ATUL A. SANGHVI, MUMBAI V. ACIT CEN CIR 11, MUMBAI

ITA 1366/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6252 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2003-2004
• Appeal Filed On: 18-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMTR KUSUM INGLE
• Assessee Lawyers: ADITYA B NEMANI
• Keywords: Search and seizure; Reasonable cause; Non compliance
• Section: 273B; 143(3); 142(1); 153A; 27; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS. 1364 TO 1370/MUM/2010 (ASSESSMENT YEARS: 2001-02 TO 2007-08) SHRI ATUL A. SANGHVI ACIT, CENTRAL CIRCLE - 11 1607B, SANKARSETT PALACE MUMBAI NANA CHOWK, MUMBAI 400007 VS. PAN - AHZPS 2778 P APPELLANT RESPONDENT APPELLANT BY: SHRI SHARAD SHAH & SHRI ADITYA B. NEMANI RESPONDENT BY: SMTR. KUSUM INGLE O R D E R PER BENCH THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF CIT(A)-XXXVII, DATED 07.01.2010 ARISING FROM TH E PENALTY ORDER U/S 271(1)(B) OF THE INCOME TAX ACT, 1961 FOR THE ASSES SMENT YEARS 2001-02 TO 2007-08. 2. THE ASSESSEE HAS RAISED ONLY COMMON GROUND IN AL L THESE APPEALS AS UNDER: - 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN LEVYING A PENALTY OF RS.50,000/-U/S 271( 1)(B) OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE 3. WE HAVE HEARD THE LEARNED COUNSEL AS WELL AS THE LE ARNED DR AND CONSIDERED THE RELEVANT RECORD. THE AO LEVIED T HE PENALTY FOR ALL THE SEVEN ASSESSMENT YEARS BECAUSE DURING THE ASSESSMEN T PROCEEDINGS, UNDER SECTION 143(3) READ WITH SECTION 153A, THE AS SESSEE DID NOT COMPLY WITH THE NOTICES ISSUED U/S 142(1) AND 143(2 ) ON FIVE OCCASIONS. THEREFORE, THE A.O. INITIATED THE PENALTY PROCEEDIN GS FOR NON-COMPLIANCE AND DEFAULT ON THE PART OF THE ASSESSEE. THE ASSESS EE HAS SUBMITTED BEFORE THE AO IN THE PENALTY PROCEEDINGS AS UNDER: - ITA NOS. 1364 TO 1370/MUM/2010 SHRI ATUL A. SINGHVI 2 IN THIS RESPECT, IT IS SUBMITTED THAT THE ASSESSEE HAD ENGAGED THE SERVICES OF A MR. ANAND AND A MR. HARISH MANIAR, WH OSE NAMES IN FACT FIND MENTION IN THE ASSESSMENT ORDER PASSED AS WELL. THESE TWO PERSONS HAD REASSURED THE ASSESSEE AT EACH TIME THA T THE NOTICE WAS RECEIVED THAT THE MATTER IS BEING LOOKED INTO AND IS BEING REGULARLY ATTENDED TO. THE ASSESSEE WAS UNDER A BONAFIDE BE LIEF THAT THE CASE IS BEING REGULARLY ATTENDED TO, WHICH BEING CONTRA RY TO FACT WAS KNOWN TO HIM ONLY LATER WHEN IN FACT, HE HAS RELIEV ED THESE PERSONS OF THEIR SERVICES AND HAS ENGAGED ANOTHER REPRESENTATI VE TO APPEAL AND EXPLAIN THE MATTES ON HIS BEHALF. ALL THESE FACTS ARE EVIDENT FROM YOUR GOODSELF AS WELL. FURTHER, WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBM ITTED THAT IT WOULD BE WELL APPRECIATED THAT THE CASE WAS THEREAFTER HE ARD AND THERE HAS BEEN NO OTHER INSTANCE WHERE THE CASE HAD NOT BEEN ATTENDED TO. THIS GOES TO SHOW THE INTENTION OF THE APPELLANT WAS NOT MALAFIDE AND HE TOO WAS WANTING TO AID IN THE TIMELY AND JUDICIOUS COMPLETION OF THE CASE; 4. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND LEVIED THE PENALTY OF ` 10,000/- FOR EACH NON-COMPLIANCE/DEFAULT ON THE PAR T OF THE ASSESSEE AGAINST ALL THE NOTICES ISSUED BY T HE AO AND VIDE ORDERS DATED 25.06.2009 LEVIED PENALTY OF ` 50,000 IN EACH YEAR. 5. ON APPEAL, THE ASSESSEE HAS SUBMITTED BEFORE THE CIT(A) WHICH WAS CONSIDERED IN PARAGRAPH 2.2.1 AS UNDER : 2.2.1 REGARDING THE MERITS OF THE PRESENT APPEAL, IT WAS ARGUED THAT THE APPELLANT HAD ENGAGED THE SERVICES OF ONE MR. ANAND AND ONE MR. HARISH MANIAR, WHOSE NAMES IN FACT FIND MENTION IN THE ASSESSMENT ORDER CONCERNED. THESE TWO PERSONS HAD REASSURED THE APPELLANT AT EACH TIME THAT THE NOTICES WERE RECEIV ED AND THAT THE MATTER WAS BEING LOOKED INTO AND WAS BEING REGULARL Y ATTENDED TO. IT WAS ARGUED THAT THE APPELLANT WAS UNDER A BONAFID E BELIEF THAT THE CASE WAS REGULARLY AND ROUTINELY ATTENDED TO. FURT HER LD. AR ADMITTED THAT WHEN THE APPELLANT CAME TO KNOW ABOUT THE NON- COMPLIANCE WITH THE TERMS OF THE NOTICES ISSUED AN D FAILURE ON THE PART OF THE APPELLANT TO FURNISH THE RELEVANT DETA ILS NECESSARY FOR FRAMING THE ASSESSMENT IN THIS IMPORTANT SEARCH AND SEIZURE MATTER, HE CHANGED HIS COUNSELS. IT WAS ARGUED BY THE LD. A R THAT THERE AFTER THE ASSESSMENT WAS FRAMED AND NO FURTHER NONCOMPLIA NCE WAS NOTED ON RECORD. IT WAS ALSO ARGUED BY THE LD. AR THAT T HE RELEVANT SCRUTINY ASSESSMENT WAS FRAMED U/S 143(3) AND NOT U/S 144 OF THE ACT IN AN EXPARTE MANNER. IT WAS DUE TO THE CIRCUMSTANCES PRE VAILING AT THAT TIME AND THE APPELLANT HAD NO DELIBERATE INTENTION TO EVADE THE TAXES OR TO AVOID THE ASSESSMENT PROCEEDINGS. HE ALSO AR GUED THAT THE PENALTY CANNOT BE LEVIED ON NONCOMPLIANCE OF THE NO TICE OWING TO THE LD. COUNSELS FAULT. REGARDING THE ADDITIONS MADE BY THE LD. AO IN THE SCRUTINY ASSESSMENT ORDER U/S 143(3) OF THE ACT, IT WAS STATED THAT ITA NOS. 1364 TO 1370/MUM/2010 SHRI ATUL A. SINGHVI 3 THE ADDITIONS MADE BY THE LD. AO IN THE RELEVANT AS SESSMENT YEARS ARE SUBJUDICE BEFORE THE APPELLATE AUTHORITY 6 . THE CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANA TION OF THE ASSESSEE AND CONFIRMED THE PENALTY LEVIED BY THE AO. 7. THE LEARNED COUNSEL SUBMITTED THAT ON SIMILAR FA CTS IN THE BUSINESS ASSOCIATES CASE OF SHRI DILIP SHAH IN ITA NOS. 135 7 TO 1363/MUM/2010 THE ITAT HAS CONSIDERED THE FACTS AND BONAFIDE REASONS AND DELETED THE PENALTY. THE LEARNED COUNSEL PLACED ON RECORD THE ORDERS IN THE CASE OF SHRI DILIP SHAH AND EXPLAINED HOW THEY ARE SIMILAR TO THE FACT S OF ASSESSEES CASE. 8. THE LEARNED D.R., ON THE OTHER HAND, SUBMITTED T HAT IT WAS A CLEAR CASE OF DEFAULT AND FURTHER SUBMITTED THAT THE ITAT HAS CONSIDERED ONLY ONE DEFAULT WHEREAS THERE ARE FIVE DEFAULTS FOR EACH AS SESSMENT YEAR IN THE SEVEN APPEALS, HENCE THIS HAS TO BE CONSIDERED ON MERITS. 