KUMUD CHAND JAIN, Jaipur V. ITO, Jaipur

ITA 716/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5191 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 29-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DR DHK
• Keywords: Business income; Period of limitation; Initiation of penalty proceedings; Reasonable cause; Accommodation entries; Time period of passing order
• Section: 273B; 142(1); 27; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 716/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 SHRI KUMUD CHAND JAIN 63, SHOPPING CENTRE,NEAR PEETAL FACTORY, JAIPUR CUKE VS. THE ITO WARD- 1(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ABTPJ 9167 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI P.C. PARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI R.A. VERMA, ADDL CIT-. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09/08/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16 /08/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 24-08-2015 FOR THE ASSESSME NT YEAR 2007-08 RAISING THEREIN FOLLOWING GROUNDS:- 1 THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THAT PENAL TY LEVIED BY THE AO U/S 271A ON THE DIRECTION OF THE LD. CIT (A) IS ILLEGAL AND BAD IN LAW SINCE AS PER SECTION 271A IF LD. CIT(A) IS SATISFIED THAT ASSESSEE HAS NOT MAINTAINE D BOOKS OF ACCOUNT, ONLY LD. CIT(A) HAS THE AUTHORITY TO IMPOS E PENALTY. ITA NO. 716/JP/2015 SHRI KUMUD CHAND JAIN VS. ITO, WARD- 1(1) JAIPUR . 2 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF AO IN LEVYING PENALTY OF R S. 25,000/- U/S 271(A) OF THE I.T. ACT, 1961. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 5-11-2007 DECLARING TOTAL INCOME OF RS. 1,81,430/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED ALONGWIT H NOTICE U/S 142(1) OF THE ACT. THE ASSESSEE DID NOT RESPOND TO THE NOTICE S. AFTER GIVING AMPLE OPPORTUNITIES TO THE ASSESSEE, THE AO ISSUED A SHOW CAUSE NOTICE U/S 142(1) ON 19-11-2009 AS A FINAL OPPORTUNITY BEFORE FINALIZATION OF THE ASSESSMENT. THE ASSESSEE DID NOT RESPOND TO IT. THE CASE WAS COMPLETED U/S 144 OF THE ACT AT AN INCOME OF RS. 16,68,557/- BY MAKING TRADING ADDITION OF RS. 5,43,233/-, DISALLOWANCE OF EXPENSE S OF RS. 2,16,894/- AND ADDITION U/S 68 OF RS. 6,27,000/-. THE ASSESSEE PRE FERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO VIDE HER ORDER DATED 30-0 1-2012 DECIDED THE APPEAL PARTLY IN FAVOUR OF THE ASSESSEE. HOWEVER, T HE LD. CIT(A) WHILE DECIDING THE APPEAL OF THE ASSESSEE AT PARA 7 OF HE R ORDER OBSERVED AS UNDER:- ON PERUSAL OF THE DETAILS FILED BY THE APPELLANT, IT IS SEEN THAT EVEN BY HIS OWN ADMISSION, HE HAD EARNED BROKERAGE INCOME OF MORE THAN RS.1,25,000/- AND HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS IN ITA NO. 716/JP/2015 SHRI KUMUD CHAND JAIN VS. ITO, WARD- 1(1) JAIPUR . 