The Commissioner Of Income-Tax vs M/S S C Naregal on 23 September, 2008

[Cites 2, Cited by 3]

Karnataka High Court

The Commissioner Of Income-Tax vs M/S S C Naregal on 23 September, 2008

Bench: V.G Sabhahit, S.N.Satyanarayana

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EN $53 HIGH COURT 9? KAgs§f§%§f :ﬂf'
CERCUET BE§¢5_g$ QaAR®§§. 
BATES THIS THE 23"V3Ayf¢f'§E$?ﬁ&§:ﬁ72¢@€
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THE HSN'BLE Mg ﬁysrgcé v!Q éA$B%HlT

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THEVHON'BLE MR;JU$TICEV%ﬁSATYANARAYANA
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BETwEEN; i. ' "°' ' " '

i, .?ag'é5ﬁ§:s$:d&ER 3? INCGME TAX
'. HUBLEVV " v4'v.»
 THE ZNCGME TAX GFFICER
WRRD_2{Z}
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. APFELL£NTS

V'*:3; sf; aRAv1ND KUMAR M ADV.}

V"'MXs. S.C.NAR£§AL
"VIJAYA RGAD

RUBLI RBS?$ﬁDEN?

(ﬂy SRI.B.S.SAN§éTI K.S.HA§UM£NTH§ RﬂG--AQVS.}

TEES I.T.A FILES U/S. 268% 3? THE EN$GME Tﬁx
ACT, 1961 ARESIﬁG OUT ﬁF GREEK DA?EQ 23.1.2984
PASSED IN ZT& NO.44l/8ANGf2003 FOR THE ESSESSMENT



yaaa 2a$@«2ee1 PRAYINQ THAT ?HI$  HGH*BﬁE C§uRT
MAY BE PLEASED TO: »~-.<,'g . v. a

FQRMULATE wag sUasTANT:AL;'Q8as?:oms_ Q?' LAW}

3}
STATED TBEZREIIN

B)ALLOW THE APPEAL AND SET ASIDE THE GREEK pgssam
BY THE ENCOHE TAX A?§ELLA?E'$RI£UNA; in ETA NO.
441/BANG/2093 DT.23.;g2Qo¢ AN§"CQNF§RM THE QRDER
PASSED 2? $HE_ I'C0ME.jTkx QFFICER, WARD~2(1)
HUBLE, DT. 23.9,:Q02 E$c;=f»'=

@323 1TA,cdM1NG SN E§Rﬂ§EAR§NG TEES DAY,
sABnAH;$aJ,,:QE;:VgRgD $ﬁEgFoLLowIwG;

' This gﬁﬁeéi by the Revenue is filed under

Seciignv 26QA:*0f the Incame Tax Act, 1961

*§{§é:§inéfteryreferred to as 'the Act') being

« W_aggrié§ed by the order passed by the Income

."7TéX E§§éllate Tribunal, BangalQr@ Bench 'B' in

"lfﬁ'$0.441/Bang/2@G3fAsSessment Years l99l~§2

n;V tdJ2OOl~O2) dated 23.i.2GO4 wherein t§e appeal

'Afiled has the assessee 3&3 allowed ivy setting

aside the arder passed %y the Commissisner of
Income Tax {Appeals} Hubii, dated 17.2.2003,
csnfizming the order passed by the Income ?ax

Officer Ward%2(2), Hubli dated 23.9.2032.

\\9&



2. The essential facts .efe.ﬁhe ,caee
leading ﬁe the filing of thie"ep§eel ere as
follows :~

The assessee'_ie a *dee1e: *in~m§et:o1eum

preducte of BharathM§e£:eleum"?re@ﬁcts Private

Limited anﬁ "he .haee}fiIeﬂW retures for the

aesessmeet ye3ree1§9Q¥§l;.i%§lm92 te ZOGEWOZ.

it was feﬁmd during egxvey that in the returns

filed by fhe_eeeeseee for the financial years

133.91. :g31;:'e?:{1.e2--Q{3:=L,.~-~ the salee declared to Sales

_Tax Eeeertmeet exceeded to rupees forty lakhe.

