Ajay Kumar Singh, Bhubaneswar V. ACIT, Circle-1(2), Bhubaneswar

ITA 204/CTK/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5331 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 20-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Keywords: Capital asset converted into stock in trade; Search and seizure
• Section: 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ITA NO. 203 TO 206 / CTK /20 16 ( / ASSESSMENT YEAR S : 20 09 - 2010 TO 201 2 - 201 3 ) SRI AJAY KUMAR SINGH, AT:PLOT NO.6/380, IRC VILLAGE, NAYAPALLI, BHUBANESWAR VS. ACIT, CIRCLE - 1(2), BHUBANESWAR ./ ./ PAN/GIR NO. : BCBPS 1813 F ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : NONE /REVENUE BY : SHRI D.K.PRADHAN , DR / DATE OF HEARING : 22 / 11 /201 7 / DATE OF PRONOUNCEMENT 23 / 11 /201 7 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : TH E SE ARE THE APPEALS FILED BY THE ASSESSEE AGAIN ST THE DIFFERENT ORDER S OF CIT(A) - 2 , BHUBANESWAR, PASSED U/S. 271A OF THE I.T. ACT . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE MATTER WAS CALLED FOR HEARING. HOWEVER, AN ADJOURNMENT APPLICATION WAS PLACED ON RECORD BY THE ASSESSEE SEEKING FOR ADJOUR NMENT OF HEARING ON THE GROUND THAT THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE IS SUFFERING FROM COLD, WHICH IN OUR CONSIDERED, IS NOT A PLAUSIBLE ONE AND, THUS, WE REJECT THE APPLICATION AND PROCEED TO DISPOSE OFF THE APPEAL ON THE BASIS OF WRITTEN SUB MISSION FILED BY THE ASSESSEE AND MATERIAL AVAILABLE ON RECORD AND THE SUBMISSIONS OF LD. DR. 3. AS PER THE OFFICE NOTE, THERE IS A DELAY OF 27 DAYS IN FILING THE ABOVESAID APPEALS. THE ASSESSEE HAS FILED AN APPLICATION DATED 20.05.2016 FOR CONDONATION OF DELAYING ALONG WITH AN AFFIDAVIT EXPLAINING THE REASONS FOR DELAY. CONSIDERING THE APPLICATION OF ASSESSEE AND ITA NO S . 203 - 206 CTK/201 6 2 LOOKING TO THE FACT S AND CIRCUMSTANCES OF THE CASE AND THERE IS NO OBJECTION OF LD. DR, WE ALLOW THE APPLICATION AND CONDONE THE DELAY OF 27 DAY S IN FILING ALL THE APPEAL AND THE APPEALS ARE HEARD ON MERITS AFTER CONSIDERING THE SUBMISSIONS OF LD. DR AND THE MATERIAL FACTS AVAILABLE ON RECORD. 4. SINCE THE ISSUE INVOLVED IN ALL THE APPEALS ARE CONNECTED AND COMMON, HENCE, THE APPEALS ARE HEARD AL TOGETHER AND DISPOSED OFF BY THIS CONSOLIDATED ORDER. WE SHALL TAKE UP APPEAL I.E. ITA NO. 203 /CTK/201 6 (AY : 20 09 - 201 0 ) AND THE FACTS NARRATED THEREIN . 