High Court Of Madhya Pradesh
Income Tax Officer vs. Nanak Singh Guliani
Sections 260A, 271B, 273B
Rajeev Gupta & Arun Mishra, JJ.
IT Appeal No. 6 of 1999
18th September, 2001
Rohit Arya, for the Appellant
ARUN MISHRA, J. :
This appeal is preferred by the ITO aggrieved by the reversal order in respect of imposition of penalty by the CIT(A), which order was confirmed on appeal by the Tribunal.
The essential facts indicate that Shri Nanak Singh Guliani, an assessee is engaged in business of contractorship. 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 M/s Zenith Engineers, Bhopal, on 2 per cent profit and the remaining work was completed by M/s Guliani Construction Company, in which the assessee is a partner. The assessment officer found that the total contract amount received by the assessee was more than Rs. 40 lac, as such he should have filed a return along with the audit report under s. 44ABB of the IT Act (hereinafter referred to as the âActâ). Penalty proceedings were initiated under s. 271B. A notice under s. 271B was issued on 20th Dec., 1991. The ITO passed an order under s. 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 s. 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 ITO, Bhopal.
Aggrieved by the order, the assessee filed an appeal. The CIT(A) allowed the appeal setting aside the penalty. Against the order passed by the CIT(A), the ITO filed an appeal before the Tribunal, Indore, which was dismissed. Hence, the present appeal has been filed before this Court.
Learned counsel for the appellant submits that since the gross receipts of the assessee exceeded Rs. 40 lac, 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 CIT (A) and the Tribunal are perverse. Hence, the orders are liable to be set aside in the present appeal under s. 260A of the Act.
5. No doubt, it is mandatory under s. 44AB of the IT Act 1961 to get the accounts audited, however s. 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 s. 44AB, the AO 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 the penalty is not mandatory. The word used is âmayâ. A discretion is conferred on the authority to impose the penalty or not to impose it. The provision with respect to imposition of penalty is not mandatory, is further fortified by the statutory provision contained in s. 273B of the Act, which is reproduced hereunder : “273B. Notwithstanding anything contained in the provisions of cl. (b) of sub-s. (1) of s. 271, s. 271A, s. 271B, s. 271BB, s. 271C, s. 271D, s. 271E, s. 271F, cl. (c) or cl. (d) of sub-s. (1) of sub-s. (2) of s. 272A, sub-s. (1) of s. 272AA or sub-s. (1) of s. 272BB or cl. (b) of sub- s. (1) or cl. (b) or cl. (c) of sub-s. (2) of s. 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.”
The provision of s. 273B contains a non obstante clause and provides that notwithstanding the provision of s. 271B, 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.
In the instant case, it is found concurrently by the CIT(A) and the Tribunal that there was reasonable cause for the assessee not to get the accounts audited as required under s. 44AB. The finding recorded that the contract was divided in two portions, from one portion of the contract the assessee had received only 2 per cent of the contract value and from the other portion, which was given to 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 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 subcontractor was not to be accounted towards his income, 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 M/s Zenith Engineers to whom the part of the main contract was sub-divided. 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 CIT(A) as well as the Tribunal having accepted his explanation, we find no substantial question of law worth consideration involved in the present appeal.
Resultantly, the appeal is dismissed in limine.
[Citation : 257 ITR 677]