I never maintained books of account at all. Can the department penalise me under section 271B for not getting them audited?
No. The Gauhati High Court held that where an assessee has not maintained books of account at all, penalty under section 271B for failure to get them audited cannot be imposed. Maintenance of accounts is required by section 44AA, and failure there is punished by section 271A. Once that default is complete there is nothing to audit, so no failure under section 44AB can arise and section 271B has nothing to bite on. The Tribunal had overlooked this. The question was answered in the negative and in favour of the assessee, leaving the department to act under section 271A.
Decided by the High Court (Gauhati High Court) on 1996-08-06, reported as (1996) 222 ITR 691 (Gauhati). It bears on section 271B, section 271A, section 44AB, section 44AA of the Income Tax Act 1961, in Penalty matters.
This is the case relied on wherever the department imposes both penalties, or the wrong one, on a taxpayer with no books. It puts the two defaults in sequence rather than in parallel: section 44AA obliges you to keep accounts and section 271A penalises the failure; section 44AB obliges you to have those accounts audited and section 271B penalises that failure. The second obligation presupposes the first has been performed. So the taxpayer with no books commits one default, not two, and it is the section 271A default. The Court was careful to say this is no acquittal - it recorded that the section 44AA failure was apparent and left the Tribunal to take action in accordance with law.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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After completing the assessment, the Income-tax Officer initiated penalty proceedings under section 271B against the assessee for not getting its books of account audited as required by section 44AB. The assessee's answer was that because of the nature of the work it carried on, books of account could not be maintained, and it was an admitted fact that no books had been maintained for several years. The Commissioner (Appeals) rejected that contention and the Tribunal affirmed the penalty. The assessee asked the Tribunal to refer six questions to the High Court; the Tribunal referred only one, whether it was right in upholding the levy of penalty under section 271B. Before the High Court the assessee argued that since no books were maintained the question of their being audited under section 44AB did not arise. The Revenue argued that maintenance of books is a condition contemplated by section 44AA, that section 44AB contemplates audit of accounts, and that penalties are provided for both by sections 271A and 271B.
The question was answered in the negative and in favour of the assessee, so the penalty under section 271B could not stand. Maintenance of accounts is envisaged by section 44AA, and on failure to maintain them the assessee is liable to be penalised under section 271A. Where accounts are maintained the assessee's obligation does not end there - he must do something more, namely get those accounts audited by an accountant. But when a person commits the default of not maintaining books of account as contemplated by section 44AA, that default is complete, and after it there can be no possibility of the default contemplated by section 44AB. Imposing penalty under section 271B in those circumstances is erroneous, and the Tribunal had overlooked this aspect. The Court added that it was apparent from the record that the assessee had failed to maintain books as required by section 44AA, for which penalty is prescribed by section 271A, and that it was for the Tribunal to take action in accordance with law.
The Court read the four provisions as a chain rather than as a set of independent obligations. Section 44AA imposes the first duty, to keep books of account, and section 271A supplies the penalty for breaking it. Section 44AB imposes a further duty on the assessee who has kept books, to have them audited by an accountant, and section 271B supplies the penalty for breaking that one. The second duty is expressed in terms of the accounts, so it can only be performed, and can only be broken, by someone who has accounts. The consequence the Court drew is one of timing as much as of language: the default under section 44AA is complete the moment the books are not kept, and once it is complete there is no subject matter left on which a section 44AB default could occur. To penalise under section 271B in such a case would be to punish the same single failure twice over, and under the wrong provision. The Court was equally clear about what its conclusion did not do. It did not treat the assessee as blameless. The failure to keep books was apparent on the record, the penalty for it is prescribed by section 271A, and the Court expressly left it to the Tribunal to take action in accordance with law. The assessee's explanation, that the nature of its work made books impossible to maintain, was not accepted as an answer to anything; it was simply not the question referred.
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.
