own earlier order in Shanthilal D Jain, which had deleted seventeen such penalties on the same footing (paras 4 and 28.2 to 28.3 as reproduced). It then set out at length the Allahabad High Court's judgment in CIT v. Bisauli Tractors, in which that Court held that separate penalties are provided for non-maintenance of accounts and for failure to audit, that if a person has not maintained any accounts the question of their audit does not arise, that s.44AB is therefore not violated where no accounts have been maintained at all, and that s.271B is not attracted in such a case, recourse lying instead under s.271A (para 5, quoting Bisauli Tractors paras 7 and 14). Applying that reasoning to the admitted facts, and noting that the s.271A penalty had in fact been levied, the Tribunal directed deletion of the s.271B penalty (para 6). In the words reproduced by the source cited on this page: "In the light of the afore said discussion and judicial precedents cited (supra), and since in the present case, the AO had levied penalty of Rs.25,000/- u/s.271A of the Act, the AO ought not to have levied penalty u/s271B of the Act." The decision followed or applied CIT v. Bisauli Tractors, IT Reference No. 89 of 1999, decided 18 May 2007, [2008] 299 ITR 219 (All) — relied on and quoted at length; Surajmal Parsuram Todi v. CIT [1996] 222 ITR 691 (Gauhati) — relied on; CIT v. S.K. Gupta & Co. [2010] 322 ITR 86 (All) — relied on; CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) — applied to resolve the conflict of authority; Shanthilal D Jain, ITA Nos. 2357 to 2363 and 2389 to 2402/Chny/2019 (ITAT Chennai) — followed.
It was decided by the ITAT on 2024-04-30 and is reported as ITA No. 1428/Chny/2023 (ITAT Chennai 'B' Bench); AY 2015-16. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271B, section 271A, section 44AB, section 44AA, section 144, section 148, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the s.271B penalty of Rs 1,50,000 deleted. Since the Assessing Officer had already levied a penalty of Rs 25,000 under s.271A, he ought not to have levied a penalty under s.271B as well (para 6). The s.271A penalty was not disturbed. It arises in Penalty matters, on section 271B, section 271A, section 44AB, section 44AA, section 144, section 148 of the Income Tax Act 1961, and was decided by Shri Aby T. Varkey, Judicial Member and Shri S.R. Raghunatha, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where both penalties have been levied, concede nothing on s.271A but attack s.271B on the ground that a duty to audit presupposes books in existence. Cite the High Court line — Surajmal Parsuram Todi v. CIT (Gauhati), CIT v. Bisauli Tractors (Allahabad) and CIT v. S.K. Gupta & Co. (Allahabad) — and cite CIT v. Vegetable Products Ltd. as the rule that resolves the conflict. Disclose the contrary line yourself, and name it: the Madhya Pradesh High Court in Bharat Construction Company v. ITO (1 December 1998, (1999) 153 CTR (MP) 414 / [1999] 106 Taxman 460 (MP)) held that the defaults under s.271A and s.271B are separate and distinct and that a failure to get the accounts audited attracts s.271B even where books were not maintained, and the Ranchi Bench applied it that way in Rakesh Kumar Jha v. ITO (ITA No. 72/Ran/2022). Do not take the list of authorities at para 28.2 of this order at face value — it places Bharat Construction on the assessee's side of the split, which is wrong, and para 2 of the same order records it correctly. A bench that discovers a split you concealed, or that finds you have cited a decision on the wrong side of it, will discount everything else you said. Where income was assessed at a presumptive percentage of receipts precisely because no books existed, point to that as the Revenue's own admission that there was nothing capable of audit.
High Courts differ on this point. High courts differ on the point this order decides, and the split has been established rather than assumed. Against the assessee: Bharat Construction Company v. ITO, Madhya Pradesh High Court, B.A. Iman J., 1 December 1998, (1999) 153 CTR (MP) 414 / [1999] 106 Taxman 460 (MP) — retrieved and read at indiankanoon.org/doc/709267/. The assessee there had not maintained account books and had declared income on an estimate basis; the Court held that 'the defaults contemplated by section 271A and section 271B are separate and distinct', that a person who fails to get his accounts audited under s.44AB is liable to penalty under s.271B, and dismissed the petition, holding the s.271B notice not barred by limitation under s.275(b). The question before that Court was limitation, so the proposition is its ratio on the question it was cited for rather than a full construction of s.271B — but it is squarely against the line this order follows. It was applied the same way by Rakesh Kumar Jha v. ITO, ITA No. 72/Ran/2022, ITAT Ranchi (indiankanoon.org/doc/166415541/), which quotes the same passage and upheld its own s.271B penalty; those were the two authorities the CIT(A) relied on below. For the assessee: Surajmal Parsuram Todi v. CIT (Gauhati), CIT v. Bisauli Tractors (Allahabad) and CIT v. S.K. Gupta & Co. (Allahabad) — the Allahabad judgment in Bisauli Tractors, on which this order chiefly rests, was separately retrieved and read in full and the passages quoted in this order match it. No search was made for any appeal against this Tribunal order or for later Tribunal decisions considering it, and a further Tribunal decision said to confirm both penalties for the same year, Saraswati Gupta v. ITO (ITAT Kolkata), was not retrieved. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two things in the report need flagging. First, the order's own account of Bharat Construction Co. v. ITO (MP) is self-contradictory: para 2 records that the CIT(A) confirmed the penalty citing that decision, while the block quoted at para 28.2 — an extract from the Tribunal's earlier order in Shanthilal D Jain — lists the same decision among the High Court authorities holding that no s.271B penalty may be levied once books were not maintained. That contradiction has now been resolved by reading the judgment itself at indiankanoon.org/doc/709267/: para 2 is right and the para 28.2 listing is wrong. Bharat Construction Company v. ITO (MP), 1 December 1998, held that the defaults under s.271A and s.271B are separate and distinct and left the s.271B penalty proceedings on foot against an assessee who had not maintained books; it is a Revenue-side authority and must not be cited from the para 28.2 list as though it supported the assessee. Second, the paragraph numbering in the order is irregular: paras 1 to 5 are the Tribunal's own, para 5 then opens a long quotation from CIT v. Bisauli Tractors whose internal paragraphs are numbered 7 to 15, and paras 6 and 7 of the Tribunal's own order follow. Paragraphs 7 to 15 as they appear in the middle of this order are the Allahabad High Court's words, not the Tribunal's, and must not be cited as the Tribunal's reasoning. I separately retrieved and read CIT v. Bisauli Tractors in full at indiankanoon.org/doc/668600/ and the quoted passage matches that judgment. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the s.271B penalty of Rs 1,50,000 deleted. Since the Assessing Officer had already levied a penalty of Rs 25,000 under s.271A, he ought not to have levied a penalty under s.271B as well (para 6). The s.271A penalty was not disturbed.
TaxSphere, “Bright Singh Chelladurai v ITO”, https://taxnotice.vittsphere.com/caselaw/case/bright-singh-chelladurai-v-ito-271a-and-271b-for-the-same-year/ (validity last checked 2026-09-07)
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I never maintained books of account at all. Can the department penalise me under section 271B for not getting them audited?
I never maintained books at all. Can they penalise me under 271B for not getting them audited?
My client filed under s.44AD for two years and then declared below eight per cent in the third. What happens to him for the next five years, and does he now have to get audited?
They already penalised me under 271A for keeping no books. Can they levy 271B on top?