aﬁewevez, tee eeceents have not been audited as

""aﬁeqefieé; under Section. ééﬁﬁ of the "Act and

 audiﬁed report has not filed in Ebrm N0.3CE

eleeg with the return filed by the aeeessee

ﬂfeed since there was failure with the

requirement of Section 44RB of the Act, Show
cause notice was iesuede to the eeeeeeee on
23.3.2092 ee to why fer the eaid failure on

the part ef the eeeeeeee, penalty' of half

\9«/"> -



 

parcent of the gross receipts a§«_@nea year,

ptopoged penalty of one Katha ﬁhdﬁidiﬁﬁt be

levied. for each year,mH Th@I"éai&,'shcw';céu$éL

metice was served upQn:fth@'QasSéssée,'Q' The'

a$sesse@ filed yggiy i3téCib€it§h&§;isé¢iing
price of petrslaum éf§§ugtsii§i%§m§aistered by
the GQvetnmaﬁti'gﬁ§ j€i*ié:'a§piicabie to all
petroleum: de§L$t$=Vi§E i§di%§°: The petroleum

Campany' ﬁuthorises _the' §é$esse@ to adeduct a

fixed ipefﬁentaﬁe 'éé c@mmis$i©n from the

am©unts--§ayabi§ far its purchase consideration

_and teiatiéatﬁétween the petroleum Company and

he a$sesSée"is of principal agent.

iVit was centended by the assessee befere

the ﬁssessment Officer that no accounts have

'fbeen maintained since only cQmmis3ioﬁ was

paid to ihé assessee by the §PCL and he was
under the bona fide imptessign that aince the
amaunt sf commission paid did not exceed

rupees forty lakhs, the acceunts were not

\}v%.



requirad to be audited aha whereﬁQ:§;j§énalty

could not be imgosed under SectiQﬁ~2?iB of the

Act and not under Section Zjléaaﬂﬁ 3véﬁ'if the.

penalty is imposabie uﬁ&§§ Sec{i§ﬁ*27ié $f*:h@
Act; tha assess@é":%as "uﬂ4@r ;£ﬁ% V§Qma§ide
im;:>res5iom tins'z;__A_hag»§;':¥;g'V%.j';wi§;T;«¢$3:;~&  fact that
he has only '$ﬁ¢#hsW£h%* §§§mission- in the
return?,f§l&i:b§$@i§i§hQQ@ﬁ forty lakhs, he
would ﬁoﬁ t§ﬁ§i§% t§i¢§ﬁvthe acaounts audited.

"*&'lt w££*a1sdy¢Qntended that in View of ﬁhe

pfOViSiCﬂST_®f Wﬁection 2?lB of the Act, no

fVpena$ty 'ﬁmaid be imposed as propased and

"vwheféfﬁrﬁ, no penaity csulé be imposad under

'"Sea€i¢n5 2?3B as proposed. in the ahow cauee

noigce.

The Assessing Authority' by' order dazed
23.§.2002 negatived tha aontentions r§is@d by
ﬁne assessee and heid that the penalty was

3

Eévyable under Section 2713 of ﬁne Act as

xx/5»



Sectimn 4%RB of éﬁmé Rat reqairewauﬁitihg of
L

"ha accounts where the tgtéi f£ufn"fove$

exceeded fatty iakhs aﬁd fu:ther--hé}d tha£ tﬁek

assessee has no V§0n§€§de rQ§3§n3  $©§ 3m0t
getﬁinq the accounﬁS:5@ditéd aﬁd Q%éé§see has
admitted tha%W,hG m@é§Rﬁ&ain€$i§i$Q acccunts
baoks cQntain§g§ ﬁ§?:§ar€f?%@x%3 regisier for

credit' 5ai€s}_ ?uécaV b@Qk_fof cash Sales and

Furéhasé, régié€er= and 'since those books of

gccoﬁnﬁs §g;ﬁtained by the ass@$see has not

been audit¢@"aéx:equireﬂ under S@ction ééﬁﬁ,

«penalty nundér "Section. 2718 of the ﬁat was

levyablg ééa assessea has no sufficient cause

V"fQ§"uﬂQﬂ getting the acceunts audited and

"réceipt fer the assassmemt yea: 199% to 2

accéxgingiy, heid that half gercant of grosa

C)

O

Q

wauld came to R3.3,Q?,§Q2f«. Rewever, in View
of the ﬁmximum penaity that scald ha imposed
maﬁa: S$CtiOﬁ 2?1B of the Act, impwsed penaity
Qf Rs.1,Q@,0G@%w. Eaing aggrieved by t&e said

Qrder passwj by the Assessing Cﬁficer dated

M



The1d"fﬁhei the proceedings

fpenaity could be imposed under Section 2?1E

.9.2Q82, appeal was preferred before ihe

Commissioner of income Tax {App€élS§ pHUbli

msmbezted  1%. No.1:">§ieeL;c:f:f"{*A:.g:t::;:%;eﬁ5-'--e and

the Fire? Rppellete Authezity by erdez dateﬁﬁ

17.2.2093 dismieeed téﬁze eaeppm. the "

aeseeeee. Being aggrieved eyVthe"eeid aide:

passed bye tee _CemmieeiQnerﬁ*efVgincome Tax

{Appeals}, thee aeéesseea prefezzed appeal
before _§he InCeﬂ£_ Tax 7ﬁp§ellate ﬁribunai,

T5'

Beegelbre";=3emeh "'$' in Appeal NOaLL
NO.éﬁl?Bé§g?2@C3}~w%ieb wee elubbed wi*h other

appeaie arzeieg 5a: of the common oxﬁer passed

_by the Qemmigeieeer of Eeceme Tax {Appeals},
.§Hub1: under the Same ie@ugned order eeé the

Aﬁgeiiete Tribune} by' order dated 23.1.2054

initiated fer

"impeei£ien ef penalty and the order imposing

penelﬁy' was barred by time and since the

eeseesee has not anaintained any' eeceenﬁ, no
-.i'

0
£0

E"?

the ACE and proceedinge Genie be initiated

\9x/Q'



 

impoaing' penalty' made: Section 273§1 cf the
Ac*. The ?ribunai further hgld¥_ﬁEa€_ tha

aseasee has raasenable cause fa: ﬁei geiéin

ﬂag

the accounts audited aﬁ hé'was-5nly_£Oi§eétiQg7

commission and the commission rcéaivad by him

W1

ﬂiﬁ not exceed Rﬁgées ror:yv ;a$hs and th

(E)

return filed by the éggaégee has béan accepted
for ten years &an&f aCcQfﬁingiy; aiiowgd the

appea;.a§d--s§t aéide°ﬁ§e_§rder passed by the

ﬁdﬁmisgioﬁéf '@f' Enééﬁw Tax iagpaalg} Hubii.

M'

Eéing aggrieﬁed by he said order passed by

_tha WEhcQme ,T3x ﬁppeilate Tribunal dated

"323,i"2GQ§;*ﬁevenue hag prefexred this app@&§.

'>35 The appeal was admittad on 3G.9.20@é

fa: C®D3id@fatiOﬁ sf the following substantial

 @question3 cf iaw as set out in paragxapu i£{l}

to {$2 in the memcrandum of appeal as fewlows

2. Whether tha Appeliata Tribunal was correct

in holding that the penalty undet Section

\&~3»



 

271B for the Assessment Year igﬁlaﬁﬁ are

barred by Limitation as per ptoﬁiéions of

Section 275(l)(c 3 of the i.$ got; iéoi?
Whether the Appellate izibunai was cotteot
in holding that only ponaityiunootinection
271A is leViablo"anotncnaltyiﬁnﬁor Section
2718 is not at:£aatéd§}]5i;
Whethétjthéinnoc1iatc,f§iounal was correct

iﬂiiﬁGl5inq'Fthét,taSsessee had raasonable

« canoe fdr~not getting his accounts audited

m_aS:pa§o§e¢tionW44AB of IT Act, 1961?

Wnothar'gtna wTribunal was correct in not

~7, :hoiding< that the receipt of moneyh by
,¥asaoé3ae from BPCL was not commission and
{Whether the Tribunal was correct in applying

*£na ratio laid down in H.Ajitbai & Co. - vs --

Assistant Commissioner of Income Tax (1993)

(45 ITD 262) to the

which is per contra
decision of the Madhya Pradeah High Court in
the case of Bharat Construction Company -- vs

- ITO (1999) 153 CTR (MP) 414, 417?

