COMMR OF INCOME VSP V. M/S.GODAVARI COOP MILK PRODUCERS UNION L

ITTA/50/2000

AI Insights

The case involves the Commissioner of Income Tax, Visakhapatnam, as the appellant, and Godavari Co-operative Milk Products Union Ltd., Rajahmundry, as the respondent. The core issue was the penalty levied under Section 271B of the Income Tax Act for not filing the audit report as required under Section 44AB. The Tribunal had earlier ruled in favor of the respondent, finding that the delay caused by a government official's auditing was a reasonable cause for the late submission. The High Court upheld the Tribunal's decision, emphasizing the need to read Sections 271B and 273B together, which allows for the non-imposition of penalties if a reasonable cause is proven.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 724275 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 20-06-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Audit report; Co-operative Societies Act; Jurisdiction; Penalty; Reasonable cause
• Section: 44AB; 273B; 271B

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI ITTA Nos. 50 of 2000 & 21 of 2001 Between: Commissioner of Income Tax, Visakhapatnam. ….Appellant And Godavari Co-operative Milk Products Union Ltd., Rajahmundry. …Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI ITTA Nos. 50 of 2000 & 21 of 2001 COMMON JUDGMENT: (Per the Hon’ble the Chief Justice Sri K.J. Sengupta) These appeals are directed against the orders of the learned Tribunal dated 28.01.2000 and the same were admitted by this Court on 16.11.2000 & 02.02.2001 respectively, on the following of substantial questions of law. “(1) Whether on the facts and circumstances of the case, the Appellate Tribunal is right in deleting the penalty levied under Section 271B of the Income Tax Act. (2) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that delay caused due to delay in auditing by a Government Official under A.P. Co-operative Societies Act is a reasonable cause for non-filing of Audit report under Section 44AB of the Income Tax Act, within the time? (3) Whether on the facts and in the circumstances of the case, the order of the Appellate Tribunal in so far as nullifying its earlier order and allowing the assessee’s appeal amounted to reviewing its earlier order and hence without jurisdiction.” The facts set out in these cases are as follows: The returns filed by the assessee for the three years i.e. 1989-90, 1990-91, 1991-92 were not accompanied by the audit report as contemplated under Section 44AB of the Income Tax Act (for short ‘the Act’). Since the audit report in terms of Section 44AB of the Act was not accompanied with, the Assessing Officer initiated proceedings and levied penalty under Section 271B of the Act. The respondent assessee duly explained as to the failure. The Assessing Officer, not being satisfied with the explanation of the respondent for the default, has levied penalty of Rs.1 lakh for each of those years under Section 271B of the Act. On appeal, the Commissioner of Income Tax (Appeals) by the impugned orders affirmed the said orders of penalty. Thereafter, the assessee preferred appeals against the aforesaid orders before the learned Tribunal. The learned Tribunal, after hearing the parties, allowed the appeals and came to the conclusion that the penalty was not leviable as the explanation given by the assessee was satisfactory. In the context of the aforesaid events, the learned counsel for the appellant-Revenue submits that the learned Tribunal has omitted one glaring mistake of fact that the words “without reasonable cause” after the words “if any person fails” under Section 271B were deleted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 10.09.1986. Therefore, the learned Tribunal was not justified to delete the penalty applying deleted phrases. According to him, once there is a failure, if the words are deleted, no income tax authority, including Tribunal, has jurisdiction to condone the lapses or accept the explanation. Therefore, the impugned orders are liable to be set aside on the face of it. Learned counsel for the respondent-society, on the other hand, submits that it is true that the aforesaid words were deleted from Section 271B, but a new Section had been inserted with Section 273B whereunder it is provided that the same words have been provided. Therefore, the contention raised by both the learned counsel is whether the Tribunal is having jurisdiction to waive the penalty on any reasonable cause or not. It appears that if one reads Section 271B of the Act in isolation of any provision, then it has to be held that the Tribunal has no jurisdiction to condone the said lapse and delete the penalty, and once there is a failure, the penalty automatically follows. But, as rightly contended by the learned counsel for the respondent that Section 273B has to be read together with Section 271B in this context. Therefore, we set out Section 273B in this context. “273B. Penalty not to be imposed in certain cases – Notwithstanding anything contained in the provisions of (clause (b) of sub-section (1) of (section 271, section 271A, (section 271AA), section 271 B, (section 271BA), (section 271BB), (section 271C, section 271CA), section 271D, section 271E, (section 271F,section 271FA, section 271FB) (section 271G), clause ( c ) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or (section 272B or sub-section (1) or sub-section (1a) of section 272BB or sub-section (1) of section 272BBB or (clause (b) of sub-section (1) or clause (b)or clause ( c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.” The aforesaid Section starts with a non-obstante clause. Therefore, the language of the said section is mandatory in nature. In that section, it is clear that the words “if the assessee proves that there was reasonable cause for the said failure”, then the penalty under Section 271B cannot be levied. Therefore, Section 271B has to be read along with Section 273B. If these are read conjointly, one can come to the conclusion that the tax authority has power not to levy any penalty in case it is found that there was reasonable cause for such failure. Once the power is found, it has to be seen whether the power has been exercised in a judicial manner or not. Existence of power is one thing and exercise of the said power is another thing. Power has to be exercised in judicial manner and not in a casual way. In this case, the Tribunal, on fact, has found that the assessee being a co-operative institution is bound by the provisions of the Co- operative Societies Act to get its accounts audited by the auditors appointed by the concerned department. The assessee explained the default in getting its accounts audited in compliance with the provision under Section 44AB. The learned Tribunal held that the aforesaid cause is a reasonable cause and we have no hesitation to accept that the circumstances, which were beyond the control of the assessee, can be said to be a reasonable cause. We, therefore, hold that the Tribunal is perfectly justified in coming to the conclusion that there exists a reasonable cause for not levying penalty under Section 271B of the Act. The appeal, therefore, fails, and is accordingly dismissed affirming the order of the learned Tribunal. No order as to costs. _____________________ K.J. SENGUPTA, C.J. ______________ G. ROHINI, J. Date: 20.06.2013 KLP/GBS "