TMI Blog2004 (4) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 and sundry creditors of Rs. 2,23,84,609 which also included advances received for booking the building of Rs. 2,20,10,778. The Assessing Officer further noted that balance sheet further contains that audit report is also annexed, but there is no audit report. As audit report was not furnished, the Assessing Officer initiated proceedings to levy penalty under section 271B of the Act. The assessee submitted that he was following mercantile system of accounting and provisions of section 44AB of the Act were not applicable in this case, as there was no turnover, sale or gross receipt as required under section 44AB. The Assessing Officer considered the submission of the assessee and noted that essence of section 44AB of the Act is that certain classes of assessee, specially bigger assessee should have their accounts audited and parameters of business was determined by gross receipt, sale or turnover. As per Assessing Officer, assessee was following mercantile system of accounting, but it was incorrect on its part to state that there have been no receipts, sales or turnover. He also noted that there was advance in respect of booking of the flats to the extent of Rs. 2.20 crores and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is computing income on completion of project method, the amounts received against agreements for sale of flats would be treated as advances against sales and will not form part of the sales in these years. If in the year the project gets completed and total sale exceeds Rs. 40 lakhs, then it will be necessary for such assessee to get the books of account audited under section 44AB of the Act. Assessee also submitted that case law referred to by the Assessing Officer was entirely on different issue and the last plea was that assessee was under bona fide belief that it had not been able to get its accounts audited as in its case provisions of section 44AB were not attracted. 4. The ld. CIT(A), after considering all the facts, gave relief by noting as under:- "7.1 have considered the submissions and facts of the case. I have also considered the case law referred by the Assessing Officer. The relevant section 44AB talks of (total sales, gross receipts and turnover). The appellant has given sufficient material to prove his belief that this case was not covered under the provisions of section 44AB as no sales or business had taken place. Even the guidelines supplied to the CA did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appellant's case. 5. The expression 'total sales : turnover : 'gross receipts' appear to have been used loosely and not without any amount of deliberateness as to their scope, meaning and effect. Predominantly, they appear to be interchangeable. These expressions do not only overlap, but might confuse an assessee. For example 'total sales' means total of all sales : 'turnover' also means aggregate of sales : 'gross receipts' means similarly, entire cash received as sale price. These expressions have the sting of overlapping convey analogous meaning. Though the expression 'total sales' carries a definite concept about it the other two expressions lack such concept whose construction and meaning depends upon the context and the subject-matter. These expressions, therefore, in the context of section 44AB be read as conveying idea proximate to what 'total sales' conveys. The decision of the Supreme Court in M.K. Ranganathan v. Govt. of Madras, AIR 1955 SC 604 indicates that a word is known by the company it keeps. The Supreme Court observed thus: "It is well recognized rule of construction that when two or move words are susceptible of analogous meaning are coupled togethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds are properly maintained and faithfully reflect the true income of the taxpayer. 8. The philosophy behind the compulsory audit is stated in para 17.2 of circular No. 387 dated 6-7-1984 as follows: "17.2. A proper audit for tax purposes would ensure that the books of account and other records are properly maintained that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of Assessing Officer in carrying out routine verification, like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the Assessing Officer thus saved could be utilized for attending to more important investigational aspects of a case." 9. In the above paragraphs, it is clear that the intention of legislature in enacting the provisions of section 44AB of Income-tax Act, 1961 has been to the transactions effecting income and accordingly the Assessing Officer was replied vide reply dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards the cost of the flat booked by each customer and the amount of advance must be having cost of construction as well as element of profit, which may subsequently be bigger in proportionate when whole of the amount fixed for sale of flat is realized, but it cannot be said that the amount of advance received by the assessee will not be included in the scope of words "gross receipt". 8. The other plea of the ld. counsel for the assessee was in respect of the very object, for which section 44AB of this Act was brought on statute. The philosophy behind the compulsory audit is stated in para 17.2 of circular 387 dated 6-7-1984 and reproduced by ld. CIT(A). There is no dispute about the very object of bringing provisions of section 44AB and the same had further been laid down in the case of Rajkot Engg. Association to the effect that object of section 44AB of the Act read with Rule 6G of Income-tax Rules is to safeguard against tax evasion and tax avoidance which will ensure that the economic system does not result in concentration of wealth to the common detriment. The ld. CIT(A), while disposing off the appeal of the assessee, had referred to the guidelines issued by the Institute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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