2018 (11) TMI 1954 - HC - Indian Laws

Registration of petitioner firm as transporter and handler of the agricultural produce - denying the registration of the firm on account of not getting the balance-sheets audited by Income Tax Department for last three years - Non-considering the bid of the petitioner for the purpose of empanelment - Counsel submitted that the requirement of having the turnover of 1.5 Crore in last 3 financial years is fulfilled by the petitioner-firm and only on account of audit not being carried out, the respondents have acted arbitrarily in rejecting the empanelment of the petitioner-firm. HELD THAT - Requirement of audit of accounts is to be governed by the provisions contained in Section 44AB of the Income Tax Act, 1961 and if the turnover/sale/gross receipts in business does not exceed one crore rupees in any previous year, there is no requirement of getting the accounts audited. This Court further finds that the requirement as per Condition No. 5 was to consider the turnover for last three years of Rs. 1.50 Crore and if the petitioner-firm had the turnover in last three years of 1.50 Crore, the same could not be related to the condition of audited balance-sheets. The plea of the respondents that even if the turnover is less than One Crore but it exceeds to 1.50 Crore in the last three years, the same is required to be audited, this Court finds no substance in the arguments raised by counsel for the respondents, as it runs contrary to the requirement of Section 44 (A)(B) of the Income Tax Act, 1961. This Court finds that if the procuring entity prescribes a condition to be fulfilled by the bidder, such condition had to be in consonance with the requirement of law. The Income Tax Act, 1961 has prescribed the minimum turnover for getting the accounts audited, the procuring authority cannot interprete and put such a condition to insist upon getting the accounts audited even if some assessee/businessmen who has a turnover of less than one crore in a particular year. This Court finds little substance in the submission of the learned counsel for the respondents that the action taken by the respondents is perfectly legal and justified. The respondents while considering the bid submitted by different eligible bidders was required to consider the condition which was prescribed in the tender and also to fulfill the requirement of compliance of relevant law as well. This Court finds that non inclusion of name of the petitioner-firm on account of not having the audited balance-sheets is not justified and respondents have committed illegality in rejecting the bid of the petitioner-firm. Accordingly, the present writ petition succeeds and is hereby allowed. The respondents are directed to consider the bid of the petitioner for the purpose of empanelment and it should not be rejected on the ground of not having audited balance-sheets of last three years.

Summary

Issues:
Challenge to rejection of registration as transporter and handler of agricultural produce based on audit requirement and condition No. 5 of the advertisement.

Detailed Analysis:

Challenge to Rejection of Registration:
The petitioner, a proprietor firm, challenged the rejection of its registration as a transporter and handler of agricultural produce due to the failure to get its balance-sheets audited by the Income Tax Department for the last three years. The petitioner contended that the audit was not mandatory as the balance-sheets were certified by a Chartered Accountant and the turnover was less than one crore rupees in each of the preceding three financial years. The respondents rejected the petitioner's bid based on the absence of audited balance-sheets, claiming compliance with the tender conditions.

Legality of Audit Requirement:
The Court examined Section 44AB of the Income Tax Act, 1961, which mandates audit for businesses with turnover exceeding one crore rupees in any previous year. The Court noted that the condition in the advertisement requiring audited balance-sheets for a turnover of 1.50 Crore in the last three years was not in line with the legal provisions. The respondents' argument that turnover exceeding 1.50 Crore necessitated an audit was deemed invalid as it contradicted the Income Tax Act's requirements.

Validity of Tender Condition:
The Court emphasized that conditions imposed by procuring entities must align with legal mandates. It held that the requirement of audited balance-sheets for a turnover exceeding 1.50 Crore, irrespective of the one crore turnover threshold for audit under Section 44AB, was unjustified. Rejecting the petitioner's bid solely based on unaudited balance-sheets was deemed illegal, as it did not comply with the law.

Judgment and Relief:
The Court allowed the writ petition, directing the respondents to reconsider the petitioner's bid for empanelment without rejecting it on the grounds of unaudited balance-sheets. The decision was to be implemented within fifteen days from the receipt of the order's certified copy, overturning the initial rejection and emphasizing compliance with legal provisions over arbitrary conditions set by the procuring entity.

This analysis highlights the key legal arguments and the Court's reasoning in overturning the rejection of the petitioner's registration bid, emphasizing the importance of aligning tender conditions with statutory requirements.