THE COMMISSIONER OF INCOME TAX vs. TEA KING.

ITA/355/1999HC GujaratGJHC24025094199927 October 1999Author: HONOURABLE MR. JUSTICE B.C.PATEL,HONOURABLE MR. JUSTICE P.B.MAJMUDAR5 pages
AI SummaryDismissed

What were the facts?

The Commissioner of Income-tax (CIT) filed applications under Section 256(2) of the Income-tax Act, 1961, after the Income-tax Appellate Tribunal (ITAT) rejected their applications for reference. The assessee, Tea King, a registered partnership firm, filed returns for Assessment Years (AY) 1985-86 to 1989-90 on October 10, 1990, following a survey operation on March 1-2, 1990. The Assessing Officer levied penalty under Section 271B for AY 1986-87 to 1989-90 due to non-audited books. The Appellate Authority confirmed the penalty for AY 1985-86 but set aside penalties for subsequent years, citing the inability to audit due to incomplete preceding year's accounts. The assessee did not contest the penalty for AY 1985-86.

What did the High Court hold?

The High Court dismissed the applications filed by the Commissioner of Income-tax. The Court noted that the CIT(Appeals) had deleted the penalty for AY 1986-87 to 1989-90, holding that it was not possible for the assessee to get the books audited due to the incomplete state of accounts for AY 1985-86. The Tribunal had confirmed this finding. The Court observed that Section 271B allows for penalty imposition, but Section 273B provides that no penalty shall be imposed if there was a reasonable cause for the failure. The onus was on the assessee to prove reasonable cause. The Court found that the CIT(Appeals) and the Tribunal had considered the explanation offered by the assessee and accepted it as a reasonable cause for the subsequent years, based on factual findings that the books for those years were ready but could not be audited due to the preceding year's issues. The Court concluded that the exercise of discretion based on these established facts, coupled with the concurrent findings of fact by the appellate authorities, did not raise any substantial question of law. Therefore, the applications for reference were dismissed.

What were the issues?

1. Whether the ITAT was right in law and on facts in levying penalty under Section 271B for AY 1986-87 to 1989-90 on the ground that the books of accounts for AY 1985-86 were not completed, when the Tribunal itself held that the books for these years were complete at the time of survey action? (Question of law and fact, concerning Section 271B and Section 44AB). 2. Whether, on the facts and circumstances, when the assessee did not carry forward balances from AY 1985-86 to later years, the ITAT was right in holding that the assessee was prevented by reasonable cause from completing the books of accounts for AYs 1986-87 to 1989-90 and getting them audited within the time permitted under Section 44AB? (Question of fact and law, concerning Section 271B and Section 44AB). Assessee's arguments: The assessee contended that the inability to get books audited for subsequent years was due to the incomplete and unaudited status of the books for the preceding year (AY 1985-86), which constituted a reasonable cause. They also argued that the ITAT and CIT(A) made concurrent findings of fact in their favour. Revenue's arguments: The revenue argued that Section 44AB mandates audit if turnover exceeds the prescribed limit, and failure to do so justifies invoking Section 271B. They contended that there was no plausible explanation or reasonable cause for the assessee's failure to get its accounts audited for the subsequent years, and both the CIT(Appeals) and the Tribunal erred in their findings.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 133A,Section 271B,Section 44AB,Section 273B

AI-generated summary — verify with the full judgment below

r)) IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX APPLICATION No 355 of 1999 with ITA Nos.356/99, 357/99, & 358/99

For Approval and Signature:

Hon'ble MR.JUSTICE B.C.PATEL and Hon'ble MR.JUSTICE P.B.MAJMUDAR ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

The order continues below.

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