5 . THE SOLE SUBSTANTIVE GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE LEVY O F PENALTY U/S.271A FOR NON - MAINTENANCE OF BOOKS OF ACCOUNT WHICH IS BAD IN LAW. 6 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE CONSULTANCY SERVICE AND LOOKING AFTER THE VARIOUS LIASIONING WORKS OF EMARS MINING & CONSTRUCTION (P) LTD., KOLKATA AND RECEIVING CONSULTANCY CHARGES AND FILED THE RETURN OF INCOME ON 23.07.2009 FOR THE ASSESSMENT YEAR 2009 - 2010 WITH TOTAL INCOME OF RS.1,68,300/ - AND THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT. THERE WAS A SEARCH AND SEIZURE OPERAT ION S U/S.132 OF THE ACT CONDUCTED IN THE CASE OF M/S EMAR MINING CONSTRUCTION (P) LIMITED AND GROUP OF CASES AS WELL AS THE ASSESSEE ON 17.11.2011 AND SOME INCRIMINATING DOCUMENTS OF THE ASSESSEE WERE SEIZED DURING THE COURSE OF SEARCH. T HE AO ISSUED NOTIC E U/S.153A OF THE ACT AND ASSESSEE FILED RETURN OF INCOME ON 11.11.2013 DISCLOSING TOTAL INCOME OF RS.1,48,386/ - . SUBSEQUENTLY, THE AO ISSUED ITA NO S . 203 - 206 CTK/201 6 3 NOTICE U/S.143(2) OF THE ACT AND THE ASSESSEE SUBMITTED THE INFORMATION AND OTHER DETAILS AS CALLED FOR WHEREAS T HE AO ON PERUSAL OF THE FINANCIAL STATEMENTS AND DOCUMENTS FOUND THAT THERE ARE SOME DISCREPANCIES AND THE ASSESSEE COULD NOT SUPPORT THE CLAIMS AND THE AO MADE ADDITION S AND ASSESSED THE TOTAL INCOME AT RS. 15,68,220/ - AND PASSED THE ORDER U/S.153A/143(3) OF THE ACT DATED 30.03.2014 . 7. SUBSEQUENTLY, THE AO INITIATED PENALTY PROCEEDINGS FOR NON - MAINTENANCE OF BOOKS OF ACCOUNTS U/S.44AA (2) OF THE ACT AS THE ASSESSEE WAS RECEIVING CONSULTANCY CHARGES FROM M/S EMAR MINING CONSTRUCTION (P) LIMITED AND THE A SSESSEE S RECEIPTS FOR THE SAID ASSESSMENT YEAR INCLUDING MOBILISATION ADVANCES HAS EXCEED ED THE LIMIT AND REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS, THEREFORE, PENALTY PROCEEDINGS WERE INITIATED. IN COMPLIANCE THE LD.AR SUBMITTED THAT THE ASSESSEE HAS FILED APPEAL AGAINST THE ORDER U/S.153A/143(3) OF THE ACT AND REQUESTED NOT TO TAKE ANY COERCIVE ACTION TILL DISPOSAL OF THE APPEAL. THE ASSESSEE SUBMITTED THE EXPLANATIONS ON 23.09.2014 AT PARA 3 OF THE ORDER AND THE AO WAS NOT SATISFIED WITH THE REPLY AND EXP LANATIONS OF ASSESSEE AND LEVIED THE PENALTY U/S.271A OF THE ACT OF RS.25,000/ - AND PASSED ORDER ON 29.9.2014. 8 . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 9 . AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 10 . L D. DR RELIED ON THE ORDER S OF AUTHORITIES BELOW. ITA NO S . 203 - 206 CTK/201 6 4 11 . WE HEARD THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL ON RECORD. LD. D R SUBMITTED THAT THE ASSESSEE IS ENGAGED IN CONSULTANCY SERVICE S AND FAILED TO MAINTAIN BOOKS OF ACCOUNTS. WE FOUND THE AO HAS OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNTS AS REQUIRED U/S.44AA THOUGH HIS GROSS RECEIPT S ARE MORE THAN RS.10 LAKHS, AND LEVIED THE PENALTY U/S.271A OF TH E ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. WE FIND I N THE INSTANT CASE, THE AO DID NOT ISSUE