Firm wins bid challenge after authority wrongly demanded audited balance-sheets under Section 44AB Income Tax Act

HC allowed writ petition challenging rejection of petitioner firm's bid for agricultural produce transporter registration. Respondents denied empanelment citing lack of audited balance-sheets for three years despite firm meeting Rs. 1.5 crore turnover requirement. Court held audit requirement under Section 44AB Income Tax Act, 1961 applies only when turnover exceeds Rs. 1 crore in any year. Procuring authority cannot impose audit conditions beyond statutory requirements. Rejection deemed arbitrary and illegal. Respondents directed to reconsider bid without requiring audited balance-sheets.

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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.

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