By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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Part A — Reported Decisions
42 (2008) 300 ITR (AT) 310 (Cochin)
C. H. Aboobacker Haji v. ITO
A.Y. 2004-05. Dated : 14-7-2006
S. 44AA, S. 271A —Assessee engaged in contract business —
Provision for compulsory maintenance of books of accounts not applicable —
Survey action after issuing notice — Circumstances that AO unable to compute
income of assessee due to non-maintenance of accounts as required by S. 44AA(2)
does not arise — Held, penalty is not leviable.
Facts :
The assessee, a civil contractor had filed his return of
income for A.Y. 2004-05 showing a turnover of Rs.69,22,579 and he had estimated
the income at the rate of 5% of total contract receipts. For earlier years (A.Y.
2000-01 and 2001-02), the assessee had declared his income at the rate of 8% of
the gross contract receipts. Subsequently, there was a survey action against the
assessee u/s.133A and on finding that the assessee had omitted some contract
receipts, the AO concluded that the assessee had violated the provisions of S.
44AA and issued a notice u/s.274 r.w.s. 271A on 10-1-2005 while the actual
assessment order was passed on 23-6-2006. The assessee challenged the impugned
order of the AO before the CIT (A) but without any success.
On appeal to ITAT, the Tribunal held that the penalty was not
leviable and referred to the following :
(1) On the perusal of the provisions of S. 44AA held that
the assessee’s case was not covered by S. 44AA(1).
(2) At most, S. 44AA(2) may be applicable but for
attracting the said Section the condition that the AO was unable to compute
the income of the assessee was not satisfied, because the AO had passed the
penalty order prior to the completion of the assessment.
(3) It may be worth mentioning that the assessee had
offered Rs.5 lakhs as an additional income from his contract business, which
has been accepted without further comments or observation by the AO.
(4) Further, reliance was also placed on well-settled
principle of law as laid down by the Apex Court in the case of Hindustan Steel
Ltd. (1972) 83 ITR 26 (SC) that penalty proceedings are quasi-criminal in
nature and it must be brought on record by the AO that the assessee has
deliberately acted in defiance of law or was guilty of conduct contumacious or
dishonest, but in the reasoning given by the AO in the assessment order,
nothing has been mentioned. Hence, the penalty levied by the AO u/s.271A was
deleted.
Case referred to :
(i) Hindustan Steel Ltd. v. State of Orissa, (1972) 83 ITR 26 (SC).
