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5.7 Shri Raghavendra Rao further submitted that under the Central Sales Tax, turnover means the aggregate of sale price received and receivable and that under the Income-tax Act, the term turnover is not defined and that applying the definition that has been given under the Sales Tax Act, chit collection do not come within the meaning of sales or turnover. He submits that gross receipts as referred to in Section 44AB are gross receipts of the assessee. He vehemently contended that in the case of a Chit fund Company the chit collections are not the receipts of the Company. He relied on the A.P. Chit Funds Act 1971 as well as the Guidance Note issued by the Institute of Chartered Accountants of India as well as the Circular of the CBDT No. 452 dated 17.3.1996 and submits that in the case of Chit Fund Company. the position is the same as that of a share broker as it has no control over the funds and its collections have to be deployed in the manner in which specified under the Chit Fund Act and that chit subscriptions cannot form part of the turnover. He placed reliance on the decision of the ITAT, Ahmedabad Bench in the case of Asst. Commissioner of Income-tax V. Hasmukh M. Shah (85 ITD 99) as well as the CBDT Circular No. 452. He further argued that the assessee had reasonable cause inasmuch as he had bona fide felt that there was no need for filing Tax Audit Report under Section 44AB since its commission from running Chit Fund as Foreman does not exceed Rs. 40 lakhs. He submitted that the assessee had reason to believe so since the Department had never required the assessee to furnish audit reports under Section 44AB nor had initiated proceedings for failure to file such audit report for earlier years though in those years the chit collection exceeded Rs. 40,00,000/-. He relied on the decisions of the Ahmedabad Bench 'B' of the Tribunal in the cases of R. Wadiwala & Co. v. ACIT (72 TTJ 34) and 72 TTJ 35 for the proposition that no penalty can be levied under Section 271B when the Revenue is consistently accepting the method of accounting of the assessee in the earlier years.

6.1 Shri V. Prabhakar, learned counsel for the assessees M/s. Neeladri Chit Fund Pvt. Ltd., M/s. Kalpatharuvu Chit Funds (P) Ltd. and M/s. Kathiani Chit and finance (P) Ltd., joining the issue submitted that the role of a Chit Fund Company is that of a trustee or custodian and to ensure proper appropriation of the Chit Fund subscription amounts and his acts are governed by the A.P. Chit Funds Act, 1971 and Chit Funds Act, 1982. He relied on Sections 20 & 23 of the Chit Funds Act, 1982 and Sections 12 & 16 of the AP Chit Funds Act. 1971 and submitted that these enactments prescribed the mode and manner of preparation of the Balance, Sheet which are found in the Schedule and in the form prescribed there under. He submitted copies of the extracts of the sections as well as formats of the Balance Sheet and Profit & Loss Account and argued that as per these Central and State enactments all the chit Fund Companies have to prepare their balance sheet and profit & loss account in accordance with the aforesaid provisions. As per these mandatory provisions, he argued, only commission can be taken into account as gross receipts or turnover of a chit fund company and that holding a contrary view is violation of the provisions of these Acts. As to the reason for not taking the total subscriptions as gross receipts, he submitted, was that the chit fund company had no control over such amounts as they belong to the prized subscribers and as such those subscription amounts are shown as current liability in the balance sheet. He filed extracts of Section 76 of the Chit Funds Act 1982 and Section 56 of the A.P. Chit Funds Act 1971 and submitted that violation of the these Acts invite penal provisions as well as prosecution. On the order of B-Bench of this Tribunal in the case of Sree Venkateswara Chits & Financiers in ITA No. 629/Hyd/94, he submitted that order, judicial notice was not taken of the statutory provisions of the A.P. Chit Funds Act 1971 and Chit Funds Act 1982 and argued that this decision was per incuriam. He relied on Section 57 of the Indian Evidence Act and submitted that the court shall take judicial notice of all laws in force in the territory of India. The reason for this, he argues, is that whenever an issue relating a chit Fund company is dealt with under the Income-tax Act, 1961, the law governing such chit fund company shall also be taken judicial notice of. He referred to this Bench's decision in the case of Shriram Chit Funds P. Ltd. reported in 83 ITD792 and submitted that judicial notice of the Chit Funds Act was taken by the Bench therein. Thus he argued that in the case of M/s. Sree Venkateswara Chits & Financiers (supra) B-Bench of this Tribunal had rendered the decision in ignorance or due to an inadvertent omission of the legislation of Chit Funds and in such event this decision is to be treated as 'per incuriam' and it loses its efficacy as a binding precedent. For the meaning of 'per incuriam' he relied on the judgments of the Apex Court in the case of Municipal Corporation of Delhi v. Gurnam Kaur (1989) 1 SCC 101, 110 SC and in State of U.P. V. Synthetics & Chemicals Ltd. (1991) 4 SCC 139 at page 163. He had fried written submissions from pages 1 to 5 to support his stand, that the decision of B-Bench of this Tribunal in Sree Venkateswara Chits & Financiers is to beheld as per incuriam and the decision of this Bench in Laxmi Maharaja Chit Funds Pvt. Ltd. (ITA No. 347/Hyd/200 - order dated 12,4.2004) should be followed. He strongly opposed the plea of the Department to refer the matter to a Special Bench under Section 255 of the Act on this count. Replying to the contentions of the Revenue that wherever chit commission is founding excess of Rs. 10,00.000/-, the same may be treated as professional receipt for the purpose of tax audit, he submitted that the Judgment of the Rajasthan High Court in the case of Abhay Kumar & Co. v. Union of India and Ors. (164 ITR 148) has no application nor relevant to the facts of the present case as their Lordships were deciding as to whether the provisions of Section 44AB are constitutionally valid or not. He vehemently contended that chit commission is business income and the same cannot be treated as professional receipts. He further submitted that chit commission cannot be equated with professional receipts and the yardstick of Rs. 10,00,000/- cannot be applied to this case as under Section 44AB professional receipts are relevant only to those professionals that are referred to in Section 44AB of the Act and not to others. Referring to the argument to the learned Departmental Representative on the applicability or maintainability of the appeal in view of the Board's Instruction No. 1979 at. 27.3.2000, he wondered why the Revenue has raised this plea much before the assessee could contend on the same. He concluded his submission by praying that in the case of Mangal Dayak Chit Fund, Neeladri Chit Fund, Kalpatharuvu Chit Fund and Katiyani Chits & Finance, the orders of the Commissioner (Appeals) have to be upheld and the appeals of the Revenue have to be dismissed.

