ANAND PRAKASH, A. M.: This appeal is directed against imposition of penalty of Rs. 765 imposed on assessee under s. 271A of IT Act, 1961. On date of hearing none attended on behalf of assessee even though notice had been served on assessee nor there was any application for adjournment. Accordingly, appeal was heard ex-parte and is being disposed of on basis of material on record and after taking into account submissions of ld. Departmental Representative. Sec. 271A so far as it is relevant for purpose of present appeal reads inter alia as follows: "........if any person without reasonable cause fails to keep and maintain any such books of account and other documents as required by s. 44AA or rules made thereunder in respect of any previous year ........the ITO............may direct that such personal shall pay by way of penalty sum which shall not be less than 10 per cent but which shall not exceed 50 per cent of amount of tax, if any, which would have been avoided if income returned by such person had been accepted as correct income." In present case, assessee, who is contractor, had filed his return of income for asst. yr. 1980-81 declaring income of Rs. 53,000. It is not clear from order of ITO as to on what amount assessment in question was made. Inasmuch as assessee had not maintained books of account, ITO initiated penalty proceedings under s. 271A against assessee and as satisfactory explanation for non-maintenance of books of account was not forth-coming from assessee, ITO imposed on assessee penalty of Rs. 765. How aforesaid figure of Rs. 765 has been worked out is not clear from order of ITO. assessee appealed against aforesaid order of ITO to ld. AAC and pleaded before her that assessee maintained bank account in which all contract receipts were reflected and that for purpose of his assessment, aforesaid bank account was enough and that no set of books of account has been prescribed yet under s. 44AA and that, therefore, it could not be said that assessee had violated provisions of s. 44AA. ld. AAC accepted that above plea of assessee and deleted penalty in question by observing, inter alia, as follows: "However, considering facts and circumstances of case I find there is merit in case of assessee. Sec. 44AA(2) does not prescribe any types o f accounts which has to be maintained by person carrying on business or profession. What is required by that section is to keept such books of accounts or other documents from which ITO can be ablve to compute total income of assessee. In present case since assessee has maintained bank account which enables ITO to compute income of assessee, I direct ITO to delete penalty imposed in this case." aforesaid order of ld. AAC is assailed by department as unsustainable in law and on fact. According to ld. Departmental Representative maintenance of bank account was no enough for ascertaining profit of assessee and, therefore, it could not be said that assessee had maintained books of account in terms of s. 44AA. requirement of sub-s. (1) of s. 44AA is that assessee shall maintain "such books of account and other document as may enable ITO to compute his total income in accordance with provisions of this Act.". mere maintenance of bank account could not enable ITO to compute assessee's total income in accordance with provisions of Act. Therefore, ld. AAC had, according to ld. Departmental Representative, erred in accepting assessee, plea and deleting penalty on that account. We have given careful consideration to above submissions of ld. Departmental Representative. There appears to us to be merit in above contention of ld. Departmental Representative. bank statement is not books of accounts maintained by assessee, It is copy accounts maintained by bank which is supplied by bank to assessee. It cannot, therefore, be said that assessee had maintained bank a/c. Apart from it, it is not possible to ascertain total income of assessee on basis of mere bank account. assessee was, therefore, definitely guilty without any reasonable cause of non-maintenance of such books of account and other documents as may enable ITO to compute his total income in accordance with provisions of IT Act, 1961. imposition of penalty for this default was, in our opinion justified. Despite, it however, we are unable to sustain present penalty order because ITO was has imposed penalty, has not been able to grasp essential ingredients of section, viz., 271A in terms of which alone penalty can be imposed by ITO on assessee. From words of section extracted by us above in extenso, it would be clear that penalty in question can be imposed on assessee with reference to tax "which would have been avoided if income returned by such person has been accepted as correct income". It is, therefore, clear that for purpose of coming to conclusion that penalty is impossible on assessee in terms of s. 271A, ITO must apply his mind to returned income and to assessed income and then satisfy himself that there is difference in two on account of which tax has been avoided. it is only after his coming to conclusion that tax has, in fact, been avoided, he has to find out as to whether there was reasonable cause for not maintaining books of account. If he is satisfied that there was not reasonable cause, he has to impose penalty within given minimum and maximum limits which, according to afore-mentioned section, is 10 per cent of tax avoided or 50 per cent of such tax, in present case, ITO has not worked out as to what is tax avoided on account of assessee returning certain income. It was only after he had found out that there was avoidance of tax that he should have examined question as to whether there was reasonable cause for assessee's non-maintenance of books of account. In present case, assessee has not been able to point out cause which should be regarded as reasonable for not maintaining books of account. penalty can, therefore, be imposed by ITO on assessee but for aforesaid purpose, it was necessary for him to have found out tax avoided which he has not done. He has imposed ad hoc penalty of Rs. 765 on assumption as if not guidance has been laid down in section for purpose of imposition of penalty. prima facie, above action of ITO is contrary to law and as such it is not possible for us to sustain it. In result, order of ld. AAC is sustained though on different reasons. *** INCOME TAX OFFICER v. SANYESHI MAJHI