M/s. Shiv Construction Consortium, Baroda v. The Income tax Officer,Ward-2(5),, Baroda

ITA 681/AHD/2010 | 2005-2006
Pronouncement Date: 29-03-2012 | Result: Allowed

Appeal Details

RSA Number 68120514 RSA 2010
Assessee PAN AABAS7589Q
Bench Ahmedabad
Appeal Number ITA 681/AHD/2010
Duration Of Justice 2 year(s) 27 day(s)
Appellant M/s. Shiv Construction Consortium, Baroda
Respondent The Income tax Officer,Ward-2(5),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-03-2012
Date Of Final Hearing 29-03-2012
Next Hearing Date 29-03-2012
Assessment Year 2005-2006
Appeal Filed On 03-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI JM AND SHRI A. MOHAN ALAN KAMONY AM) ITA NO.681/AHD/2010:A. Y.: 2005-06 M/S. SIV CONSTRUCTION CONSORTIUM GSRTC COMPOUND RACE COURSE CIRCLE VADODARA PA NO. AABAS 7589 Q VS THE INCOME TAX OFFICER WARD 2 (5) BARODA (APPELLANT) (RESPONDENT) APPELLANT BY WRITTEN SUBMISSION (NONE) RESPONDENT BY SHRI DINESH SINGH SR. DR DATE OF HEARING: 29-03-2012 DATE OF PRONOUNCEMENT: 29-03-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT (A)-II B ARODA IN APPEAL NO. CAB-II-144/08-09 DATED 20.11.2009 FOR THE ASSESSME NT YEAR 2005-06. 2. THE ASSESSEE HAS PRESSED TWO GROUNDS IN ITS GROUNDS OF APPEAL WHEREIN GROUND NO.2 IS GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION. THE OTHER LONE GROUND IN THE APPEAL I S REPRODUCED HEREIN BELOW:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACT ION OF THE LD. A. O. IN LEVYING PENALTY U/S 271B AMOUNTING TO RS.26 400/- BY DISREGARDING THE CONTENTION OF THE A PPELLANT AS TO THE EXISTENCE OF A REASONABLE AND SUFFICIENT CAUSE IN - 2 - NOT OBTAINING THE TAX AUDIT REPORT. THE LEVY OF PEN ALTY OF RS.26 400/- BEING UNJUSTIFIED IN LAW AND IN FACTS I S PRAYED TO BE CANCELLED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM AND ITS ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 3 1-12-2007 DETERMINING TOTAL INCOME AT RS.7 93 050/-. IT WAS N OTED BY THE LEARNED AO THAT THE ASSESSEE HAS NOT FILED AUDIT REPORT U/S 44AB OF THE ACT AND THEREFORE PENALTY PROCEEDINGS WERE INITIATED U/S 2 71B OF THE ACT. BEFORE THE LEARNED AO THE ASSESSEE SUBMITTED THAT THE PROV ISIONS OF SECTION 44AB IS APPLICABLE IN THE CASE WHERE TURNOVER OR GR OSS RECEIPT EXCEEDS RS.40 LACS AND THAT TURNOVER SHOULD BE CONSTRUED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSE SSEE. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THOUGH THE TERM TUR NOVER IS NOT DEFINED THE GUIDANCE NOTE OF THE ICAI CLARIFIES THAT TURNOV ER IS THE AGGREGATE AMOUNT OF SALES OR SERVICE RENDERED BY AN ASSESSEE DURING THE PREVIOUS YEAR. IT WAS FURTHER SUBMITTED THAT AS PER REGULARL Y FOLLOWED METHOD OF ACCOUNTING ASSESSEES RECEIPTS DO NOT PARTAKE THE CHARACTER OF TURNOVER AND HENCE SECTION 44AB OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE AND THEREFORE ASSESSEE WAS NOT REQUIRED TO GET ITS ACC OUNT AUDITED AND CONSEQUENTLY PENAL PROVISIONS OF THE ACT ARE NOT AT TRACTED. HOWEVER THE LEARNED AO WAS NOT CONVINCED BY THE REPLY OF THE AS SESSEE AND LEVIED THE PENALTY VIDE HIS ORDER DATED 23-06-2008 U/S 271 B OF THE ACT WITH THE FOLLOWING WORKING:- 1. HALF PERCENT OF TOTAL TURNOVER/BUSINESS RECEIPT HALF PERCENT OF RS.52 87 000/- : RS.26 435/- 2. ONE HUNDRED THOUSAND RUPEES I.E. : RS.1 00 000/- LESSER OF THE ABOVE IS RS.26 435/-. - 3 - . 