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Handle my notice → Ask a CA on WhatsAppNo. The Gauhati High Court held that where an assessee has not maintained books of account at all, penalty under section 271B for failure to get them audited cannot be imposed. Maintenance of accounts is required by section 44AA, and failure there is punished by section 271A. Once that default is complete there is nothing to audit, so no failure under section 44AB can arise and section 271B has nothing to bite on. The Tribunal had overlooked this. The question was answered in the negative and in favour of the assessee, leaving the department to act under section 271A. This was decided by the High Court (Gauhati High Court) and bears on section 271B, section 271A, section 44AB, section 44AA of the Income Tax Act 1961. It is reported as (1996) 222 ITR 691 (Gauhati). This is the case relied on wherever the department imposes both penalties, or the wrong one, on a taxpayer with no books. It puts the two defaults in sequence rather than in parallel: section 44AA obliges you to keep accounts and section 271A penalises the failure; section 44AB obliges you to have those accounts audited and section 271B penalises that failure. The second obligation presupposes the first has been performed. So the taxpayer with no books commits one default, not two, and it is the section 271A default. The Court was careful to say this is no acquittal - it recorded that the section 44AA failure was apparent and left the Tribunal to take action in accordance with law. If it applies to you, the first step is this: If you are penalised under section 271B and kept no books at all, take the point squarely: there was nothing capable of audit, so the section 44AB obligation never arose.
After completing the assessment, the Income-tax Officer initiated penalty proceedings under section 271B against the assessee for not getting its books of account audited as required by section 44AB. The assessee's answer was that because of the nature of the work it carried on, books of account could not be maintained, and it was an admitted fact that no books had been maintained for several years. The Commissioner (Appeals) rejected that contention and the Tribunal affirmed the penalty. The assessee asked the Tribunal to refer six questions to the High Court; the Tribunal referred only one, whether it was right in upholding the levy of penalty under section 271B. Before the High Court the assessee argued that since no books were maintained the question of their being audited under section 44AB did not arise. The Revenue argued that maintenance of books is a condition contemplated by section 44AA, that section 44AB contemplates audit of accounts, and that penalties are provided for both by sections 271A and 271B. The matter was decided on 1996-08-06 by the High Court (Gauhati High Court). On those facts the High Court held as follows. The question was answered in the negative and in favour of the assessee, so the penalty under section 271B could not stand. Maintenance of accounts is envisaged by section 44AA, and on failure to maintain them the assessee is liable to be penalised under section 271A. Where accounts are maintained the assessee's obligation does not end there - he must do something more, namely get those accounts audited by an accountant. But when a person commits the default of not maintaining books of account as contemplated by section 44AA, that default is complete, and after it there can be no possibility of the default contemplated by section 44AB. Imposing penalty under section 271B in those circumstances is erroneous, and the Tribunal had overlooked this aspect. The Court added that it was apparent from the record that the assessee had failed to maintain books as required by section 44AA, for which penalty is prescribed by section 271A, and that it was for the Tribunal to take action in accordance with law.
The Court read the four provisions as a chain rather than as a set of independent obligations. Section 44AA imposes the first duty, to keep books of account, and section 271A supplies the penalty for breaking it. Section 44AB imposes a further duty on the assessee who has kept books, to have them audited by an accountant, and section 271B supplies the penalty for breaking that one. The second duty is expressed in terms of the accounts, so it can only be performed, and can only be broken, by someone who has accounts. The consequence the Court drew is one of timing as much as of language: the default under section 44AA is complete the moment the books are not kept, and once it is complete there is no subject matter left on which a section 44AB default could occur. To penalise under section 271B in such a case would be to punish the same single failure twice over, and under the wrong provision. The Court was equally clear about what its conclusion did not do. It did not treat the assessee as blameless. The failure to keep books was apparent on the record, the penalty for it is prescribed by section 271A, and the Court expressly left it to the Tribunal to take action in accordance with law. The assessee's explanation, that the nature of its work made books impossible to maintain, was not accepted as an answer to anything; it was simply not the question referred. In the words reproduced by the source cited on this page: "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."
It was decided by the High Court on 1996-08-06 and is reported as (1996) 222 ITR 691 (Gauhati). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 271B, section 271A, section 44AB, section 44AA, 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 question was answered in the negative and in favour of the assessee, so the penalty under section 271B could not stand. Maintenance of accounts is envisaged by section 44AA, and on failure to maintain them the assessee is liable to be penalised under section 271A. Where accounts are maintained the assessee's obligation does not end there - he must do something more, namely get those accounts audited by an accountant. But when a person commits the default of not maintaining books of account as contemplated by section 44AA, that default is complete, and after it there can be no possibility of the default contemplated by section 44AB. Imposing penalty under section 271B in those circumstances is erroneous, and the Tribunal had overlooked this aspect. The Court added that it was apparent from the record that the assessee had failed to maintain books as required by section 44AA, for which penalty is prescribed by section 271A, and that it was for the Tribunal to take action in accordance with law. It arises in Penalty matters, on section 271B, section 271A, section 44AB, section 44AA of the Income Tax Act 1961, and was decided by Gauhati High Court. 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. Expect the department to turn to section 271A instead, and prepare the reasonable cause defence for the failure to maintain accounts. Do not run this argument where books were in fact maintained but audit was late or not done - it has no application there. Check whether the turnover thresholds in section 44AA and section 44AB were in fact crossed for the year before arguing about which penalty applies.
Still good law. A citedby search returns 60 later citing documents. Notably, a High Court and Supreme Court filtered probe returns nothing at all - no other High Court has taken this judgment up, for or against - but the Tribunal applies it constantly and across benches. In Rakesh Kumar Agarwal v ITO (Jaipur Tribunal, 6 March 2023) the Bench recorded that 'A similar view has been taken by the Hon'ble Gauhati High Court in case of Surajmal Parsuram Todi vs. CIT', reproduced its para 6 - 'when a person commits an offence by not maintaining books... the imposition of penalty under section 271B is erroneous' - and concluded 'Accordingly, in view of the binding precedent, we hold that once the assessee found to have not maintaining the regular books of account... the penalty of levy by the AO u/s 271B is not justified and the same is deleted.' The same result is reached in Lokesh Kumar Sharma v ITO (15 February 2023), Bhawani Shankar Gupta v ITO (22 March 2023), Gurmeet Singh v ITO (Chandigarh, 13 July 2023), Natesan Ravi v ACIT (Chennai, 27 March 2019) and Ramakrishna Pillai M v ITO (Cochin, 4 September 2019). Nothing overruling, doubting or confining it was found, and no Supreme Court challenge is traceable. The practical caution is the mirror image of the rule: the correct penalty where no books are kept is s.271A for non-maintenance, and this judgment is no answer to that. 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.
The harvested text does not name the judges, and the reasoning is set out in a single short paragraph, so the judgment gives no view on what would follow if books were partly maintained, or on reasonable cause under the penalty provisions. The Tribunal referred only one of the six questions the assessee sought, and the others are not on this record. The harvested text renders section 271B as 27113 in two places, which I have read as 271B. 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 question was answered in the negative and in favour of the assessee, so the penalty under section 271B could not stand. Maintenance of accounts is envisaged by section 44AA, and on failure to maintain them the assessee is liable to be penalised under section 271A. Where accounts are maintained the assessee's obligation does not end there - he must do something more, namely get those accounts audited by an accountant. But when a person commits the default of not maintaining books of account as contemplated by section 44AA, that default is complete, and after it there can be no possibility of the default contemplated by section 44AB. Imposing penalty under section 271B in those circumstances is erroneous, and the Tribunal had overlooked this aspect. The Court added that it was apparent from the record that the assessee had failed to maintain books as required by section 44AA, for which penalty is prescribed by section 271A, and that it was for the Tribunal to take action in accordance with law.
TaxSphere, “Surajmal Parsuram Todi v CIT”, https://taxnotice.vittsphere.com/caselaw/case/surajmal-parsuram-todi-v-cit/ (validity last checked 2026-08-29)
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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?
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?