\?}



10

4. Before considering the substantial
questions of law, it is necessary to consider

the contentions raised by the learned ceunsel

for the respondent that in» vies! of ;theo.

circular issued by the -department;_shichV prescribes that no appeaiishali ce;fiied shere the amount of penalt§ imposed does not exceed two lakhs, the eﬁpesi is not msintsinable. In support of_this,contentioni§éhnas relied upon nu;nbe;:.e-5 dé:cis'ions €éh'e'riVein it is held that in View 'of _theedseidu_circular issued by the Depart'mer1t,i'tsfh'i--ch is binding upon the {Eepsrtment}~Bcwever, the learned counsel for i=iTther"apnellant has relied upon number of "A"'deeisiier;e wherein it is held that the High Courts or the Appellate Authority' is not i":dibound by the circulars issued by the Revenue. However, it is unnecessary to go into the said question as the very circular prescribes pecuniary limit for preferring the appeal itself has been amended with effect \§%5'° 1} from l$é.i999 and 3€CiiOﬁ 26%~A Qﬁ :56 AC: has beenT inserted kg: The Financa .§ét,_ ZG§$*w£i:h effect frem £.£.l999 wherein,»whéfeV$acizéulér has been iasued by tﬁé departmaﬁt fixing tha"

monetory limits for figiﬁg the appegi ﬁfateé in Section 268% of tbg ACﬁf. ?$§iﬁg»aﬁ appéai oz aﬁﬁiicatian for §&fe;en¢é §ﬁa§i be deemed to have iss$a§"§ﬁd§: Sag Section 1 aﬁd the provisions Oﬁ g%®'ée%Ei@ﬁ%EZ@3 and 4 63f the Sééti§n s§alIHgpp1y"a¢Cordingiy and under Sub Séci:on$Vx2,3- 3§@, é where the Substantial qu@sE:GnV Of ;1aw" is involved, the mere fact "?that_nwﬁéi@ry limit has been prascribed far "«_fiiiﬂgj=the appeai would act be a bar for "deci§iﬁg the appeal. Even otherwige, we are aaéisfied that it is am exceptienal case V"pwherein the Revenue was justifiaﬁ in filing the appaal and wherafare, thera is no maxi? in the cohtemtian of tha learned caumael for the respondent that appeal itsaif is mat maimtainable.

UV"

12

5. We have heard the learned couneel for the appellantwRevenue and the learned eounsel for the respondent--aesessee on the.abe§e:eeid subeantial questions of law and wefahswe;=the_l above said substantial gqueetions _o§ flee? ash' follows :

l) in the negative

2) in the negative .ll;l 35 in the"negative.f 4} does hot surviVe_for consideration;

5) in_the'negetive for the following reasons * ----

u».

A questions of law 1, 2 "and: 5 l"These substantial questions of law ° "relates to the finding given by the Income Tax T Appelate Tribunal holding that the penalty could not be imposed unéer Section 2?1B of the Act and if at all proceedings Could not W' 13 initiated unde; Seciisn 2?l£ 0f the Rat as the assessee has mat xainzained any accgumt and gue$tion of limitaﬁion balding tha§"ﬁn§ §:de§ impesing penalty was barred by tim§. « ?. ?he learned cou$ﬁ$i §®r fEé_éﬁéeéﬁﬁnt submitted that the §§3$séée h@$E§ﬁ&i£{ed 1% its statement am§ tha"f§piy_gi%énH:§ ihe show cause n0tice that he is maintaining tha party wise zeﬁistér faﬁ-Crédit saies, pucca book of caﬁh', Sale$z T3ﬁd _ puxchase register and wherefmre, ﬁit. manna: be disputed that the

- ésggssee has ~mainta:neﬁ accounts though not a:l "thaV=account3 requixed to be maintained "»hnde:CfEe Act. The decisions reliad ugen by the learned ccunsei fa: the respsndemi would :1ea:iy sh©wT that only where no baekg of acceunts §:e maintained, no proceedings can be initiated fer n©nT auditing' 0f the backs cf accounts which arg not mimtained under \,=i' 14 Section 2718 of the Act and penalﬁy Qan be imposed anly under Sectiam 271% cf the ﬁéﬁ.

8. The fallswing daci3iensV_are."relied, upon by the learnad counsel fQf.th3 ggspohdénti L v._ as SHERAT@N'.APPARELS, "Mag" caaéagéfioﬂ, S?RESSA FASHION wmvs'[§; A$s;STgmj=_cQMMiésIoNER OF INCOME TAX repop;éd_2§a: 25é7:fR 23 sURégMAL';ﬂRSU3éMf?bD: H vs -- SQMMESSEONER 0? 4§MCQME§T£"i99é 222 ITR 591 *[;EC@M§ fax GEFICER M vs M NAMAK SERGE GGLIANI *repcraéd in 2302 ITR 5??

VV-$GMMISSIONER OF INCQME TEX W VS M EERQ3 PUBLICITY SERVICES (BQMBAY) repGrt®ﬁ iﬁ 2301 ITR 2&8 uki 15 It is clear from the principle laid down if: the «decisions xeliede upon Eur the Zeezned counsel for the respondent that oe:y_wee§e no eecounte are maintained, question efieudiﬁing the accounts does not arise and~where§e:eg nee proceedings can be initieeedg for *impeeingV penalty under Sectien 27:B ;eﬁe#the Vﬁeﬁ, However, where aecouﬁte are ﬁeﬁﬁﬁeieed though not all the aceeunesieeﬁgxescxibed under the Aet;*»i€g :eﬁ--c:eer' that» gee audit;mge of the eceeuete ﬁe ﬁwﬁeeeety under Section 44AB ef the Ace}.

x'9. It. is, clear from; the provisions of «"*8eetiee74%AE of the Act thet where the turn .<everfexeeede rupees ferty lakes, eeceuete are keqeired to be auditied. There is no merit in "w§he'eententien of ige learned counsel for the "feepoedeet that the beaks referred to in the exdex of tee aeeeesment and stated by the aeeeseee in the statement and in the reply to 18

21. Similarly? the findimg' giyéﬁ"=by rthe Tribunal on the questian of limitaii0n ié=§lSo_ erzoaeous and not ba3@ﬁ"ﬁp@n tha_%m:eLial:aﬁ record and the pzoéﬁsiohs 0fx zéeétiana 275(1) lb) and 3 ' vvf>f'.._€i'},'1e§"- Eu:-:t. T E*"§e reasans assignai byJt§$*ihcoma Tax Appellate Tribunal is £§atW-5:h§'g7cbmmemcemeni of proceeding$- fo@T :mQcsiﬁionf3of pena1tyT under Sectiqﬁ 275{i}(¢g)*Q§ the,Act Jould be within Qua """ 'year. f£pyiV§he énd~knE financial year in which'thé aide: of the Commisaioner iﬁppeaig} is récaivaj;and*ih any othar case, after the j5XQifY Of *?h€v financial year in which th@ v"pr@géédihgs, in the course cf which &cti0n fox 'j the iﬁﬁﬁsitioa sf penalty has been initiated, age pC§m§:€t€d. The said findings of the A App&llate Tribunal ia erroneous.

12. ?he Tribuaal having' regard to the $aid contentg Qf Section 275(1) of the Ac:

held that in ragpact sf aasessment yaar l991~ xx?»-

19 92 till 1§§9-203$, the eeeeeement could have completed within one year from the eeeé oi relevant assessment yeax and § {eer€f@:é, initiation oi proceedings byR"1eSuiegg shew v cause notice on l3,3.2OG2 and impeeieq penalty' by order dated 23.9;2§G2 ie barge; ey time;

Thie finding ef ie} cleerljér erreeeeue. Kt "bee; ed: "leaked into the @KOViSiORSm of mSectieee_é?5fiI:'Of the Ree applieeﬁée ﬁe; ehe; feete 'eﬁ&' cireumtaeeee of the ease ,whereiﬁr itf is cieerlye eteted the peried_ oi *1£m1te£i¢w1 :3 till the expi:y' of "§ieencie1~_yeer iii which the proceedings, in '. the eeeree of which action fer the impeeitien ' pf pene3t§ has been initiated, axe eomeieted, kerieix months free the ends of the menth in A. which the order of the Cxeeaeeiener{Rppeeie} "er, Appellate Tribune} is received by Commissioner which ever period expires Eater. VJ.

