9911796707
TMI Blog2004 (4) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 . In case it is taken that assessee is following the system in which income is returned on completion of the project and in case project goes on for more than 5 years and assessee gets its books of account audited for last year in which project is completed, then from where Assessing Officer will be able to verify the figures of expenses and receipts etc. of earlier years. So, it is against the very principle of section 44AB that in project completion assessee would get the books of account audited in the last year and not in earlier years when he is debiting the expenses and showing sundry debits and different types of receipts are also there. Thus, I am of the view that assessee at the outset had not been able to bring before me the audit guideline and even if such guideline is there, the same is against the very provisions of section 44AB. Thus, I am of the view that assessee was under obligation to get its accounts audited but the same has not been done and it is a case of levy of penalty. - Member(s) : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the decision of Hon'ble Gujarat High Court in the case of Rajkot Engg. Association v. Union of India [1986] 162 ITR 28, in which it was laid down that section 44AB prescribes limits of turnover and gross receipt. Their Lordships have also observed that reasons are obvious and a particular privilege conferred or an obligation entailed with reference to the gross receipts or turnover or with the value of the property is not foreign to the present Income-tax Act. The Assessing Officer was of the view that on the basis of above observation that section 44AB of the Act prescribe mandatory limit, but the aim is not, just sales or turnover but even the value of the property is also within the scope of that provision. In the case of the assessee, there were advances of Rs. 2.20 crores and the very object of the provisions of section 44AB was to cover the big assessees as in the present case and he levied penalty of Rs. 1 lakh for not getting the books of account audited. 3. Before the ld. CIT(A), the assessee reiterated the same submissions and pointed out that words "total sales", "turnover" or "gross receipt" have been used loosely and not without any amount of deliberateness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a reasonable cause in getting his accounts audited. Therefore, the penalty is deleted." 5. The ld. D.R., placing reliance on the order of the Assessing Officer, submitted that undisputedly the assessee is in receipt of Rs. 2.20 crores from different customers and treated the same as advances. The said sum is to be included in the words "gross receipt" and the ld. CIT(A), instead of going into this issue, has simply gave benefit that assessee was having bona fide belief that its books of account were not to be audited under section 44AB of the Act inspite of the fact that assessee had filed balance sheet and mentioned therein that copy of audit report is enclosed which otherwise was not found available along with the return. It means the very basis of the ld. CIT(A) in deleting the penalty was not supported by the factual position and order of the ld. CIT(A) deserves to be reversed. 6. As against it, the ld. counsel for the assessee had reiterated the same submissions which were raised before the Assessing Officer and the ld. CIT(A) and he has submitted written submissions and the same are reproduced below so that all the pleas of the assessee may be brought on record:- "2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover' and 'gross receipts' may broadly mean gross in flow of cash receivable and other consideration arising in the course of ordinary activities of an enterprise from the sale of goods or from the rendering of services. It is measured by the charges made to customers or clients for goods supplied or services rendered to them and by the charges and rewards arising from the use of sources by them. It should, however, exclude amounts collected on behalf of the third parties trusts or obligations. 6. The expressions 'total sales' 'turnover, 'gross receipts' in section 44AB allude to transaction which have a bearing on the computation of taxable income of an assessee, under the Income-tax Act, from the business or profession carried on or deemed to be carried on by him. The amounts received should have profit making quality about them. Section 5 of the Act defines scope of total income which is lent another name for taxable income as including all income which is either received by the assessee or which accurse to the assessee, or is deemed to be received or deemed to accrued under the Act, and section 2(45) of the Act defines total income as meaning total amount of income referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for flats shops and applicant's method of accounting is mercantile and applicant is not drawing a 'receipts payments a/c' or/and 'receipts expenditure a/c'. Receipts as contemplated under section 44AB is the one which is credited in the Trading or Profit Loss A/c not otherwise. In the case of an assessee following the mercantile system of accounting a credit entry in respect of receipt does not amount to a constructive receipt unless it is matched by sales in the case of stock. The term 'receipt' shall not apply in the assessee's case as it is dealing in goods in the form of constructed property which is under construction process." Penalty thus imposed was contrary to the provisions of law, and was rightly cancelled by the Hon'ble Commissioner of Income-tax (Appeals), Lucknow." 7. I have considered the rival submissions, perused the record carefully and gone through the factual position which is not in dispute. The only question requires scrutiny is as to whether amount of Rs. 2.20 crores is to be included in the scope of word "gross receipt" used in section 44AB of the Act. The first point raised by the ld. counsel for the assessee is that words used in section 44AB are "total s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee is following the system in which income is returned on completion of the project and in case project goes on for more than 5 years and assessee gets its books of account audited for last year in which project is completed, then from where Assessing Officer will be able to verify the figures of expenses and receipts etc. of earlier years. So, it is against the very principle of section 44AB that in project completion assessee would get the books of account audited in the last year and not in earlier years when he is debiting the expenses and showing sundry debits and different types of receipts are also there. On the basis of above, I am of the view that assessee at the outset had not been able to bring before me the audit guideline and even if such guideline is there, the same is against the very provisions of section 44AB. 9. On the basis of above discussion, I am of the view that assessee was under obligation to get its accounts audited but the same has not been done and it is a case of levy of penalty. 10. Lastly, the ld. CIT(A) had given benefit to the assessee only on the ground that assessee was having bona fide belief that it was under obligation to get its bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
