Sri.S.Jayaram, Trivandrum V. The ITO, Trivandrum

ITA 235/COCH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7647 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: R KRISHNAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO. 235/COCH/2015 ASSESSMENT YEAR : 2011-12 SHRI S.JAYARAM, JAYACHITRA, 3 RD PUNNEN STREET, TRIVANDRUM-695 101. [PAN:AEYPP 2045L] VS. THE INCOME TAX OFFICER, WARD-1(4), TRIVANDRUM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASS ASS ESSEE BY SHRI R.KRISHNAN, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 05/01/2016 DATE OF PRONOUNCEMENT 06/01/2016 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDER OF THE LD. CIT(A), KOWDIAR, TRIVANDRUM DATED 02-02-2015 FOR THE ASSESS MENT YEAR 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S. 271B OF THE INC OME TAX IN RESPECT OF A CASE WHERE BOOKS OF ACCOUNTS WERE NOT MAINTAINED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE UNDERSTOOD THAT LEVY OF PENALTY U/S. 271B IS SPECIF IC FOR FAILURE TO GET THE ACCOUNTS AUDITED. WHERE NO ACCOUNTS ARE MAINTAINED AT ALL BY THE ASSESSEE, THE QUESTION OF GETTING THE ACCOUNTS AUDI TED DOES NOT ARISE AT ALL. I.T.A. NO.235/COCH/2015 2 3. . THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUG HT TO HAVE APPRECIATED THAT SECTION 44A PRESCRIBES THE CONDITI ONS FOR MAINTENANCE OF BOOKS OF ACCOUNTS BY CERTAIN PERSONS CARRYING ON PROFESSION OR BUSINESS, WHEREAS SECTION 44AB SPEAKS OF GETTING TH E ACCOUNTS OF SUCH PREVIOUS YEAR AUDITED BY AN ACCOUNTANT THE LANGUAGE IN BOTH THE SECTIONS CLEARLY STATES THAT PENALTY FOR FAILURE TO MAINTAIN THE BOOKS OF ACCOUNTS WOULD NOT FALL WITHIN THE AMBIT OF SECTION 44AB, BUT ONLY WOULD FALL U/S. 44AA. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OVERLOOKED THE FACT THAT THE ACT DOES NOT CONTEMPLATE A SITUATION FOR LEVY OF PENALTY U/S. 271A AND U/S. 271B. THE AO HAVING LEVIED PENALTY U/ S. 271A, THERE WAS NO JURISDICTION FOR HIM TO LEVY PENALTY U/S. 271B O F THE INCOME TAX ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OU GHT TO HAVE APPRECIATED THAT COURTS HAVE CONSISTENTLY HELD THAT WHERE BOOKS OF ACCOUNTS ARE NOT MAINTAINED, THERE IS NO SCOPE FOR LEVY OF PENALTY U/S. 271B. FURTHER, THERE WAS ALSO NO SCOPE FOR LEVY OF BOTH PENALTIES, WHICH FACT HAS BEEN COMPLETELY OVERLOOKED BY THE COMMISSI ONER OF INCOME TAX(APPEALS). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A CONTRACTOR WHO HAS DECLARED TURNOVER OF RS.85,09,970/-. THE ASSESSING OFFICER OBSERVED THAT U/S. 44AB, EVERY PERSON HAVING RECEIPTS EXCEEDING RS.60 LAKHS IN THE PREVIOUS YEAR HAS TO GET HIS ACCOUNTS AUDITED BY AN ACCOUNTANT BE FORE THE SPECIFIED DATE IN THE PRESCRIBED FORM. THE ASSESSEE HAS NOT MAINTAINED AN Y BOOKS OF ACCOUNT NOR FILED THE AUDIT REPORT U/S. 44AB ALONG WITH THE RETURN OF INCOME. ACCORDINGLY, PENALTY NOTICE U/S. 271B WAS ISSUED TO THE ASSESSEE. THE A SSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE STATED THAT HE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT FOR THE IMPUGNED YEAR AND THEREFORE, HE COULD NOT COMPL Y WITH THE AUDIT REQUIREMENT. THE REPLY WAS NOT FOUND SATISFACTORY A ND ACCORDINGLY, THE ASSESSING OFFICER LEVIED A MINIMUM PENALTY OF RS.42,550/- U/S . 