3 CONTRAVENTION OF SECTION 44AA(2), PENALTY PROCEEDIN GS ARE TO BE INITIATED U/S 271A BY THE AO. ON THE DIRECTION OF THE LD. CIT(A), THE AO ISSUED N OTICE DATED 01.03.2012 U/S 274 R.W.S. 271 OF THE IT ACT, 1961 INITIATING PENALTY PROCEEDINGS U/S 271A OF THE IT ACT, 1961 I.E. FAILU RE TO KEEP, MAINTAIN OR RETAIN BOOKS OF ACCOUNTS, DOCUMENTS ETC. AS REQUIRE D U/S 44AA. IN PENALTY ORDER, THE AO BY HOLDING THAT ASSESSEE HAS NOT FURN ISHED THE BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDING S AND HIS CLAIM IN THE APPELLATE PROCEEDINGS THAT BOOKS OF ACCOUNTS MAINTA INED AND ARE NOT TRACEABLE SHOWS THAT HE HAS NOT MAINTAINED THE REQU IRED BOOKS EVEN THOUGH HIS TURNOVER WAS RS.9,55,23,214/- BY HIS OWN ADMISSION, IMPOSED PENALTY OF RS.25,000/- U/S 271A OF THE IT ACT, 1961 . 2.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE PENALTY. THE CONCLUSIV E OBSERVATION OF THE LD. CIT(A) IS SUMMARIZED AS UNDER:- THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE PEN ALTY IMPOSED BY THE AO U/S 271A OF THE ACT ON THE GROUND THAT PE NALTY WAS IMPOSED ON THE DIRECTIONS OF THE LD. CIT(A). IT COULD BE SE EN FROM THE ASSESSMENT ORDER PASSED BY THE AO THAT HE HAS NOT I NITIATED PENALTY PROCEEDINGS THEREOF. HOWEVER, IT MAY BE MENTIONED T HAT SECTION 271A OF THE IT ACT DO NOT REQUIRE THE INITIATION OF THE PENALTY PROCEEDINGS AT THE TIME OF MAKING THE ASSESSMENT ORDER. IN FACT, P ENALTY PROCEEDINGS U/S 271A COULD BE INITIATED AT ANY POINT OF TIME AN D EVEN BEFORE OR AFTER THE COMPLETION OF THE ASSESSMENT PROCEEDINGS. IT MAY BE MENTIONED THAT IN THE CASE OF BHARAT CONSTRUCTION C O. VS. ITO (MP) ITA NO. 716/JP/2015 SHRI KUMUD CHAND JAIN VS. ITO, WARD- 1(1) JAIPUR . 4 153 CTR 414, IT HAS BEEN HELD THAT THERE IS NO LIMI TATION PERIOD FOR INITIATION OF PENALTY PROCEEDINGS U/S 271B OF THE A CT. THE SAME APPLIES TO THE PENALTY PROVISIONS U/S 271A OF THE ACT. THER E IS NO REQUIREMENT OF THE SATISFACTION OF THE AO BEFORE INITIATION OF PROCEEDINGS U/S 271A OF THE ACT. IN HIS APPELLATE ORDER, THE LD. CIT(A) HAD GIVEN DIRECTION TO THE AO FOR INITIATION OF PENALTY PROCEEDINGS U/S 27 1A OF THE ACT BUT THAT ITSELF DO NOT VITIATE THE PENALTY IMPOSED BY T HE AO U/S 271A OF THE ACT. THUS, THE CONTENTION OF THE ASSESSEE THAT THE AO LEVIED THE PENALTY ON THE DIRECTION OF THE LD. CIT(A) HAS NO WEIGHT AN D DESERVES TO BE REJECTED. THE ASSESSEE HAS NOT MAINTAINED THE REQUIRED BOOKS OF ACCOUNTS U/S 44AA EVEN THOUGH HIS TURNOVER WAS OF RS.9,55,23 ,214/- BY HIS OWN ADMISSION AND THUS AO LEVIED A PENALTY OF RS.25,000 /- U/S 271A OF THE ACT. EVEN OTHERWISE, THE ASSESSEE WAS REQUIRED TO M AINTAIN BOOKS OF ACCOUNTS FOR ITS ACCOMMODATION ENTRIES BUSINESS WHE REIN IT WAS EARNING COMMISSION INCOME OF MORE THAN RS.1,25,000/ - AS REQUIRED BY THE PROVISIONS OF SEC. 44AA OF THE ACT. HOWEVER, TH E SAID BOOKS OF ACCOUNTS WERE NEITHER PREPARED NOR MAINTAINED