33. in the present cage, :he» retu:ns fiied by the agsessee fa: the as$§ssm&ﬁt'year, 1991w92 to 2903 has beeh é+cep:ea;*.aoweve:;. during {ha survey of thé ;ép§tté iE"wé§rfﬁumﬁ that there was tu:ﬁ_rov@ﬁ 'éxc%aﬂi%§W'rupeés forty iakhs aﬁda th§§%i§%e{ ﬁ%éCéﬁing3 for initiatian of ' §§ﬁ§iﬁy,u ﬁ§%". intiated an l3.3.2%Q2g?gndR wﬁ@feféfe,K:t§e commencement perio$ §§ﬁ\€§§:§§;ieﬂ i%m1tation would net be oﬁéW§é§f é%ﬁ&f"ihe«fiiing cf the return and pefiéd bf :g¢::gg:Qa would be six mcnths from the <3été cﬁi coﬁﬁéncemeni. cf proceedings for

-minitiation'"U£ penaity and in view' of the Tfwag@:a§s'gef Seation 271(1; of the Act the w Liism wouid be and of the momih in which imiﬁa S21} étﬁam for imposition of panalty is initiated ._ ﬁnd wherefore, it weuld be 31.9.2092 far imposing penalty has beén passed by the Assassing ﬁmthority on 23.§.Z0$2 and whezafere, tha erder impo$ing pénalty is not §""£"

E?-

b red £3 1 2* t1 :3 *k: f rm g '¢ ar im'Ma "on an n e i;'in O;

\9»% 21 Tribunal is eleariy erreneeus end edeitary to the provisions ef Seetiee 275(1§;effEheeﬁe€g and hence, uneusiainable ené henee, we eeewer; substantial questiene of law.1,2 and 5 ie*the negative in faveur sf ﬁhe Reveﬁue aed against the assessee.

z4.:.v$':'.@g:;:g§;t:{a;2;.': ¢:jz2es--:t'i:;g2V.f'of jaw No.3 Thie embsiahﬁial question relates to the questien '53 eteV Whether the finding cf the Appeilete 'Tfibuﬁa2V that the aeeessee ead reasonable Cease for not getting the accounts V'v_eud§ﬁe@".unde§ Seetien 2733 of the Act is 7jee:f§§eé; The Tribunal has proceeded on the Basie =ﬁhet since the return fiied by the '.,esseeee had been accegtej for ten years and V"Lﬁe eeseeeee was under the benafide impreseeon. that he was only earning cemmiesion which did not exceed ferty lakhs, account beeke were not reqaired te be audited, is required. to be \3»£~ 22 accepted as sufficient cause a3 prqyiééd under Section 2738 of the Act. The said fiﬁ&in§:ﬁf the Tribunal is clearly' erronecuS._ '*it".ié. ° clear fram the returns f;i%§ by %he=é$§e§see that for the fi%énciéiu 'yé§f T%i§90~§i, assessment year ;9§;;$é;»¢§J \pﬁgg5§ﬁles is shown as 22,386,' 44AB of the Act 4Wﬁ€n §ﬁﬁ§ ;tﬁ§% Qf%% vexﬁeeds rupées forty l%$§$;fﬁhég@@q§gﬁﬁ_books maintained by the asééﬁééé is géqﬁired to be audited. What wa§ plé§H§£ @yDﬁ%§¥aSseSsee is ignorance of 1awT which .is,:né excusa in answering of vioiétion "of_ Section '''' ééAB of the Act, as .;<§ec§i©a, 4§AB of the Act clearly' state that <Awhefe--f;$Eﬁ4 over exceeds rupees forty' lakhs, ﬁh§"3C§§uni backs are required to be auditeé x'a§d wherefore, it is not open for the asaessee :€b contend that he has safficient cause for ' not getting the accounts audited on account of exemption received by him did not axceed iorty lakhs. The fiﬁdinq cf the Tzibunal is Contrary \ﬁv% 23 to the centeats sf Section ééAB of the Act. The Tribuna} has met taken into consideration Sectien 4433 of the Act Whilﬁ c0nside:in§.the contention of tha assessee and whégeﬁbte, thek said findiag is also e:romeo§5,aﬁd.Ca§nct be* sustained and we hoid thét the f§3#§$§_9fﬁ§¢ Tribunai that the é%§9§seé<.§aé ;easonable cause for not'@§ttiﬁ% Rig %OcQun%§ §udited as Eequired gﬁder $S§ti§%:4éﬁé 5% the Act. The deCisiOW §§?§%%, 9§éﬂiE%ﬁ ?h$« laaxned Caunsel *;z:11 §§cC;:\«;§. TAX OFFICER -- vs W mix;-1A§<%% mporteci in 2002 2%? ZTR 6??_is ms: helpfu} to him in tha present casa '_ as Ehéaas3essee himseif has Shawn the total .;salé$ "f@:r the assessment year l990w§1 upto *20OQ~§19 and wherefore, tha finding cf the V"A TTrihﬁnal holding that the assessae has " sufficient cause for getiing his income auéited is pezvaxse and arbiirary and cannot be sustained. aad accgrdingly, answer 3ubstantiai question cf law No.3. \?«/3*» 24

15. The learned counsel__ fora ~the respondent submitted that the word im;y?t§séat in Section 271A of the Act shows that penalty 17 imposable under Section _i?iﬁ ~of!itheVthcti*is discretionary and Vwherefore,rathehjhbcellate Tribunal has rightly eaerciaed discretion in holding that the aeeeaeee hae reasonable cause for not .dettind gtheahaccounte audited under sectioyri * ¢m_i$.'Wé hold that there is no merit in the contention as ﬁe have held that the assessee _cennot plead ignorance of contents of Section ' e"é§ABi«§f:°the-.Act which. requires that if 'the " turn 7¢vét exceeds rupees forty lakhs, the accounts are required to be audited and not "»n;where commission received by him exceeds forty U} iakhs and in View' of our finding that the order passed by the Tribunal holding that the asseseee has reasonable cause in not getting 25 his acceunts audited is contrary" :6 Section MAB of tha Act and hence, we hold that the discretion exercis@d by the Rppel1a?e»Tr§b@nal is not judicious ané ihe same is liablé to bag set aside.

1?. The only ctbér subatanﬁié; question of law which i§¢réqaired fQ_b& Cbnéidered i3 i.@. framed at the timé of $dm:3sion, 'whether the Tribuﬁéi was ﬁustifiéd in holding that the redeipt.v¢£f*§bnéyg by assessee fzon; BPCL was csmmis$ionV and. 'not profiﬁ? {substantial ,qpesti0n Gf_;§w N9.4) ThiS substantial questiam of law daas not 53:33 fer c@nsideration in thig agpeai as it "15 clear frem the grovisioms of Seation ééﬁg bdf tﬁe Eat that whenever the turn over exceeds rupees farty iakhs, the accounts axe required to be audited and the questian a5 ta whethar thg as3es$ee was receiving commissian and mat wﬁ ' 26 profit would not in any way waifeetiﬂthe liability of the assessee in ggettingl:tne_ accounts audited undext Section '4§AB, of tthe_1t Act.

Accordingly, wee, 2 answer_ _ all the substantial qeestiong of lae"om favour of the appellant and against"the.eseessee. lg} In ﬁiew of our answer to substantial questioﬁs ef"law; we held that the appeal is entitled.td be ailewej by setting aside the order Kpassed gby' the Income Tax Appellate jfrieunal iii ﬁo.ITA 441/Bang/O3 ENE} restoring ire the brder passed by the Income Tax (Appeals), ioyﬁﬁbli and accordingly, we pass the following% ordez :~ l't ii The appeal is allowed;

ii) The order passed by the Income Tax Appellate Tribunal Bangalore Bench 'B' in ITA NO.44l/Bang/O3 is set aside and order passed by the Commissioner of Income Tax we 27 {appeals} Rubli, Coniirmingi tﬁ@ «¢fder passad ﬁyT th§ ASS@3$iUg HéffiCéI d3téd 23.9.2§G2 :3 :estoréd. T5 ""«Iud'ige M S&/Q Tudgé

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Karnataka High Court

The Commissioner Of Income-Tax vs M/S S C Naregal on 23 September, 2008

Bench: V.G Sabhahit, S.N.Satyanarayana