Sri H. Chenne Gowda, Pandavapura V. ITO, Mandya

ITA 1039/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8538 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: V SRINIVASAN
• Keywords: Reasonable cause
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, J.M.AND SHRI A. MOHAN ALANKAMONY, A.M. ITA NOS.1038 & 1039(BNG)/09 (ASSESSMENT YEARS : 2005-06 & 2006-07) SHRI H. CHENNE GOWDA, PROP. SRI RAGHAVENDRA FERTILISERS, J.P. STREET, PANDAVAPURA. VS. THE INCOME TAX OFFICER, WARD 2, MANDYA. APPELLANT. RESPONDENT. APPELLANT BY : SHRI V. SRINIVASAN. RESPONDENT BY : SMT. V.S. SREELEKHA. O R D E R PER BENCH : THESE APPEALS BY THE ASSESSEE IS DIR ECTED AGAINST THE CONSOLIDATED ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), MYSOR E DT.25.9.2009 FOR THE ASSESSMENT YEARS 2005-06 & 2006-07. THE ORDER OF TH E LEARNED CIT(A) EMANATES FROM THE SEPARATE ORDER PASSED UNDER SECTION 271B O F THE INCOME TAX ACT, 1961. 2. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEAL S, THEY ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE AND BREVITY. 3. THE GROUNDS RAISED IN THESE APPEALS ARE IDENTICA L. THE EFFECTIVE GROUNDS RAISED ARE AS FOLLOWS : ITA NOS.1038 & 1039(BNG)/09 - 2 - THE ORDER IMPOSING PENALTY UNDER SECTION 271B OF THE INCOME TAX ACT, 1961 IS BAD IN LAW IN AS MUCH AS, THE APPELLAN T HAS NOT COMMITTED ANY DEFAULT OF THE NATURE REFERRED TO IN SECTION 271B T O WARRANT THE LEVY OF PENALTY AND THEREFORE, THE PENALTY LEVIED REQUIRES TO BE CANCELLED. WITHOUT PREJUDICE TO THE ABOVE, THE AUTHORITIES BE LOW ARE NOT JUSTIFIED IN IMPOSING PENALTY UNDER SECTION 271B OF THE ACT, UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS C ASE. THEY FAILED TO APPRECIATE THAT THE APPELLANT WAS PREVENTED BY REAS ONABLE CAUSE FROM OBTAINING AND FURNISHING THE AUDIT REPORT UNDER SEC TION 44AB WITHIN TIME AND THE DELAY IN OBTAINING AND FURNISHING THE AUDIT REPORT WAS NOT OUT OF WILLFUL DEFAULT OR NEGLECT ON THE PART OF THE APPEL LANT AND CONSEQUENTLY, THE PENALTY LEVIED DESERVES TO BE CANCELLED. 4. BRIEFLY THE FACTS ARE AS FOLLOWS : THE ASSESSEE, AN INDIVIDUAL WAS IN THE BUSINESS OF DEALING IN FERTILIZERS AND PESTICIDES IN THE LAST TWENTY YEARS. IT APPEARS TH AT HE WAS NOT FILING ANY INCOME TAX RETURNS IN THESE YEARS SINCE HE WAS NOT HAVING TAXA BLE INCOME ACCORDING TO HIM. THERE WAS NO ACTION TAKEN BY THE INCOME TAX DEPARTMENT TO GET THE RETURNS FILED BY THE ASSESSEE APPARENTLY BECAUSE THE REVENUE WAS ALSO SA TISFIES THAT THE ASSESSEE DID NOT HAVE ANY TAXABLE INCOME. THERE WAS A SURVEY CONDUC TED IN THE BUSINESS PREMISES OF THE ASSESSEE UNDER SECTION 133A OF THE ACT ON 23.1. 2007. NO NOTICE APPEARS TO HAVE BEEN ISSUED TO THE ASSESSEE CALLING FOR INCOME TAX RETURN. HOWEVER, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE, AS TO WHY PENALTY UNDER SECTION 271B OF THE ACT SHOULD NOT BE IMPOSED. THE ASSESSEE FILED A REPLY TO THE SHOW CAUSE NOTICE ON 30.3.2009 EXPLAINING THAT HE WAS NOT AWARE OF THE P ROVISIONS OF THE ACT RELATING TO TAX ITA NOS.1038 & 1039(BNG)/09 - 3 - AUDIT. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE DID NOT HAVE ANY TAXABLE INCOME FOR ANY OF THE YEAR IN THE PAST AND IT IS ONLY AFTER TH E SURVEY, THE ASSESSEE WAS DIRECTED TO FILE RETURNS OF INCOME. IT WAS ALSO EXPLAINED THA T THE ASSESSEE DID NOT MAINTAIN CASH BOOK, LEDGER, ETC., AND IT WAS NOT POSSIBLE TO GET THE BOOKS OF ACCOUNTS AUDITED IN THE ABSENCE OF BOOKS. UNDER THESE CIRCUMSTANCES, THE A SSESSEE PRAYED THAT THE PENALTY SHOULD NOT BE IMPOSED. THE LEARNED ASSESSING OFFIC ER DID NOT ACCEPT THE EXPLANATION TENDERED BY THE ASSESSEE AND HE PROCEEDED TO HOLD T HAT THE ASSESSEE HAD FAILED TO PROVE THAT THERE WAS REASONABLE CAUSE FOR FAILURE T O GET THE BOOKS OF ACCOUNTS AUDITED. ACCORDINGLY, THE LEARNED ASSESSING OFFICER IMPOSED PENALTY OF RS.51,189 BEING % OF THE TURNOVER OF THE ASSESSEE FOR A.Y. 2005-0 6. 5. SIMILARLY, FOR ASSESSMENT YEAR 2006-07, THE ASSE SSEE IMPOSED A PENALTY OF RS.67,910 BEING PERCENT OF THE TURNOVER DETERMINE D FOR THE CONCERNED ASSESSMENT YEAR. 6. ON APPEAL, THE PENALTY IMPOSED UNDER SECTION 271 B WAS CONFIRMED BY THE LEARNED CIT(A) AND THE ASSESSEE IS FURTHER IN APPEA L BEFORE THE TRIBUNAL. 7. THE LEARNED AUTHORISED REPRESENTATIVE DURING THE COURSE OF PROCEEDINGS BEFORE US DREW OUR ATTENTION TO THE REPLY FILED BY THE ASS ESSEE AND WRITTEN SUBMISSIONS FILED BEFORE THE LEARNED CIT(A). IT WAS SUBMITTED THAT T HE ASSESSEE DID NOT MAINTAIN ANY ITA NOS.1038 & 1039(BNG)/09 - 4 - CASH BOOK, LEDGER, ETC BUT MAINTAINED THE STOCK BOO K AND DEBTORS BOOK, PURCHASE AND SALES BILLS AND BANK STATEMENTS EVER SINCE HE HAD C OMMENCED BUSINESS. IT WAS STATED THAT THE ASSESSEE IS A SOLE PROPRIETOR AND THE ACCO UNTS WERE MAINTAINED TO THE BEST OF HIS KNOWLEDGE. IT WAS FURTHER STATED THAT THE ASSE SSEE WAS PERSONALLY SUPERVISING THE BUSINESS DAILY AND THE ACCOUNTS MAINTAINED KEPT AWA RE OF THE TRADING RESULTS TO HIS SATISFACTION. IT WAS SUBMITTED THAT THE MARGIN OF THE ASSESSEE ON SALE WAS VERY NEGLIGIBLE VARYING FROM 0.25 % TO 0.5 % OF THE SALE VALUE. HE ALSO RELIED ON THE DECISION OF THE BANGALORE BENCH B OF ITAT IN THE CASE OF SHRI M.R. UNNIKRISHNAN NAMBISAN VS. ACIT (ITA NO.673/BANG/03 DT.30.5.2005) FOR THE PROP OSITION THAT NO PENALTY UNDER SECTION 271B CAN BE IMPOSED IN A CASE WHERE NO AUDI TING CAN BE DONE AS NO ACCOUNTS WERE MAINTAINED. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDERS OF THE AUTHORITIES BELOW. IT WAS ARGUED BY HER THAT IT WA S A STATUTORY REQUIREMENT TO FILE THE TAX AUDIT REPORT AND THE ASSESSEE FAILED TO GET THE ACCOUNTS AUDITED THOUGH THE TURN OVER EXCEEDED RS.1 CRORE FOR BOTH THE ASSESSMENT YE ARS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS ADMITTED POSITION THAT THE ASSESSEE HAS NOT BEEN FILING RETURNS FOR THE PAST TWENTY YEARS OR SO AND THE INCOME TAX DEPARTME NT HAS NOT TAKEN ANY ACTION FOR ITA NOS.1038 & 1039(BNG)/09 - 5 - ANY OF THE YEARS PRESUMABLY BECAUSE THEY WERE SATIS FIED THAT THE ASSESSEE DID NOT HAVE ANY TAXABLE INCOME. EVEN THE RETURN FILED BY THE ASSESSEE AFTER THE DATE OF SURVEY, IT WAS NOT PROCESSED BY THE ASSESSING OFFIC ER FOR FILING OF INCOME TAX RETURN. IN THE INSTANT CASE, PENALTY HAS BEEN INITIATED BY THE OFFICER CONCERNED FOR THE REASON THAT THE ASSESSEE HAS BEEN MAINTAINING BOOKS OF ACC OUNTS IN TERMS OF SECTION 44AA OF THE INCOME TAX ACT, 1961 AND ITAT HAS GIVEN A FINDI NG