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TMI Blog2007 (5) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... erlink with section 44AA of the Income-tax Act, 1961? 2. The reference relates to the assessment years 1987-88 to 1989-90. 3. Briefly stated the facts giving rise to the present reference are as follows: 4. The assessee-firm deals in the sales and purchase of tractors and its spares. During the assessment year 1987-88, the assessee has filed its return showing an income of Rs. 32,000. Along with the return of income the assessee has not attached any documents, except one challan of advance tax of Rs. 1,500. The assessment was completed under section 143(3) of the Act. The returns of the assessment years 1988-89 and 1989-90 had been filed on March 17, 1990, proceedings of which has been completed under section 143(1)(a) of the Act. These returns also did not accompany any document, i.e., trading account, profit and loss account and balance-sheet, etc. During the course of assessment proceedings, certain queries were raised from the Sales Tax Department and from the Escort Ltd. from where the assessee had made purchases of tractors and its spares. The sales of the assessee as per the Sales Tax Department for the assessment years 1987-88 to 1989-90 are as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um limit in the relevant previous year, to get the accounts audited and failure to do so would make liable such person for penalty as provided under section 271B of the Act. According to him, non- maintenance of accounts, as required under section 44AA of the Act, attracts penalty provisions under section 271A of the Act but that would not take out the jurisdiction of the assessing authority to impose the penalty under section 271B of the Act. The submission is wholly misconceived. Section 44AB of the Act read as follows "44AB. Every person,— (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year, or (b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year, get his accounts of such previous year audited by an accountant before the specified date and obtain before that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed." 9. The penalty provisions are contained in sections 271A and 271B of the Act which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in a taxing statute has to be strictly construed. Penalty is exigible only where a person falls within the four corners of the penal provisions otherwise not. Further, in the tax matters interpretation in favour of the assessee has to be adopted. We may mention here that in case where the returns are not being filed, there is unanimous judicial view that no penalty can be imposed for concealment of income and that is why Parliament had to make suitable amendment in the penalty provision by inserting Explanation 3 to section 271 of the Act and Explanation 3 to section 18 of the Wealth-tax Act, 1957. 11. The question as to whether an assessee has concealed the particulars of his turnover where he has not filed the return came up for consideration before the apex court in the case of Narain Das Suraj Bhan v. Commissioner, Sales Tax [1968] 21 STC 104. The apex court, while considering the provisions regarding the imposition of penalty provided under clause (b) of section 15A(1) of the U. P. Sales Tax Act, has held as follows (page107) "In our opinion, clause (b) of section 15A(1) is attracted as soon as it is shown that the assessee has concealed the particulars of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uage of the section clearly indicates that in a case where no return has been filed penal proceedings can be initiated only under section 15A(1) (a). There are observations in a decision of the Supreme Court in Narain Das Suraj Bhan v. Commissioner, Sales Tax [1968] 21 STC 104 which supports the view that we are taking." 13. In the case of Thoppil Kutti Eroor v. CIT [1958] 34 ITR 850, the Kerala High Court, while considering the question of imposition of penalty under section 38(1) (c) of the Cochin Income-tax Act which provides imposition of penalty for concealment or for furnishing inaccurate particulars, has held as follows (page 856) "It is impossible to say that when a person has failed to furnish any return at all what he has done is to conceal the particulars of his income or to deliberately furnish inaccurate particulars of such income within the meaning of clause (c) of section 38(1) of the Act. We entertain no doubt that the offence in such a case should be considered as one coming under clause (a) and not under clause (c) of sub-section (1) of section 38." 14. In the case of S. Narayanappa and Brothers v. CIT [1961] 41 ITR 125, the Mysore High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) (c) except as relating to a case where a return has been filed but from which return, particulars of income have been omitted or any particulars have been deliberately inaccurately furnished. The use of the expression 'particulars of his income' and 'particulars of such income' would be wholly inapposite in a case where no return has at all been filed; such a case would clearly come within the scope of section 28(1) (a) alone." 16. This court in Wealth-tax Appeal No. 28 of 1999 CWT v. Yadu Raj Narain Singh [2006] 286 ITR 564 decided on August 4, 2006, has also taken the same view. It has held as follows (page 572): "Thus applying the strict construction of penalty provisions Contained in clause (c) of sub-section (1) of section 18 of the Act, we find that prior to the amendment in Explanation 3 by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, in a case where the person who has previously been assessed under the Act does not file any return in response to the notice or even where time for filing the return has expired has not filed any return there cannot be any concealment for which penalty provision can be imposed. In view of the foregoing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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