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TMI Blog1993 (5) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... 90. In the reply to show-cause notice, the assessee in its letter dated 15-1-1991 stated as under : " It is very true that I have not maintained regular books of accounts such as cash book, ledger etc. but I have got available following information with me such as purchase bills and a register maintained regarding purchase of goods and amount paid to them. " Assessments were completed under section 143(1)(a) for the assessment year 1988-89 and for the assessment year 1989-90 accepting the income returned. 3. Pursuant to the assessment orders, the Assessing Officer initiated penalty proceedings and imposed penalty of Rs. 10,000 and Rs. 5,000 respectively for these years under section 271A of the Income-tax Act, 1961 for the failure of the assessee to maintain books of accounts as required under section 44AA of the Income-tax Act without reasonable cause. The assessee furnished written explanation in response to penalty notice of the assessment year 1988-89 while he failed to do so for the assessment year 1989-90. The Assessing Officer concluded that he was satisfied that there was no reasonable cause for the failure of the assessee to maintain books of accounts and the explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot necessary to prescribe rules for each and every line of business. Alternatively, he has also conceded that atleast minimum penalty could have been levied by the Assessing Officer. 8. Shri G.N. Gadgil, the learned counsel for the assessee was heard at great length. According to him, the Board has not prescribed books of accounts to be maintained for business as yet as in the case of profession. According to him, section 44AA(1) requires that such books of accounts shall be kept and maintained which may enable the Assessing Officer to compute his total income in accordance with the provisions of the Income-tax Act, 1961. Referring to pages 5 and 6 of his paper compilation, he pointed out that the assessee could compute the business income with reference to purchase bills and purchase register and therefore, requirement of section 44AA was satisfied. This practice is also sought to be reinforced by subsequent action of the Assessing Officer in accepting the income returned under section 143(1)(a). He also pointed out that the Board has not prescribed books of accounts for persons carrying on business or profession other than those professions for which the Board has prescribed bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period for which the books of accounts and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained. " It would be seen that the requirement is the keeping and maintenance of books and that too such books of accounts and other documents which would enable the Assessing Officer to compute the total income in accordance with the provisions of the Income-tax Act. It is significant to note the words "compute his total income in accordance with the provisions of this Act". Therefore, the requirement of law is that the assessee should maintain such books of accounts which would enable the Assessing Officer to compute the total income in accordance with the various provisions of the Act. Section 5 of the Income-tax Act, 1961 provides the scope of total income which includes all income from whatever source derived which is received or deemed to be received in India or accrues or arises or is deemed to accrue or arise to him in India during the previous year or accrues or arises to him outside India during such year in the case of a resident. Section 7 deals with income deemed to be received, while section 9 deals with income deemed to accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act nor the rules have prescribed the specified books of accounts to be maintained for the purpose of business. Therefore, recourse is to be taken to the commercial parlance. The learned author Shri J. R. Batliboi in his books on "Advanced Accounting" 25th edn. states that ordinarily books of accounts may be divided into two classes, namely, (a) principal books, namely, Ledgers and (b) subsidiary books or books of original entry such as cash book, purchases book, sales book, journal, bill books, etc. In the light of what is understood as books of accounts in the commercial parlance, it is seen that what has been maintained by the assessee could not be considered as books of accounts at all. During the course of arguments, the learned counsel for the assessee laid stress on the facts that the assessee could furnish computation statement of total income and this has been accepted as correct and complete by the Assessing Officer. 12. Let us look into the computation statements filed by the assessee for these years which are similar. At once, it has to be stated that the assessee has only business income and not income from any other sources and therefore, business income itself h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income offered by the assessee. In these facts and circumstances of the case and despite the admission of the assessee in the computation statements filed alongwith the return that regular books of accounts have not been maintained, but income was only estimated, the contention which was strenuously made by the learned counsel for the assessee is not acceptable because to accept such contention would amount to travesty of truth. The mere fact that return has been accepted under section 143(1)(a) itself would not support the plea of the assessee that complete and correct books of accounts have been maintained and the method of accounting has been systematically followed by the assessee. There may be several administrative reasons for which the income returned in petty cases might be accepted in order to save valuable time for applying to revenue yielding cases. But by itself it would not amount to maintenance of such books of accounts by the assessee which would enable the Assessing Officer to compute the total income. On the other hand, we are satisfied and the assessee also admitted that the assessee has not maintained regular books of accounts or such books of accounts as under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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