NOTICE U/S.139(9) OF THE ACT WHERE BOOKS OF ACCOUNTS ARE NOT MAINTAINED AND DIRECTING THE ASSESSEE TO REMOVE THE DEFECT OF NOT ENCLOSING THE FINANCIAL STATEMENTS I..E GROSS RECEIPTS, EXPENSES AND NET PROFIT ETC. AND ACCEPTED THE STATEMENT OF TOTAL INCOME AND COMPLETED THE ASSESSMENT. FOR THE SAKE OF CONVENIENCE WE WOULD LIKE TO REPRODUCE THE PROVISIONS OF SECTION 139(9)(F) AS UNDER : - SECTION 139(9) : WHE RE THE 85[ASSESSING] OFFICER CONSIDERS THAT THE RETURN OF INCOME FURNISHED BY THE ASSESSEE IS DEFECTIVE, HE MAY INTIMATE THE DEFECT TO THE ASSESSEE AND GIVE HIM AN OPPORTUNITY TO RECTIFY THE DEFECT WITHIN A PERIOD OF FIFTEEN DAYS FROM THE DATE OF SUCH INTI MATION OR WITHIN SUCH FURTHER PERIOD WHICH, ON AN APPLICATION MADE IN THIS BEHALF, THE 88[ASSESSING] OFFICER MAY, IN HIS DISCRETION, ALLOW; AND IF THE DEFECT IS NOT RECTIFIED WITHIN THE SAID PERIOD OF FIFTEEN DAYS OR, AS THE CASE MAY BE, THE FURTHER PERIOD SO ALLOWED, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE RETURN SHALL BE TREATED AS AN INVALID RETURN AND THE PROVISIONS OF THIS ACT SHALL APPLY AS IF THE ASSESSEE HAD FAILED TO FURNISH THE RETURN : PROVIDED THAT WHER E THE ASSESSEE RECTIFIES THE DEFECT AFTER THE EXPIRY OF THE SAID PERIOD OF FIFTEEN DAYS OR THE FURTHER PERIOD ALLOWED, BUT BEFORE THE ASSESSMENT IS MADE, THE 88[ASSESSING] OFFICER MAY CONDONE THE DELAY AND TREAT THE RETURN AS A VALID RETURN. EXPLANATION. FOR THE PURPOSES OF THIS SUB - SECTION, A RETURN OF INCOME SHALL BE REGARDED AS DEFECTIVE UNLESS ALL THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY : (A)XXXXXXX (AA)XXXXXX (B)XXXXXXX ITA NO S . 203 - 206 CTK/201 6 5 (C)XXXXXXXX (D)XXXXXXXX (E)XXXXXXXXX (F) WHERE REGULAR BOOKS OF ACCOUNT ARE NOT MAINTAINED BY THE ASSESSEE, THE RETURN IS ACCOMPANIED BY A STATEMENT INDICATING THE AMOUNTS OF TURNOVER OR, AS THE CASE MAY BE, GROSS RECEIPTS, GROSS PROFIT, EXPENSES AND NET PROFIT OF THE BUSINESS OR PROFESSION AND THE BASIS ON WHICH SUCH AMOUNTS HAVE BEEN COMPUTED, AND ALSO DISCLOSING THE AMOUNTS OF TOTAL SUNDRY DEBTORS, SUNDRY CREDITORS, STOCK - IN - TRADE AND CASH BALANCE AS AT THE END OF THE PREVIOUS YEAR.] AND RELY ON THE DECISION I N CASE OF PYARELAL GAUR, [1993] 47 ITD 33 , THE NAGPUR BENCH OF T HE TRIBUNAL HAS HELD AS UNDER : - HELD IT IS NOT CORRECT TO SAY THAT THE PENALTY WILL BE IMPOSABLE UNDER SECTION 271A IN ALL THE CASES WHERE RECOURSE IS TAKEN TO SECTION 145(1) AND SECTION 145(2)FOR COMPUTING THE INCOME OF THE ASSESSEE. WHAT IS A RELEVANT BOOK OF ACCOUNT WILL VARY FROM CASE TO CASE. IN THE INSTANT CASE, THE PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 271 A FOR NON - MAINTENANCE OF BANK ACCOUNT. IF A PENALTY UNDER SECTION 271A COULD BE IMPOSED FOR