2017 (11) TMI 1878 - AT - Income Tax

Penalty u/s.271A - non-maintenance of books of account as required u/s.44AA - no notice u/s.139(9) issued - HELD THAT - We find in the instant case, the AO did not issue notice u/s.139(9) of the Act where books of accounts are not maintained and directing the assessee to remove the defect of not enclosing the financial statements i.e. gross receipts, expenses and net profit etc. and accepted the statement of total income and completed the assessment. If an assessee maintains such documents which enables to prepare an income or expenditure account/profit and loss account, then such document shall comply the requisite provisions u/s.44AA of the Act, which enables the Assessing Officer to compute the income of the assessee under the provisions of the Income-tax Act and should be treated as sufficient compliance for completion of assessment. In the present case, the Assessing Officer did not issue notice under section 139(9) of the Act directing the assessee to remove the defect of not having enclosed profit and loss account. The assessee had enclosed the statement of income where gross receipts, expenses are disclosed and profit was computed. The very fact that the Assessing Officer did not issue any notice of defect under section 139(9) shows that the AO was satisfied with documents accompanied with the return of income and are sufficient to enable him to compute the income of the assessee. Accordingly, we are of the substantive view that the penalty imposed by the AO cannot be sustained and we set aside the order of CIT(A) and delete the penalty levied u/s.271A of the Act and allow the grounds of appeal of the assessee.

Summary

Issues:
Appeal against orders of CIT(A)-2, Bhubaneswar u/s.271A of the I.T.Act, Delay in filing appeals, Levy of penalty u/s.271A for nonmaintenance of books of account.

Analysis:
1. Delay in Filing Appeals: The assessee filed an application for condonation of delay in filing the appeals, which was allowed by the tribunal considering the facts and circumstances of the case. The appeals were then heard on merits after considering submissions and material facts available on record.

2. Levy of Penalty for Nonmaintenance of Books of Account: The main issue raised by the assessee was the levy of penalty u/s.271A for nonmaintenance of books of account. The AO initiated penalty proceedings as the assessee failed to maintain books of accounts despite receiving consultancy charges exceeding the limit. The CIT(A) upheld the penalty, leading to the appeal before the tribunal.

3. Legal Interpretation: The tribunal analyzed the provisions of Section 139(9) and relevant case laws to determine the compliance requirements for maintaining books of account under Section 44AA. Referring to the decision in Pyarelal Gaur, the tribunal emphasized that the absence of a specific rule for people covered under Section 44AA(2) should not automatically lead to penalty imposition for nonmaintenance of books of account.

4. Judicial Precedents: Citing the decision of the Karnataka High Court in Babu Reddy, the tribunal highlighted that in the absence of a prescribed format for maintaining books of accounts, assessees are entitled to maintain books as per the nature of their business. The tribunal concluded that if documents enable the computation of income under the Income-tax Act, they should be considered sufficient compliance with Section 44AA.

5. Decision: Based on the legal interpretations and precedents, the tribunal set aside the order of the CIT(A) and deleted the penalty imposed u/s.271A for nonmaintenance of books of account for the assessment year 2009-2010. The tribunal extended this decision to other appeals for subsequent assessment years, leading to the deletion of penalties imposed in those cases as well.

6. Final Verdict: The tribunal allowed all appeals of the assessee (ITA Nos.203 to 206/CTK/2016) and pronounced the order in the open court on 23/11/2017. The judgment emphasized the importance of compliance with legal provisions and highlighted the significance of maintaining adequate documentation for income computation under the Income-tax Act.