2005 (5) TMI 293 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under section 271A of the Income-tax Act.
2. Non-maintenance and non-production of books of account during the survey.
3. Applicability of Rule 6F of the Income-tax Rules.
4. Validity of penalties imposed for past assessment years.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271A:
The appeals concerned penalties levied under section 271A for the assessment years 1997-98 to 2001-02 and 2002-03. The Assessing Officer imposed penalties of Rs. 1 lakh for the former and Rs. 25,000 for the latter. The CIT(A) reduced these penalties to Rs. 45,000 and Rs. 11,250, respectively. The appellants challenged the partial relief granted by the CIT(A) and sought further reduction.

2. Non-maintenance and Non-production of Books of Account:
During a survey conducted on 20-3-2003 under section 133A, the appellants admitted to not maintaining regular books of account. However, they later retracted this statement, claiming that the vouchers and books were with their accountant. The Assessing Officer found contradictions in their statements and observed that the books produced later were freshly prepared on a computer, suggesting they were not maintained contemporaneously. The CIT(A) noted that the appellants had filed profit & loss accounts and balance sheets with their returns, indicating that books were maintained but not produced during the survey.

3. Applicability of Rule 6F of the Income-tax Rules:
The appellants argued that as per sub-rule (4) of Rule 6F, they were only required to maintain books of the current year at the business premises, not previous years. They contended that penalties for past years were unjustified as the rule did not mandate keeping those books at the business location. The Tribunal examined the legal provisions and concluded that the appellants were not required to keep books of account for previous years at the place of profession, thus supporting the appellants' argument.

4. Validity of Penalties Imposed for Past Assessment Years:
The Tribunal noted that penalties were imposed for assessment years 1997-98 to 2002-03, which had already ended by the time of the survey. The Tribunal emphasized that penalties under section 271A should consider Rule 6F, which does not require maintaining books of account for past years at the business premises. The Tribunal found that the appellants had maintained books for the relevant years, as evidenced by the profit & loss accounts and balance sheets filed with their returns. Therefore, the penalties were deemed wrongly imposed.

Conclusion:
The Tribunal quashed the penalties, holding that the appellants did not commit any default by not producing books of account for past years during the survey. The appeals filed by the assessees were allowed, and the penalties levied by the revenue authorities were annulled.