A.S. MOLOOBHOY & SONS, MUMBAI V. ACIT 17(1), MUMBAI

ITA 1042/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8867 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 09-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: MEGHNA BUTALA
• Keywords: Reasonable cause
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI PRAMOD KUMAR, AM AND SHRI V. DURGA RA O, JM I.T.A.NO. 1042/MUM/2010 ASSESSMENT YEAR : 2003-04 M/S. A.S. MOLOOBHOY & SONS, ANCHOR HOUSE, 1 ST MAGAZINE STREET, DARUKHANA, MUMBAI 400 010 PAN: AAAFA 2693 P VS. THE ASST COMMISSIONER OF INCOME- TAX-17(1), ROOM NO. 113, LST FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. MEGHNA BUTALA RESPONDENT BY : SHRI A.K. NAYAK O R D E R PER V. DURAGA RAO, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-29, MUMBAI DAT ED 31.12.2009 FOR THE ASSESSMENT YEAR 2003-04. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS LEVY O F PENALTY U/S.271B OF THE INCOME-TAX ACT. THE FACTS OF THE CASE ARE THAT TH E ASSESSEES RETURN OF INCOME ALONG WITH THE AUDIT REPORT HAS DUE TO BE FILED ON 31,10.2003, BUT THE SAME FILED AFTER A GAP OF ABOUT ONE YEAR I.E. 1.11.2004. IT W AS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE AUDIT GOT DELAYED BECAUS E OF DIFFERENCES AND DISPUTES ARISING AMONG THE PARTNERS. THIS HAS BEEN REFERRED TO ARBITRATION AND THE ANNUAL ACCOUNTS WERE FINALIZED ONLY IN THE MONTH OF OCTOBE R 2004 AND SUBSEQUENTLY THE RETURN OF INCOME WAS FILED. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE IMPOSED PENALTY U NDER SECTION 271B OF THE ACT. 3. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT FILED THE RETURN ON THE DUE DATE OR THERE IS NO EVIDENCE THAT THERE WAS ANY BASIC AUDIT CARRIED OUT. THERE HAD NOT BEEN AT LEAST AN ATTEMPT TO FILE ORIG INAL RETURN OR LETTERS FILED BEFORE THE ASSESSING OFFICER REQUESTING TIME SUCH A CAUSE COULD HAVE BEEN CONSIDERED. ITA NO.1042/M/2010 M/S.A.S. MOLOOBHOY & SONS . . 2 FAILURE TO DISCHARGE SUCH STATUTORY OBLIGATION ON T HE PART OF THE ASSESSEE, HE UPHELD THE ACTION OF THE ASSESSING OFFICER. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES. WE HAVE ALSO PER USED THE RECORDS PLACED BEFORE US. AT THE TIME OF HEARING, THE LEARNED COU NSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IN QUESTION IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 (ITA NO. 1041/MUM/2010 ) DECIDED ON 23.12.2010, WHEREIN THE TRIBUNAL HAS CON SIDERED THE ISSUE AND DECIDED AS UNDER: IT IS CLEAR FROM THE ABOVE REASONING GIVEN BY THE AO FOR NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE THAT THE CORRECTNESS OF THE EXPLANATION AND THE REASONS WER E NOT DISPUTED BY THE AO. THE EXPLANATION WAS TURNED DOW N BY THE AO BECAUSE IN VIEW OF THE AO IT WAS NOT TENABLE. AS PER THE PROVISIONS OF SECTION 273B, NO PENALTY SHALL BE IMP OSED ON THE PERSON OR THE ASSESSEE FOR ANY FAILURE REFERRED TO IN THE VARIOUS PROVISIONS AS MENTIONED IN THE SAID SECTIO N INCLUDING SECTION 271B, IF HE PROVES THAT THERE WAS A REASONA BLE CAUSE FOR THE SAID FAILURE. THE ASSESSING OFFICER HAS NO T DISPUTED THAT THERE WAS A DELAY IN FINALIZATION OF THE ACCOU NTS DUE TO THE DIFFERENCES AND DISPUTES BETWEEN PARTNERS OF TH E ASSESSEE-FIRM AND FINALLY THE FIRM WAS RECONSTITUTE D IN THE MONTH OF MAY 2004 AFTER THE SETTLEMENT BETWEEN THE PARTNERS THROUGH ARBITRATION. THUS, UNLESS AND UNTIL THE A CCOUNTS ARE FINALIZED THERE CANNOT BE AUDIT REPORT U/S 44AB. W HEN THE EXPLANATION AND REASONS FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 271B ARE NOT FOUND AS UNTRUE THEN WHILE CONSTRUING THE REASONABLE CAUSE FOR THE SAID FAILUR E THE PERIOD OF DELAY SHALL NOT BE SOLE BASIS. IT IS REAS ON AND CAUSE WHICH IS MATERIAL FOR DECIDING THE REASONABLENESS OF THE CAUSE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES O F THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS EXPLAINED A REASONABLE CAUSE FOR NOT FILING THE TAX AUDIT REPOR T WITHIN A PERIOD OF TIME AS PRESCRIBED UNDER THE PROVISIONS O F ACT AND THEREFORE IN VIEW OF THE PROVISIONS OF SECTION 273 B NO PENALTY CAN BE IMPOSED WHEN THE EXPLANATION AND REA SONS ARE FOUND AS REASONABLE. ACCORDINGLY, WE SET ASI DE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE PENA LTY. THE FACTS OF THE PRESENT CASE IS SIMILAR TO THE CAS E RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE. WE RESPECTFULLY FOLLOWING OUR OW N ORDER FOR THE ASSESSMENT YEAR 2002-03, DELETE THE PENALTY LEVIED UNDER SECTION 27 1B OF THE ACT. ITA NO.1042/M/2010 M/S.A.S. MOLOOBHOY & SONS . . 3 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY, 2011. SD. SD. (PRAMOD KUMAR) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED THE 21 ST JANUARY, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-17, MUMBAI 4. THE CIT(A)-29, MUMBAI 5. THE DR G BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI