TMI Blog2007 (2) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... te and furnish the audit report by that date as required under section 44AB of the Act. As the assessee did not file the return by the due date nor furnished the audit report by the specified date, the Assessing Officer initiated penalty proceedings under section 271B of the Act for the years under consideration. A show-cause notice was, therefore, issued. In reply thereto, the assessee has submitted that the notice under section 271B has been issued by the Assessing Officer by assuming that the assessee has been maintaining regular books of account and has failed to furnish the tax audit report as required under section 44AB of the Act within the specified date. It was further submitted that the assessee did not maintain regular books of account and as such the question of getting the same audited did or could not arise. It was, therefore, submitted by the assessee that the assessee has committed an offence under section 44AA of the Act and thus liable to be penalized under section 271A of the Act and not under section 271B of the Act. In support thereof, the assessee relied on a decision of the Hon'ble Gauhati High Court in the case of Surajmal Parsuram Todi v. CIT [1996] 222 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant filed along with the return of income, it was noticed that the figures reflected in these accounts were very minutely given under each head and this could not be possible in absence of the books of account maintained. The Assessing Officer also noticed continuity of the appellant's account from the fact of appellant showing the closing stock of the assessment year 2001-2002 as the opening stock of the subsequent assessment year 2002-2003, which in the opinion of the Assessing Officer corroborated that the appellant had maintained regular books of account. Thus, the Assessing Officer observed that since the appellant had maintained regular books of account, which the appellant had failed to get audited under section 44AB of the Income-tax Act, 1961, the penalty proceedings under section 271B of the Income-tax Act, 1961 were not initiated on assumption, but were rightly initiated. In the opinion of the Assessing Officer, the decision relied by the appellant was not applicable to its case. According to the Assessing Officer, the acceptance of the default under section 44AA of the Income-tax Act, 1961 by the appellant proved that the appellant was aware of the quantum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hire purchase. I would, therefore, hold that the appellant was indeed maintaining the books of account, but while responding to the penalty notice issued under section 271B of the Income-tax Act, 1961, raised a defence that no books of account were maintained to avoid the penal consequences of section 271B of the Income-tax Act, 1961, which are more harsh that the penalty consequences under section 271A of the Income-tax Act, 1961. I do not find any reason to differ with the findings of the Assessing Officer and the penalties levied for the assessment years under consideration are confirmed." 7. S till aggrieved, the assessee has preferred these appeals before the Tribunal. 8. The assessee has given the synopsis of arguments as under:- (1) The assessee has not maintained books of account. When books of account are not maintained, audit of the same cannot take place. (i) Ram Prakash C. Puri v. Asstt. CIT [2001] 77 ITD 210 (Pune) (SMC) Para 6; (ii) Surajmal Parsuram Todi's case; (iii) Chadha Sudhir Kumar v. ITO [1996] 56 ITD (Delhi) 470 Para 2/Para 7. (2) The Assessing Officer as well as the Commissioner of Income-tax (Appeals) have presumed that the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales exceeding prescribed limits to get his "accounts" audited before the specified date and furnish by that date a report of such audit in the prescribed form duly signed and verified by such Accountant and setting forth such particulars as may be prescribed. Under section 44AB of the Act the requirement is to get the 'accounts' audited and to furnish the report of such audit by the specified date. In section 44AB reference is made to the word 'accounts' and not to the words 'books of account' or 'regular books of account'. The requirement under section 44AB is to get the 'accounts' audited. The 'accounts' denotes a statement of the debits and credits or reckoning of business dealings. There are three broad categories of accounts, such as, nominal accounts, real accounts and personal accounts where concerned debits and credits of a transaction are recorded. The nominal accounts deal with revenue and expenditure, real accounts deal with assets and capital and personal accounts deal with list of creditors and debtors. Therefore, whatever records or documents where the entries (i) dealing with the revenue and expenditure; (ii) giving details of assets and liabilities; and (iii) reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. In both the sections, the expression used by the Legislature is 'accounts' which are required to he got audited, and not the expression 'books of account' or 'regular books of account' or 'such books of account as required to be kept and maintained under section 44AA of the Income-tax Act'. 13. The expression 'accounts' used in section 142(2A) had come for interpretation before the Hon'ble Delhi High Court in two cases, namely, (i) Central Warehousing Corpn. v. Secretary, Department of Revenue [2005] 277 ITR 452 (Delhi) and (ii) Rajesh Kumar, Proprietor, Surya Trading v. Dy. CIT [2005] 275 ITR 641 (Delhi). In the latter case of Rajesh Kumar, Proprietor, Surya Trading, the Division Bench of the Hon'ble Delhi High Court has held that there is no merit in the contention raised on behalf of the petitioner that the expression 'accounts of the assessee' can only refer to the books of account of the assessee and not the other records available before the Assessing Officer for examination or otherwise. The complexity of accounts of the assessee is to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained by the assessee but some accounts or books of account are maintained, the auditors would be in a position to give a qualifying report to be given under section 44AB of the Act. In Form 3CD, a column No. 9 is prescribed under which the auditor is required to state whether the books of account are prescribed under section 44AA, and if yes, list of books prescribed is to be given. In other words if the books of account maintained by the assessee were not prescribed under section 44AB the auditor would say so in his report. In clauses (a), (b) and (c) of clause (9) of Form 3CD, there is a requirement of giving list of books of account maintained, implying thereby that whatever books were maintained by the assessee that are to be stated in clauses (a), (b) and (c) of column 9. Thus, for the purpose of section 44AB, it is not necessary that any books of account or any accounts maintained by the assessee should at first be such books of account as required under section 44AA of the Act. 16. In the light of the decisions of the Hon'ble Delhi High Court in above two cases and the expression 'accounts' used in section 44AB of the Act, it is, thus, clear that the expression 'accounts' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 31-3-2001. The Assessing Officer has also stated that on going through these annexures it was seen that the assessee has minutely included all the items which are normally required to be included in the trading account, profit and loss account and the balance sheet. It is also observed by the Assessing Officer that the figures are given to the last decimals. The Assessing Officer, therefore, concluded that the assessee's stand taken in the course of penalty proceedings that the assessee did not maintain any books of account, is not correct. The Assessing Officer concluded that the assessee did maintain some books of account which were required to be audited under section 44AB of the Act. The CIT(A) in his order has also stated that the trading account, profit and loss account and the balance sheet submitted by the assessee contain all the details of receipts and expenses squared up to a single rupee, implying thereby the assessee has maintained some books of account to curl out the figures of expenses like materials, labour, transport, diesel, repairs, office, travelling, conveyance etc. besides the expenses like bank interest, sales tax, depreciation. The CIT(A) has also observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer as well as the CIT(A) not merely on presumption but rather on the basis of adequate and sufficient evidences enclosed with the return of income filed by the assessee itself have concluded that the assessee did maintain the accounts which were required to be audited under section 44AB of the Act. Therefore, the decisions relied on by the assessee are not at all applicable to the present case where a categorical finding has been arrived at that the assessee did maintain some accounts on the basis of which the trading account, profit and loss account and the balance sheet with all the minute details of the receipts and expenses were prepared and were also filed along with the return of income. Having regard to the totality of the facts and circumstances of the case, the assessee's contention that he did not maintain any books of account or any accounts is without any merit being not supported by any adequate or reliable evidence. The assessee has taken this plea only with a view to avoid the consequences of the provisions of section 271B of the Act. The assessee's such stand taken after receiving a show-cause notice of penalty from the Assessing Officer, is not at all found to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the assessee has been able to prove that there was a reasonable cause for the assessee for not getting its accounts audited under section 44AB of the Act and then to furnish the report by the specified date. The assessee's only reason given for not getting the accounts audited is that since he did not maintain any regular books or accounts or books of account the question of getting them audited under section 44AB simply did or could not arise. No other reason or reasons have been given by the assessee for not complying with the provisions of section 44AB of the Act. On the facts and the present case, the assessee's stand that he was not maintaining any books of account and as such the question of getting them audited under section 44AB did not arise, is not found to be at all bona fide and honest one as held by us above. The assessee has taken this stand with a motive to avoid the penal consequences of section 271B of the Act. It is thus clear the assessee has not been able to give any sufficient and reasonable cause for not getting the accounts whatsoever maintained by him audited under section 44AB of the Act. 20. In the light of the discussions made above, I am therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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