9.11 Thus, a combined reading of the Board's circular No. 1175 dt. 16.5.78, Chit Funds Act, 1982, and A.P. Chit Funds Act, 1971, and Rules 1971 and Technical Guide on Accounting of Institute of Chartered Accountants of India, suggests that the opinion given in the form of Guidance Note by the Institute of Chartered Accountants of India is the correct position of law. The method of accounting is given in the Chit Funds Act and by following this method, chit subscriptions are not to be treated as income or turnover. Thus, we hold that the provisions of Section 44AB are not attracted in the case of the assessee as its total turnover from carrying on chit fund business in the form of commission earned from chits, interest receipts etc., does not exceed Rs. 40,00,000, as per its audited accounts. We also hold that the subscription amount collected by the foreman from the subscriber is on capital account and thus not part of turnover/gross receipts/sales for the purpose of Section 44AB of the Act. The terms "total sales", "turnover" and "gross receipts" referred to in this section, should be those, which have in them, income taxable or loss allowable under the Act. The main purpose of audit under Section 44AB is to ensure that the assessee does not claim deductions which are not allowable under the Act and that his taxable income is properly determined. The term "gross receipts" means those receipts which are normally assessable as business income.

9.15 The Special Bench of the Income-tax Appellate Tribunal, in the case of ACIT v. Gayatri Traders, 58 ITD 121 (Hyd) (SB), at pages 135 and 136, held in paragraph 25 as follows:-

"25. Levy of penalty under Section 271B is neither mandatory nor a must. The plain language of Section 271B provides that if any person fails to get his accounts audited or obtain a report as required under Section 44AB, "the Assessing Officer may direct that such person shall pay by way of penalty". The use of the words 'may direct' clearly indicates that the Assessing Officer is vested with the discretion either to impose or not to impose penalty depending upon the facts and circumstances of the case. No doubt, it is true, the said discretion should be exercised judicially and not either arbitrarily or capriciously. When there is a technical or minor breach of the law, the ends of justice require that the discretion should not be exercised in favour of punishing a venial default. Further, it is not as though the moment a default under Section 44AB is committed, the levy of penalty under Section 271B is automatic. The words 'without reasonable cause' that existed in Section 271B as applicable to the assessment years under consideration are important. If the assessee is able to show a reasonable cause for his failure to comply with the requirements of Section 44AB before the due date, no penalty is leviable under Section 271B. What is "a reasonable cause", in a given set of facts depends upon the peculiar facts of that case. A cause which a reasonable man accepts it as a reasonable one can be taken as a reasonable cause. The expression 'reasonable cause' requires to be interpreted liberally in a fair and reasonable manner so as to advance the cause of justice, since harsh legalistic approach should be mitigated by soft practical approach in applying penal provisions."