2014 (12) TMI 440 - HC - Income Tax

Sale of gas cylinders to be included in the turnover or not - Whether the sale of gas cylinders by the appellant was liable to be included in the turnover and was required to be audited u/s 44AB Held that - The agreement clearly indicated that the assessee was appointed as a distributor on principal to principal basis for sale of gas cylinders to consumers - assessee was carrying on business of supply of gas cylinders to the consumers and that the assessee was carrying on the business of purchase and sale of gas cylinders and not on a commission basis - the sale of gas cylinders was liable to be included on the turnover - Since the turnover exceeded ₹ 40 lacs for the relevant year the books of accounts was liable to be audited u/s 44AB. Books of accounts not audited Validity of initiation of penalty proceedings u/s 271B Held that - It has not come on record that the assessee had not maintained any books of account - in view of Section 237B of the Act if a reasonable explanation is given, the penalty proceedings initiated u/s 271B being discretionary could be dropped or a lesser penalty could be imposed - assessee was carrying on the business of sale of gas cylinders and since his turnover was more than ₹ 40 lacs the appellant was under an obligation to get his books of account audited under Section 44AB - since the books of account was not audited, penalty proceedings were rightly initiated - explanation given by the assessee for non-compliance of the provision of Section 44AB was neither sound not justifiable - The imposition of penalty was justified - thus, the order of the Tribunal is upheld Decided against assessee.

Summary

Issues:
1. Whether the sale of gas cylinders by the appellant was liable to be included in the turnover and was required to be audited under Section 44AB of the Act?
2. Whether in the facts and circumstances of the present case the assessee was justified in imposing penalty under Section 271B of the Act?

Issue 1:
The appellant, a distributor of Indian Oil Cooking Gas, showed a turnover for the assessment year 1999-00. The Assessing Officer issued a notice under Section 271B for failing to get his accounts audited under Section 44AB due to undisclosed turnover from the sale of gas cylinders. The appellant argued that as a distributor, he only received commission and was not obligated to get his accounts audited. However, the High Court found that the appellant was appointed as a distributor for the sale of gas cylinders, indicating he was engaged in the business of supply of gas cylinders. As the turnover exceeded the threshold, the books of accounts were required to be audited under Section 44AB.

Issue 2:
The Assessing Officer imposed a penalty under Section 271B for failure to audit the accounts. The appellant argued that the imposition of penalty was discretionary, citing relevant case laws. The High Court acknowledged the discretionary nature of the penalty but emphasized that if a reasonable cause was not shown, the penalty could be imposed. The appellant's argument that he was only a commission agent and therefore not required to audit his accounts was deemed unreasonable. The Court held that since the appellant's turnover exceeded the threshold, he was obligated to audit his accounts, and the penalty imposition was justified. The Court dismissed the appeals and upheld the imposition of the penalty.

In conclusion, the High Court ruled that the sale of gas cylinders by the appellant was part of his turnover and required auditing under Section 44AB. The Court also found that the penalty imposed under Section 271B was justified due to the appellant's failure to provide a reasonable cause for not complying with the auditing requirement. The Court dismissed the appeals and upheld the penalty imposition.