Smt. Rajni vs Ito
2004 Latest Caselaw 584 Del

ORDER

M.V. Nayar, A.M.:

The assessed is in appeal against the order of Commissioner (Appeals)-IX, New Delhi, in appeal No. 202/98-99, dated 31-7-2000.

The grounds of appeal are as given below :

"1. The learned Commissioner (Appeals) has erred on facts as well as in law in sustaining the penalty under section 271A by not appreciating :

(a) The legal position that rule 6F does not prescribe any books for persons engaged in business.

(b) That the appellant has kept copy on basis of which balance sheet is drawn from year to year and income is shown by increase in assets over those in the last year. This method of computation of income has been duly accepted from year to year and even for this year.

(c) That the appellant has not committed the default as stated by the learned Commissioner (Appeals).

(d) Judgments relied upon by the appellant in written arguments dated 14-4-1999, inspite of the copies of the judgments having been duly supplied.

2. The learned Commissioner (Appeals) is not correct in stating that penalty notices issued remained uncomplied with because notices dated 24-12-1996 and 13-5-1997, were not received by the appellant. Letter dated 3-6-1997, fixing the case for 10-6-1997 (though received on 11-6-1997, i.e., after the date of hearing), was duly complied with as admitted by the assessing officer in the penalty order.

It is, therefore, prayed that the penalty imposed may kindly be cancelled.

2. The brief facts of the case are that the assessed had filed a return of income of Rs. 60,669. The return was processed under section 143(l)(a) and penalty proceedings under section 271A of the Income Tax Act, 1961 read with section 274, were initiated for nonmaintenance of books of account, as the assessed's income exceeded the threshold limit of Rs. 40,000. A show-cause notice under section 271A read with section 274 was' issued on 24-12-1996. This notice was not complied with. A second show-cause notice was issued on 13-5-1997, for compliance on 23-5-1997.

2. The brief facts of the case are that the assessed had filed a return of income of Rs. 60,669. The return was processed under section 143(l)(a) and penalty proceedings under section 271A of the Income Tax Act, 1961 read with section 274, were initiated for nonmaintenance of books of account, as the assessed's income exceeded the threshold limit of Rs. 40,000. A show-cause notice under section 271A read with section 274 was' issued on 24-12-1996. This notice was not complied with. A second show-cause notice was issued on 13-5-1997, for compliance on 23-5-1997.

This notice was served on 19-5-1997. This notice was also not complied with. As the assessed had not filed trading a/c, P&L a/c and balance sheet along with return of income, and as assessed did not comply with the two show-cause notices issued, the assessing officer concluded that the assessed had no reasonable explanation to offer for non-maintenance of books of account as per the requirement of section 44AA of the Income Tax Act, 1961. A penalty of Rs. 6,000 was levied vide order dated 26-6-1997.

3. Commissioner (Appeals) confirmed the penalty against which the assessed is now in appeal before us.

3. Commissioner (Appeals) confirmed the penalty against which the assessed is now in appeal before us.

4. Shri K.R. Manjani, advocate, appeared for the assessed, The authorised representative submitted that neither the Act nor the rule prescribes types of books of account to be maintained. The assessed maintains a copy in which bank transactions, sundry debtors and creditors, investments and drawings are kept from which balance sheet is drawn and income is declared by increase of assets over those in last years. The Authorised Representative submitted that the computation has been done on the basis of Circular dated 26-2-1969, by CBDT wherein net worth basis was recommended for computation of income. Thus, the assessed satisfied the conditions of section 44AA(1) of the Income Tax Act, 1961, because she has kept details from which income is deduced. Therefore, the levy of penalty is illegal and arbitrary, and should be cancelled. The authorised representative relied on the ruling of Tribunal, Chandigarh 'A' Bench reported in Asstt. CIT v. Anfl Luthra (2001) 116 Tamnan 126 (Chd) (Mag) dated 18-7-2000

4. Shri K.R. Manjani, advocate, appeared for the assessed, The authorised representative submitted that neither the Act nor the rule prescribes types of books of account to be maintained. The assessed maintains a copy in which bank transactions, sundry debtors and creditors, investments and drawings are kept from which balance sheet is drawn and income is declared by increase of assets over those in last years. The Authorised Representative submitted that the computation has been done on the basis of Circular dated 26-2-1969, by CBDT wherein net worth basis was recommended for computation of income. Thus, the assessed satisfied the conditions of section 44AA(1) of the Income Tax Act, 1961, because she has kept details from which income is deduced. Therefore, the levy of penalty is illegal and arbitrary, and should be cancelled. The authorised representative relied on the ruling of Tribunal, Chandigarh 'A' Bench reported in Asstt. CIT v. Anfl Luthra (2001) 116 Tamnan 126 (Chd) (Mag) dated 18-7-2000

5. Ms. Vandana Verma, Departmental Representative, appeared for the department. She relied on the order of the assessing officer and the order of the Commissioner (Appeals).

5. Ms. Vandana Verma, Departmental Representative, appeared for the department. She relied on the order of the assessing officer and the order of the Commissioner (Appeals).

6. We have examined the rival submissions. The assessed's income for the year was Rs. 60,000 which is excess than the prescribed limit of Rs. 40,000 prescribed under the Act. The assessment was completed under section 143(l)(a) of the Income Tax Act, 1961. The assessed has been maintaining bank transactions, sundry debtors and creditors, investments and withdrawals for which balance sheet is drawn and defective bills of over those of last year (sic). Since the form of keeping/maintaining accounts has not been prescribed, we agree with the view of the Authorised Representative that this computation was on the basis of the Circular dated 26-2-1969, by the CBDT wherein the net worth basis was recommended for computation of income. According to it, the assessed satisfies the condition of section 44AA(1) of the Income Tax Act, 1961, for which assessed had kept details from which income was deduced. Following the judgment of Tribunal, Chandigarh 'A' Bench, in Asstt. CIT v. Anil Luthra (supra), we cancel the penalty imposed by the assessing officer of Rs. 6,000. The order of the Commissioner (Appeals) is set aside and the appeal of the assessed is allowed.

6. We have examined the rival submissions. The assessed's income for the year was Rs. 60,000 which is excess than the prescribed limit of Rs. 40,000 prescribed under the Act. The assessment was completed under section 143(l)(a) of the Income Tax Act, 1961. The assessed has been maintaining bank transactions, sundry debtors and creditors, investments and withdrawals for which balance sheet is drawn and defective bills of over those of last year (sic). Since the form of keeping/maintaining accounts has not been prescribed, we agree with the view of the Authorised Representative that this computation was on the basis of the Circular dated 26-2-1969, by the CBDT wherein the net worth basis was recommended for computation of income. According to it, the assessed satisfies the condition of section 44AA(1) of the Income Tax Act, 1961, for which assessed had kept details from which income was deduced. Following the judgment of Tribunal, Chandigarh 'A' Bench, in Asstt. CIT v. Anil Luthra (supra), we cancel the penalty imposed by the assessing officer of Rs. 6,000. The order of the Commissioner (Appeals) is set aside and the appeal of the assessed is allowed.

7. In the result, the appeal of the assessed is allowed.

7. In the result, the appeal of the assessed is allowed.