Shri Ch.Venkateswara Rao, Palakol V. THE DCIT., CENTRAL CIRCLE, Rajam

ITA 332/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0157 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 18-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Search and seizure
• Section: 143(3)

Judgement Text

ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.332/VIZAG/2012 ( / ASSESSMENT YEAR : 2007-08 ) CH. VENKATESWARA RAO PALAKOL VS. DCIT CENTRAL CIRCLE RAJAHMUNDRY [ PAN: ACMPC 0598F ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) ./ I.T.A.NO.345/VIZAG/2012 ( / ASSESSMENT YEAR : 2007-08 ) A. KASIVISWESWARA RAO PALAKOL VS. DCIT CENTRAL CIRCLE RAJAHMUNDRY [ PAN: AARPR 5891B ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI G.V.N. HARI, AR '(& ) / RESPONDENT BY : SMT. D. KOMALI KRISHNA, DR ) - / DATE OF HEARING : 0 8 .12.2015 ) - / DATE OF PRONOUNCEMENT : 11.12.2015 ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE APPEALS FILED BY THE TWO DIFFERENT ASSESSEES FOR THE ASSESSMENT YEAR 2007-08 IS DIRECTED AGAINST THE ORD ER OF CIT(A) VISAKHAPATNAM DATED 29.6.2012. SINCE THE ISSUE INV OLVED IN THESE APPEALS IS COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. ITA 332/VIZAG/2012 : 2. THE FACTS ARE IN BRIEF THAT THE ASSESSEE IS A CI VIL CONTRACTOR HAD FILED A RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS.30,02,510/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE AC T). THEREAFTER, BY FOLLOWING THE DUE PROCESS ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. THE A.O. HAS ASSESSED THE INCOME OF THE ASSES SEE FROM CIVIL CONTRACT WORKS ESTIMATED AT 6% ON GROSS RECEIPTS IN THE ABSENCE OF BOOKS OF ACCOUNTS. THEREAFTER PENALTY PROCEEDINGS INITIATED U/S 271B OF THE ACT. IN THE PENALTY ORDER, ASSESSING OFFICER H AS OBSERVED THAT EVEN THOUGH TURNOVER OF THE ASSESSEE IS RS.3,98,50,851/- . DURING THE ASSESSMENT YEAR 2007-08, THE ASSESSEE HAS NOT MAINT AINED ANY BOOKS OF ACCOUNTS SUCH AS CASH BOOK, JOURNAL, LEDGER OR A NY BILLS OR VOUCHERS. ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 3 THE ASSESSEE ADMITTED THE INCOME ON ESTIMATED BASIS AT 5% ON THE NET RECEIPTS. IT IS ALSO ADMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE A.R. OF THE ASSESSEE THAT NO REG ULAR BOOKS WERE MAINTAINED. IN RESPONSE TO THE NOTICE ISSUED BY TH E A.O. U/S 274 R.W.S. 271B OF THE ACT, IT WAS EXPLAINED THAT SINCE THE AS SESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNTS, IT COULD NOT GET THE TAX AUDIT REPORT. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANA TIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAVING TURNOVER OF CRORE S AND THAT TOO FOR THE LAST SEVERAL YEARS, HE IS SUPPOSED TO GET ACCOU NTS AUDITED WHICH IS MANDATORY AS PER THE PROVISION OF THE FISCAL LAW. NON-MAINTENANCE OF BOOKS OF ACCOUNTS AND NON-AUDITING OF BOOKS OF ACCO UNTS ARE TWO SEPARATE VIOLATIONS OF THE ACT AND HENCE PENALTY CA N BE IMPOSED UNDER BOTH THE PROVISIONS. HE FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 44AB OF TH E ACT AND THEREFORE SECTION 271B OF THE ACT IS CLEARLY APPLICABLE AND A CCORDINGLY PENALTY WAS IMPOSED U/S 271B OF THE ACT. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HAS OBSERVED THAT ADMITTEDLY THE FACTS O F THE PRESENT CASE ARE SAME AS IN CASE BEFORE THE HONBLE ITAT. THE H ONBLE ITAT IN THE CASE OF ASSESSEE FOR EARLIER YEARS HELD IF AO IS AB LE TO COMPUTE THE TOTAL ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 4 INCOME FROM THE RECORDS MAINTAINED BY THE ASSESSEES IT CANNOT BE SAID THAT THERE IS VIOLATION OF SECTION 44AA OF THE ACT. AS ALREADY DISCUSSED THE FACTS OF THE CASE IN THE PRESENT ASSESSMENT YEA RS ARE SIMILAR TO THAT OF THE EARLIER YEARS AND HENCE THE FINDINGS OF THE FACT BY HIGHEST FACT FINDING AUTHORITY I.E. HONBLE ITAT HOLDS GOOD IN T HE PRESENT CASE ALSO. IN SHORT, IT IS HELD THAT THE ASSESSEE BEING A CONT RACTOR IS NOT REQUIRED TO MAINTAIN ANY PRESCRIBED BOOKS AS PER PROVISIONS OF SECTION 44AA OF THE ACT. ONCE A.O. IS ABLE TO COMPUTE INCOME BASED ON RECORDS/BOOKS AS MAINTAINED BY THE ASSESSEE, THERE IS NO VIOLATION O F SECTION 44AA OF THE ACT. THE LD. CIT(A) FURTHER OBSERVED THAT ONCE IT IS HELD THAT THE ASSESSEE HAS MAINTAINED THE BOOKS/RECORDS WHICH ENA BLE THE A.O. TO COMPUTE THE TOTAL INCOME, THE ASSESSEE IS DUTY BOUN D TO GET THE SAME AUDITED AS PER THE PROVISIONS OF SECTION 44AB OF TH E ACT. ASSESSEE MAY NOT HAVE MAINTAINED THE REGULAR BOOKS OF ACCOUNTS A ND/OR THE VOUCHERS REQUIRED, HOWEVER ASSESSEES TOTAL RECEIPTS AND BAN K BOOKS IN THE FORM OF BANK STATEMENTS ARE AVAILABLE AND ARE NOT DISPUT ED BY THE ASSESSING AUTHORITIES. IN SUCH CIRCUMSTANCES, ASSESSEE IS DU TY BOUND TO PRODUCE THE SAME BEFORE THE AUDITOR AND GET THEM AUDITED AS PER SECTION 44AB OF THE ACT. HENCE, THE ASSESSEE HAD COMMITTED A DE FAULT U/S 44AB OF THE ACT, DELETED THE PENALTY LEVIED U/S 271A OF THE ACT AND CONFIRMED ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 5 THE PENALTY LEVIED U/S 271B OF THE ACT. ON BEING A GGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TR IBUNAL. 4. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT IN THE VERY SAME ASSESSEES CASE FOR THE ASSESSMENT YEARS 2001- 02 TO 2005-06 PENALTY WAS LEVIED U/S 271A & B OF THE ACT. ON APP EAL, THE LD. CIT(A) BY ORDER DATED 14.12.2010 DELETED THE ADDITION IN R ESPECT OF PENALTY LEVIED U/S 271B OF THE ACT. WHEN ASSESSEE CARRIED THE MATTER IN APPEAL IN RESPECT OF PENALTY LEVIED U/S 271A OF THE ACT CO NFIRMED BY LD. CIT(A), THE HONBLE ITAT DELETED ADDITION IN RESPECT OF PEN ALTY LEVIED U/S 271A OF THE ACT ALSO AND HELD THAT NO PENALTY CAN BE LEV IED. HE ALSO SUBMITTED THAT THE ORDER PASSED BY THE LD. COMMISSI ONER FOR THE ASSESSMENT YEARS 2001-02 TO 2006-07 BY ORDER DATED 14.12.2010 BECAME FINAL. 5. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED TH AT PENALTY HAS TO BE CONFIRMED EITHER U/S 271A OR 271B OF THE ACT. T HEREFORE, SUBMITTED THAT THE LD. CIT(A) BY FOLLOWING THE DECISION OF TH E ITAT IN THE ASSESSEES OWN CASE RIGHTLY DELETED PENALTY LEVIED U/S 271B OF THE ACT AND CONFIRMED PENALTY LEVIED U/S 271A OF THE ACT. HE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 6 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A SSESSEE IS A CIVIL CONTRACTOR AND FOR THE ASSESSMENT YEARS 2000-01 TO 2006-07, FOR NON- MAINTENANCE OF BOOKS OF ACCOUNTS PENALTY U/S 271A & B OF THE ACT WAS LEVIED. ON APPEAL, THE LD. CIT(A) DELETED THE ADDI TION LEVIED U/S 271A OF THE ACT AND CONFIRMED THE PENALTY LEVIED U/S 271 B OF THE ACT. WHEN THE ASSESSEE CARRIED THE MATTER BEFORE THE ITAT, TH E HONBLE ITAT HAS DELETED THE PENALTY LEVIED U/S 271A OF THE ACT BY O BSERVING AS UNDER: 5. IN THE INSTANT CASES, THOUGH THE ASSESSEES HAVE OBTAINED CONTRACT