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO AFTER EXAMINING THE FACTS CONFIRMED THE ORDER OF THE LEARNED AO AND HELD AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. SECTION 44AB US APPLICABLE WHEN THE ASSESSEE IS CARRYING ON A BUSINESS WHERE THE TURNOVER SALE OR GROSS RECEIPT IS ABOVE RS.40 LACS. IF BOTH THESE CONDITIONS ARE MET THE ASSESSEE IS REQUI RED TO GET HIS ACCOUNTS AUDITED. IN THE INSTANT CASE THE APPELLAN T IS CARRYING ON A BUSINESS. THE GROSS RECEIPTS ARE MORE THAN RS.40 LA CS. THE SECTION IS NOT CONCERNED WITH THE METHOD OF COMPUTA TION OF INCOME. IT IS ONLY CONCERNED WITH THE TURNOVER THE SALE OR THE GROSS RECEIPTS. IN THE APPELLANTS CASE THE GROSS RE CEIPTS WERE ABOVE RS.40 LACS BEING RS.52 87 000/-. HE WAS LIABL E TO GET HIS ACCOUNTS AUDITED. SINCE HE FAILED TO DO SO THE ASSE SSING OFFICER WAS JUSTIFIED IN LEVY OF PENALTY. THE SAME IS CONFI RMED. 5. BEFORE US THE LEARNED AR SUBMITTED WRITTEN SUBM ISSION WHICH IS REPRODUCED HEREIN BELOW: THE APPELLANT IS ENGAGED IN THE BUSINESS OF CONSTR UCTION AND FOLLOWS 'PROJECT COMPLETION METHOD OF ACCOUNTING' A ND ACCORDINGLY THE AMOUNT OF RS.52 87 000/- RECEIVED DURING THE YE AR WAS TREATED AS ADVANCE. SINCE THE MEANING OF 'TURNOVER' IS NOT DEFINED IN T HE ACT THE MEANING WAS SOUGHT TO BE OBTAINED FROM THE GENERAL CLAUSES AND ALSO THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF C HARTERED ACCOUNTANTS OF INDIA FOR AUDIT U/S. 44AB WHEREIN 'T URNOVER' IS EXPLAINED TO MEAN 'THE AGGREGATE AMOUNT FOR WHICH S ALES ARE EFFECTED OR SERVICES RENDERED BY AN ENTERPRISE'. THE APPELLANT RELIED ON THE HON'BLE FINANCE MINISTE R'S SPEECH AS WELL AS THE BOARC 4 ''S CIRCULAR NO. 387 DATED 6 TH JULY 1984 EXPLAINING THE OBJECTIVE OF INTRODUCTION OF PROVISI ONS OF SEC. 44AB. THE APPELLANT ALSO RELIED ON THE DECISION OF THE JU RISDICTIONAL HON'BLE TRIBUNAL IN THE CASES OF: - 4 - A) PATEL AMBALAL SOMNATH SARKAR 100 TTJ 735 (AHD.) WHERE THE ASSESSEE'S TURNOVER FROM SALES WAS LESS THAN RS .40.00 LAKHS AND ALONG WITH INTEREST RECEIPT THE GROSS RECEIPTS EXCEEDED THE THRESHOLD LIMIT. THE ASSESSEE HAVING SHOWN BOTH THE RECEIPTS SEPARATELY IN THE ACCOUNTS NURTURED BONAFIDE BELIEF THAT PROVISIONS OF SEC. 44AB WERE NOT ATTRACTED UNLESS THE TURNOVER EXCEEDED RS. 40.00LAKHS. THIS BELIEF ACCORDING TO THE HON'B LE TRIBUNAL CONSTITUTED REASONABLE CAUSE AND THUS PENALTY WAS D IRECTED TO BE DELETED. B) IN R. WADIWALA & CO. VS. ACIT 72 TTJ 34 (AHD.) IN THE CASE OF THE BROKER WHO UNDER BONAFIDE BELIEF DID NOT GET THE ACCOUNTS AUDITED U/S.44AB CONSIDERING THAT IN THE CASE OF B ROKER SINCE THE TRANSACTIONS ARE CARRIED OUT ON BEHALF OF OTHERS T HE TRANSACTIONS OF PURCHASE AND SALE ON THEIR BEHALF DID NOT CONSTITUT E TURNOVER. THIS BEING A REASONABLE CAUSE PENALTY WAS DELETED. THE ASSESSEE IN HIS WRITTEN SUBMISSION FURTHER SUBM ITTED THAT SINCE THERE WAS A REASONABLE CAUSE FORMED ON THE BONAFIDE BELIEF OF THE TAX AUDIT BEING NOT APPLICABLE TO IT AND THE PENALTY LE VIED U/S 271 B OF THE ACT MAY BE DELETED. 5.1 ON THE OTHER HAND THE LEARNED DR SUPPORTED THE ARGUMENTS OF THE LEARNED AO AND THE LEARNED CIT(A). 6. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MAT ERIALS ON RECORD. THE ASSESSEE IS IN CONTRACT BUSINESS AND TH EREFORE ACCORDING TO THE FACTS OF EVERY CASE INCOME HAS TO BE BOOKED BY FOLLOWING THE MOST APPROPRIATE METHOD. IN THE APPELLANTS CASE THE BU SINESS IS OF CONSTRUCTION AND DEVELOPMENT OF COMMERCIAL COMPLEX. FOR THE RELEVANT YEAR UNDER CONSTRUCTION THE APPELLANT HAS RECEIVED ONLY ADVANCE FOR PERFORMANCE OF SUCH CONTRACTS. ACCORDING TO THE ACC OUNTING METHOD FOLLOWED BY THE APPELLANT AND AS PER THE TERMS OF T HE CONTRACT ONLY ON COMPLETION OF THE SHOP/OFFICE SPACE SALES ARE BOOKE D. THEREFORE THE ADVANCE RECEIPT OF THE APPELLANT CANNOT BE TERMED A S TURNOVER OF THE CONTRACT FOR THE PREVIOUS YEAR. SINCE THE ASSESSEE HAS FOLLOWED PROJECT - 5 - COMPLETION METHOD CONSIDERING THE TERMS OF CONTRACT OBVIOUSLY ONLY ON COMPLETION OF PROJECT AND ON THE COMPLIANCE OF THE TERMS & CONDITIONS OF THE CONTRACT TURNOVER CAN BE BOOKED IN THE BOOKS O F ACCOUNTS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOR THE REASONS FURNISHED BY THE ASSESSEE AS DISCUSSED ABOVE WE AR E OF THE CONSIDERED VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALT Y U/S 271B OF THE ACT. ACCORDINGLY WE DELETE THE PENALTY LEVIED BY THE RE VENUE. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29-3-2012. SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHME DABAD