Income Tax Appellate Tribunal - Cuttack
Ranjita Jena, Angul vs Acit, Central Circle, Cuttack on 18 February, 2020
आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री सी.एम.गगग, न्याययक सदस्य एवं श्री एऱ.ऩी.साहु,ऱेखा सदस्य के समऺ BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM आयकर अपीऱ सं./ITA Nos.63 to 68/CTK/2019 (नििाारण वषा / AYs. :2010-2011 & 2012-2013 to 2016-2017) Ranjita Jena, Vs. ACIT, Central Circle, Cuttack Talcher Town, Talcher, Dist: Angul स्थायी ऱेखा सं ./ PAN No. : ACVPJ 3787 A (अऩीऱाथी /Appellant) .. (प्रत्यथी / Respondent) यनधागररती की ओर से /Assessee by : Shri J.M.Pattnaik, Advocate राजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT-DR सुनवाई की तारीख / Date of Hearing : 29/01/2020 घोषणा की तारीख/Date of Pronouncement : 18/02/2020 आदे श / O R D E R Per Bench :
These are the appeals filed by the assessee against the consolidated order of CIT(A)-2, Bhubaneswar, all dated 21.12.2018 for the assessment years 2010-2011 & 2012-2013 to 2016-2017.
2. Since the issues involved all the appeals are identical regarding penalty u/s.271 of the I.T.Act, 1961 of R.25000/- each, therefore, with the consent of both the parties, all the appeals are heard analogously and disposed off by this consolidated order. For the sake of convenience, we shall take into consideration the facts and grounds mentioned in ITA No.63/CTK/2019 for the assessment year 2010-2011 2 ITA Nos.63-68/CTK/2019 for deciding all the appeals. Grounds taken by the assessee in the said appeal for assessment year 2010-2011 are as under :-
(i) For that the learned AO is erred by invoking Section 271 (A) of the I.T. Act for imposition of penalty without issuing any notice U/s.
139(9)/139(9)(f) of the I.T. Act as a pre condition for such imposition is bad in law.
(ii) For that the learned AO is erred by invoking the provision of Section 44AD of the I.T. Act as the turnover of the assessee during the AY did not exceed the threshold limit.
3. Brief facts of the case are that a search and seizure action u/s.132 of the Act was conducted against the assessee on 03.09.2015. In consequence to that search, the cases of the assessee for assessment years under consideration were taken up for assessment u/s.153A of the Act and the assessment was framed for the assessment year 2016- 2017 u/s.143(3) of the Act making various additions on the basis of various documents filed by the assessee. During the course of assessment proceedings, the AO noticed that the assessee had filed original return of income u/s.139(1) of the Act on 26.12.2012 of Rs.6,36,260/- and later on he filed return in pursuant to the notice u/s.153A declaring total income of Rs.18,52,981/-. The assessee was running and managing nursing home in the name and style of M/s Jena & Jena Nursing Home at Talcher, Odisha. The predominant source of income was from medical treatment given to the patients by the doctors/professionals/technicians etc. On being asked regarding the books of account, the ld. AR submitted before the AO that the assessee 3 ITA Nos.63-68/CTK/2019 was not required to maintain any books of accounts and he had filed return as per section 44AD of the Income Tax Act, 1961. He further submitted that the assessee is neither a doctor nor possessed any other professional or technical qualification to be engaged in medical profession. After a long discussion in the assessment order by the AO, he computed no taxable income as under :-
12. In view of above discussion, net taxable income and tax payable is computed as under:-
Income from salary as per return ----- 2,40,000.00 Income from house property as per return ------ 71,400.00 Income from nursing home as discussed in para-9 above ---- 34,07,293.00 Income from other sources as per return ----- 11,29,873.00 Income from undisclosed bank credits as discussed above-----10,00,000.00 58,48,566.00 Deduction u/s 80C as per return ---- 1,00,000.00 Net taxable income as per this order --- 57,48,566.00 Rounded off to --- 57,48,570.00 Penalty proceedings u/s 271(l)(c) of the Act are initiated for concealment of income on the issues of salary income, unexplained credit in bank account and income from nursing home as discussed above. Penalty proceedings u/s 271A of the Act are initiated for non-maintenance of books of account u/s 44AA of the Act and u/s 271B for not getting the accounts audited u/s 44AB of the Act.
Computation of Taxable Income and tax thereon Particulars Amount (Rs) Amount (Rs) Total income as per return of income 57,48,570/-
Tax on above 15,75,571/-
Add:EC&SHEC@3% 47,267/-
Tax Payable 16,22,838/-
Less: Adv. Tax 60,000/-
15,62,838/-
Add: Interest U/s. 234A 1,25,027/-
: Interest U/s. 234B 12,65,899/- 13,90,926/-
Tax Payable 29,53,764/-
Rounded off u/s. 288A 29,53,760/-
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ITA Nos.63-68/CTK/2019
4. Ld. AO imposed penalty of Rs.25,000/- u/s.271A of the I.T.Act, 1961 r.w.r.1962 for non-maintenance of books of accounts as required u/s.44AA of the Act read with relevant rules.
5. Feeling aggrieved with the penalty order, the assessee preferred appeals before the CIT(A), however, the CIT(A) after considering the submissions of the assessee and findings of AO, upheld the penalty so levied by the AO u/s.271A of the Act for all the assessment years under consideration.
6. Further feeling aggrieved with the order of CIT(A), the assessee is in appeals before the Income Tax Appellate Tribunal.
7. Ld. AR before us submitted that the penalty is not imposable in case of the assessee for the six assessment years as there is no notice u/s.139(9)/139(9)(f) issued by the AO before levying penalty. Ld.AR also filed written submissions which read as under :-
"That on 03/09/2019, there was a search and seizure u/s. 132 of the I.T. Act both in the residence as well as business premises namely Jena & Jena Nursing Home situated in the name of Appellant at Talcher in the District of Anugul.
In course of such search operation no books of accounts or any of the documents were impounded except for the AY 2014-2015 to 2016- 2017;
The assessment was completed based on appraisal report submitted by the Deputy Director of Investigation, Bhubaneswar. After the search, notice u/s.153(A) was issued and accordingly, the assessment was completed for the AYs and this penalty order is consequential to the said assessments.
The learned AO imposed penalty u/s.271(A) of I.T. Act for each AYs at Rs.25,000/- for each AYs under dispute. For non maintenance of books of accounts u/s. 44AA (2) of the I.T.Act as the appellant organisation is doing business i.e. Nursing Home activities.
It is an undisputed fact that the business activities of the assessee is nothing but coming under the head of "business income" thereby 5 ITA Nos.63-68/CTK/2019 Section 44 "AB is squarely applicable and as the rate of profit disclosed on such business is more than the prescribed limit, it was not required any audit as contemplated U/s. 44 AD of the I.T. Act, the books of accounts were not audited and the return was filed. As per Section 139 (9) of the I.T. Act where the AO considers that the returned of income furnished by assessee is defective he may intimate the effect to the assessee give him an opportunity to rectify its defect within a period of 15 days from the date of such intimation or within such period, which on an application made in this behalf; If the assessee has not complied such notice the return shall be treated as invalid return and assessment be made accordingly. In the instant case there is no such action of the learned AO.
The books of accounts of the appellant was not audited as transaction were below the threshold limit which were uncontroverted facts as per record in quantum assessment;
The income so derived by the appellant on estimated basis as the books of accounts were not audited u/s.44AD of the I.T. Act albeit the activity of the nursing home is business in nature. However, the Learned AO without issuing notice u/s. 139 (9) of the I.T. Act which is a condition precedent for imposition of penalty u/s.271(a) of the I.T. Act imposed penalty;
The learned AO imposed penalty by passing order u/s.271(A) of the I.T. Act by stating that the appellant did not keep and maintain the books of accounts and other documents as required under provision of section 44 AA of the I.T. Act, 1961;
The appellant against such order of penalty approached the 1 st Appellate Authority by filing the appeal for the aforesaid AYs; The learned CIT (A) upheld the order of the learned AO as the return was submitted in pursuance of notice u/s.153 (A) of the I.T. Act by disclosing the higher income.
The learned CIT (A)' failed to take note of the law that without issuing the statutory notice u/s. 139 (9) of the I.T. Act, the Learned AO is bereft of jurisdiction and authority to impose penalty; In the above back ground and back drop of the matter, the appellant preferred the instant appeal before this Hon'ble Tribunal; among other grounds on the grounds that the decision maker has not understood the law correctly that regulars his decision making power and that the decision of the decision maker is vitiated by illegality and irrationality. BECAUSE, as per section 139 (9) (F) where regular books of accounts are not maintained by the assessee, the returned is accompanied by a statement indicating the amounts of turn over or as the case may be, gross receipts, gross profits, expenses and net profit or business or profession on the basis of which such amount has been computed and also disclosing the amount of to5tal sundry creditors stock in trade and cash balance as at the end of the previous year. In the instant case the learned AO failed to understand those things while passing the order U/s. 271 (A) of the I.T.Act. In such circumstances the co ordinate Bench 6 ITA Nos.63-68/CTK/2019 in the case of Pyaralal Gaur 1993 (47) I.T.A.T page 33 and Hon'ble Karnataka in case of Babu Reddy (2010) 38DTR 0147 have concurrently hold a view that in absence of notice u/s.139 (9) of the I.T. Act, penalty u/s. 271(A) cannot be imposed due to procedural lapses. However, the said view h as also been accepted by this Hon'ble Tribunal in case of Shri Ajaya Kumar Singh vs ACIT circle 1(2), BBSR vide ITA No. 203- 206/CTK/2016. In this back ground the imposition of penalty u/s. 271(A) of the I.T. Act at Rs. 25, 000/- for each of the AYs required to be deleted and the orders of the learned AO and Learned CIT (A) require to be set aside."
8. On the other hand, ld. DR relied on the orders of both the authorities below and submitted that the assessee was engaged in the medical profession, therefore, he was required compulsory to maintain books of accounts as per the provisions of Section 44AA of the Income Tax Act,1961 and as per Income Tax Rules, 1962. The total income of the assessee from business and profession as determined by the AO is Rs.34,07,293/-, which are more than the limits prescribed for compulsory maintenance of books of accounts of the assessee. It is not required to hold a special degree for engaging in profession. During the course of search and seizure proceedings various documents were found and seized which has been referred by the AO in the order which clearly indicates that the assessee's source of income are generating from medical profession. The assessee's income does not fall for filing return of income as per 44AD of the Income Tax Act, 1961. The AO has calculated the business income as per the documents found and seized. Therefore, the AO is justified to impose the penalty u/s.271A which has been confirmed by the CIT(A). In the peculiar facts and circumstances 7 ITA Nos.63-68/CTK/2019 of the case, the case law relied on by the ld. AR is not applicable in the present case.
9. After considering the submissions of both the parties and perusing the entire material available on record, we find that the AO imposed penalty u/s.271A of the Act for non-maintenance of books of account u/s.44AA of the Act. In the appellate proceedings, the CIT(A) upheld the action of AO observing that the assessee could not file any reasonable cause for non-maintenance of books of accounts. However, as per the provisions of Section 271A of the Act, If any person fails to keep and maintain any such books of account and other documents as required by section 44AA of the Act or the rules made thereunder, in respect of any previous year or to retain such books of account and other documents for the period specified in the said rules, the Assessing Officer or the Commissioner (Appeals) may direct that such person shall pay, by way of penalty a sum of twenty-five thousand rupees. The relevant provisions of Section 271A of the Act read as under :-
"Failure to keep, maintain or retain books of account, documents, etc"
271A. Without prejudice to the provisions of [section 270A or] section 271, if any person fails to keep and maintain any such books of account and other documents as required by section 44AA or the rules made thereunder, in respect of any previous year or to retain such books of account and other documents for the period specified in the said rules, the [Assessing] Officer or the [Commissioner (Appeals)] may direct that such person shall pay, by way of penalty, [a sum of twenty-five thousand rupees].
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ITA Nos.63-68/CTK/2019
10. It is clear from the assessment order that the assessee had filed return of income as per section 44AD of the Act, but in the computation part of the assessment order, we noticed that the AO has mentioned under the three heads of income as per return as stated in the facts of the case that income from salary, income from house property and income from other sources. Ld. AO has himself calculated the income from business and profession as per para 9 of the assessment order of Rs.34,07,293/-. As the assessee been filed return u/s.44AD of the Income Tax Act, therefore, he has shown the income from business and profession, which is lack in the computation of the AO. The AO has meticulously calculated total gross receipts of Rs.09,53,660/- on the basis of the documents available before him at para 8 of the assessment order and arrived at para 9 after allowing amount of Rs.35,46,367/- profit from nursing home at operated by the assessee of Rs.34,07,293/- The Assessing Officer has ignored the profit calculated by the assessee as per Section 44AD of the I.T.Act, 1961.
11. On perusal of the assessment order and submission of the assessee, we also observe that the assessee if unable to disclose anywhere in his submission that there was a total receipt from the operation of the nursing home and how he has calculated the profit. The AR of the assessee just has discussed the AO has accepted the return of income, therefore, he was to require to issue defect notice as 9 ITA Nos.63-68/CTK/2019 per Section 139(9)(f) of the Act. It is no doubt that the AO has accepted the return of assessee as per para 12 of the Income Tax Act in the major three heads of the income. Therefore, it was not required to issue notice in this regard. The AO has calculated the income from business and profession from medical profession and in this regard the assessee was required to maintain books of accounts as per Section 44AA of the Income Tax Act. For ready reference, we would like to reproduced section 44AA of the Act, which reads as under :-
Maintenance of accounts by certain persons carrying on profession or business.
44AA. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette 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 provisions of this Act. (2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,--
(i) if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or
(ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or
(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AE or section 44BB or section 44BBB, as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year; or
(iv) where the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum 10 ITA Nos.63-68/CTK/2019 amount which is not chargeable to income-tax in any previous year, 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 provisions of this Act:
61[Provided that in the case of a person being an individual or a Hindu undivided family, the provisions of clause (i) and clause (ii) shall have effect, as if for the words "one lakh twenty thousand rupees", the words "two lakh fifty thousand rupees" had been substituted : Provided further that in the case of a person being an individual or a Hindu undivided family, the provisions of clause (i) and clause (ii) shall have effect, as if for the words "ten lakh rupees", the words "twenty-five lakh rupees" had been substituted.] (3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-
section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.
(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.
12. Further the 'person' has been defined in Income Tax Act in Section 2(31) which reads as under :-
2(31) "person" includes--
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) a local authority, and
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses;
13. From the facts and findings recorded by the AO, it is clear that the assessee was engaged in the medical profession for earning her income as calculated by the AO on the basis of documents available before him. The main source of income of the assessee is from the 11 ITA Nos.63-68/CTK/2019 consultancy/services from the treatment of patients which was being given by the doctors/professionals/technicians etc. The predominant source of income was from medical profession. During the course of search and seizure operation various incriminating documents were found. The relevant portion from the assessment order is as under :-
"5. In the return of income for this year, assessee has disclosed gross receipts of Rs.40,04,880/-. She has disclosed profit of Rs.5,11,708/- on such receipts u/s 44AD of the Act. Before discussing the eligibility of expenses claimed, the issue of gross receipts needs to be discussed in relation to findings in the course of search at her premises. During the course of search, several registers and documents were found and seized. These were given mark of identification in the series - J & J. The relevant among all these were those marked in this series as 1,3,4,7, 8,9,10,11 and 15. During the course of search and post search investigation, these were reported to be as under:-
i. 1 & 3 --- OPD register, i.e. register containing details of OPD patients, ii. 4 -- Abortion, register, i.e. register containing details of patients undergoing pre delivery abortions, iii. 7 & 8 --- Operation register, i.e. register containing details of patients undergoing caesarean operation for delivery, iv. 9 & 10 --- Ultrasound register, i.e. register containing details of patients who were subjected to USG diagnosis. v. 11 & 15 -- money receipt books containing details of fees received from patients from all the activities as reported above.