271B OF THE ACT. I.T.A. NO.235/COCH/2015 3 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSE T, ARGUED THAT THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT, THEREFORE, THERE IS NO QUESTION OF GETTING THE ACCOUNTS AUDITED. HE ALSO SUBMITTED THA T HIS CASE IS COVERED BY THE DECISION OF THE ITAT, COCHIN BENCH IN THE CASE OF K .V. RAMACHANDRAN VS. DCIT IN I.T.A. NO. 104/COCH/2013 DATED 26-07-2013 ON THE ID ENTICAL FACTS. HE FURTHER ARGUED THAT PENALTY U/S. 271A OF THE ACT HAS ALREAD Y BEEN LEVIED FOR NOT MAINTAINING THE BOOKS OF ACCOUNT AND THEREFORE, THE RE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS NOT MAINTAINING THE BOOKS OF A CCOUNT WHICH, IN FACT, IS ALSO A MATTER OF RECORD AND HAS CLEARLY BEEN MENTIONED BY THE ASSESSING OFFICER IN HIS ORDER AT PAGE 2. ACCORDINGLY, HE PRAYED TO CANCEL THE PENALTY CONFIRMED BY THE LD. CIT(A) . 6. THE LD. DR RELIED UPON THE ORDERS OF BOTH TH E AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE UNDISPUTED FACTS IN THE PRESENT CASE ARE THAT THE A SSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT AND THEREFORE, IF ANY PENALTY IS TO BE LEVIED, IT CAN BE LEVIED U/S. 271A OF THE ACT AND IN OUR VIEW, NO PENALTY U/ S. 271B OF THE ACT CAN BE LEVIED FOR NOT MAINTAINING THE BOOKS OF ACCOUNT. OU R VIEWS ARE COVERED BY THE DECISION OF THE ITAT, COCHIN BENCH IN THE CASE OF K .V. RAMACHANDRAN VS. DCIT I.T.A. NO.235/COCH/2015 4 (SUPRA) AND THE FACTS AND FINDINGS OF THE SAID CASE ARE REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: 2. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE ASSESSEE IS A CIVIL CONTRACTOR UNDERTAKING MAINLY GOVERNMENT CONT RACT WORKS. HOWEVER, HE DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS AND HENCE HE DID NOT FILE AUDIT REPORT AS PER THE PROVISIONS OF SEC.44AB OF THE ACT . THE LD. COUNSEL FURTHER SUBMITTED THAT THE CBDT HAS NOT PRESCRIBED ANY BOOKS OF ACCOUNTS IN RESPECT OF CIVIL CONTRACT BUSINESS AND HENCE, TH E ASSESSEE CANNOT BE BLAMED FOR NOT MAINTAINING BOOKS OF ACCOUNTS. HE FU RTHER SUBMITTED THAT THE ASSESSEE DID NOT GET THE AUDIT REPORT, SINCE HE DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE DID NOT GET AUDIT REPORT FOR IDENTICAL REASONS IN ASSESSMEN T YEAR 2008-09 AND HENCE THAT THE ASSESSING OFFICER LEVIED PENALTY U/S. 271B OF THE ACT FOR THAT YEAR ALSO. THE LD CIT(A) CONFIRMED THE PENALTY, BUT THE TRIBUNAL HAS DELETED THE SAME, VIDE ITS ORDER DATED 28-03-2013 IN I.T.A. NO. 208/COCH/2012. THE LD COUNSEL ALSO FILED A COPY OF THE ORDER PASSED BY THE TRIBUNAL, REFERRED SUPRA. 