Karnataka High Court
A. Keshava Bhat vs Income-Tax Officer And Ors. on 18 February, 2000
Equivalent citations: (2001)166CTR(KAR)421, ILR2001KAR2126, [2001]247ITR83(KAR), [2001]247ITR83(KARN), [2001]115TAXMAN208(KAR), 2001 AIR - KANT. H. C. R. 91, 2001 TAX. L. R. 249, (2001) 166 CURTAXREP 421, (2001) 247 ITR 83, (2001) 160 TAXATION 302, (2001) 115 TAXMAN 208, (2000) 49 KANTLJ(TRIB) 521
Author: Ashok Bhan
Bench: Ashok Bhan, K.R. Prasada Rao
JUDGMENT
Ashok Bhan J.
1. The appellant is a practising advocate. He is an income-
tax assessee from the year 1989-90 onwards. For the assessment year 1989- 90, he had declared his gross income at Rs. 45,000. For the assessment year 1990-91, the gross income returned was Rs. 1,00,000, and for the year 1991- 92, the gross receipt was shown at Rs. 1,15,000. After allowing the permis sible deductions, the assessments were framed for all the three years. The tax was paid.
2. Admittedly, for the year 1991-92, the appellant had not maintained books of account. A show-cause notice under Section 271A read with section 273B of the Income-tax Act. 1961 (for short, "the Act"), was issued to him requiring him to explain as to why the penalty be not levied for not complying with the provisions of Section 44AA read with rule 6F(1) of the Income-tax Rules, 1962 (for short, "the Rules")..
3. The appellant filed his reply to the show-cause notice stating therein that because of the proviso to rule 6F(1) he was not required to maintain the books of account for the assessment year 1991-92 and, therefore, no penalty was leviable.
4. The Income-tax Officer did not accept the 'contention raised by the appellant and imposed a penalty of Rs. 2,000 for not maintaining accounts for the year 1991-92. The said order was confirmed in appeal by the Deputy Commissioner of Income-tax (Appeals) by his order dated September 10, 1992. Aggrieved against the order of the appellate authority, the appellant filed a revision petition under Section 264 before the Commissioner of Income-tax. The same was rejected by an order dated August 18, 1993.
5. Aggrieved against the orders passed to the authorities under the Act, the appellant filed the writ petition which has been dismissed by the learned single judge.
6. Parliament inserted Section 44M by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, providing therein that every 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, shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act. Sub-section (3) of Section 44AA provided that the Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe by rules, the books of account and other documents to be kept and maintained under Sub-section (1) or Sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.
7. Rule 6F(1) was inserted in the rules by the Income-tax (Ninth Amendment) Rules, 1981, with effect from November 21, 1981. Provisos (a) and (b) to rule 6F(1) were inserted by the Income-tax (Fifth Amendment) Rules, 1983, with effect from February 28, 1983. The relevant portion of rule 6F(1) is extracted below :
"6F. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorised representative or film artist shall keep and maintain the books of account and other documents specified in Sub-rule (2) :
Provided that nothing in this Sub-rule shall apply in relation to any previous year-
(a) in the case of any person other than a person referred to in Clause (b), if his total gross receipts in the profession do not exceed sixty thousand rupees in any one of the three years immediately preceding the previous year, or, where the profession has been newly set up in the previous year, his total gross receipts in the profession for that year are not likely to exceed the said Amount. . . ."
8. The case of the appellant is that since in one of the years immediately preceding the previous year his gross receipt was less than Rs. 60,000 he was not required to maintain the books of account. The learned single judge did not accept this: contention and held that if the income of an assessee exceeds Rs. 60,000 in any one of the three preceding years from the previous year, then the assesses is required to maintain the books of account. As the income of the appellant exceeded Rs. 60,000 in the assessment year 1990-91, he was mandatorily required to maintain the books of account. Because he had failed to do so, penalty had been rightly been levied.
9. Counsel for the parties have been heard.
10. A reading of rule 6F(1) would spell out that any person carrying on legal profession shall keep and maintain books of account and other documents specified in Sub-rule (2). The proviso to Sub-rule (1) provides that nothing in Sub-rule (1) shall apply in relation to any previous year in the case of any person, if his total gross receipts in the profession do not exceed Rs. 60,000 in any one of the three years iminedintely preceding the previous year. The learned single judge has taken the view that if the gross income exceeds Rs. 60,000 in any one of the three years immediately preceding the previous year, then the assessee is required to maintain books of account. With respect we would not subscribe to the view taken by the single judge. A plain reading of the proviso to Sub-rule (1) is that a person is not required to maintain books of account if the total gross receipts from the profession did not exceed Rs. 60,000 in any one of the three years immediately preceding the previous year and not vice versa. The rule would have read otherwise had that been the intention. The rule then would have been that if the income exceeds Rs. 60,000 in any one of the three years immediately preceding the previous year, then the assessee would be required to maintain the books of account. The proviso provides to the contrary and states that nothing in Sub-rule (1) would apply if the income does not exceed Rs. 60,000 in any one of the three years immediately preceding the previous year.
11. The learned single judge has taken the view that the contemplation of the rule is that gross receipt of Rs. 60,000 should not exceed in any one of the three years preceding the previous year to claim exemption from maintaining the books of account; whereas the contemplation of the rule is that a person is exempted from the operation of Sub-rule (1) if his total gross receipt of income does not exceed Rs. 60,000 in any one of the three years preceding the previous years. If the gross receipt does not exceed Rs. 60,000 in any one of the three years immediately preceding the previous year, then he is not required to maintain the books of account.
12. For the reasons stated above, we accept this appeal, set aside the order of the single judge and those of the authorities under the Act and hold that the imposition of penalty was not justified as the appellant's income did not exceed gross receipt of Rs. 60,000 in one of the assessment years (assessment year 1989-90) immediately preceding the assessment year in question. No costs.