Hiteshkumar Valjibhai Kyada, Surat V. ITO Ward-3(3)(2), Surat

ITA 117/SRT/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7850 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 28-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Keywords: Business income; Principle of natural justice; Non compliance
• Section: 143(3); 142(1); 143(2); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE: SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA NO. 117/SRT/2019 ASSESSMENT YEAR: 2014-15 SHRI HITESHKUMAR VALJIBHAI KYADA, 72, SATYANARAYAN SODIETY, VARACHHA ROAD, NEAR RACHANA SOCIETY, KAPODARA, SURAT VS. ITO, WARD (3)(3), SURAT PAN/GIR NO.: CSCPK0346R APPELLANT RESPONDENT ASSESSEE BY : SHRI VIRESH I. RUDALAL (CA) SHRI RUSHI J. PAREKH (CA) REVENUE BY : SHRI B.P.K. PANDA (SR. DR) DATE OF HEARING : 10/05/2019 DATE OF PRONOUNCEMENT: 26/06/2019 ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-3, SURAT DATED 08.10.2018 WHEREIN HE HAS CONFIRMED THE LEVY OF PENALTY U/S 271(1)(B) OF THE ACT. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE NOTICE U/S 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED BY THE ASSESSING OFFICER ON 17.05.2016 WHICH WAS DULY SERVED ON THE ASSESSEE. HOWEVER, ON THE SCHEDULED DATE OF HEARING FIXED ON 01.07.2016, NEITHER THE ASSESSEE/HIS AUTHORIZED REPRESENTATIVE ATTENDED THE PROCEEDINGS NOR ANY SUBMISSION WAS FILED/ANY REQUEST WAS MADE SEEKING ADJOURNMENT OF THE SCHEDULED HEARING. ACCORDINGLY, A SHOW CAUSE NOTICE DATED 05.08.2016 WAS ISSUED AS TO WHY PENALTY U/S 271(1)(B) OF THE IT ACT SHOULD NOT BE LEVIED. GIVEN THAT THE ASSESSEE HAS NOT EVEN RESPONDED TO ITA NO. 117/SRT/2019 SHRI HITESHKUMAR VALJIBHAI KYADASHNA, SURAT VS. ITO, SURAT 2 THE SHOW CAUSE NOTICE, THE AO WAS OF THE BELIEF THAT IT IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(B) FOR NON COMPLIANCE AND DELIBERATELY AVOIDING THE SCRUTINY ASSESSMENT PROCEEDINGS. ACCORDINGLY, HE LEVIED PENALTY AT RS. 10,000/- U/S 271(1)(B) OF THE ACT. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). IN ITS SUBMISSION BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) & NOT U/S 144 VIDE ORDER DATED 15.11.2016. THE ASSESSEE HAS COMPLIED WITH THE DETAILS CALLED FOR AND THE ASSESSMENT WAS COMPLETED ACCEPTING THE RETURNED INCOME AND THERE WAS THUS NIL ASSESSMENT AND NO DEMAND WAS RAISED. IT WAS FURTHER SUBMITTED THAT THE AO HAS NOT INITIATED THE PENALTY U/S 271(1)(B) IN THE BODY OF THE ASSESSMENT ORDER VIOLATING THEREBY THE GOOD CANNONS OF TAXATION AND PRINCIPLES OF NATURAL JUSTICE. IT WAS FURTHER SUBMITTED THAT THE NOTICE DATED 17.05.016 ISSUED U/S 142(1) BEING THE FIRST NOTICE, THE DEPARTMENT WAS NOT TAKING UP CASE. GENERALLY, THE CASES ARE TAKEN UP EITHER IN THE MONTH OF OCTOBER & NOVEMBER AND THAT IS THE GENERAL PRACTICE PREVALENT IN THE IT DEPARTMENT FOR ALL THESE YEARS. THE DETAILS WERE SUBSEQUENTLY SUBMITTED IN COMPLIANCE OF NOTICE DATED 17.05.2016. THEREAFTER THE ASSESSEE AND HIS REPRESENTATIVE ATTENDED THE HEARINGS NUMBER OF TIME AND FURNISHED THE VARIOUS DETAILS CALLED FOR. ULTIMATELY THE MATTER WAS FINALIZED AND THE RETURNED INCOME WAS ACCEPTED. IT WAS FURTHER SUBMITTED THAT THE PENALTY U/S 271(1)(B) OF THE ACT SHOULD NOT BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. IT WAS FURTHER SUBMITTED THAT THERE ARE VARIOUS TRIBUNAL DECISIONS WHICH HAVE LAID DOWN LEGAL PROPOSITION THAT WHERE THE ASSESSMENT ORDER IS PASSED U/S 143(3) AND NOT U/S 144 OF THE ACT, THEN NON COMPLIANCE IS DEEMED HAVE BEEN WAIVED BY THE ASSESSING OFFICER. ITA NO. 117/SRT/2019 SHRI HITESHKUMAR VALJIBHAI KYADASHNA, SURAT VS. ITO, SURAT 3 4. THE CIT(A) CONSIDERED THE SUBMISSIONS SO FILED BY THE ASSESSEE. HOWEVER, SAME WERE NOT FOUND ACCEPTABLE TO HIM. AS PER LD. CIT(A), THE AO ISSUED NOTICE U/S 142(1) FOR WHICH THERE WAS NON-COMPLIANCE. SO THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(B) AND EVEN TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAS NOT RESPONDED, THE AO WAS RIGHT IN LEVY OF PENALTY U/S 271(1)(B) OF THE ACT. REGARDING THE LEGAL PROPOSITION THAT WHERE THE ASSESSMENT ORDER IS PASSED U/S 143(3) AND NOT U/S 144 AND THE NON- COMPLIANCE IS DEEMED TO HAVE BEEN WAIVED, THE LD. CIT(A) HELD THAT THE SAID LEGAL PROPOSITION IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE IN THIS CASE, PENALTY IS LEVIED ON 07.10.2016, WHERE AS THE ASSESSMENT ORDER IS PASSED MUCH LATER ON 15.11.2016. HENCE, THERE IS NO QUESTION OF CONSIDERING THAT PENALTY HAS BEEN DEEMED TO HAVE BEEN WAIVED BY LD. AO. IT IS LIKELY THAT BECAUSE OF THIS PENALTY, THE COMPLIANCE WAS MADE BY ASSESSEE DURING ASSESSMENT PROCEEDINGS. AGAINST THE SAID FINDING OF THE LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, THE LD. AR REITERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT ATTEND THE HEARING AS THIS WAS THE FIRST SCRUTINY ASSESSMENT IN HIS LIFETIME AND HE HAS EARNING SMALL BUSINESS INCOME OF RS 218,870 & FIRST YEAR OF HIS RETURN FILING. THE ASSESSEE ON RECEIVING THE SHOW CAUSE NOTICE APPOINTED A CA TO PRESENT HIS CASE. THE DETAILS WERE SUBSEQUENTLY SUBMITTED IN COMPLIANCE OF NOTICE DATED 17.05.2016 AND THE ASSESSEE AND HIS REPRESENTATIVE ATTENDED THE HEARING NUMBER OF TIMES AND FURNISHED THE VARIOUS DETAILS CALLED FOR. ULTIMATELY, THE MATTER WAS FINALIZED AND THE RETURNED INCOME WAS ACCEPTED. FURTHER, OUR REFERENCE WAS DRAWN TO HONBLE SUPREME COURT DECISION IN CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA 83 ITR 26 (SC) WHEREIN IT WAS HELD THAT THE PENALTY SHOULD NOT BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR ITA NO. 117/SRT/2019 SHRI HITESHKUMAR VALJIBHAI KYADASHNA, SURAT VS. ITO, SURAT 4 DISHONEST OR ACTED IN CONSCIOUS DISREGARDS OF ITS OBLIGATION. IT WAS SUBMITTED THAT THERE IS NO SUCH DELIBERATE CONDUCT ON THE PART OF THE ASSESSEE IN TERMS OF NON-COMPLIANCE WITH THE NOTICE. IT WAS SUBMITTED THAT THE PENALTY SO LEVIED MAY KINDLY BE DELETED. IN SUPPORT, OUR REFERENCE WAS DRAWN TO THE CO-ORDINATE BENCH DECISION IN CASE OF MWARNABEN M. KHANNA VS. DCIT [2010] SOT 25 (AHD) WHEREIN IT WAS HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS AS EMERGE FROM THE ABOVE DISCUSSION ARE THAT THE STATUTORY NOTICE UNDER SECTION 142(1) WAS ISSUED TO THE FOUR ASSESSEES FOR ASSESSMENT YEAR 2006-07 ONLY AND NOT FOR ANY OTHER ASSESSMENT YEARS. NO NOTICE UNDER SECTION 142(1) WAS ISSUED TO THESE ASSESSEES IN RESPECT OF OTHER ASSESSMENT YEARS. SO FAR AS LETTERS REQUIRING COMPLIANCE ISSUED BY THE ASSESSING OFFICER ON 14-8-2007/17-8- 2007 ARE CONCERNED, IT IS NOTICED THAT EXCEPT IN THE CASE OF SHRI KAUSHAL M. KHANNA, THE LETTERS DID NOT MENTION THAT COMPLIANCE IS REQUIRED TO BE MADE UNDER SECTION 142(1). BEFORE LEVYING PENALTY UNDER SECTION 271(1)(B), THERE MUST BE SPECIFIC NOTICE TO THE ASSESSEE FOR SPECIFIC ASSESSMENT YEAR WITH SPECIFIC REQUIREMENTS TO BE COMPLIED WITH. THE COMPLIANCE MUST HAVE RELEVANCE TO THE ASSESSMENT YEAR IN QUESTION AND IT MUST HAVE APPARENT NEXUS WITH THE ASSESSMENT FOR THAT ASSESSMENT YEAR TO BE FRAMED. GENERAL INFORMATION SOUGHT MAY NOT BE RELEVANT FOR ANY PARTICULAR ASSESSMENT YEAR. IN ADDITION, ADEQUATE TIME SHOULD BE GIVEN TO THE ASSESSEE FOR MAKING COMPLIANCE. THE NOTICES WERE ISSUED ON 14-8-2007 IN SOME CASES AND COMPLIANCE WERE REQUIRED TO BE MADE BY 24-8-2007. THEREAFTER THE ASSESSING OFFICER PROCEEDED TO INITIATE THE PENALTY PROCEEDINGS. IN OUR CONSIDERED VIEW, IT IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AS NO REASONABLE OPPORTUNITY IS GIVEN TO THEM FOR MAKING COMPLIANCE OF THE INFORMATION SOUGHT. FOR THE SAKE OF CONVENIENCE, WE REFER TO THE COMPLIANCE SOUGHT BY THE ASSESSING ITA NO. 117/SRT/2019 SHRI HITESHKUMAR VALJIBHAI KYADASHNA, SURAT VS. ITO, SURAT 5 OFFICER VIDE LETTER DATED 14-8-2007 CONTAINING FIVE PAGES FROM SHRI KAUSHAL M. KHANNA AS SIMILAR COMPLIANCE WAS SOUGHT BY HIM FROM OTHERS AS WELL. IF THERE IS APPARENT IMPOSSIBILITY OF COMPLIANCE OR COMPLIANCE COULD TAKE NATURALLY LONG TIME, THEN THE ASSESSING OFFICER IS EXPECTED TO GIVE ADEQUATE TIME TO THE ASSESSEES BEFORE HE INFERS THAT THEY ARE TENDING TO NON-COMPLIANCE AND AVOIDING TO FURNISH INFORMATION. THE STATUTORY PROVISION FOR LEVY OF PENALTY IS NOT FOR MERE TECHNICAL NON- COMPLIANCE BUT FOR ACTUAL OR HABITUAL DEFAULTERS. ON THE FACE OF PRESENT FACTS WHERE THE ASSESSING OFFICER HAS HASTILY PROCEEDED TO INITIATE PENALTY PROCEEDINGS IN ALL THE CASES, IT IS DIFFICULT TO INFER THAT THESE ASSESSEES WERE INTENDING TO MAKE NON-COMPLIANCE, INFORMATION SOUGHT BY THE ASSESSING OFFICER IS VERY DETAILED AND REQUIRES ASSISTANCE FROM PROFESSIONALS LIKE ADVOCATE OR CHARTERED ACCOUNTANT. AN AFFIDAVIT HAS BEEN FILED FROM SHRI KAUSHAL M. KHANNA BEFORE THE LD. CIT(A), I.E., ERSTWHILE CHARTERED ACCOUNTANT WHO WAS HANDLING HIS TAX MATTERS, HAS LEFT ALL THESE ASSESSEES AND THE FAMILY IS IN SEARCH OF NEW COUNSEL FOR MAKING COMPLIANCE MADE BY THE INCOME-TAX DEPARTMENT. IT SHOWS THAT THESE ASSESSEES HAD REALLY INTENDED TO COMPLY WITH THE NOTICES AND, THEREFORE, IT SHOULD NOT BE INFERRED THAT THERE WAS A DEFAULT WHICH COULD INVITE PENALTY UNDER SECTION 271(1)(B). THE ITAT DELHI BENCH-G IN THE CASE OF AKHIL BHARTIYA PRATHMIK SHIKSHAK SANGH BHAWAN TRUST (SUPRA) HAS HELD THAT IF ASSESSMENT ORDER IS PASSED UNDER SECTION 143(3), AND NOT UNDER SECTION 144 THEN NON-COMPLIANCE IS DEEMED TO HAVE BEEN WAIVED. 6. THE LD. SR. DR IS HEARD WHO HAS RELIED ON THE FINDING OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PENALTY HAS BEEN LEVIED U/S 271(1)(B) FOR NON-COMPLIANCE OF ITA NO. 117/SRT/2019 SHRI HITESHKUMAR VALJIBHAI KYADASHNA, SURAT VS. ITO, SURAT 6 NOTICE ISSUED U/S 142(1) ON 17.05.2016. WE FIND THAT THE YEAR UNDER CONSIDERATION IS THE FIRST YEAR OF RETURN FILING BY THE ASSESSEE WHEREIN HE HAS REPORTED BUSINESS INCOME OF RS 2,18,870. THOUGH THERE HAS BEEN AN INITIAL NON-COMPLIANCE OF THE AFORESAID NOTICE, SUBSEQUENTLY, WITH THE ASSISTANCE OF A CHARTERED ACCOUNTANT, THE ASSESSEE HAS COMPLIED WITH THE SAID NOTICE AND HAS FILED REQUISITE DETAILS AND INFORMATION WHICH HAS BEEN ACCEPTED AND TAKEN ON RECORD BY THE ASSESSING OFFICER. NOTHING ADVERSE HAS BEEN FOUND BASED ON THE VERIFICATION OF SUCH DOCUMENTS/INFORMATION SO CALLED FOR BY THE ASSESSING OFFICER AND THE RETURNED INCOME HAS BEEN ACCEPTED. WE THEREFORE DONT FIND THAT THE ASSESSEE WAS DELIBERATELY AVOIDING COMPLYING WITH THE AFORESAID NOTICE, RATHER THE FACTS ON RECORD SUGGEST THAT ONCE HE RECEIVED THE NOTICE, HE SOUGHT ASSISTANCE AND ADVICE FROM A CHARTERED ACCOUNTANT AND THEREAFTER, THE REQUISITE INFORMATION/DOCUMENTS AS CALLED FOR WERE DULY SUBMITTED, THOUGH WITH A SLIGHT DELAY, BEFORE THE ASSESSING OFFICER. IN FACT, IN THE ASSESSMENT ORDER PASSED U/S 143(3), THE ASSESSING OFFICER HAS STATED THAT IN RESPONSE TO NOTICE ISSUED U/S 143(2) AND 142(1), THE AUTHORIZED REPRESENTATIVE ATTENDED FROM TIME TO TIME AND SUBMITTED THE DETAILS WHICH HAVE BEEN TAKEN INTO CONSIDERATION AND DISCUSSED WITH THE AUTHORIZED REPRESENTATIVE WHILE FINALIZING THE ASSESSMENT AND BASIS THE SAME, RETURNED INCOME HAS BEEN ACCEPTED. IN LIGHT OF THE SAME, WE ARE OF THE VIEW THAT THE MATTER IS NOT FIT FOR LEVY OF PENALTY U/S 271(1)(B) AND THE SAME IS DIRECTED TO BE DELETED. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/06/2019. SD/- SD/- (SUDHANSHU SRIVASTAVA) (VIKRAM SINGH YADAV) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO. 117/SRT/2019 SHRI HITESHKUMAR VALJIBHAI KYADASHNA, SURAT VS. ITO, SURAT 7 DATED:- 26/06/2019 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI HITESHKUMAR VALJIBHAI KYADASHNA, SURAT 2. THE RESPONDENT- ITO, WARD 3(3)(2), SURAT 3. CIT 4. CIT(A) 5. DR, ITAT, SURAT. 6. GUARD FILE {ITA NO. 117/SRT/2019} BY ORDER, / / TRUE COPY / / ASST. REGISTRAR