4. WE HAVE ALSO HEARD THE LD. DR, WHO STRONGLY SUPPORT ED THE ORDER PASSED BY THE LD. CIT(A). 5. WE NOTICE THAT THE ASSESSING OFFICE HAD LEVIED PENA LTY U/S 271B OF THE ACT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, VIZ., ASSESSMENT YEAR 2008-09 ON IDENTICAL CIRCUMSTANCES AND THE TRIBUNAL HAS DELETED THE SAME, VIDE ITS ORDER REFERRED SUPRA. FOR THE SAKE OF CON VENIENCE, WE EXTRACT THE OPERATIVE PORTION OF THE ORDER PASSED BY THIS TRIBU NAL IN ASSESSMENT YEAR 2008-09:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 44AA OF THE ACT. SUB CLAUSE (2) OF SECTION 44AA CLEARLY SAYS THAT EVERY CARRYING ON BU SINESS OR PROFESSION [NOT BEING THE PROFESSION REFERRED TO IN SUB CLAUSE (1)] SHALL KEEP AND MAINTAIN THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS A S MAY ENABLE THE ASSESSING OFFICER TO COMPUTE HIS TOTAL INCOME IN AC CORDANCE WITH THE PROVISIONS OF THIS ACT IN CASE THE INCOME FROM BUSI NESS OR PROFESSION EXCEEDS ONE LAKH TWENTY THOUSAND RUPEES OR HIS TOTA L SALES, TURNOVER OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS OR PROFESSION EXCEEDED OR EXCEEDS TEN LAKH RUPEES IN ANY ONE OF T HE THREE YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR. THEREFORE , IN OUR OPINION, THE LEGISLATURE EXPECTS EVEN A CIVIL CONTRACTOR TO MAINTAIN THE BOOKS OF ACCOUNT. I.T.A. NO.235/COCH/2015 5 5. IN EXERCISE OF THE EXECUTIVE POWERS AND WHILE FRAMING RULE 6F OF INCOME-TAX RULES, THE EXECUTIVE AUTHORITIES PRESCRI BED THE BOOKS OF ACCOUNT IN RESPECT OF PROFESSIONALS IN RULE 6F(1) O F THE ACT. WE FIND THAT THERE IS AN OBVIOUS OMISSION IN RESPECT OF CIV IL CONTRACTOR IN RULE 6F(1) OF THE I.T. RULES. THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT IT IS AN UNINTENDED OMISSION ON THE PART OF THE EXE CUTIVE AUTHORITIES IN NOT INCLUDING THE BUSINESS OF CIVIL CONTRACT AND OT HER BUSINESS IN RULE 6F(1). WHEN THE PARLIAMENT IN ITS WISDOM EXPECTS E VERY PERSON CARRYING ON BUSINESS INCLUDING CIVIL CONTRACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE EXECUTIVE AUTHORITIES ( CBDT) OUGHT TO HAVE PRESCRIBED MINIMUM REQUIRED BOOKS OF ACCOUNT. THE KARNATAKA HIGH COURT IN THE CASE OF BABU REDDY (SUPRA) AND THE CO- ORDINATE BENCHES OF THIS TRIBUNAL AT CHANDIGARH IN AGGARWAL CONSTRUC TION CO. (SUPRA) FOUND THAT ALTHOUGH BOOKS OF ACCOUNT HAD TO BE PRES CRIBED, SUCH BOOKS HAD NOT BEEN PRESCRIBED UNDER THE INCOME-TAX RULES IN RESPECT OF BUSINESS OF CIVIL CONTRACT. ACCORDINGLY, THE KA RNATAKA HIGH COURT IN THE CASE OF BABU REDDY (SUPRA) AND THE CHANDIGARH B ENCH OF THIS TRIBUNAL IN THE CASE OF AGGARWAL CONSTRUCTION CO. ( SUPRA) DELETED THE PENALTY LEVIED U/S. 271A OF THE ACT FOR NOT MAINTAI NING THE BOOKS OF ACCOUNT. 