HATHISING MFG. CO. LTD. V. CIT

TAXAP/479/2006

AI Insights

The case revolves around the imposition of a penalty under section 271B of the Income Tax Act, 1961, due to the appellant's failure to file a Tax Audit Report within the prescribed time. The appellant, a public limited company, initially filed a return declaring a loss and later submitted a revised return along with the Tax Audit Report, albeit after the due date. The Assessing Officer imposed a penalty, which was later quashed by the CIT(A). However, the Tribunal reversed this decision, leading to the present appeal. The High Court, referencing decisions from other jurisdictions, adopted a liberal approach considering the circumstances of the appellant being a 'sick unit' under the BIFR, and restored the CIT(A)'s decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 670563 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 24-12-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Kashiram Textile Mills (P) Ltd., Commissioner of Income Tax v. U.P. Rajya Sahkari Evam Bhoomi Vikas Bank Ltd, Commissioner of Income Tax v. Punjab State Leather Development Corpn. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NITIN K MEHTA
• Assessee Lawyers: D K PUJ; NIYATI K SHAH
• Keywords: BIFR; Penalty; Sick Unit; Tax audit report
• Section: 44AB; 260A; 271B; 139(9)

Judgement Text

"O/TAXAP/479/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 479 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ HATHISING MFG. CO. LTD.....Appellant(s) Versus CIT....Opponent(s) ================================================================ Appearance: MR.D K.PUJ, ADVOCATE for the Appellant(s) No. 1 MS NIYATI K SHAH, ADVOCATE for the Appellant(s) No. 1 MR NITIN K MEHTA, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and Page 1 of 6 O/TAXAP/479/2006 JUDGMENT HONOURABLE MR.JUSTICE K.J.THAKER Date : 24/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This appeal u/s.260A of the Income Tax Act, 1961 is filed against the judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No.361/AHD/1991 dated 20.09.2005 whereby, the appeal filed by the Revenue was allowed. 2. Briefly stated, the appellant-assessee is a Public Limited Company. On 31.12.1993 the assessee filed its Return of income for the A.Y. 1993-94 declaring loss of Rs.1,13,19,799/-. Along with the the Return, provisional Balance-sheet and P & L Accounts were enclosed. Notice u/s.139(9) was issued and served upon the assessee pointing out the defects in the Return. However, the assessee did not remove these defects within the prescribed time-limit. Thereafter, a revised Return was filed on 04.10.1994. As the assessee had failed to obtain the Tax Audit Report within the due date, as specified u/s.44AB of the Income Tax Act, 1961, Notice dated 11.03.1996 was issued to the assessee asking it to show cause as to why penalty u/s.271B of the Act should not be imposed. The assessee did not furnish any reply Page 2 of 6 O/TAXAP/479/2006 JUDGMENT to the said Notice. The Assessing Officer passed the order dated 30.09.1996 directing the assessee to pay penalty u/s.271B amouting to Rs.1.00 Lacs. 3. Aggrieved by the order dated 30.09.1996, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee vide order dated 10.12.1998. Being aggrieved by the order of CIT(A), the Revenue preferred appeal before the Tribunal. Vide impugned judgment and order dated 30.09.2005, the Tribunal allowed the appeal of the Revenue. Hence, this appeal at the instance of the assessee. 4. This Tax Appeal was admitted on 21.09.2006 in terms of the following substantial question of law; “Whether in the facts and circumstances of the case, the Tribunal is right in law in confirming the levy of penalty of Rs.1,00,000/- u/s.271B?” 5. Ms. Niyati Shah learned counsel appearing for the assessee submitted that the appellant- assessee is a “sick unit” under the BIFR and could not finalize its Accounts and obtain the Tax Audit Report before 31.03.1994. The assessee had submitted the original Return on the basis of Page 3 of 6 O/TAXAP/479/2006 JUDGMENT the provisional Balance Sheet and P & L Accounts and revised Return was filed on 04.10.1994 along with the Tax Audit Report. Therefore, there was sufficient cause behind the delay and the A.O ought not to have imposed the penalty u/s.271B of the Act. 6. Mr. Nitin Mehta learned Standing Counsel appearing for the Revenue submitted sufficient opportunity was granted to the assessee to file the Tax Audit Report, however, the assessee failed to avail all the opportunities provided to it. Further, the assessee also did not respond to the Notice u/s.139(9) of the Act dated 31.03.1994 issued to it. Therefore, penalty u/s.271B has righlty been imposed on the assessee. 7. We have heard learned counsel for both the sides and perused the material on record. It is a matter of fact that the assessee did not file the Tax Audit Report within the prescribed time. It appears from the record that the accounts were audited and signed by the Statutory Auditor on 24.03.1994 and the Tax Audit Report was obtained on 31.03.1994 and therefore, it could not be filed prior to 24.03.1994. It is a matter of fact that the assessee is a “sick unit” before the BIFR. Therefore, it could not file the Tax Audit Report within the prescribed time-limit. Page 4 of 6 O/TAXAP/479/2006 JUDGMENT 8. Considering the facts of the case, it would be relevant to refer to a decision of this Court in the case of Commissioner of Income Tax v. Kashiram Textile Mills (P) Ltd., 284 ITR 61, wherein it has been held that liberal approach has to be adopted for determining whether reasonable cause existed or not behind delay in filing audit report. Similar view has been taken by the Allahabad High Court in the case of Commissioner of Income Tax v. U.P. Rajya Sahkari Evam Bhoomi Vikas Bank Ltd, [2013] 353 ITR 152 (All) and by the Punjab and Haryana High Court in the case of Commissioner of Income Tax v. Punjab State Leather Development Corpn. Ltd., [2001] 119 Taxman 258 (Punj & Har). 9. Considering the facts of the present case and the principle rendered in the above cases, we are of the view that the Tribunal ought not to have reversed the order of CIT(A) whereby, the penalty u/s.271B imposed by the Assessing Officer was quashed and set aside. Hence, the impugned judgment and order passed by the Tribunal in ITA No.361/AHD/1991 dated 20.09.2005 is quashed and set aside and the order of CIT(A) dated 10.12.1998 is restored. Therefore, the question of law as to whether the Tribunal is right in law in confirming the levy of penalty of Page 5 of 6 O/TAXAP/479/2006 JUDGMENT Rs.1,00,000/- u/s.271B of the Act is answered in the negative in favour of the assessee and against the Revenue. The appeal is, accordingly, allowed. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 6 of 6 "