BY TH E ASSESSEE. THE CASE OF MEHTA PARVESH VS. ITO RELIED UPON BY THE AS SESSEE IS OF NO HELP TO IT AS IN THAT CASE, THE ASSESSEE SUBMITTED SUFFICIENT INFORMATION TO THE AO TO DETERMINE ITS INCOME, HOWEVER, IN THE INSTANT CASE UNDER CONSIDERATION, THE ASSESSMENT WAS COMPLETED U/S 144 OF THE ACT AS ASSESSEE NEITHER FILED ANY INFORMATION NOR PRODUCED ANY BOOKS OF ACCOUNTS BEFORE THE AO FOR DETERMINATION OF ITS INC OME. THE ASSESSEE WAS NOT ABLE TO SHOW ANY REASONABLE CA USE NEITHER DURING THE PENALTY PROCEEDINGS NOR DURING T HE APPELLATE PROCEEDINGS FOR NON-MAINTENANCE OF BOOKS OF ACCOUNT S AND THUS IS NOT ENTITLED FOR ANY RELIEF U/S 273B OF THE ACT AND THE REFORE, THE PENALTY OF RS. 25,000/- IMPOSED BY THE AO U/S 271A OF THE ACT IS CONFIRMED. 2.3 NOW THE ASSESSEE IS IN APPEAL BEFORE ME AGAINST CONFIRMING THE LEVY OF PENALTY BY THE LD. CIT(A) AMOUNTING TO RS. 25,000/- U/S 271A OF THE ACT. DURING THE COURSE OF THE HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF PENALTY U/S 271A OF THE ACT THROUGH HIS WRITTEN SUBMISSION AS UNDER:- 1. SEC. 271A OF THE IT ACT, 1961 READS AS UNDER:- ITA NO. 716/JP/2015 SHRI KUMUD CHAND JAIN VS. ITO, WARD- 1(1) JAIPUR . 5 WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 271 , IF ANY PERSON FAILS TO KEEP AND MAINTAIN ANY SUCH BOOKS OF ACCOUN T AND OTHER DOCUMENTS AS REQUIRED BY SECTION 44AA OR THE RULES MADE THERE UNDER, IN RESPECT OF ANY PREVIOUS YEAR OR TO RETAIN SUCH BOOKS OF ACCOUNTS A ND OTHER DOCUMENTS FOR THE PERIOD SPECIFIED IN THE SAID RULES, THE AO OR T HE CIT(A) MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM OF TWENTY-FIVE THOUSAND RUPEES. 2. FROM THE PLAIN READING OF THE ABOVE SECTION, IT CAN BE NOTED THAT THE POWER TO IMPOSE THE PENALTY LIES EITHER WITH THE AO OR THE C IT(A) DEPENDING UPON THE AUTHORITY WHO IS SATISFIED THAT BOOKS OF ACCOUNTS A ND OTHER DOCUMENTS REQUIRED BY SECTION 44AA ARE NOT MAINTAINED. IN THE PRESENT CAS E, THE ASSESSEE BEFORE THE AO HAS FURNISHED THE AUDITED ACCOUNTS WHERE THE SALE OF RS . 9,55,23,214/- WAS DISCLOSED. BASED ON SUCH ACCOUNTS, THE AO MADE THE TRADING ADD ITION BY APPLYING G.P. RATE OF 2% ON THE DECLARED SALE. THUS, THE AO WAS SATISFIED THAT ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS AND THEREFORE HE HAS NOT INITIATE D PENALTY PROCEEDINGS U/S 271A THOUGH HE HAS INITIATED PENALTY PROCEEDINGS U/S 271 (1)(C), 271(1)(B) AND 271B. THEREAFTER, IN COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT(A) RECORDED A FINDING THAT ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS. THUS, ONCE THE LD. CIT(A) REACHED TO A FINDING THAT ASSESSEE HAS NOT MAINTAIN ED ANY BOOKS OF ACCOUNTS, THE AUTHORITY TO IMPOSE THE PENALTY VESTS WITH CIT(A) A ND HE CANNOT DIRECT THE AO TO INITIATE THE PENALTY PROCEEDINGS U/S 271A. THEREFOR E, THE SUBSEQUENT NOTICE ISSUED BY THE AO U/S 274 R.W.S. 271 