NON - MAINTENANCE OF BANK ACCOUNT, THEN ALL THE ASSESSEES WHO DID NOT MAINTAIN ANY BANK ACCOUNT BUT WROTE THEIR BOOKS OF ACCOUNT REGULARLY AND MAINTAINED CASH BOOK AND LEDGERS WOULD BE LIABLE FOR PENALTY. THIS WOULD LEAD TO AN ABSURD SITUATION. THEREFORE, IF AN ASSESSEE MAINTAINED SUCH DOCUMENT WHI CH ENABLED AN ACCOUNTANT, AND NOT NECESSARILY A CHARTERED ACCOUNTANT, TO PREPARE AN INCOME OR EXPENDITURE ACCOUNT, THEN SUCH DOCUMENT SHOULD BE CONSIDERED AS A BOOK OF ACCOUNT WHICH MAY ENABLE THE ASSESSING OFFICER TO COMPUTE THE INCOME OF A GIVEN ASSESSEE UNDER THE PROVISIONS OF THE 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 ASSESSEES INCOME UNDER THE PROVISIONS OF THE ACT. IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT ISSUE ANY NOTICE UNDER SECTION 139(9) DIRECTING THE ASSESSEE TO REMOVE THE DEFECT OF NOT HAVING ENCLOSED WHAT HE CON SIDERED AS PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAD ENCLOSED THE STATEMENTS OF INCOME WHERE GROSS RECEIPTS WERE 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 ) SHOWED 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 ASSESSEE. THEREFORE, THE DY. COMMISSIONER (APPEALS)S ORDERS CANCELLING THE PENALTIES WERE UPH ELD. ITA NO S . 203 - 206 CTK/201 6 6 12. WE ALSO PLACE R ELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF BABU REDDY, (2010) 38 DTR 0147, WHEREIN THE HONBLE HIGH COURT HELD AS UNDER : - HELD : A READING OF S. 44AA MAKES IT CLEAR THAT A 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 HAS TO MAINTAIN BOOKS OF ACCOUNTS AND OTHER DOCU MENTS, IN ORDER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT. NOWHERE IN THE SAID SECTION IS IT STATED THAT THE BOOKS OF ACCOUNTS HAVE TO BE MAINTAINED AS PER THE PRESCRIBED FORMAT. THIS IS NOT A CASE WHERE NO BOOKS OF ACCOUNTS WERE MAINTAINED AT ALL. ALTHOUGH BOOKS OF ACCOUNTS HAD TO BE PRESCRIBED SUCH BOOKS HAD NOT BEEN PRESCRIBED UNDER THE RULES FOR THE BUSINESS OF CIVIL CONTRACTS, IN WHICH THE ASSESSEE IS ENGAGED. IN THE ABSENCE OF THERE BEING ANY PRESCRIBED FORMAT FOR THE V ARIOUS PROFESSIONS AS STATED IN THE SAID SECTION ASSESSEES ARE ENTITLED TO MAINTAIN BOOKS OF ACCOUNTS IN TERMS OF THE NATURE OF THE BUSINESS OR PROFESSION CARRIED ON BY THE VARIOUS CATEGORIES MENTIONED THEREIN. IN THE INSTANT CASE, SINCE ON THE BASIS OF TH E BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE, THE AO HAS PROCESSED THE ASSESSMENT AND HAS ACCEPTED THE SAID RETURN, THE SUBSEQUENT ISSUANCE OF NOTICE AND PROCEEDINGS INITIATED FOR IMPOSITION OF PENALTY ON THE GROUND THAT THE BOOKS OF ACCOUNTS WERE NOT MAIN TAINED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, IS NOT JUST AND PROPER, WHEN THERE IS NO INFRACTION OF S. 