Income Tax Appellate Tribunal - Mumbai
Brij Lal Goyal vs Assistant Commissioner Of Income-Tax on 30 October, 2003
Equivalent citations: [2004]88ITD413(MUM)
ORDER
B.R. Jain, Accountant Member
1. In these appeals, common issue of imposition of penalty under Section 27 IB for failure of the assessee to get its accounts audited as required under Section 44AB of the Act, which stands confirmed by the ld. CIT(A), is in dispute. For the sake of convenience, all the three appeals are disposed of by a common order.
2. The main order confirming the penalty of Rs. 31,825 in the case of Shri Brij Lal Goyal is for assessment year 1995-96. The other order for assessment year 1993-94 confirming penalty of Rs. 27,890 is in the case of the same assessee and the third order confirming penalty of Rs. 36,837 in the case of Shri I.S. Goyal for assessment year 1995-96 which are both on identical facts and circumstances wherein the ld. CIT(A) followed his decision of assessment year 1995-96 given in the case of Shri Brij Lal Goyal.
3. Both the assessees were searched on 4-10-1994 by an action under Section 132 of the Act. The assessee was maintaining books of account in the regular course of business. The turnover disclosed in such account for assessment year 1995-96, was Rs. 10,23,912. As per seized annexure from the assessee's premises, the Assessing Officer found that the assessee has carried out additional sales of Rs. 53.41 lakhs which were not recorded in the regular books of account. The Assessing Officer was of the view that aggregate turnover of the assessee after taking into accounts additional sales, found out from the papers seized in the course of search, exceeded to Rs. 40 lakhs. Since the assessee was liable to get his accounts audited in terms of Section 44AB and for his failure to show any reasonable cause in not getting the same audited, the Assessing Officer imposed penalty of Rs. 31,825.
4. The ld. CIT(A) after considering the assessee's explanation and reasons stated, was of the view that the reference in the act is to 'account' or 'books of account'. Law does not permit to keep the duplicate accounts. There is nothing in the principles of accountancy or in the Income Tax Law to treat any part of record of business in duplicate, non-regular or unofficial and to withhold it from the auditors or the Income Tax authorities. He, therefore, was of the view that in the eyes of law, the account of a person will obviously include all the records kept by him in respect of his transactions, assets and liabilities. He was further of the opinion that neither the bad shape, form or condition of any part of record is a valid ground for secreting it. In the assessee's case, the seized record contains the assessee's business transaction by his own admission. Accordingly, crediting a part of sales turnover so as to bring it below Rs. 40 lakhs did not absolve the assessee from its obligation to have its account audited under Section 44AB of the Act. The said section refers to "total sales, turnover or gross receipt" and "account". It does not allow the assessee to substitute the part of the turnover from total turnover and a part of account from the account. The correct and admitted turnover of the assessee in this case exceeded to Rs. 40 lakhs. He upheld the decision of the Assessing Officer that the appellant was liable to get his accounts audited under Section 44AB of the Act.
5. On the question of reasonable cause, he stated that it stands to no reason that a reasonable cause would be in secreting of accounts by the assessee. In the assessee's case, the net disclosure of sales/turnover was act of his own volition and as such this act did not constitute a reasonable cause. He further held that an illegal intention can hardly be admitted as a mitigating circumstance justifying non-compliance with the provisions of law. Accordingly, imposition of penalty was upheld.
6. In 1993-94, the assessee had filed his return of income on 30-8-1993 which was prior to the date of search on 26-11 -1994. In his original return, the turnover disclosed was Rs. 6,23,919 which was as per his regular books of account. However, on the basis of annexure i.e. books and documents etc. seized, the assessee was found to have additional sales for Rs. 49.54 lakhs. Thus the aggregate of such turnover exceeded to Rs. 40 lakhs for the identical reasons and penalty imposed stood confirmed by the ld. CIT(A).
7. In the case of Shri I.S. Goyal, the total sales of the assessee as per his regular books of account, were Rs. 2,20,788 only. However, consequent to action under Section 132(1) of the Act, the assessee was found to have made additional sales of Rs. 51.59 lakhs in the books/documents etc. seized from him, which were not recorded in the regular books of account maintained by the assessee. For the parity of reason, the Assessing Officer imposed penalty of Rs. 36,837 and the same stood confirmed by the ld. CIT(A).
8. We have heard the parties with reference to material on record and precedents relied upon. Assessee's counsel has strongly relied upon the decision of the Hon'ble Bombay High Court in the case of Sheraton Apparels v. Asstt. CIT[2002] 256 ITR 20' for the plea that annexures or diaries so seized can hardly be described as books of account and no liability can be fastened on the assessee. We have taken note of this judgment. Explanation (5) to Section 271(1)(c) enacts a deeming provision and has application to a situation where in the course of a search under Section 132, the assessee is found to be the owner of any money, bullion, jewellery and other valuable articles or thing and the assessee claims that such assets have been acquired by him by utilizing wholly or in part, his income of any previous year which has already ended before the date of search or which is to end on or after the date of search. In such a situation, notwithstanding the fact that such income is declared by him in any return of income furnished on or after the date of the search, he, for the purposes of Section 271 (1)(c), is deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income unless where such income, or the transaction resulting in such income is recorded on or before the date of the search in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Commissioner before the date of search.
9. The term "books of account" referred to in Sub-clause (i) of Clause (a) of Explanation 5 would mean those books of account whose main object is to provide credible data and information to file the tax returns. The credible accounting record provides the best foundation for filing return of both direct and indirect taxes.
10. In Explanation 5 the words "books of account if any maintained by him for any source of income" are important words signifying the legislative intent embodied in the Explanation warranting grant of immunity from penalty. The legislative intent is to admit only those books of account maintained by the assessee on his own behalf, which by their very nature and circumstances are maintained for the purpose of drawing the source of income. Therefore, when books of account are tendered for claiming the benefit of Explanation 5 to Section 271(1)(c) of the Act, they must be shown to be books, those books must be books of account, and they must be maintained for the purpose of drawing the source of income under the Income-tax Act.
11. It is evident from the aforesaid observation that books of account maintained in regular course only make the assessee eligible for grant of immunity from penalty and not with reference to any of such books, which have not been maintained in the regular course of business. Admittedly, the additional sales found as a result of search, was not recorded in the books of account regularly kept in the course of business by the appellant. Merely because the appellant accepted the additional sales for the purpose of assessment of the relevant year on the basis of entries in the seized documents, the same would not constitute accounts of the appellant maintained in the regular course of business and on that basis alone liability cannot be fastened on the assessee by holding him to have committed the default. Furthermore, the word "accounts" has not been defined under the Income-tax Act. However, under Section 34 of the Indian Evidence Act, 1872, sanctity is attached to the books of account, if the books are indeed "account books", i.e., in original if they show on their face, that they are kept in the 'regular course of business'. So, the accounts under Section 34 of the Indian Evidence Act means accounts which are maintained in the regular course of business. Accordingly we are satisfied that the record carrying entries from which the appellant admits of additional sales are not the accounts as referred to under Section 44AB of the Act. On that basis, it was not open to the Assessing Officer to hold that the sales of the assessee as referred in Section 44AB of the Act have exceeded to Rs. 40 lakhs and by not getting such accounts audited from an accountant, the appellant has committed a default. Such a finding arrived at by the Assessing Officer is reversed.
12. Even otherwise, the appellant before us have shown that copy of seized Annexure A-8 was not provided to him at least up to 21-2-1997 which is the date of issuance of a show-cause notice during the assessment proceedings for assessment year 1994-95 and is evident from internal page 2 of the assessment order of that year where the Assessing Officer says "a detailed show-cause notice based on the seized record was handed over to the AR of the assessee on 21-2-1997 after giving complete photocopies of the seized materials and other records". From perusal of assessment order for the assessment year 1995-96, we also find a mention made by the Assessing Officer that the appellant did not include income on the basis of seized Annexure A-8 in the income returned by him on 16-9-1996. This goes to prove the bona fides of the appellant for explaining reasonable cause on the alternate plea raised before the Assessing Officer and contended before us by relying on the judgment of Hon'ble Punjab & Haryana High Court in the case of ITO v. Babu Lal Jain [2001] 251 ITR 656 as a good reason for his failure to get his accounts audited when the documents were still lying with the department and with which we also agree. Accordingly, no penalty was exigible in all these years on both the appellants before us.
13. As a result, all the three appeals stand allowed.