Commissioner of Income Tax vs S.K. Gupta and Co.

The present appeal has been filed u/s 260A of the income tax Act, 1961 (hereinafter referred to as "the Act") against the order dated September 2, 1999, passed by the Appellate Tribunal, New Delhi. The appeal has been admitted on the following substantial question of law vide order dated November 13, 2006: Whether, on facts and in the circumstances of the case, the learned income tax Appellate Tribunal was legally correct in holding that there was a reasonable cause for not getting the accounts audited as no accounts were maintained, and thus the assessee could not be penalised both under sections 271A and 271B of the income tax Act, whereas the assessee being a contractor having total receipts from contract work at Rs. 1,24,69,486 has failed to maintain books of account and has not got his accounts audited u/s 44AB of the income tax Act. Thereafter, the assessee has violated the provisions contained in both the sections and he is liable for penal action both under sections 271A and 271B of the income tax Act, 1961?

Briefly stated the facts giving rise to the present appeal are as follows:

The appeal relates to the assessment year 1990-91. The respondent-assessee was a firm which had been granted registration u/s 185(1)(a) of the Act for the assessment year 1985-86. It is engaged in the construction work. It had not maintained any books of account. The receipts from contract business was to the tune of Rs. 1,24,69,486. As the assessee had not maintained any books of account, it did not get its books of account audited nor submitted any audit report while filing the return on income. Penalty proceedings u/s 271B of the Act was initiated by the assessing authority who vide order dated May 23, 1991, imposed a sum of Rs. 62,350 as penalty for not getting the accounts audited. The assessee feeling aggrieved preferred appeal before the Commissioner of income tax (Appeals) who vide order dated July 28, 1993, cancelled the penalty which order has been upheld by the Tribunal.

We have heard Sri A.N. Mahajan, learned standing counsel for the Revenue and Sri R.R. Kapoor, learned counsel appearing for the respondent assessee.

Sri Mahajan contended that the Tribunal has erred in law while upholding order of the Commissioner of income tax (Appeals) cancelling the penalty inasmuch as the assessee had failed to get its books of account audited.

The submission of Sri Mahajan is misconceived for the reason that the requirement of getting the books of account audited could arise only where the books of accounts are maintained. If for some reason the assessee has not maintained the books of account the appropriate provision under which penalty proceedings can be initiated is u/s 271A of the Act which recourse has also been taken by the assessee as would appear from the order of the Tribunal.

The Tribunal was, therefore, justified in upholding the order of the Commissioner of income tax (Appeals) cancelling the penalty imposed u/s 271B of the Act. The appeal fails and is, therefore, dismissed.