44AA. ACCORDINGLY, THE PENALTY PROCEEDINGS HAVE TO BE DROPPED. (PARAS 4 & 5) CONCLUSION : NO BOOKS HAVE BEEN PRESCRIBED UNDER THE RU LES IN TERMS OF S. 44AA FOR THE BUSINESS OF CIVIL CONTRACTS AND, THEREFORE, PENALTY UNDER S. 271A IS NOT LEVIABLE ON THE ASSESSEE, A CIVIL CONTRACTOR, ON THE GROUND THAT BOOKS OF ACCOUNT WERE NOT MAINTAINED BY HIM IN ACCORDANCE WITH THE PROVISIONS OF THE A CT WHEN THE AO HAS ACCEPTED THE RETURN FILED BY THE ASSESSEE AND PROCESSED THE ASSESSMENT ON THE BASIS OF BOOKS OF ACCOUNT PRODUCED BY HIM. WE SUPPORT OUR VIEW S RELYING ON THE RATIO OF THE ABOVE DECISIONS AND ARE OF THE OPINION THAT IF AN ASSESSEE MAINTAIN S SUCH DOCUMENT S WHICH ENABLES TO PREPARE AN INCOME OR EXPENDITURE ACCOUNT /PROFIT AND LOSS ACCOUNT , THEN SUCH DOCUMENT SHALL COMPLY THE REQUISITE PROVISIONS U/S.44AA OF THE ACT, WHICH ENABLE S THE ASSESSING OFFICER TO COMPUTE THE ITA NO S . 203 - 206 CTK/201 6 7 INCOME OF THE ASSESSEE U NDER THE PROVISIONS OF THE INCOME - TAX ACT AND SHOULD BE TREATED AS SUFFICIENT COMPLIANCE FOR COMPLETION OF ASSESSMENT . IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT ISSUE NOTICE UNDER SECTION 139(9) OF THE ACT DIRECTING THE ASSESSEE TO REMOVE THE DEFECT OF NOT HAVING ENCLOSED PROFIT AND LOSS ACCOUNT. THE ASSE SSEE HAD ENCLOSED THE STATEMENT OF INCOME WHERE GROSS RECEIPTS , EXPENSES ARE DISCLOSED AND PROFIT WAS COMPUTED . THE VERY FACT THAT THE ASSESSING OFFICER DID NOT ISSUE ANY NOTICE OF DEFECT UNDE R SECTION 139(9) SHOWS THAT THE ASSESSING OFFICER WAS SATISFIED WITH DOCUMENTS ACCOMPANIED WITH THE RETURN OF INCOME AND ARE SUFFICIENT TO ENABLE HIM TO COM PUTE THE INCOME OF THE ASSESSEE . ACCORDINGLY, WE ARE OF THE SUBSTANTIVE VIEW THAT THE PENALTY IMPOSED BY THE AO CANNOT BE SUSTAINED AND WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE PENALTY LEVIED U/S.271A OF THE ACT AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 13 . THE ISSUE RAISED IN OTHER APPEALS I.E. ITA NOS.20 4 TO 206/CTK/2016 FOR THE ASSESSMENT YEARS 2010 - 11 TO 2012 - 2013 ARE SIMILAR TO THE APPEAL FOR THE ASSESSMENT YEAR 2009 - 2010 (ITA NO.203/CTK/2016), WHEREIN WE HAVE DELETED THE PENALTY IMPOSED U/S.271A OF THE ACT, AND ACCORDINGLY, THE PENALTY IMPOSED IN THE ABOVE SAID APPEALS ARE ALSO DELETED . 14 . IN THE RESULT, APPEALS OF THE ASSESSEE IN ITA NOS.20 3 TO 206/CTK/2016 ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 / 11 / 201 7 . SD/ - ( N. S. SAINI ) SD/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 23 / 11 /201 7 . . / PKM , SENIOR PRIVATE SECRETARY ITA NO S . 203 - 206 CTK/201 6 8 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. APPELLANT - 2. / THE RESPONDENT - 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//