During the course of search, neither any regular books of account were found nor could the assessee explain as to whether such books were maintained at all or not. A detailed examination and investigation was carried out by the Investigation Wing reconciling the details contained in various registers with the money receipt books. The findings of such investigation are reproduced as under. It is to be stated that the registers seized pertained only to financial years 2013-14, 2014-15 and 2015-16. After arriving out at the gross receipts from the respective registers for these three years, the gross receipts of the earlier four years i.e. financial years 2009-10 to 2012-13 were computed by averaging the receipts for the other three years."
From the above order of the AO it is clear that the assessee has maintained various registers and money receipt books containing 12 ITA Nos.63-68/CTK/2019 details of fee received from patients against the medical services obtained by the patients. Therefore, it cannot be said that the assessee is not engaged in the medical profession. It is not necessary that the proprietor of the institution must have qualified degree. The predominant purpose of service needs to be tested for falling u/s.44AA of the Act, 1961 which is existing in the present case. The AO has calculated the income of the assessee in detailed manner after verifying from the seized record.
14. The contention of the assessee as taken in ground No.1 is not acceptable because the AO has not accepted the returned income of the assessee while calculating taxable income of the assessee. Therefore, no need to issue defect notice by the AO u/s.139(9)(f) of the Act before initiating penalty u/s.271A of the Act. With regard to ground No.2 the contention of the assessee is that as the turnover of the assessee during the year did not exceed the threshold limit, therefore, Section 44AD of the Act cannot be invoked. This contention of the assessee is also not acceptable because the assessee has different type of registers which were discovered during the course of search and seizure proceedings. According to the registers the assessee is giving services of medical treatment and charging fee for the services/treatment given to the patients. Therefore, it cannot be denied that the assessee was not engaged in the medical profession which covers u/s.44AA of the Act as 13 ITA Nos.63-68/CTK/2019 stated above. During the course of assessment proceedings, the assessee could not produce any accounts which were required to be maintained by the assessee for earning the impugned income from the operation of nursing home. Therefore, the AO was justified in imposing the penalty u/s.271A of the Act for non-maintenance of the books of accounts. Accordingly, we do not see any reason to interfere in the order of the CIT(A) in upholding the penalty levied by the AO u/s.271A of the Act and we confirm the same and dismiss the grounds of appeal of the assessee raised in all the appeals for the assessment years under consideration.
15. In the result, all appeals of the assessee are dismissed.
Order pronounced in the open court on 18/02/2020.
Sd/- Sd/-
(C.M.GARG) (L.P.SAHU)
न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER
कटक Cuttack; ददनांक Dated 18/02/2020
Prakash Kumar Mishra, Sr.P.S.
आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :
1. अऩीऱाथी / The Appellant-
Ranjita Jena, Talcher Town, Talcher, Dist: Angul
2. प्रत्यथी / The Respondent-
ACIT, Central Circle, Cuttack
3. आयकर आयुक्त(अऩीऱ) / The CIT(A),
4. आयकर आयुक्त / CIT
5. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack
6. गार्ग पाईऱ / Guard file.
सत्यावऩत प्रयत //True Copy// आदे शािुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack