Income Tax Appellate Tribunal - Patna
Smt. Nirmal Jain vs Income Tax Officer on 14 February, 2007
Equivalent citations: [2008]112ITD164(PAT), [2008]304ITR246(PAT), (2007)112TTJ(PAT)90
ORDER
D.C. Agarwal, A.M.
1. This is an appeal filed by the assessee against the levy of penalty of Rs. 15,808 under Section 271B of the Act.
2. The allegation of the AO was that the assessee ought to have got his accounts audited as required under Section 44AB of the Act because he has declared net profit at a rate less than 8 per cent whereas if an assessee is claiming profits and gains from civil construction at a rate less than 8 per cent then he ought to have got accounts audited as required under sub-s. (c) of Section 44AB. Since there was a failure on the part of the assessee to get the accounts audited, a penalty of Rs. 15,808 was levied. This was confirmed by the learned CIT(A).
3. Against this, the learned Authorized Representative of the assessee submitted that the assessee is not a civil contractor as he is only using a mobile crane for loading and unloading iron (and) steel material from the railway siding. Therefore, the provisions of Section 44AB or Section 44AD would not be applicable in that case. Therefore, there is no question of getting the accounts audited when he is claiming income at a rate less than 8 per cent.
4. Against this, the learned Departmental Representative submitted that the case of the assessee falls under Expln. (ii) to Section 44AD which defines the expression "civil construction" and which includes the execution of any works contract. The assessee is carrying on works contract and, therefore he is not (sic) required to get his accounts audited as he has claimed his income less than 8 per cent of the gross receipts.
5. The learned Authorised Representative in his rejoinder submitted that the assessee has a reasonable cause for not getting his accounts audited as he was under bona fide belief that his case would not fall under the expression "civil construction". Further, the meaning of works contract should be seen from the point of view of Section 44AD and its meaning cannot be enlarged. Therefore, according to him, works contract should be confined to "civil construction" only.
6. We have considered the rival submissions and perused the material on record. We are of the considered view that the assessee has reasonable cause for not getting his accounts audited. The use of mobile crane for loading and unloading iron steel at the railway siding cannot be said to be civil construction. Further, the works contract cannot mean to any contract relating to work. Once the provisions of Section 44AD are enacted for computing profits and gains of business of civil construction then any other work which is not in the nature of civil construction cannot be brought within the mischief of this section. The principle of ejusdem generis has to be invoked when particular words pertaining to a class or category or genre are followed by general words, then the general words are construed as limited to words of the same kind as those specified. This principle would apply when :
(i) the statute contains an enumeration of specified words;
(ii) the subject of enumeration constitutes a class or category;
(iii) that class or category is not entrusted by enumeration;
(iv) each term follows enumeration; and
(v) there is no indication of a different legislative intent.
For this proposition, we derive support from the decision of the Hon'ble Bombay High Court in the case of CIT v. Shiee Wama Sahakan Sakhai Kaikhana (2002) 173 CTR (Bom) 188 : (2002) 253 ITR 226 (Bom) and of the Hon'ble Madhya Pradesh High Court in the case of CIT v. Mohd. Ishaque Gulam . In Section 44AD, Explanation reads as under:
Explanation.-For the purpose of this section, the expression 'civil construction' includes-
(a) the construction or repair of any building, bridge, dam or other structure or of any canal or road;
(b) the execution of any works contract.
We also find that there is no legislative intent to infer that works contract can mean any other works contract other than civil construction. The heading of Section 44AD clearly says "Special provision for computing profits and gains of business of civil construction, etc." Sub-s. (1) of Section 44AD provides that a sum equal to 8 per cent of the gross receipts paid or payable to the assessee can be assessed as income from civil construction or supply of labour for civil construction. Section 44AE has been enacted in respect of computing profits and gains of business of hiring or leasing of goods carriage and Section 44AF has been enacted for computing profits and gains of retail business. Similarly, Sections 44B, 44BBA and 44BBB have been enacted for specific purpose as mentioned in those sections. Therefore, intention of the legislature is clear that Section 44AD has been enacted for the purpose of computing profits and gains of business of civil construction and nothing else. This shows that the execution of any works contract is preceded by construction or repair of any building, bridge, dam or other structure or of any canal or road. Clause (a) is, therefore, squarely confined to civil construction work wherein other activities are defined and Clasue (b) follows thereafter which gives general term being the execution of any works contract. The question is now whether the scope of "works contract" can be expanded to any works contract such as carrying out the work other than civil construction e.g. repairs of electrical appliances, transformers, maintenance of coaches, bus vehicles, etc. Even though all these activities can be assigned by way of works contract, but they cannot be said to be related to civil construction. By the principle of ejusdem generis, we have to confine the scope of works contract only to that works contract awarded to a contractor which relates to civil construction only. Merely by inference, we cannot say that a work in 3rd or 4th stage can also be said to be a civil work. Here in the present case, the view of the Department is that since the mobile crane is used for loading or unloading iron material and iron material is used for civil construction and, therefore, by inference this loading and unloading is also a part of civil construction cannot hold good. It may be that iron steel may be used for sale and purchase or used as raw material in some foundry or factory. Therefore, it cannot be presumed that what the assessee executed was directly a part of civil construction work. A work assigned to a contractor must be directly related to or add to civil construction of a contractor and it should be an integral part of civil contract work, only then an activity of works contract can be brought within the mischief of Section 44AD of the Act. As a result, we hold that the assesseo was under a bona fide belief that his case will not fall within Section 44AD and, therefore, he was not required to get his accounts audited where he is claiming his income less than 8 per cent of gross receipts. Once his gross receipts are less than Rs. 40 lacs there was no compulsion on him by virtue of Section 44AB of the Act to get his accounts audited. Once that is so, no fault can be found with the assessee for not getting his accounts audited. In any case, the explanation furnished by the assessee is satisfactory and, therefore, no penalty can be levied on him. Penalty so levied is cancelled.
7. In the result, the appeal filed by the assessee is allowed.