Savaleshwar Dudh Utpadak Sahakari Sanstha Ltd, Solapur V. Income-tax Officer, Ward - 1, Pandharpur

ITA 1211/PUN/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5000 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 12-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M.G. JASANI
• Keywords: Reasonable cause; TDS
• Section: 273B; 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No.1211/PUN/2018 निर्धारण वषा / Assessment Year : 2014-15 Savaleshwar Dudh Utpadak Sahakari Sanstha Ltd., Bamani, Taluka Sangola, Dist. Solapur – 413304 PAN : AAMTS2990K Vs. ITO, Ward-1, Pandharpur Appellant Respondent आदेश / ORDER PER S.S. GODARA, JM : This assessee‟s appeal for AY 2014-15 arises against the CIT(A)-7, Pune‟s order dated 10-04-2018 passed in case No. PN/CIT(A)-7/Wd.1/10086/2017-18 in proceedings under Section 271B of the Income Tax Act, 1961, in short „the Act‟. Heard both the parties. Case file perused. 2. Coming to the assessee‟s sole substantive ground raised in the instant appeal that the CIT(A) has erred in law and on facts in affirming the Assessing Officer‟s action imposing section 271B Assessee by Shri Sunil Ganoo Revenue by Shri M.G. Jasani Date of hearing 12-07-2022 Date of pronouncement 21-07-2022 ITA No.1211/PUN/2018 Savaleshwar Dudh Utpadak Sah Sanstha Ltd. 2 penalty of Rs.65,200/- on account of its failure to get its accounts audited as required u/s 44AB, we note that the lower appellate findings to this effect reads as under: “5.3 I have carefully considered the facts of the case and law apparent from records. The assessee has e-filed return of income on 30/03/2016 declaring total income of Rs. Nil. The AO noticed that the assessee has received grants amounting to Rs.1,30,31,178/- (inclusive of Milk and allied sales of Rs.35,11,538/-. The assessee did not get accounts audited u/s.44AB within 30.09.2014 the time limit prescribed u/s. 44AB. The AO issued notice dated 30.12.2016 u/s. 273B r. w. s. 271B seeking explanation for failure to comply provisions of section 44AB. The assessee did not submit any written submission. The AO considered the material available on record and observed that that there was contractor and contract relationship between assessee and govt. of Maharashtra and TDS has been deducted u/s. 194C. The AO imposed penalty u/s. 271B of Rs. 65,200/- on 29.06.2017. 5.4 During the appellate proceedings the appellant did not submit any written submission. However, in statement of fact the appellant contended that grant is not a receipt and there is no profit or loss. 5.5 Ostensibly, the appellant is in receipt of grant of Rs. 1,30,31,178/- (inclusive of Milk and allied sales of Rs. 35,11,538/-). The appellant entered in agreement with state Government for fodder camp. Apparently, receipts were from government grant at prescribed rate and other receipts like sale of milk etc. Therefore, there was contractor and contractee relationship between the appellant and state government where the rate of receipt were pre-determined by the government. Mere receiving of the grant does not alter the character of the receipt. It was not the case of the appellant where the expenditure has been actually reimbursed to the appellant leaving no profit or loss to the appellant. The appellant was required to maintain fodder camp by incurring expenditure. Under these circumstances, the amount received from government in form of grant is also a receipt containing element of profit. Moreover, the state government has also recognized the appellant is a contractor to run the fodder camp. Therefore, the contention of the appellant that receipt of grant does not constitute the turnover fails. 5.6 The appellant itself has mentioned in statement of fact that the various expenses on account of water, fodder and medicine incurred by the assessee for maintaining the cattle were subject to stringent audit of the official of the government of Maharashtra. These itself ITA No.1211/PUN/2018 Savaleshwar Dudh Utpadak Sah Sanstha Ltd. 3 suggest that appellant was required to get its account audited u/s. 44AB for the purpose of Income Tax as the turnover exceeded Rs.1 crore. Once the appellant got the accounts audited for other purposes the appellant could have got accounts audited u/s. 44AB as required. The appellant contended that there is no profit or surplus generated by it on activity of cattle camp. The generation of profit and loss has no bearing as far as audit u/s. 44AB is concerned. Therefore, the reason forwarded by the appellant that no profit/loss entitled him to not get accounts audited deserves to be rejected. 5.7 Apparently, the appellant did not submit audit report u/s. 44AB on presumption that provisions of section 44AB is not applicable to the appellant. The appellant did not make any effort to correct its stand by submitting audit report even till the date of the passing of the order u/s. 271B and the default of the appellant continued. 5.8 In view of the above, action of the AO in imposing the penalty u/s.271B of Rs.65,200/- is upheld and ground No.1 & 2 of the appeal are dismissed.” 3. Suffice to say, it transpires during the course of hearing that the instant issue of correctness of section 271B penalty involving a co-operative society which is already audited under the state co- operative law as a mandatory condition. 4. It emerges that this tribunal‟s recent co-ordinate bench‟s order in ITA No.1542/PUN/2018 in Raje Dudh Utpadak Sahakari Sanshta Ltd. decided on 12.01.2022 holds that such a failure in case of grant-in-aid received from State government taken as part of turnover by the departmental authorities indeed forms a reasonable cause u/s 273B as under: ITA No.1211/PUN/2018 Savaleshwar Dudh Utpadak Sah Sanstha Ltd. 4 “3. We have heard the ld. DR through Virtual Court and gone through the relevant material on record. There is no appearance from the side of the assessee despite notice. As such, we are proceedings to dispose of the appeal ex parte qua the assessee. It is seen that the assessee is primarily engaged in the business of purchasing milk from its members and sale of the same. The assessee has also been engaged in running a fodder camp aided by the Maharashtra State Government for the cattle of drought hit farmers. It received grant of Rs.81.38 lakh from the Government of Maharashtra and the turnover of milk and cattle feed stood at Rs.84.34 lakh. The assessee did not get the accounted audited u/s.44AB within the statutory time allowed. However, the assessee got its books of account audited on 25-11- 2014. The AO imposed penalty for failure to get the accounts audited in time. The assessee contended before the authorities below that it had maintained proper books of account as prescribed under the provisions of Maharashtra Cooperative Societies Act, 1960 which were duly audited as per the provisions of that Act. The assessee got directives from the Government of Maharashtra for undertaking the activity of maintaining Fodder camp for the cattle as a social responsibility. The assessee undertook this work as majority of its members were poor farmers from the immediate vicinity and were having dairy income on small basis to support their families. The assessee was in receipt of grant-in-aid from the Government of Maharashtra at predetermined rates on which deduction of tax at source was made u/s.194C. The assessee further submitted that its turnover during the year was below the limit specified u/s.44AB, if the amount of grant-in-aid was excluded. But for that, the accounts were audited by the Cooperative Auditor and the Audit report was submitted to the AO as well as the Registrar of Cooperative Societies. From the above narration of facts, it is clear that the assesse’s receipts, except from grant-in-aid received from Government of Maharashtra amounting to Rs.84.34 lakh, were less than the statutory limit of turnover for getting the accounts audited at Rs.1.00 crore. This shows that if the amount of grant-in-aid is excluded, the regular turnover of the assessee was only below the stipulated limit. It is undisputed that the assessee got its accounts audited under the Cooperative Societies Act and also furnished such report to the AO as well as the Registrar of Cooperative Societies. The fact that the amount received from Government of Maharashtra was chargeable to tax, against which the assessee incurred expenses is relevant only for determining the taxability or otherwise of the amount. It is further relevant to accentuate that section 271B requiring imposition of penalty for failure to get the accounts audited u/s.44AB, is covered u/s.273B, which, in turn, prescribes that no penalty shall be imposed if reasonable cause for the failure is established. We are confronted with a case of a Cooperative Society dealing with small farmers ITA No.1211/PUN/2018 Savaleshwar Dudh Utpadak Sah Sanstha Ltd. 5 having turnover of less than Rs.1.00 crore with the exclusion of the amount of grant-in-aid. The very fact that the assessee got its accounts audited under the Cooperative Societies Act prima facie shows that it entertained a bona fide belief that the amount of grant- in-aid received from Government of Maharashtra was not includible for the purposes of computing turnover u/s.44AB. Had it been otherwise, it would have got the accounts audited u/s.44AB apart from the auditing for the purposes of Cooperative Society Act. Considering the facts in totality, we are of the considered opinion that there was a reasonable cause in the assessee not getting the accounts audited u/s.44AB resulting in attracting of section 271B of the Act. Since the penalty section is covered u/s.273B, we hold that the penalty was not required to be levied and confirmed. The same is hereby directed to be deleted. 4. The ld. DR fairly admitted that the facts and circumstances of the other appeals are mutatis mutandis similar to those of Raje Dudh Utpadak Sahakari Sanstha Ltd. Following the view taken hereinabove, we delete the penalty in the case of other assesses as well since all of them are Cooperative Societies engaged in purchase and sale of milk from small farmers in the vicinity.” 5. We adopt the foregoing detailed discussion mutatis mutandis and reject the Revenue‟s arguments supporting the impugned penalty. The assessee succeeds in this sole substantive ground. 6. This assessee‟s appeal is allowed in above terms. Order pronounced in the Open Court on 21 st July, 2022. Sd/- Sd/- (DIPAK P. RIPOTE) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER प ु णे Pune; ददिधांक Dated : 21 st July, 2022 GCVSR ITA No.1211/PUN/2018 Savaleshwar Dudh Utpadak Sah Sanstha Ltd. 6 आदेश की प्रतिलिपि अग्रेपिि/Copy of the Order is forwarded to: 1. अपीऱधर्थी / The Appellant; 2. प्रत्यर्थी / The Respondent; 3. The CIT(A)-7, Pune 4. 5. The Pr.CIT-6, Pune विभागीय प्रविविवि, आयकर अपीलीय अविकरण, पुणे “B” / DR „B‟, ITAT, Pune 6. गार्ड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अविकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 12-07-2022 Sr.PS 2. Draft placed before author 13-07-2022 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.