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TMI Blog2007 (1) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... which could enable the Assessing Officer to compute its income. 3. It is prayed that the order of the ld. CIT(A) be cancelled and that of the Assessing Officer may be restored. 4. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or disposed off." 2. During arguments, we have heard Shri D.P. Dhankar, ld. Sr. DR and Shri P.N. Singla and Shri Arun Singla, learned counsels for the assessee. 3. The only ground raised by the revenue pertains to deleting the penalty of Rs. 1 lakh levied under section 271A of the Act for not maintaining books of account as per the provisions of section 44AA of the Act and also in holding that the Assessing Officer was having sufficient information for making the assessment. At the outset, it was brought to our notice that this issue is covered by the decision of the Tribunal in the case of Amarjit Singla v. ITO [IT Appeal No. 1250 (Chd.) of 2004 dated 2-11-2005]. The assessee declared an income of Rs. 8,62,91O in its return filed on 27 -3-2002. The assessee has disclosed total con tract receipt at Rs. 1,55,72,788 as the assessee is a civil contractor. As per the revenue, the assessee did not furnish the audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits and gains of the assessee under section 44AD or section 44AE or section 44AF or section 44BB or section 44BBB, as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year, keep and maintain such books of account and other documents as. may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act. (3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or subsection (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained. (4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained." If the aforesaid section is analyse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant record to show the expenses/claim of deduction which was not done rather in spite of so many opportunities extended to the assessee, either the assessee sought adjournment or did not appear on the fixed date. It can be said that the assessee deliberately and consciously evaded the attendance. The Assessing Officer was rightly having no alternative but to impose penalty under section 271A of the Act. We are aware that penally is not imposable if there is no conscious breach of law as was held by the Hon'ble Apex Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. At the same time, for imposing penalty, the conduct of the assessee must be conscious as was held by the Hon'ble Apex Court in, the case of K. C. Builders v. Asstt. CIT[2004] 265 ITR 562. If these judicial pronouncements are kept in juxtaposition with the facts of the present appeal, the assessee deliberately defied the law in not maintaining the books of account. The ld. CIT(A) while concluding the issue mentioned that the Assessing Officer was having necessary information for completing assessment. We are not agree with it because 'books of account' refers to those boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. (c) The assessee fails to keep and maintain books of account and documents as discussed above for a period of 6 years from the end of the relevant assessment year. (d) In case an assessment is reopened under section 147, the books of account and other documents are not continued to be so kept and maintained till the assessment so reopened is completed. If all the facts and the conditions are analysed, then certain undisputed facts are oozing out like: - Computation of income on flat rate is not prescribed in the Act as the provisions of section 44AD are not applicable in the present case since the receipts are more than Rs. 40 lakhs. - Violation of section 40A(2)(a) and section 40A(3), sections 26988 and 269T cannot be quantified in the absence of books of account. - The genuineness of expenses claimed by the assessee could not be verified. - The assessee is not following correct method of accounting as prescribed under section 145 of the Act. - The factum of payment of interest/salary to the partners is not verifiable without the books of account and also the daily cash position. In view of these facts, the decision from the Hon'ble Apex Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not maintaining books of account and was declaring income @ 10 per cent of total receipts. According to the Assessing Officer the assessee was required to compute its taxable income as per IT Act on the basis of books of account maintained by it. According to him, the assessee had failed to compute the income as per Income-tax Act, and was not maintaining/retaining books of account, so it was liable to be penalized under section 271A of Income-tax Act. The Assessing Officer came to the conclusion that the assessee was liable to penalize under section 271A of Income-tax Act for the reason stated at para 4 of the penalty order dated 15-11-2002. After having reached the conclusion that the assessee was liable to be penalized under section 271A, the Assessing Officer mentioned that the provisions of the said section were amended with effect from 1-6-2001 and as per the amended provisions the penalty of Rs. 25,000 was to be imposed under section 271A of Income-tax Act. He, however, levied the penalty of Rs. 1 lakh by stating that the provisions which existed as on 1-3-2001 were applicable. 