WORKS IN THEIR NAMES, BUT THEY HAVE EXECUTED THE SAID CONTRACT WORKS THROUGH VARIOUS PARTNERSHIP FIRMS TH AT WERE FLOATED BY THEM. THERE IS NO DISPUTE WITH REGARD TO THE FACT T HAT THE SAID PARTNERSHIP FIRMS HAVE MAINTAINED THE BOOKS OF ACCO UNT AND THEY ALSO FILED THEIR RESPECTIVE RETURNS OF INCOME. DURING TH E COURSE OF SEARCH AND SEIZURE OPERATIONS ONLY, THE ABOVE SYSTEM OF EXECUT ING THE CONTRACT WORKS THROUGH PARTNERSHIP FIRMS WAS FOUND FAULT WITH AS T HE ASSESSEE COULD NOT EXPLAIN THE DETAILS CONCERNING THE PARTNERSHIP FIRM S. HENCE, THESE ASSESSEES HAVE DECLARED THE INCOME DERIVED FROM ALL THE CONTR ACT RECEIPTS IN THEIR RESPECTIVE HANDS, EVEN THOUGH THEY HAVE OFFERED THE INCOME IN THE HANDS OF VARIOUS PARTNERSHIP FIRMS. IN THIS PROCESS THE P ARTNERSHIP FIRMS WERE DISREGARDED. 6. NOW THE QUESTION THAT WOULD ARISE IS WHETHER THE SE ASSESSEES CAN BE PENALIZED FOR NON-MAINTENANCE OF BOOKS. IT IS N OT A CASE THAT THE ASSESSEES HAVE FAILED TO MAINTAIN THE BOOKS OF ACCO UNT FOR THE IMPUGNED BUSINESS ACTIVITIES. SINCE THEY HAD PLANNED EARLIE R TO EXECUTE THE WORKS THROUGH THE PARTNERSHIP FORMS, THE BOOKS OF ACCOUNT WERE MAINTAINED BY THE RESPECTIVE PARTNERSHIP FIRM. AT THAT TIME, THESE ASSESSEES COULD NOT HAVE VISUALIZED THE SEARCH AND ALSO CONSEQUENT ADMI SSION OF ALL INCOME BY DISREGARDING THE PARTNERSHIP FIRMS. AS STATED EARLI ER, ONLY DURING THE COURSE OF SEARCH, THESE ASSESSEES CAME FORWARD TO OFFER ENTIR E INCOME IN THEIR RESPECTIVE HANDS BY DISREGARDING THE PARTNERSHIP FIRMS. THUS E FFECTIVELY THE ASSESSMENT OF INCOME DERIVED FROM CONTRACT WORKS HA S BEEN SHIFTED FROM THE HANDS OF PARTNERSHIP FIRMS TO THE HANDS OF ASSE SSEES HEREIN. THE SAID PARTNERSHIP FIRMS HAVE MAINTAINED THE BOOKS OF ACCO UNT. ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 7 7. SEC. 44AA OF THE ACT ALSO STATES THAT THE ASSESSEES SHOULD KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE THE ASSESSING OFFICER TO COMPUTE THE TOTAL INCOME IN AC CORDANCE WITH THE PROVISIONS OF THE ACT. CAS ALREADY STATED, THERE IS NO FINDING FROM THE ASSESSING OFFICER THAT HE WAS UNABLE TO COMPUTE THE TOTAL INCOME IN THE HANDS OF THE ASSESSEES. IN THE CASE LAW RELIED UPON BY THE ASSESSEE, IT HAS BEEN HELD THAT THE PENALTY UNDER SECTION 27IA IS NO T LEVIABLE IF THE ASSESSING OFFICER IS ABLE TO COMPUTE THE TOTAL INCO ME FROM THE RECORD MAINTAINED BY THE ASSESSEE. ACCORDINGLY IT CANNOT BE SAID THAT THERE WAS VIOLATION OF PROVISIONS, OF SEC.44AA OF THE ACT BY THESE ASSESSEES IN ALL THE YEARS UNDER CONSIDERATION. 8. IN VIEW OF THE FOREGOING DISCUSSIONS, IN OUR CON SIDERED VIEW, THE PENALTY UNDER SECTION 271A OF THE ACT IS NOT LE VIABLE IN THE HANDS OF THE ASSESSEES FOR THE YEARS UNDER CONSIDERATION'. A CCORDINGLY, WE REVERSE THE ORDER OF LEARNED CIT(A). AND DIRECT THE ASSESSI NG OFFICER TO DELETE THE IMPUGNED PENALTY LEVIED IN ALL THE YEARS UNDER CONS IDERATION. 9. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEES ARE ALLOWED. 7. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2007-08, THE A.O. HAS LEVIED THE PENALTY U/S 271A AS WELL AS 271 B OF THE ACT ON THE GROUND THAT ASSESSEE HAS FAILED TO MAINTAIN THE BOO KS OF ACCOUNTS AND THEREFORE PENALTY IS LEVIABLE UNDER BOTH THE SECTIO NS. ON APPEAL, THE LD. CIT(A) CONFIRMED THE PENALTY U/S 271A OF THE ACT BY OBSERVING THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THAT OF EA RLIER YEARS AND THE FINDING GIVEN BY THE HIGHEST FACT FINDING AUTHORITY I.E. HONBLE TRIBUNAL HOLDS GOOD IN THE PRESENT CASE ALSO AND THE ASSESSE E BEING A CONTRACTOR IS NOT REQUIRED TO MAINTAIN ANY PRESCRIBED BOOKS AS PER PROVISIONS OF SECTION 44AA OF THE ACT AND ONCE THE A.O. IS ABLE T O COMPUTE THE INCOME BASED ON THE RECORDS/BOOKS MAINTAINED BY THE ASSESSEE, THERE IS ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 8 NO VIOLATION OF SECTION 44AA OF THE ACT AND THEREFO RE DELETED PENALTY U/S 271A OF THE ACT AND CONFIRMED PENALTY U/S 271B OF T HE ACT. WE FIND THAT THE ORDER OF THE TRIBUNAL IN THE EARLIER YEAR 2006-07, THE TRIBUNAL HAS OBSERVED THAT THERE IS NO FINDING FROM THE ASSE SSING OFFICER THAT HE WAS UNABLE TO COMPUTE THE TOTAL INCOME IN THE HANDS OF THE ASSESSEE. PENALTY U/S 271A OF THE ACT IS NOT LEVIABLE IF THE ASSESSING OFFICER IS ABLE TO COMPUTE THE TOTAL INCOME FROM THE RECORD MAINTAI NED BY THE ASSESSEE. ACCORDINGLY, IT CANNOT BE SAID THAT THER E WAS A VIOLATION OF PROVISIONS OF SECTION 44AA OF THE ACT. BASED ON TH IS ABOVE OBSERVATION, THE LD. CIT(A) CAME TO THE CONCLUSION THAT ASSESSEE HAS MAINTAINED SOME BOOKS OF ACCOUNTS, THEREFORE, THERE IS A VIOLA TION OF SECTION 44AA OF THE ACT FOR NON-MAINTENANCE OF BOOKS OF ACCOUNTS . THE LD. CIT(A) FAILED TO UNDERSTAND THAT IN THIS CASE, THE ASSESSI NG OFFICER ESTIMATED THE GROSS PROFITS FOR NON MAINTENANCE OF PROPER BOOKS O F ACCOUNTS. THE LD. CIT(A) IS OF THE OPINION THAT THE A.O. IS ABLE TO C OMPUTE THE INCOME OF THE ASSESSEE AND THERE IS NO VIOLATION U/S 271A OF THE ACT. WE FIND THAT THE ABOVE OBSERVATION OF THE LD. CIT(A) IS NOT CORR ECT FOR THE SIMPLE REASON THAT THE A.O. IS NOT ABLE TO COMPUTE THE COR RECT INCOME OF THE ASSESSEE. THEREFORE, HE HAS ESTIMATED THE INCOME O F THE ASSESSEE. ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 9 8. WE THEREFORE HOLD THAT THE LD. CIT(A) IS NOT CORR ECT IN HOLDING THAT ASSESSEE IS LIABLE FOR PENALTY U/S 271B OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION BY TAKING INTO CONSIDERATION OF THE ENTI RE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE PENALTY LE VIED BY THE A.O. U/S 271B OF THE ACT. UNDER THESE CIRCUMSTANCES NO PENAL TY CAN BE LEVIED U/S 271B OF THE ACT AND THE ASSESSEES APPEALS ARE ALLO WED. 9. IN SO FAR AS ITA NO.345 OF 2012 IS CONCERNED, TH E FACTS ARE SIMILAR TO THE CASE DISCUSSED ABOVE AND IN VIEW OF OUR DECI SION ABOVE, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, APPEALS FILED BY DIFFERENT ASSES SEES IN ITA NOS.332/VIZAG/2012 & 345/VIZAG/2012 ARE ALLOWED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH DEC15. SD/- SD/- ( . . . . ) ( . ) ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 3 / DATED : 11.12.2015 VG/SPS ITA NOS.332 & 345/VIZAG/2012 CH. VENKATESWARA RAO & A. KASIVISWESWARA RAO, PALAK OL 10 ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT CH. VENKATESWARA RAO, D.NO.3-6-201, WEAVERS COLONY, PALAKOL-534260, W.G. DIST. (AP) 2. & / THE APPELLANT A. KASI VISWESWARA RAO, D.NO.3-6-20 1, WEAVERS COLONY, PALAKOL-534 260, W.G. DIST. (AP) 3. '(& / THE RESPONDENT DCIT CENTRAL CIRCLE, RAJAHMUNDRY 4. THE ITO WARD-1, PALAKOL-534260 5. 5 / THE CIT, VISAKHAPATNAM 6. 5 () / THE CIT(A), VISAKHAPATNAM 7. ' , , / // / DR, ITAT, VISAKHAPATNAM 8 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM