Madhya Pradesh High Court
Income-Tax Officer vs Nanak Singh Guliani on 18 September, 2001
Equivalent citations: [2002]257ITR677(MP)
Author: Arun Mishra
Bench: Rajeev Gupta, Arun Mishra
JUDGMENT Arun Mishra, J.
1. This appeal is preferred by the Income-tax Officer aggrieved by the reversal order in respect of imposition of penalty by the Commissioner of Income-tax (Appeals), which order was confirmed on appeal by the Appellate Tribunal.
2. The essential facts indicate that Shri Nanak Singh Guliani, an assessee is engaged in a business of contractor-ship. He was granted a contract amounting to Rs. 88,92,248 from MACT College, Bhopal. Out of this, the assessee had sub-contracted the work of Rs. 39,36,075 to Zenith Engineers, Bhopal, on two per cent, profit and the remaining work was completed by Guliani Construction Company, in which the assessee is a partner. The Assessing Officer found that the total contract amount received by the assessee was more than Rs. 40 lakhs, as such he should have filed a return along with the audit report under Section 44AB of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). Penalty proceedings were initiated under Section 271B. A notice under Section 271B was issued on December 20, 1991. The Income-tax Officer passed an order under Section 271B of the Act to the effect that there was failure by the assessee to get his account books audited from a chartered accountant as required under Section 44AB. As the assessee failed to get his books audited and default committed, he was held liable for penalty and the penalty of Rs. 44,461 was imposed by the Income-tax Officer, Bhopal.
3. Aggrieved by the order, the assessee filed an appeal. The Commissioner of Income-tax (Appeals) allowed the appeal setting aside the penalty. Against the order passed by the Commissioner of Income-tax (Appeals), the Income-tax Officer filed an appeal before the Income-tax Appellate Tribunal, Indore, which was dismissed. Hence, the present appeal has been filed before this court.
4. Learned counsel for the appellant submits that since the gross receipts of the assessee exceeded Rs. 40 lakhs, it was mandatory for him to get his accounts audited. There was no reasonable explanation given and the grounds adopted for setting aside the imposition of penalty by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal are perverse. Hence, the orders are liable to be set aside in the present appeal under Section 260A of the Act.
5. No doubt, it is mandatory under Section 44AB of the Income-tax Act, 1961, to get the accounts audited, however Section 271B which deals with imposition of penalty, is reproduced hereunder :
"271B. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under Section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent, of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less."
6. A reading of the aforesaid provision makes it clear that the imposition of penalty is not mandatory. The word used is "may". A discretion is conferred on the authority to impose penalty or not to impose it. That the provision with respect to imposition of penalty is not mandatory, is further fortified by the statutory provision contained in Section 273B of the Act, which is reproduced hereunder :
"273B. Notwithstanding anything contained in the provisions of Clause (b) of Sub-section (1) of Section 271, Section 271A, Section 271B, Section 271BB, Section 271C, Section 271D, Section 271E, Section 271F, Clause (c) or Clause (d) of Sub-section (1) or Sub-section (2) of Section 272A, Sub-section (1) of Section 272AA or Sub-section (1) of Section 272BB or Clause (b) of Sub-section (1) or Clause (b) or Clause (c) of Sub-section (2) of Section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure."
7. The provision of Section 273B contains a non obstante clause and provides that notwithstanding the provision of Section 271B, no penalty shall be impos-able on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for the said failure.
8. In the instant case, it is found concurrently by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal that there was reasonable cause for the assessee not to get the accounts audited as required under Section 44AB. The finding recorded that the contract was divided in two portions, from one portion of the contract the assessee had received only two per cent, of the contract value and from the other portion, which was given to the other concern, in which he was a partner, he returned share income from the concern in the return filed by him. It appears that the assessee had disclosed the entire facts and he did not suppress any material fact with respect to the entire contract value and his share and it is also not the case of the Department that sub-contracting was impermissible. The finding which has been recorded is that the assessee was under the bona fide belief that the amount obtained by the sub-contractor was not to be accounted towards his income and has been taken to be a reasonable cause for not getting the accounts audited. It is also the finding recorded that the assessee was having no control over the account maintained by Zenith Engineers to whom the part of the main contract was sub-divided.
9. Particularly in view of the fact that there was no suppression of the income made by the assessee, made from the entire contract and the explanation which was filed by him has not been found to be incorrect and the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal having accepted his explanation, we find no substantial question of law worth consideration involved in the present appeal.
10. Resultantly, the appeal is dismissed in limine.