Income Tax Appellate Tribunal - Nagpur
Income-Tax Officer vs Pyarelal Gaur on 19 July, 1993
Equivalent citations: [1993]47ITD33(NAG)
ORDER
H.C. Shrivastava, Accountant Member
1. As both the appeals raise similar issues and are otherwise connected appeals, they are being decided together for the sake of convenience.
2. The two assessees filed their returns of income from truck plying. While the returns were processed under Section 143(1)(a) of the Income-tax Act, 1961 and were accepted, the Assessing Officer initiated the proceedings under Section 271A for "non-maintenance of bank account". The assessee had filed the statements of income along with the returns. According to the assessees, they had maintained the details of income and expenditure account and, were therefore not defaulters liable to be penalised under Section 271A of the Act. The Assessing Officer, however, rejected the plea of both the assessees and imposed the penalties of Rs. 2,000 each. When the matter was taken to the D.C.I.T.(A), he held that it has not been proved by the Assessing Officer that the records maintained by the assessee could not be called the books of account or the books of account were such that the same could not enable the Assessing Officer to compute the total income under provisions of the Act. He also gave a finding that the assessees had not shown income on estimate basis only. He also gave a finding that the Assessing Officer had not invoked the provisions of Section 139(9) and the net profit shown by the assessees was accepted. He accordingly cancelled the penalties so imposed. The department is in appeal before us.
3. At the appellate level, the Departmental Representative Shri M. Mani appeared and requested us to take into consideration the various aspects of Section 44AA(2). Though the assessees were not represented, we requested Shri L.S. Dewani, Advocate and Shri M.M. Jain, Chartered Accountant to assist us in this exercise. We express our appreciation for the help rendered by them in this regard.
4. Shri Mani, the senior Departmental Representative took us through the provisions of Section 44AA. He submitted that all the Sub-sections of Section 44AA had to be read together. As the Board has prescribed certain books of account required to be maintained under Rule 6F read with Section 44AA(3) by a person carrying on certain profession, then the same can be taken as a sure guideline by the other assessees for maintenance of such books of account. In these cases, both the assessees had shown income from business exceeding Rs. 25,000. Therefore, the provisions of Section 44AA(2) will clearly apply to them. Under Section 44AA(2), every person whose income from business or profession exceeds Rs. 25,000 or his total sales exceed Rs. 2.50 lakhs in one of the three years immediately preceding previous year, he shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the Income-tax Act. If an assessee does not maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act, then he will be liable to be penalised under Section 271A of the Act. In these cases, no profit and loss account or balance sheet was filed by the assessees along with the returns. Therefore, it was obvious that the assessee did not maintain such books of account as mentioned in Section 44AA(2)(ii) of the Act. It was, therefore, submitted that the D.C.I.T.(A) was not justified in cancelling the penalties so imposed.
5. Shri L.S. Dewani, Advocate, making his submission as amicus curiae suggested that if the Board has not prescribed any such books of account which may lead the Assessing Officer to compute the income of an assessee in accordance with the provisions of the I.T. Act, in cases of the type of which these assessees belong then any set of documents which enable an assessee to prepare his profit and loss statement, should be considered such books of account. It was submitted that Section 44AA(1) applies only to professional people and not to people carrying on business. It is Section 44AA(2) which applies to such people. While taking recourse to Section 44AA(3), the Board has prescribed certain books of account, no such rules have been made or no such books of account have been prescribed for the people covered under Section 44AA(2) of the Act. He submitted that if a comparison is made of these provisions with Section 44AB second proviso, then it may be seen that while compulsory audit has been prescribed for people having certain turnover, no such provision has been made under Section 44AA.
6. Shri M.M. Jain, Chartered Accountant, submitted that as an Accountant, he would be satisfied if his client gives to him some documents which will enable him to prepare a profit and loss account.
7. We are of the opinion that the D.C.I.T.fA), in these cases, was justified in cancelling the penalties imposed under Section 271A of the Act. Section 44AA contains 4 Sub-sections. Sub-section (1) concerns people who are referred to as "specified professional people". Sub-section (2) concerns all other businessmen. This Sub-section is further divided into two clauses. Clause (0 concerns businessmen who are already engaged in their business pursuit. Clause (ii) concerns persons newly taking up business pursuit. We also find that Section 44AA(1) applies not to all professionals but to certain specified professionals. No such rules have been prescribed for the people covered under Section 44AA(2). In our opinion, any document or books of account which enable an Accountant to prepare a profit and loss account and if possible, a balance sheet will also enable the Assessing Officer to compute the assessee's total income in accordance with the provisions of the Income-tax Act.
On a query being raised from the Bench as to whether in all cases where the provisions of Section 145(1) or 145(2) are applied for computing the income of an assessee, can it be held that such assessees have not maintained such books of account and other documents as may enable the Assessing Officer to compute the assessee's total income in accordance with the provisions of the I.T. Act, the Senior Departmental Representative submitted that such was his understanding of law. We are unable to accept this contention as we find that Section 44AA(2) talks about keeping and maintenance of such books of account and other documents as may enable the Assessing Officer to compute the assessee's total income in accordance with the provisions of the I.T. Act. It is obvious that the Income-taxAct, 1961, contains Sections 145(1)and 145(2) as well. Therefore, if this plea of the department is accepted that the penalty will be imposable under Section 271A of the Act in all the cases where recourse is taken to Section 145(1) and Section 145(2) for computing the income of an assessee, then all the cases of grocery shop owners, truck operators, civil building contractors and many other assessees will suffer penalties under Section 271A in spite of maintaining cash book, ledgers and other primary books of account. Therefore, we do not agree with the Departmental Representative that the penalties will be imposable under Section 271A under such circumstances. We find ourselves in agreement with the submissions made by two amicus curiaes appearing before us that what is a relevant book of account will vary from case to case. In these cases, the penalty proceedings were initiated under Section 271A for non-maintenance of bank account. If a penalty under Section 271A can be imposed for non-maintenance of bank account, then all the assessees who do not maintain any bank account but write their books of account regularly and maintain cash book and ledgers will be liable for penalty. This will lead to an absurd situation. We are, therefore, of the opinion that if an assessee maintains such document which enables an Accountant and not necessarily a Chartered Accountant, to prepare an income or expenditure account, then such document should be considered as books of account which may enable the Assessing Officer to compute the income of a given assessee under the provisions of the Income-tax Act. Therefore, in absence of any specific rule made by the Board for the people covered under Section 44AA(2)(i) or (ii), it should be considered as sufficient compliance if an assessee produces such document which may enable the Assessing Officer to compute the assessee's income under the provisions of the Income-tax Act. An assessee may maintain a sale book, purchase book, stock register and ledger and the Income-tax Officer may still find out defects and reject the books of account. It has to be kept in mind that the provisions of Section 145(1) or 145(2) are very much part of what has been described as "this Act" (Income-tax Act). When an income is determined after taking recourse to Section 145(1) or 145(2), then it has to be held that such income has been computed in accordance with the provisions of the Income-tax Act. Therefore, we cannot accept the plea raised by the Senior Departmental Representative that wherever recourse is taken to Section 145(1) or 145(2) to compute the income of an assessee, penalty under Section 271A willbe imposable.
8. In these cases, the Assessing Officer did not issue any notice under Section 139(9) of the Act directing the assessees to remove the defect of not having enclosed what he considered as profit and loss account. The assessees had enclosed the statements of income where gross receipts are shown and computation of profit was also shown. The very fact that the Assessing Officer did not issue any notice of defect under Section 139(9) shows that the Assessing Officer was of the opinion that whatever documents accompanied the returns were sufficient to enable him to compute the income of the assessees.
9. Therefore, we agree with the D.C.I.T.(A) that the penalties imposed by the Assessing Officer should be cancelled. We uphold the orders of the D.C.I.T.(A) cancelling the penalties in the cases of both the assessees.
10. In the result, the departmental appeals are dismissed.