4. The assessee carried the matter to the Ld. CIT(A) and submitted that the proceedings were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or judicial analysis. Hence the assessee was not in default of section 44AA read with rule 6F and penalty proceedings were un called for. 4.1 It was further stated that the partners to the deed mutually agreed and were of the view that if record of bank account and receipt against work done and note books containing capital account, expenses account and other account i.e., salary, conveyance, stationery, material, electrical expenses etc., legal expenses and other expenses were maintained then it would be the account of the firm for their satisfaction and profit or loss could be drawn by applying a general rate of profit as agreed to between the parties from time-to-time and divided accordingly, it was slated that there was no violation of any provisions of law by not maintaining day-to-day cash book and ledger as per rule 6F. It was contended that the record maintained by the assessee enabled the Assessing Officer to determine the assessee's income while applying flat rate as per history of the case, therefore, initiation of penally proceedings were un-called for, un-warranted and illegal which deserved to be dropped. 5. Ld. CIT(A) after considering the submissions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents which enabled the Assessing Officer to determine total contract receipt of the assessee during the year under consideration on the basis of which the income of the assessee has been computed by the Assessing Officer by applying a rate of 10 per cent. There is no material or evidence on record to establish that the assessee has not maintained books due to which Assessing Officer could not be able to compute the income. The assessee has maintained such books of account and documents which enabled the Assessing Officer to compute the total income. Therefore, in our opinion, the assessee has not made any default under section 44AA. In the absence of any default being made under section 44AA, no penalty under section 271A can be imposed. We, therefore, set aside the order of ld. CIT(A) and delete the impugned penalty." 7.1 It is also relevant to point out that the instant case was heard along with another departmental appeal in the case of Asstt. CIT v. Supreme Builders [IT Appeal No. 827 (Chd.) of 2004] for assessment year 2001-02. In the said case, the penalty levied in similar circumstances by the Assessing Officer had been deleted by the ld. CIT(A), thereafter the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s settled precedent that different view should not be taken by knocking down the well-established principle of consistency. The Hon'ble Supreme Court in the case of Sundarjas Kanyalal Bhatija v. Collector[1990] 183 ITR 130 has held that- "In a Multi-Judge Court, the Judges are bound by precedents and procedure. They could use their discretion only when there is no declared principle to be found, no rule and no authority. Judicial decorum and legal propriety demand that where a Single Judge or a Division Bench does not agree with the decision of a Bench of co-ordinate jurisdiction, the matter may be referred to a larger Bench. It would be subversion of judicial process not to follow this procedure." Similarly in the case of Union of India v. Paras Laminates (P.) Ltd. [1990] 186 ITR 722 (SC), their Lordships while discussing the functioning of the Tribunal at page 726 had observed as under: "It is true that a Bench of two Members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer was justified in levying the penalty of Rs. 1 lakh under section 271A of Income-tax Act when the income had been estimated by applying Gross Profit rate on the accepted contract receipt maintained in the ledger type book." THIRD MEMBER ORDER Per Vimal Gandhi, President.- On account of difference between the Hon'ble Members of Income-tax Appellate Tribunal, 'B' Bench, Chandigarh, the matter has been referred to me under section 255(4) for resolving the difference. 2. After hearing both the parties and with the consent of their learned representatives of the parties, the following question was reframed for arguments of the parties:- "Whether on the facts and in the circumstances of the case, the deletion of penalty of Rs. 1 lakh imposed under section 271A of Income-tax Act is justified." 3. The assessee in the relevant period carried on the business of Civil Contractor and filed return declaring an income of Rs. 8,62,910. The Assessing Officer rejected the books of account and applied flat rate of 12 per cent to the contract receipts and computed assessee's income at Rs. 18,68,735. On appeal, some relief was allowed to the assessee. Further appeals be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee also did not furnish any reasonable cause for not furnishing required books. He was further of the view that in the absence of books, the Assessing Officer was not able to see whether there was contravention of provisions of sections 269SS, 269T and 40A(3) of the Income-tax Act etc. In upholding the levy of penalty, the learned Judicial Member strongly relied upon the decision of the Tribunal ('SMC' Bench) in the case of Amarjit Singla. The learned Judicial Member in the proposed order accordingly set aside the impugned order of Commissioner of Income-tax (Appeals) and restored order of the Assessing Officer. 