THAT THE ASSESSEE HAS COMPLIED PROVISIONS UNDER SECTION 44AA WHILE DELETING THE PE NALTY UNDER SECTION 271A OF THE INCOME TAX ACT, 1961. IN THIS CONTEXT, WE HAVE PER USED THE ORDER OF ITAT IN ASSESSEES OWN CASE DELETING THE PENALTY UNDER SECT ION 271A. WE ARE OF THE OPINION THAT THE TRIBUNAL HAS NOT FOUND THAT THE ASSESSEE H AD MAINTAINED PROPER BOOKS OF ACCOUNTS. IT WAS ONLY STATED THAT THE ASSESSEE HAS MAINTAINED STOCK REGISTER TOGETHER WITH THE PURCHASE AND SALE BILLS AND ALSO THE BANK STATEMENTS AND SAME WOULD BE SUFFICIENT TO ENABLE THE ASSESSING OFFICER TO COMPU TE THE INCOME UNDER THE ACT. IT IS IN THESE CIRCUMSTANCES, THE TRIBUNAL HAD HELD THAT THERE WAS SUFFICIENT CAUSE FOR THE ASSESSEE FOR BEING INSULATED AGAINST THE LEVY OF PE NALTY. IN THE INSTANT CASE, IT IS ADMITTED POSITION THAT THE ASSESSEE HAS NOT MAINTAI NED ANY CASH BOOK, LEDGER ETC BUT HAS ONLY MAINTAINED STOCK BOOK AND DEBTOR BOOK, PUR CHASE AND SALE BILLS. THEREFORE IN THIS CONTEXT IT IS NOT POSSIBLE TO GET THE BOOKS OF ACCOUNTS AUDITED IN ABSENCE OF ITA NOS.1038 & 1039(BNG)/09 - 6 - PROPER BOOKS OF ACCOUNTS. THE TRIBUNAL IN THE CASE OF M.R. UNNIKRISHNAN NAMBISAN (SUPRA), ON SIMILAR SET OF FACTS HAS HELD AS FOLLOW S : WE HAVE HEARD BOTH THE PARTIES. TAX AUDIT REPOR T CAN BE OBTAINED IN CASE THE BOOKS OF ACCOUNT ARE PROPERLY MAINTAINED. IT IS ALSO A FACT THAT RETURNED INCOME HAS BEEN ACCEPTED. IT IS THEREFORE CLEAR THAT THERE HAS BEEN NO LOSS TO THE REVENUE IN CASE TAX REPORT HAS NOT BEEN FILED. THIS BENCH VIDE ORDER DT.25.2.1997 IN ITA NO.1656 TO 1658/BANG/90 HAS HELD THAT NO PENALTY UNDER SECTION 271B CAN BE IMPOSED IN A CASE WHERE NO AUDITING CAN BE DONE AS NO ACCOUNTS WERE MAINTAINED. SIMILAR FINDING WAS GIVEN BY THIS BENC H VIDE ORDER DT.9.10.96 IN ITA NO.1084/BANG/05. FOLLOWING THE O RDERS OF THIS BENCH AND CONSIDERING THE FACT THAT THERE HAS BEEN NO LOSS TO THE REVENUE, IT IS HELD THAT LEARNED CIT(A) WAS NOT JUS TIFIED IN CONFIRMING THE PENALTY. THE PENALTY IMPOSED BY THE ASSESSING OFFICER IS CANCELLED AND THE APPEAL IS ALLOWED. AS ALREADY MENTIONED ABOVE, THE ASSESSEE IN THE PAS T YEARS HAD NOT BEEN FILING THE INCOME TAX RETURNS SINCE ACCORDING TO HIM THERE WAS NO TAXABLE INCOME. NO ACTION HAS BEEN TAKEN BY THE INCOME TAX DEPARTMENT TO GET THE RETURNS FILED BY THE ASSESSEE APPARENTLY BECAUSE THEY WERE SATISFIED THAT THE ASS ESSEE DID NOT HAVE ANY TAXABLE INCOME. EVEN THE RETURN FILED BY THE ASSESSEE AFTE R THE DATE OF SURVEY HAS NOT BEEN PROCESSED BY THE ASSESSING OFFICER CONCERNED. FOR THE AFORESAID REASONS, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY OF RS.51,189 AND RS.67,910 FOR THE ASSESSMENT YEARS 20 05-06 AND 2006-07 RESPECTIVELY. ITA NOS.1038 & 1039(BNG)/09 - 7 - HENCE WE REVERSE THE ORDER OF THE LEARNED CIT(A) AN D DELETE THE PENALTY LEVIED UNDER SECTION 271B OF THE ACT. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE ALLO WED. PRONOUNCED IN THE OPEN COURT ON 3 RD MARCH, 2010. SD/- SD/- (A. MOHAN ALANKAMONY) (GEO RGE GEORGE K) ACCOUNTANT MEMBER JU DICIAL MEMBER BANGALORE, DT.03-03-2010. COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. 7. GUARD FILE, ITAT, NEW DELHI. * GPR BY OR DER ASSISTANT R EGISTRAR