R.W.S. 271A ON THE DIREC TION OF THE CIT(A) IS ILLEGAL AND BAD IN LAW AND THEREFORE THE PENALTY SO IMPOSED IS LIABLE TO BE DELETED. IN THIS CONNECTION, REFERENCE CAN BE MADE TO THE DECISION O F KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013 ) 359 ITR 0565 WHERE IN PARA 54 TO 57 OF THE ORDER, IT WAS HELD THAT PENALTY CAN BE IMPOSED ONLY BY THAT AUTHORITY WHO IS SATISFIED ABOUT THE DEFAULT AND HE CANNOT DI RECT THE AO TO INITIATE THE PENALTY PROCEEDINGS AND LEVY THE SAME. THOUGH THIS DECISION IS WITH REFERENCE THE PENALTY LEVIABLE U/S 271(1)(C) BUT THE PRINCIPAL LAID DOWN IN THIS DECISION EQUALLY APPLIES TO THE PENALTY LEVIABLE U/S 271A AS BOTH THE PENALTIES FALLS IN CHAPTER XXI AND ARE SIMILARLY WORDED. THE RELEVANT PARA 54 TO 57 OF THI S DECISION IS REPRODUCED AS UNDER:- WHO INITIATES PENALTY PROCEEDINGS 54. AS IS CLEAR FROM THE WORDS IN SECTION 271, IF T HE ASSESSING OFFICER OR THE COMMISSIONER OF APPEALS OR THE COMMI SSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY PERSON HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF HIS INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE AMOUNT MENTIONED THEREIN. THEREFORE, THE PENALTY PROCEEDIN GS HAVE TO BE INITIATED BY THE PERSON WHO IS SATISFIED ABOUT THE CONCEALMEN T OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN THE COURSE O F ANY PROCEEDINGS UNDER THIS ACT. IN A GIVEN CASE IF THE ASSESSING OFFICER HAS NOT. RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INI TIATE PENALTY PROCEEDINGS, IN APPEAL OR IN REVISION, THE AUTHORITY IS SATISFIE D REGARDING CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS, THEN IT I S THAT AUTHORITY WHICH IS SATISFIED ABOUT THE SAID CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS HAS TO INITIATE PENALTY PROCEEDINGS AND THEN PASS O RDERS IN RESPECT OF THE PENALTY TO BE IMPOSED. THE IMPOSITION OF PENALTY MA Y BE DONE AT THE STAGE OF ASSESSMENT OR AT THE STAGE OF AN APPEAL. AT THE ASS ESSMENT STAGE, THE ASSESSING OFFICER HAS TO ISSUE A NOTICE TO THE ASSE SSEE TO SHOW CAUSE WHY A ITA NO. 716/JP/2015 SHRI KUMUD CHAND JAIN VS. ITO, WARD- 1(1) JAIPUR . 6 PENALTY SHOULD NOT BE IMPOSED AND THIS NOTICE HAS T O BE ISSUED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE IMPOSITION OF TH E PENALTY HAS ALSO TO BE DONE BY THE ASSESSING OFFICER BUT THIS CAN BE DONE WITHIN THE TIME PRESCRIBED IN SECTION 275. 55. IN THE CASE OF INITIATION OF PENALTY PROCEEDING S DURING THE COURSE OF APPEAL OR REVISION PROCEEDINGS, THE AUTHO RITY WHO HAS TO BE SATISFIED IS THE AUTHORITY IN WHOSE PROCEEDINGS THE ISSUE IS EXAMINED AND NOT ANY OTHER AUTHORITY. THE LEVY OF PENALTY HAS ALSO T O BE DONE BY THE SAME OFFICER AS THE LANGUAGE USED IN THE LATER PART OF S ECTION 271 IS THAT HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY . THE AUTHORITY IN WHICH PROCEEDINGS, THERE IS SATISFACTION OF CONCEALMENT O R FURNISHING INACCURATE PARTICULARS OF INCOME ALONE CAN LEVY THE PENALTY AN D NOT ANY OTHER AUTHORITY. IF THE COMMISSIONER (APPEALS) IN THE COU RSE OF APPEAL PROCEEDINGS IS SATISFIED THEN IT IS THE COMMISSIONE R (APPEALS) WHO HAVE TO INITIATE THE PENALTY PROCEEDINGS AND ALSO COMPLETE THE SAME BY LEVYING THE PENALTY. HE CANNOT PERMIT THE ASSESSING AUTHORITY T O LEVY PENALTY. 