+ I.t.t.a.nos.153 Of 2002 And 161 Of 2003 v. $ The Income Tax Officer, Bapatla …

* THE HON’BLE SRI JUSTICE L. NARASIMHA REDDYAND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.Nos.153 of 2002 and 161 of 2003 % 14.10.2014 M/s. Triveni Textiles and another ….Appellants Vs. $ The Income Tax Officer, Bapatla …. Respondent ! Counsel for the Appellants: Sri M.V.K. Moorthy Counsel for Respondent: Standing Counsel for Income Tax Department <Gist : >Head Note: ? Cases referred: THE HON’BLE SRI JUSTICE L. NARASIMHA REDDYANDTHE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.Nos.153 of 2002 and 161 of 2003 COMMON JUDGMENT:(Per Hon’ble Sri Justice L.Narasimha Reddy) These two appeals are filed under Section 260A of the Income TaxAct, 1962 (for short, ‘the Act’) by two different assessees feeling aggrievedby the common order, dated 15.04.2002, passed by the Income TaxAppellate Tribunal, Visakhapatnam Bench, in I.T.A.Nos.284/Hyd/1997 and285/Hyd/1997 referable to the assessment year 1995-96. The appellants are the assessees under the Act. Both of them aretraders and their turnover exceeds Rs.40.00 lakhs during the assessmentyear 1995-96 concerned. Section 44AB of the Act mandates that whereverthe turnover of an assessee exceeds Rs.40.00 lakhs, the books of accountmust be got audited. A survey was conducted in the premises of the appellants on07.12.1995. Alleging that the books of accounts ought to have beenaudited by 31.10.1995, the Assessing Officer passed orders under Section271B of the Act levying penalty 1½ percent on the turnover or Rs.1.00 lakhwhichever is less. Feeling aggrieved by those orders, the appellants filedappeals before the Commissioner. The appeals were allowed by theCommissioner on 12.12.1996. The department carried the matter in furtherappeal before the Tribunal. The appeals were allowed by the Tribunal on15.04.2002 and the order of penalty passed by the Assessing Officer wasupheld. Hence, these two appeals. Heard Sri M.V.K. Moorthy, learned counsel for the appellants andSri J.V. Prasad, learned standing counsel for the Income Tax Department. The due date for completion of audit of the books of account of theappellants was 31.10.1995. About one and half months subsequent tothat date, survey was conducted and was found that the books of accountwere not audited. In their explanation to the show-cause notice issuedunder Section 271B of the Act, the appellants pleaded that theirAccountants and other persons connected with the audit suffered ill-healthand they have also filed the medical certificates. The over reaching natureof the Income Tax Officer – Assessing Officer in the instant case is evidentfrom the fact that he not only visited the Doctors, who issued the medicalcertificates but also expressed the view that the said certificates cannot bebelieved since the corresponding entries were not made in the Out PatientRegister. He has also obtained a letter in that regard. We deprecate thesteps taken by the Income Tax Officer. He exhibited his power, obviouslybeing under the impression that there is none to check his highhandedaction. An assessee and a trader whose turnover was more than Rs.1.00crore was virtually treated as a culprit, by the Income Tax Officers that tooon the sole basis that there was delay in getting the books of accountaudited. We would have appreciated the one man-ship of the Income TaxOfficer had he made an endeavour to point out any defect in the books ofaccount. He wanted to exhibit his superiority just by pointing out thetechnical violation of provision of law. Unfortunately, there is no dearth ofthe officers, with such a tendency. It is these very officers who sleep overthe returns for years together and do not even pass orders of assessmentwherever the application of mind is needed. If the department has earneda typical reputation of frightening the assesses, it is not without reason. Another aspect is that the Income Tax Officer proceeded on the We would have appreciated the one man-ship of the Income TaxOfficer had he made an endeavour to point out any defect in the books ofaccount. He wanted to exhibit his superiority just by pointing out thetechnical violation of provision of law. Unfortunately, there is no dearth ofthe officers, with such a tendency. It is these very officers who sleep overthe returns for years together and do not even pass orders of assessmentwherever the application of mind is needed. If the department has earneda typical reputation of frightening the assesses, it is not without reason. Another aspect is that the Income Tax Officer proceeded on the assumption that the amendment caused to Section 137A as well as toSection 44AB of the Act with effect from 01.07.1995 is applicable to theassessment year 1995-96 also. The appellate authority accepted the reasons pleaded for the failureto get the books of account audited for a relatively negligible period andallowed the appeals. The Tribunal, in our opinion, has undertaken anenquiry, which does not befit to its stature. No attempt was made to pointout any corresponding loss to the exchequer or the revenue or anydeliberate act of illegality on the part of the appellants. Even in its wildestdreams, the Members of Parliament would not have dreamt that theprovisions relating to penalty would be put to such a gross misuse. Ifevery lapse or defect is to result in penalties, a close scrutiny of the lapsesof the officers of the Income Tax Department at various levels would leadto a situation, where the State had to shell down tons of money, onapplication of similar standards. We find that the common order passed bythe Tribunal is totally untenable in law and not sustainable on facts. Both the appeals are allowed setting aside the common order,dated 15.04.2002, passed by the Income Tax Appellate Tribunal,Visakhapatnam Bench, in I.T.A.Nos.284/Hyd/1997 and 285/Hyd/1997.Miscellaneous Petitions, if any pending in these appeals shall also standdisposed of. There shall be no order as to costs. __________________________ L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J (B/o)GHN/GK