B.V. Nagarathna, J.@mdashThese appeals are filed by the revenue raising the following substantial questions of law:
1. Whether the Tribunal was correct in holding that the bank account and other statements from which income cannot be computed but is written on estimate basis constitute books of accounts and other documents within the meaning of provisions of Section 44AA particularly when Clauses (d) and (f) of Explanation to Sub-section (9) of Section 139 makes a distinction between a case where books of accounts and documents are maintained and a case where such books of accounts and documents are not maintained.
2. Whether the Tribunal was correct in holding that maintenance of bank accounts reflecting receipts and the turnover certificate based on which financial statements are prepared would be sufficient compliance for the purposes of Section 44AA of the Act even though such statements would not accurately take into account expenditure, other payments and receipts etc.?
2. The assessee is a civil contractor. For the assessment year 1999-2000 he had declared a turnover of Rs. 1,66,55,892. The said return was submitted without a tax audit report. The assessing officer, on noticing that the assessee had not maintained books of accounts as prescribed u/s 44A of the Income Tax Act, proceeded to initiate penalty proceedings u/s 271A of the Act. Pursuant to a notice issued to the assessee, a reply was given that the books were maintained in the usual course of computations and that the penalty could not be levied. The assessing officer, however held that the accounts were not maintained in the prescribed form and accordingly levied a penalty as per order dated 19-9-2003. The said order was challenged before the Commissioner (Appeals) which came to be rejected by order dated 30-4-2004. The assessee, being aggrieved by the aforesaid orders, preferred an appeal before the Tribunal. The Tribunal held that the initiation of penalty proceedings was not in accordance with the Act and accordingly dropped the said proceeding. Being aggrieved by the said order, the revenue has filed this appeal.
3. We have heard the learned Counsel for the appellants and the learned Counsel for the respondent assessee.
4. From the material on record, it is evident that for the assessment year 1999-2000, the assessee had declared his turnover by filing a return and the said return was also processed by the assessing officer. However subsequently, Section 44AA of the Act was applied and notice was issued to the assessee contending that the books of accounts were not maintained in terms of the said section. A reading of the said Section makes it clear that a person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette has to maintain books of accounts and other documents, in order to compute his total income in accordance with the provisions of this Act. Nowhere in the said Section is it stated that the books of accounts have to be maintained as per the prescribed format. This is not a case where no books of accounts were maintained at all. On the other hand, it is contended by the learned Counsel for the revenue that the books of accounts were not maintained as per the prescribed format. Although books of accounts had to be prescribed such books had not been prescribed under the rules for the business of civil contracts, in which the assessee is engaged. The Tribunal has considered the said question and has concluded when no prescribed format has been issued by the revenue, the maintenance of the books of accounts as far as the civil contract business is concerned in the manner in which the books of accounts were maintained by the assessee, could not be found fault with and accordingly, has allowed the appeal filed by the assessee.
5. We have perused the reasoning given by the Tribunal and also the relevant provision of law with regard to the maintenance of books of accounts. As already stated, in the absence of there being any prescribed format for the various professions as stated in the said Section are entitled to maintain books of accounts in terms of the nature of the business or profession carried on by the various categories mentioned therein. In the instant case, since on the basis of the books of accounts produced by the assessee, the assessing officer has processed the assessment and has accepted, the said return, the subsequent issuance of notice and proceedings initiated for imposition of penalty on the ground that the books of accounts were not maintained in accordance with the provisions of the Act, in our view, is not just and proper, when there is no infraction of Section 44AA of the Act. Accordingly, the penalty proceedings have to be dropped and the appeals filed by the revenue have to be dismissed.
Answering the questions of law against the revenue, the appeals stand dismissed.