56. PROVISIONS OF SECTION 274(3) MAKES IT CLEAR THA T IF AN AUTHORITY OTHER THAN THE ASSESSING OFFICER PASSES AN ORDER UN DER CHAPTER XXI WHICH DEALS WITH MATTERS OF PENALTIES THEN SUCH AUTHORITY HAS TO FORTHWITH SEND THE COPY OF THE ORDER TO THE ASSESSING OFFICER. THIS FO RTIFIES THAT IT IS THE AUTHORITY WHO IS SATISFIED IN THE COURSE OF THE PRO CEEDINGS BEFORE IT HAS THE JURISDICTION TO INITIATE AND LEVY OF PENALTY. THE A LLAHABAD HIGH COURT IN THE CASE OF MOTILAL SHAMSUNDAR REPORTED IN 84 ITR 183 H ELD THAT WHEN THE AMOUNTS WERE DISCOVERED IN THE COURSE OF APPELL ATE PROCEEDINGS BEFORE HIM, IT WAS DISCOVERED BY HIM. IT WAS FOR HIM THEN TO IMPOSE THE PENALTY IF HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED THE P ARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULAR S OF IT. 57. THE QUESTION OF THEIR RECORDING SATISFACTION AN D THEN CALLING UPON THE ASSESSING OFFICER TO INITIATE PENALTY PROC EEDINGS WOULD NOT ARISE. PENALTY PROCEEDINGS HAS TO BE INITIATED BY THE AUTH ORITY WHICH IS SATISFIED ABOUT THE CONCEALMENT OF THE PARTICULARS OF THE INC OME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN VIEW OF ABOVE, THE PENALTY IMPOSED U/S 271A BY T HE AO ON DIRECTION OF THE CIT(A) IS ILLEGAL AND BAD IN LAW A ND THE SAME BE DELETED. 3. ON MERITS ALSO, PENALTY IS NOT LEVIABLE AS THE A SSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNTS IN AS MUCH AS THE AUDITED ACCOUNT S WERE FILED BEFORE THE AO ON THE BASIS OF WHICH ONLY THE AO CONSIDERED THE TURNOVER IN ASSESSMENT PROCEEDINGS. ONLY BECAUSE THESE BOOKS WERE MISPLACED AND COULD NOT BE PRODUCED DOES NOT MEAN THAT THERE IS A FAILURE IN MAINTAINING BOOKS OF ACCOUNTS . FURTHER, THE INCOME IS ASSESSED AS BUSINESS INCOME FROM TRADING OF PRECIOUS AND SEMI P RECIOUS STONES OR AS COMMISSION INCOME MAKES NO DIFFERENCE SO FAR AS THE MAINTENANC E OF BOOKS OF ACCOUNTS ARE CONCERNED. THUS, THERE IS A REASONABLE CAUSE U/S 27 3B IN NOT PRODUCING THE BOOKS OF ACCOUNTS AND ONCE THE AO COMPLETED THE ASSESSMENT O N THE BASIS OF THE AUDITED ACCOUNTS AND THE CIT(A) ALSO ACCEPTED THAT TURNOVER IN WORKING OUT THE COMMISSION INCOME, NO PENALTY CAN BE LEVIED AS HELD IN CASE OF MEHTA PARVESH VS. ITO 60 TTJ 278 (DEL.). THE LD. CIT(A) HAS INCORRECTLY DISTINGU ISHED THIS DECISION HOLDING THAT IN THAT CASE ASSESSEE SUBMITTED SUFFICIENT INFORMATION TO THE AO TO DETERMINE ITS INCOME IGNORING THAT IN THE ASSESSEES CASE ALSO ASSESSEE HAS GIVEN THE CORRECT DETAIL OF THE TURNOVER ON WHICH THE INCOME IS ESTIMATED. ITA NO. 716/JP/2015 SHRI KUMUD CHAND JAIN VS. ITO, WARD- 1(1) JAIPUR . 