6. EVEN IN THE PRESENT CASE, THE VERY SAME CIT(A) DE LETED THE PENALTY U/S. 271A AFTER PLACING RELIANCE ON THE DECISION OF THE CHANDIGARH BENCH OF THIS TRIBUNAL IN THE CASE OF AGGARWAL CONS TRUCTION CO. (SUPRA). THEREFORE, ONCE THE PENALTY FOR NOT MAINT AINING THE BOOKS OF ACCOUNT WAS DELETED, IT IS NOT KNOWN HOW THE VERY S AME CIT(A) CONFIRMED THE PENALTY LEVIED U/S. 271B OF THE ACT F OR NOT GETTING THE BOOKS OF ACCOUNT AUDITED. 7. IN YET ANOTHER CASE OF SHRI RAMACHANDRA D KELUSK AR IN I.T.A. NO. 668/PN/10, THE PUNE BENCH OF THIS TRIBUNAL FOUND TH AT WHEN THERE ARE NO BOOKS OF ACCOUNT, THE QUESTION OF ITS AUDIT DOES NOT ARISE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THERE IS NO JUSTIFICATION FOR LEVYING PENALTY U/S. 271B OF THE ACT FOR NOT GETTING THE BOOKS OF ACCOUNT AUDITED. 8. AFTER ANALYSING THE PROVISIONS OF SECTION 44AA O F THE ACT AND RULE 6F OF I.T. RULES, THIS TRIBUNAL FIND THAT THE OMISS ION TO INCLUDE CIVIL CONTRACT AND OTHER BUSINESS IN RULE 6F IS ONLY AN U NINTENDED OMISSION. THEREFORE, IT IS OPEN TO THE DEPARTMENT TO BRING IT TO THE NOTICE OF THE CONCERNED EXECUTIVE AUTHORITY (CBDT) ABOUT THE LACU NAE/OMISSION IN RULE 6F IF THE DEPARTMENT IS SO ADVISED. I.T.A. NO.235/COCH/2015 6 9. WITH THE ABOVE OBSERVATIONS, THE ORDERS OF LOWER AUTHORITIES ARE SET ASIDE AND THE PENALTY U/S. 271B IS DELETED. 6. IN THE INSTANT YEAR ALSO, THE ASSESSEE DID NOT MAIN TAIN BOOKS OF ACCOUNTS. THERE IS ALSO NO DISPUTE THAT THE CBDT D ID NOT PRESCRIBE THE LIST OF BOOKS OF ACCOUNTS TO BE MAINTAINED BY A CIVIL CO NTRACTOR. THUS, THE FACTS PREVAILING IN THIS YEAR IS IDENTICAL WITH THE FACTS OF THE IMMEDIATELY PRECEDING YEAR. ACCORDINGLY, CONSISTENT WITH TH E VIEW TAKEN BY THE TRIBUNAL IN ASSESSMENT YEAR 2008-09 IN THE HANDS OF THE ASSESSEE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AS SESSING OFFICER TO DELETE THE PENALTY LEVIED U/S. 271B OF THE ACT FOR THIS YE AR ALSO. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8. IN THE CIRCUMSTANCES AND FACTS OF THE CASE A ND IN VIEW OF THE DECISION OF THE ITAT, COCHIN BENCH IN THE CASE OF K.V. RAMACHAN DRAN VS. DCIT (SUPRA), THE ASSESSING OFFICER IS NOT JUSTIFIED IN LEVYING THE P ENALTY U/S. 271B OF THE ACT AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSE D. THUS ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 235/COCH/2015 IS ALLOWED. PRONOUNCED IN THE OPE N COURT ON 06-01-2016. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 06TH JANUARY, 2016 GJ COPY TO: 1. SHRI S.JAYARAM, JAYACHITRA, 3 RD PUNNEN STREET, TRIVANDRUM-695 101. 2. THE INCOME TAX OFFICER, WARD-1(4), TRIVANDRUM. I.T.A. NO.235/COCH/2015 7 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVAND RUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGI STRAR) ITAT, COCHIN