7. The learned Accountant Member did not agree with this view of the learned Judicial Member. He considered the decisions of the Tribunal followed by the learned Commissioner of Income-tax (Appeals) in the impugned order cancelling the penalty. He noted that the assessee was not required to maintain any specified books. Rule 6F of Income-tax Rules was not applicable in this case. After considering decisions of the Tribunal in the case of Unicon Builders & Contractors, as also of Vinod Kumar Bhim Sain's case and several other decisions of Division Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Assessing Officer that the assessee committed a default under section 44AA read with rule 6F were wrong and untenable. The said provisions were applicable to the cases of professions specified in sub-section (1) of section 44AA whereas no books of account were prescribed for business of civil contractor carried by the assessee in the relevant period. Rule 6F was not applicable to the case of the assessee. Therefore, initiation of proceedings and levy of penalty was bad in law. He also relied upon the proposed order of the learned Accountant Member. 10. On careful consideration of rival submissions and relevant material on record, I find that it has been the consistent view of Benches that no penalty under section 271A is exigible in the cases of contractors. However, a contrary view was taken by SMC Bench of the Tribunal in the case of Amarjit Singla and levy of penalty was upheld. The proposed order of the learned Judicial Member is based upon above decision. In the case of Unicon Builders & Contractors to which I was a party, the Bench after considering the relevant provisions of section 44AA deleted the penalty with the following observations :- "3. We have heard the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to the notice of the Hon'ble Member deciding the case. Therefore, the aforesaid case has to be treated as case decided per incurium Therefore, on facts and in the circumstances of the case, I am inclined to follow large number of cases where various Benches of the Tribunal cancelled similar levy imposed under section 271 A of the Act. The learned Accountant Member has rightly seen no scope to impose penalty under the above section in this case of the contractor. It is pertinent to mention that the Commissioner of Income-tax (Appeals) while cancelling the penalty had followed and applied the view adopted by the Tribunal. However, when the matter was brought before the ITAT itself, the learned Member has refused to follow his own order and taken a contrary view. I am constrained to observe that this is not a healthy trend. Consistency of approach is fundamental to judicial disciplines and decorum. The Hon'ble Members of Income-tax Appellate Tribunal would do well to abide by this basic principle to maintain good image of Institution. 11. Even independent of above circumstances, I see no justification for upholding levy of penalty in this case. The provisions which the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses. The cashbook has not been maintained. Assessee has clearly mentioned in his written replies that no day-to-day regular books have been maintained and also no cash book is maintained. 7.2 In view of the above, I am not satisfied about the correctness of the. . . and the assessment is accordingly made in the manner provided in section. . . ITA No. 1258/Chd./96, dated 3-2-2003 in the case of DCIT, Spl. Range-II, Chandigarh v. Vijay Kumar Garg Contractors Pvt. Ltd., Chandigarh. 7.3 Having rejected books of account, we come to the question of computing the taxable income in the hands of the assessee. In this connection, a similar case has been recently decided by Learned ITAT, Chandigarh vide order dated 16-9-2003 in the case of ESS ESS Builders (P.) Ltd., Ludhiana reported at ITA No. 707/Chd./1997. In this case also the books of account of the assessee were rejected and the Hon'ble ITAT has found it reasonable to work out the assessee's income by applying flat rate of 12 per cent to the contract receipts. Following the ratio of learned ITAT in the above-mentioned case, I hereby apply net profit rate of 12 per cent on contract receipts shown in the return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided a rate which is not reasonable. Further, having regard to provisions of section 44AD, which is overriding, it is not possible for the revenue to argue that profit computed as per the section is not profit computed 'in accordance with provisions of this Act' or that the Legislature was unaware of provisions of sections 68, 69, 269SS, 269T, 140(3) etc. in the enactment of section 44AD. Thus reading entire scheme of the Act one has to hold that profit computed as per section 44AD of the Act by application of flat rate is one recognized method of computation of total income, or part of total income. The fact that the above provisions is applicable only to cases where gross contract receipts are below Rs. 40 lakhs, does not make any difference to the nature of business carried by the assessee or method of computation. Having applied such high rate of 12 per cent Assessing Officer cannot contend that he was unable to make assessment. Therefore, in the above peculiar circumstances of the case, the Commissioner of Income- tax (Appeals) was right in holding that there was no failure on the part of the assessee under section 44AA of the Income-tax Act and penalty imposed un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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