Allahabad ITAT Deletes Section 271B Penalty for Absence of Books of Accounts

The case had been filed by a taxpayer named Anita Mehrotra before the Income Tax Appellate Tribunal (ITAT), Allahabad, challenging an order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] on July 19, 2024.

The income tax department had passed an order under section 271B of the Income Tax Act, imposing a penalty of Rs. 98,524 on Anita for not filing her audit report within the statutory time limit under section 44AB of the Act.

The aggrieved Anita approached the Commissioner of Income Tax (Appeals) [CIT(A)]; however, it dismissed her appeal vide order dated July 19, 2024. Thereafter, she filed the present appeal before the ITAT Allahabad.

The tribunal heard the arguments of both sides and examined the documents furnished by Anita. The taxpayer claims that she did not maintain books of accounts, hence is not liable for the penalty imposed under section 271B of the Act. However, the income tax department claimed that the book of accounts was indeed maintained by her. However, the department did not show proper evidence before the tribunal in support of its claim.

The case cited by Anita of the ITAT Agra bench, titled Madadev Cold Storage vs. Jurisdictional Assessing Officer, also announced a decision in favour of the taxpayer. Another case cited by Anita of the ITAT Bangalore Bench, titled Nagesh Consultants vs. DCIT (order dated 07/03/2023 in I.T.A. No.32/Bang/2023), also ruled in favour of the taxpayer.

When the High Court that has authority over this case has already given a decision that supports the taxpayer, we do not agree with the tax department’s argument to rely on opposite decisions passed by other High Courts (like Karnataka) or other ITAT benches (like Ranchi).

Moreover, the Delhi ITAT, in the case of Arvind Aggarwal vs. ITO (2025), has also given a decision that supports the taxpayer. Anita’s case is fully supported by two important decisions of the Allahabad High Court, which is the jurisdictional court for this case.

The first case is titled CIT vs. Bisauli Tractors (2007), where the Allahabad High Court held that a penalty under Section 271B cannot be imposed if the assessee has not maintained books of accounts at all. So, if no books are maintained, the question of getting them audited does not arise.

The second case is titled CIT vs. S. K. Gupta & Co. (2010), where the Allahabad High Court held the same decision in favour of the assessee on the same issue.

On the basis of the above findings, the ITAT Allahabad deletes the penalty imposed under Section 271B in the present case. The assessee’s appeal is allowed.