7 4. THE LD. CIT(A) HAS ALSO HELD THAT THERE IS NO LI MITATION PERIOD FOR INITIATION OF PENALTY PROCEEDINGS U/S 271B OF THE ACT. HOWEVER , WHERE NO LIMITATION PERIOD IS PRESCRIBED, THE PROCEEDINGS NEEDS TO BE INITIATED W ITHIN A REASONABLE TIME AND IT CANNOT BE KEPT OPEN AT WHIMS AND FANCIES OF THE AUT HORITIES. IN THIS CONNECTION, RELIANCE IS PLACED ON THE DECISION OF SUPREME COURT IN CASE OF STATE OF PUNJAB VS BHATINDA DIST. CO OPERATIVE MILL UNION LTD (2007) 1 1 SCC 363 WHERE IT WAS HELD THAT IF NO PERIOD OF LIMITATION IS PRESCRIBED, A ST ATUTORY AUTHORITY MUST EXERCISE ITS JURISDICTION WITHIN A REASONABLE PERIOD. THE REASON ABLE PERIOD FOR INITIATING THE PENALTY PROCEEDINGS BY THE AO U/S 271A R.W.S. 271 C AN BE ONLY ON OR BEFORE THE DATE OF THE COMPLETION OF THE ASSESSMENT PROCEEDINGS IN AS MUCH AS SECTION 271A IS GOVERNED BY SECTION 271 ONLY. THEREFORE, THE PENALT Y NOTICE U/S 271A ISSUED BY THE AO ON 01.03.2012 IS OTHERWISE BARRED BY LIMITATION 2.4 THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A ). 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS OBSERVED IN THE PRESENT CASE THAT THE ASSESSEE FURNISHED THE AUDITED ACCOUNTS BEFORE THE AO WHERE THE SALE OF RS. 9,55,23,214/- WAS DISCLOSED. BASED ON SUCH ACCO UNTS, THE AO MADE THE TRADING ADDITION BY APPLYING GROSS PROFIT RATE OF 2% ON THE DECLARED SALE. THUS THE AO WAS SATISFIED THAT THE ASSESSEE H AD MAINTAINED BOOKS OF ACCOUNT AND THEREFORE, HE HAD NOT INITIATED PENALTY PROCEEDINGS U/S 271A THOUGH THE AO HAD INITIATED PENALTY PROCEEDINGS U/ S 271(1), 271(B) AND 271B OF THE ACT. IN APPELLATE PROCEEDINGS, THE LD. CIT(A) RECORDED A FINDING THAT THE ASSESSEE HAD NOT MAINTAINED ANY BO OKS OF ACCOUNT AND EARNED BROKERAGE INCOME OF MORE THAN RS. 1,25,000/- LACS AND THUS PENALTY PROCEEDINGS U/S 271A IS TO BE INITIATED BY THE AO. TAKING INTO CONSIDERATION ALL THE ASPECTS OF THE ISSUE IN QUEST ION, IT IS OBSERVED THAT ITA NO. 716/JP/2015 SHRI KUMUD CHAND JAIN VS. ITO, WARD- 1(1) JAIPUR . 8 THE ASSESSEE HAS SUBMITTED THE COPY OF AUDITED ACCO UNTS BEFORE THE AO BUT THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACC OUNT DUE TO LOSS OF THE SAME. IN SUCH A SITUATION, PENALTY IMPOSED U/S 271A FOR NON-MAINTENANCE OF BOOKS OF ACCOUNT DESERVES TO BE DELETED AND THUS PENALTY IS NOT LEVIABLE. HENCE, THE APPEAL OF THE ASSESSEE IS ALLO WED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/08/2016 SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16 /08/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI KUMUD CHAND JAIN, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 1(1), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 716/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR