THE AJMER URBAN COOPERATIVE BANK LTD., Ajmer V. ACIT, Ajmer

ITA 125/JPR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5401 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R MEENA JCIT DHK
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH EQDQY DS-JKOR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI MUKUL K. SHRAWAT, JM & SHRI VIKRAM SING H YADA, AM VK;DJ VIHY LA-@ ITA NOS. 125, 126 & 127/JP/2015 ASSESSMENT YEARS : 2007-08, 2010-11 & 2011-12. THE AJMER URBAN COOPERATIVE BANK LTD., AJMER. CUKE VS. THE ACIT, CIRCLE-1, AJMER. LFKK;H YS[KK LA - @THVKBZVKJ LA - @ PAN/GIR NO. AAABT 2333 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE (WRITTEN SUBMISSION) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.R. MEENA (JCIT) LQUOKBZ DH RKJH[K @ DATE OF HEARING : 08.03.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/03/2016. VKNS'K@ ORDER PER MUKUL K. SHRAWAT, JM : ALL THESE THREE APPEALS HAVE BEEN FILED BY THE ASS ESSEE PERTAINING TO ASSESSMENT YEARS 2007-08, 2010-11 AND 2011-12 ARISING FROM THE ORDERS OF LD. CIT (A) AJMER RESPECTIVELY DATED 27.11.2014 AND 08.12.2014. FOR A.Y 2007-08, PENALTY UNDER SECTION 271B WAS CONFIRMED BY LD. CIT (A) AMOUNTING TO RS. 1,00,000/- AND FOR A.YS. 2010-11 AND 2011-12 THE AMOUNT OF PENALTY WAS RS. 1,50,000/ - EACH. SINCE THE ISSUE INVOLVED FOR ALL THE THREE YEARS IS IDENTICAL, THEREFORE, FO R THE SAKE OF CONVENIENCE THE FACTS SHALL BE NARRATED FROM THE LEAD ASSESSMENT YEAR 2007-08 I N WHICH THE GROUNDS RAISED WERE AS UNDER :- 2 ITA NOS. 125-127/JP/2015 THE AJMER URBAN COOPERATIVE BANK LTD VS. ACIT 1. THAT THE LEARNED CIT (APPEALS) AJMER ERRED IN DISMI SSING OUR APPEAL WITHOUT APPRECIATING THE FULL FACTS &S CIRCUMSTANCE S OF THE CASE. HE HAS NOT CONSIDERED OUR WRITTEN SUBMISSIONS & TRUE F ACTS SHOWN THEREON. IT IS QUITE WRONG TO ALLEGE THAT NO REPLY WAS GIVEN FOR PENALTY NOTICES, WHEREAS REPLY DATED 30.09.2009 & 14.06.201 1 IN COMPLIANCE TO NOTICE DATED 23.09.2009 & 03.05.2011 RESPECTIVEL Y SUBMITTED IN TIME BUT HAS NOT AT ALL CONSIDERED WITH THE REASONS BEST KNOWN TO AO. 2. THAT THERE WAS SUFFICIENT REASONABLE CAUSE FOR LATE FILING OF AUDIT REPORT U/S 44AB OF IT ACT WHICH WAS FILED BEFORE NO TICE ISSUED U/S 142(2) OF IT ACT. THE ASSESSEE WAS PREVENTED BY SU FFICIENT CAUSE IN SUBMISSION OF AUDIT REPORT LATE & IT WAS BEYOND THE IR CONTROL EVEN. THERE COULD HAVE ANY OBJECT OR INTENTION ON THE PAR T OF ASSESSEE NOT TO SUBMIT RETURN IN TIME SPECIALLY WHEN HE WAS TO TAKE REFUND OF MORE THAN RS. 20 LACS & THERE WAS NIL INCOME BUT DECLARE D LOSS OF RS. 1,10,81,191/- AS ADMITTED IN APPEAL ORDER EVEN. THE FINALLY DETERMINED INCOME WAS ALSO LOSS IN CRORES OF RUPEES AS ALLOWED BY ITAT JAIPUR VIDE THEIR ORDER OF REMAND WHICH HAS NOT BEEN CONSI DERED BY CIT (APPEALS) IN HIS ORDER. 3. THAT IN CASE OF NIL INCOME THE DEFAULT IF ANY IS TH ERE FOR LATE FILING OF AUDIT REPORT REMAIN TECHNICAL FAULT ONLY FOR WHICH NO PENALTY IS LEVIABLE. AS PER DECISIONS OF HIGHER COURT SUCH DELAY CAN BE TREATED AS TECHNICAL & VENIAL IN NATURE & NO REVENUE SUFFERS FROM SUCH T ECHNICAL FAULTS & SPECIALLY WHEN THE AUDITORS HAS NOT SUBMITTED HIS S TATUTORY REPORT IN TIME. 2. THIS IS A CASE OF A COOPERATIVE SOCIETY REGISTER ED UNDER RAJASTHAN CO-OPERATIVE SOCIETIES ACT, 1956 ENGAGED IN BANKING ACTIVITIES. WHILE LEVYING A PENALTY UNDER SECTION 271B, THE OBSERVATION OF THE AO WAS THAT THE ASSESS EE WAS REQUIRED TO GET THE ACCOUNTS AUDITED AND TO OBTAIN THE REPORT AS PER TH E PROVISIONS OF SECTION 44AB OF THE IT ACT. THE ALLEGATION OF THE AO WAS THAT A TIME I S SPECIFIED, HOWEVER, THE ASSESSEE HAD FAILED TO COMPLETE THE LEGAL OBLIGATION. FOR A. Y. 2007-08, THE AUDIT REPORT WAS STATED TO BE DATED 29.12.2007 WHICH ACCORDING TO AO WAS IN VIOLATION OF THE PROVISIONS 3 ITA NOS. 125-127/JP/2015 THE AJMER URBAN COOPERATIVE BANK LTD VS. ACIT OF SECTION 44AB OF THE IT ACT. DUE TO THE SAID DEF AULT THE IMPUGNED PENALTIES WERE IMPOSED RESPECTIVELY FOR ALL THE YEARS NOW UNDER AP PEAL. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAD FURNISHED THE REASONS F OR THE SAID DELAY AS PER THE SUBMISSIONS INCORPORATED IN THE APPELLATE ORDER, RE LEVANT PORTION REPRODUCED BELOW :- THAT THERE WAS SUFFICIENT REASONABLE CAUSE FOR FI LING THE AUDIT REPORT DELAY AS THE FAILURE TO GET ACCOUNTS AUDITED U/S 4 4AB WAS DUE TO INORDINATE DELAY BY STATUTORY AUDITORS IN COMPLETIN G THE STATUTORY AUDIT. THE LAPSE WAS BEYOND CONTROL OF ASSESSEE & IT AN BE VERIFIED FROM REGULAR REMINDER &/OR CORRESPONDENCE MADE WITH AUDITORS FRO M TIME TO TIME, THE COPIES CORRESPONDENCE ALREADY SUBMITTED VIDE LETTER DTD. 29.9.09 WHICH WAS RECEIVED BY OUR OFFICE ON 30.9.09, & DUE TO INO RDINATE DELAY OF AUDITORS THE ASSESSES HAS TO TAKE PERMISSION FROM R BI ALSO TO EXTEND THE TIME LIMIT FOR SUBMISSION OF AUDITED BALANCE SHEET & PUBLICATION OF SAME IN NEWS PAPERS TIMELY & THE RBI OBLIGED US TO ALLOWED TIME UPTO 31.12.07 DUE TO DELAY MADE BY AUDITORS. THE COPIES OF LETTER S EXCHANGED WITH AUDITORS ALREADY GIVEN TO YOU ALONG WITH THE REPLY DATED 10.8.09 T THE TIME OF ASSESSMENT PROCEEDINGS. HOWEVER REVENUE HAS NOT SUFFERED ANY LOSS ON ACCOUNT OF DELAY IN SUBMISSION OF AUDIT REP ORT WITH RETURN. HELD NO PENALTY AS DECIDED ITAT IN (2000) 23 TW 24 PAGE & ( 200() 223 CTR 152 (GUJ.) & ALSO (2009) 179 TAXMAN 27 (UTTARAKHAND). AS DECIDED IN (2002) 253 ITR 175 (CAL.) AUDIT REPORT NOT FILED DUE TO REASONABLE CAUSE OF EVEN ILLNESS OF AN ACCOUNTANT NO PENALTY CAN BE L EVIED. THAT IN OUR CASE THERE IS NO WILLFUL DEFAULT ON PART OF THE ASSESSEE AS CLEAR FROM THE FACTS OF THE CASE & AS SUCH NO PENALTY CAN BE LEVIED UPON TH E ASSESSEE U/S 271B AS HELD IN (2009) 310 ITR PAGE 366 (KARN.), IN THE CASE OF ACIT VS. DR. K. SATISH SHETTY. THE DELAY IN AUDIT REPORT BY THE STA TUTORY AUDITOR WAS A QUITE REASONABLE CAUSE FOR WHICH NO PENALTY IS JUST IFIED IN VIEW OF (1998) 63 TTJ (PUNE) PAGE 482 IN THE CASE OF SOLAHPUR ZILA VINKAR SAHKARI FEDERATION NIYAMIT VS DCIT. HOWEVER RETURN WAS FILED WITH AUDIT REPORT BEYOND D UE DATE U/S 139(1) BUT BEFORE NOTICE ISSUED U/S 14291)(I) NO PENALTY ELIGIBLE U/S 271B AS HELD IN (2006) 284 ITR PAGE 301 (P&H). SIMI LARLY AS HELD IN 149 TAXMAN 732 (P&H) HELD THAT CHARTERED ACCOUNTANT DELAYED THE PREPARATION OF AUDIT REPORT, CONSTITUTE A REASONABL E CAUSE FOR DELAY & IN SUCH CASE ALSO NO PENALTY IS LEVIABLE. THAT IN THE CONTENT OF THE FACTS NARRATED BELOW, THERE COULD HAVE BEEN NO DELIBERATE INTENTION ON THE PART 4 ITA NOS. 125-127/JP/2015 THE AJMER URBAN COOPERATIVE BANK LTD VS. ACIT OF ASSESSEE AS HELD IN (2006) 283 ITR PAGE 92 (MP). AS ALSO HELD IN (2008) XXXIX TW 153 (ITAT) UDAICHAND TIKAMCHAND MUT HA VS. ITO PENALTY U/S 271B CANNOT BE LEVIED FOR FAILURE WITH THE PROCEDURAL PROVISIONS UNDER BONAFIDE BELIEF SINCE IT AMOUNTS T O VENIAL TECHNICAL BREACH (2013) 49 TW 65 ITAT JODHPUR ACIT CIRCLE 3 V S. M/S. AZTECH SHIVA HANDICRAFT & ARTS )P) LTD., JODHPUR. NON FILING OF AUDIT REPORT IS TECHNICAL BREACH ONLY IF FILED DURING THE ASSTT. PROCEEDINGS, THE BENEFIT OF DEDUCTION SHOULD BE ALLOWED. FEW CASE LAWS HAVE ALSO BEEN CITED, NAMELY, ACIT VS . DR. K. SATISH SHETTY, 310 ITR 366 (KARN.), SOLAHPUR ZILA VINKAR SAHKARI FEDERATION NI YAMIT VS. DCIT, 63 TTJ 482 (PUNE) ETC. HOWEVER, LD. CIT (A) WAS NOT CONVINCED AND MA DE AN OBSERVATION THAT ON PERUSAL OF THE ASSESSEES LETTER DATED 21.04.2007 ADDRESSED TO M/S. SARVESHWAR MITTAL & COMPANY, IT WAS FOUND THAT THE SAID FIRM HAS BEEN A PPOINTED BY THE REGISTRAR, COOPERATIVE SOCIETIES, JAIPUR TO CONDUCT THE AUDIT WORK OF THE ASSESSEE FOR THE FINANCIAL YEAR 2006-07. IN RESPONSE, THE AUDITOR HAD INFORME D THE ASSESSEE ON 14.05.2007 THAT THE APPOINTMENT HAS NOT BEEN RECEIVED AND NO OBJECT ION CERTIFICATE WAS NOT OBTAINED FROM THE PREVIOUS AUDITOR. LD. CIT (A) HAS ALSO MEN TIONED THAT THE RESERVE BANK OF INDIA VIDE LETTER DATED 18.07.2007 HAD INTIMATED TH E ASSESSEE THAT THE AUDITED COPIES OF PROFIT & LOSS A/C AND BALANCE SHEET WERE REQUIRE D TO BE SUBMITTED TO THE RBI BY 30 TH SEPTEMBER, 2007. HOWEVER, THE ASSESSEE HAD MADE A REQUEST TO RBI TO EXTEND THE DATE UPTO 31.12.2007. LD. CIT (A) HAS ALSO MENTION ED THAT ON 05.12.2007 THE ASSESSEE HAD INTIMATED THE CHIEF AUDITOR, CO-OPERATIVE SOCIE TIES, JAIPUR THAT M/S. SARVESHWAR MITTAL & CO. WAS APPOINTED TO COMPLETE THE AUDIT WO RK BY 31 ST JULY, 2007 BUT THE SAME COULD NOT BE COMPLETED BY THE SAID FIRM. LD. CIT ( A) HAS ALSO REPRODUCED A LETTER OF M/S. SARVESHWAR MITTAL & CO. THAT THE DELAY WAS ON THE PART OF THE ASSESSEE. HENCE THE 5 ITA NOS. 125-127/JP/2015 THE AJMER URBAN COOPERATIVE BANK LTD VS. ACIT LD. CIT (A) HAS HELD THAT THE ASSESSEE HAD FAILED T O FULFILL ITS OBLIGATION TO OBTAIN THE AUDIT REPORT IN TIME. ACCORDING TO HIM, IT WAS NOT THE CIRCUMSTANCES WHICH WERE BEYOND THE CONTROL OF THE ASSESSEE. AS A RESULT, THE PENAL TY IMPOSED UNDER SECTION 271B WAS CONFIRMED. 3. IN THE LIGHT OF THE ABOVE BACK GROUND, WE HAVE H EARD LD. D/R SHRI P.R. MEENA AND CONSIDERED THE WRITTEN SUBMISSION FILED BY THE LD. A/R OF THE ASSESSEE, AS NONE ATTENDED ON BEHALF OF THE ASSESSEE. FROM THE SIDE OF THE APPELLANT, FEW DECISIONS WERE CITED TO DEMONSTRATE THAT THERE WAS A REASONABLE CA USE BEYOND THE CONTROL OF THE ASSESSEE DUE TO WHICH THERE WAS A DELAY IN OBTAININ G THE AUDIT REPORT WHICH WAS HELD AS A REASONABLE CAUSE AND THE PENALTY WAS DELETED, NAMELY, CIT VS. IQBALPUR COOPERATIVE CANE DEVELOPMENT UNION LTD., 356 ITR 34 3 (UTTARAKHAND), CIT VS. UP RAJYA SARKAR EVAM BHOOMI VIKAS BANK LTD., 216 TAXMAN 191 (ALL.), AZADI BACHAO ANDOLAN VS UNION OF INDIA, 252 ITR 471 (DELHI) ETC. THE APPELLANT HAS ALSO PLACED ON RECORD THE COPIES OF SEVERAL CORRESPONDENCES WITH T HE AUDITORS AND RBI TO DEMONSTRATE THAT THE DUE EFFORTS WERE TAKEN BUT THE AUDIT COULD NOT BE COMPLETED WITHIN TIME. 3.1. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE , THE LD. D/R SHRI P. R. MEENA HAS SUPPORTED THE ORDER OF LD. CIT (A) AND PLEADED THAT THE EXCEPTIONAL FACTUAL POSITION, AS NOTED BY LD. CIT (A), WAS THAT THE DELAY IN GETTING THE ACCOUNTS AUDITED WAS ON THE PART OF THE ASSESSEE HENCE HE WAS RESPONSIBLE FOR THE SA ID DELAY FOR WHICH THE PENALTY UNDER SECTION 271B WAS RIGHTLY IMPOSED. 3.2. ON CONSIDERING THE SUBMISSIONS OF BOTH THE SID ES, AT THE OUTSET, IT IS WORTH TO MENTION THAT THE PROVISIONS OF SECTION 271B ARE SUB JECT TO EXCEPTION AS CARVED OUT 6 ITA NOS. 125-127/JP/2015 THE AJMER URBAN COOPERATIVE BANK LTD VS. ACIT UNDER SECTION 273B OF IT ACT, WHICH PRESCRIBES THAT INSPITE ANYTHING CONTAINED IN THE PROVISIONS OF SECTION 271B, NO PENALTY SHALL BE IMP OSABLE ON THE PERSON FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. THEREFORE, THE ONUS WAS ON THE ASSESSEE TO DEMONSTRATE THAT IN FACT THERE WAS AN EXISTENCE OF A REASONABLE CAUS E DUE TO WHICH THE PRESCRIBED AUDIT REPORT COULD NOT BE OBTAINED WITHIN TIME. IN SHORT , THE REASONS GIVEN BY THE ASSESSEE WERE THAT THERE WERE SEVERAL CORRESPONDENCE WITH TH E AUDITOR FROM TIME TO TIME, PHOTOCOPIES OF THAT CORRESPONDENCE IS ON RECORD. S ECONDLY, THERE WAS A DELAY IN APPOINTING THE AUDITOR BECAUSE THE PERMISSION FROM RBI WAS AWAITED. THE ASSESSEE HAD ALSO MADE A REQUEST TO RBI TO EXTEND THE DATE O F SUBMISSION OF THE AUDITED ACCOUNTS. THE AUDITOR HAS SIMPLY MENTIONED THAT HE ALONE WAS NOT RESPONSIBLE FOR THE DELAY BECAUSE THE DRAFT BALANCE SHEET DULY AUTHORIZ ED BY THE BOARD WAS NOT CONVEYED TO THE AUDITOR. THE EXPLANATION OF THE ASSESSEE IS THAT MATTER OF APPOINTING A NEW AUDITOR WAS UNDER CONSIDERATION. THEREFORE, THE DR AFT BALANCE SHEET WAS NOT HANDED OVER TO THE NEWLY APPOINTED AUDITOR. THE APPELLANT HAS, THEREFORE, PLEADED THAT NEITHER IT WAS A DELIBERATE DELAY ON THE PART OF THE ASSESS EE NOR THE ASSESSEE IS MAKING ANY ALLEGATION THAT THE SAID DELAY HAD HAPPENED ON ACCO UNT OF THE AUDITOR. THEREFORE, WE ARE OF THE OPINION THAT ALTHOUGH ALL THOSE FACTS AN D THE REASONS WERE VERY MUCH BEFORE LD. CIT (A), AS IS EVIDENT FROM THE TEXT OF THE ORD ER, BUT HE HAS IGNORED THE SURROUNDING CIRCUMSTANCES AND CONFINED HIS DECISION ON A REMARK OF THE NEWLY APPOINTED AUDITOR THAT THE DELAY WAS NOT ON HIS PART BUT ON THE PART OF THE ASSESSEE. EVEN IF THE DELAY IS ON THE PART OF THE ASSESSEE, IT WAS EXPECTED FROM T HE LD. CIT (A) TO EXAMINE THE 7 ITA NOS. 125-127/JP/2015 THE AJMER URBAN COOPERATIVE BANK LTD VS. ACIT REASONS OF THE IMPUGNED DELAY ON THE PART OF THE AS SESSEE AND IF THOSE REASONS WERE FOUND TO BE CONVINCING THEN NATURALLY THE QUESTION OF LEVY OF PENALTY UNDER SECTION 271B DEFINITELY FALL WITHIN THE AMBITS OF THE EXCEP TION AS CARVED OUT UNDER SECTION 273B OF THE IT ACT. WE, THEREFORE, HOLD AFTER CONSIDERI NG THE CASE LAWS AS REFERRED ABOVE THAT THERE WAS A SUFFICIENT AND REASONABLE CAUSE DU E TO WHICH THE SAID DELAY HAD HAPPENED FOR WHICH THE ASSESSEE SHOULD NOT BE PENAL IZED. 3.3 FOR ALL THE THREE YEARS, WE HEREBY DIRECT TO DE LETE THE PENALTY LEVIED UNDER SECTION 271B OF THE IT ACT. 4. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/03/201 6. SD/- SD/- FOE FLAG ;KNO] EQDQY DS-JKOR (VIKRAM SINGH YADAV ) (MUKUL K. SHRAWAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/03/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE AJMER URBAN COOPERATIVE BANK LTD ., AJMER. 2. IZR;FKHZ@ THE RESPONDENT-THE ACIT CIRCLE-1, AJMER. 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.125, 126 & 127/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NOS. 125-127/JP/2015 THE AJMER URBAN COOPERATIVE BANK LTD VS. ACIT