SURAJMAL PARSURAM TODI VS COMMISSIONER OF INCOME-TAX, 1998 PTD-GAUHATI-HIGH-COURT-INDIA 3108 (1996)

Income-tax---

----Penalty---Failure to maintain books of account ---Assessee liable to pay penalty under, S. 271-A---Penalty under S.271-B is to be levied for failure to get books of account audited---Penalty under S.271-B cannot be levied for failure to maintain books of account---Indian Income Tax Act, 1961, Ss.44 AA, 44-AB, 271-A & 271-B.

Section 44-AA of the Indian Income Tax Act, 1961, imposes a duty on the assessee to maintain books of account and on failure to do so the assessee shall be liable to be penalised under section 271-A of the Act. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits the offence of not maintaining the books of account as contemplated by section 44-AA, the offence is complete: After that there can be no possibility of any offence as contemplated by section 44-AB and, therefore, penalty cannot be imposed under section 271-B of the Act.

R.K. Joshi for the Assessee.

Dr. A.K. Saraf, K.K. Gupta and R.K. Agarwal for the Commissioner.

JUDGMENT

At the instance of the assessee, the following question has been referred by the Income-tax Appellate Tribunal under section 256(1) of the Income Tax Act, 1961 (for short, "the Act"), for opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the levy of penalty on the assessee under section 271-B of the Income Tax Act, 1961?"

The facts for answering the question may be stated as follows:

The Income-tax Officer after completion of the assessment of the assessee initiated penalty proceedings under section 271-B of the Act for not getting the books of account audited under section 44-AB of the Act. The assessee contended that because of the nature of works it carried on the books of account could not be maintained. The admitted fact is that the assessee had not maintained the books of account for several years. Against that an appeal was preferred before the Commissioner of Income-tax (Appeals) who turned down the contentions of the assessee. Then the assessee preferred an appeal before the Income-tax Appellate Tribunal. However, the Tribunal affirmed the penalty. The assessee requested the Tribunal to refer six question to this Court for its opinion as mentioned in paragraphs 1 and 2 of the paper book. However, the Tribunal referred only one question as stated above.

Heard Mr. R.K. Joshi learned counsel appearing for the assessee, and Dr. A.K. Saraf, learned special counsel appearing on behalf of the respondent/Income-tax Department.

Mr. R.K. Joshi submits that it is an admitted fact that the assessee did not maintain any books of account and, therefore, the question of the books of account being audited as per the provisions of section 44-AB does not arise. Therefore, the Tribunal erred in law in holding that the assessee was guilty of penalty under section 271-B of the Act. On the other hand, Dr. Saraf, learned special counsel appearing on behalf of the Revenue, submits that maintenance of books of account if one of the conditions as contemplated by section 44-AA and section 44-AB contemplates audit of account and penalty is provided under-sections 271-A and 271 and 271-B of the Act.

We have gone through the provisions of sections 44-AA, 44-AB, 271-A and 271-B of the Act. Maintenance of accounts is envisaged under section 44-AA and on failure to do so the assessee shall be guilty and liable to be penalised under section 271-A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by section 44-AA the offence is complete. After that there can be no possibility of any offence as contemplated by section 44-AB and, therefore, in our opinion, the imposition of penalty under section 271-B is erroneous. The Tribunal has overlooked this aspect of the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of account as required under section 44-AA and for that penalty is prescribed under section 271-A. It is for the Tribunal to take action in accordance with law.

In view of the above observations, we answer the question in the negative and in favour of the assessee.

M.B.A./1582/FCReference answered.