9. AS SEEN FROM THE PENALTY ORDER AND THE ASSESSMEN T ORDER THE ASSESSEE AS WELL AS SHRI DILIP SHAH ARE HAVING THE SIMILAR B USINESS OF FURNISHING BOGUS BILLS TO VARIOUS ENTITIES, MAINLY IN THE STEE L MARKET. CONSEQUENT TO SEARCH ON 05.02.2007 PROCEEDINGS HAVE BEEN INITIATE D UNDER SECTION 153A SIMILARLY IN BOTH THE CASES. THE DEFAULTS ARE ALSO SIMILAR AND THE EXPLANATION FURNISHED BY THE ASSESSEE WAS ALSO SIMILAR. WE FIN D THAT WHEN THE AO HAS FIXED ONLY ONE DATE OF HEARING FOR ALL THE ASSESSME NT YEARS AND ISSUED IDENTICAL NOTICES OF EVEN DATE OF HEARING THEN THE DEFAULT ON THE PART OF THE ASSESSEE, IF ANY, DOES NOT CONSTITUTE SEPARATE DEFA ULTS. THUS, AT THE OUTSET, THE AO IS NOT JUSTIFIED IN TREATING SEVEN DEFAULTS FOR THE SAME DATE OF HEARING AGAINST THE NOTICES OF EVEN DATES. AS FAR AS THE E XPLANATION AND REASONS FURNISHED BY THE ASSESSEE BEFORE THE AO FOR NON-COM PLIANCE OF THE NOTICES IS CONCERNED, THE AO HAS NOT GIVEN ANY FINDING THAT T HE EXPLANATION OF THE ASSESSEE WAS BOGUS OR ABSOLUTELY FALSE BUT THE AO REJECTED THE EXPLANATION ON THE GROUND THAT IT WAS NOT ACCEPTABLE TO HIM. FR OM THE PROVISIONS OF SECTION 271(1)(B) IT IS CLEAR THAT THE LEVY OF PENA LTY FOR FAILURE TO COMPLY WITH THE NOTICES ISSUED UNDER SECTION 115WD OR UNDER SUB-SECTION (2) OF SECTION 115WE OR] UNDER SUB-SECTION (1) OF SECTION 142 OR SUB-SECTION (2) OF SECTION 143 [OR FAILS TO COMPLY WITH A DIRECTION IS SUED UNDER SUB-SECTION (2A) OF SECTION 142], IS NOT AUTOMATIC AND MANDATORY B UT IT IS DISCRETIONARY ON ITA NOS. 1364 TO 1370/MUM/2010 SHRI ATUL A. SINGHVI 4 THE PART OF THE AO. THE FAILURE OR DEFAULT IF ANY O N THE PART OF THE ASSESSEE TO THE NOTICES ISSUED U/S 142(1) AND U/S 143(2) DOES N OT IPSO FACTO RESULT LEVY OF PENALTY BUT THE A.O. HAS TO CONSIDER ALL THE FA CTS AND CIRCUMSTANCES BEFORE EXERCISING THE DISCRETIONARY POWERS OF LEVY OF PENALTY. THE AO HAS TO EXERCISE HIS AUTHORITY AND JURISDICTION JUDICIOUSLY WITH DUE REGARD TO THE PRINCIPLE OF LAW. IN THE CASE IN HAND, THE A.O. HA S NOT DISPUTED THAT THE ASSESSEE WAS BEING REPRESENTED BY EARLIER AUTHORIZE D REPRESENTATIVE MR. ANAND AND MR. HARISH MANIAR AND THEY DID NOT ATTEND THE ASSESSMENT PROCEEDINGS. THE ASSESSEE ENGAGED ANOTHER AR TO AP PEAR BEFORE THE A.O. WE FURTHER NOTE THAT THE ASSESSMENT ORDERS FOR ALL THESE YEARS HAVE BEEN FRAMED AFTER THE ASSESSEE APPEARED THROUGH THE REPR ESENTATIVE AND COMPLIED WITH ALL THE DIRECTIONS OF THE A.O. THE ASSESSMENT ORDER HAS BEEN PASSED U/S 143(3). THEREFORE, THE COMPLIANCE WAS FINALLY MADE ON THE PART OF THE ASSESSEE WELL BEFORE THE EXPIRY OF TIME OF THE AS SESSMENT AND THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT FOUND AS BOGUS, VAGUE OR ABSOLUTELY FALSE. IN VIEW OF THE PROVISIONS OF SECT ION 273B OF THE ACT, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS EXP LAINED REASONABLE CAUSE FOR FAILURE IN COMPLIANCE OF THE NOTICES ISSUED BY THE A.O. 10. ON SIMILAR FACTS THE ITAT CONSIDERED THE ISSU E IN THE CASE OF DILIP SHAH AS UNDER AND DELETED THE PENALTY: - 9. AFTER CONSIDERING THE CONTENTIONS OF BOTH THE PA RTIES AS WELL AS THE RELEVANT RECORD, WE NOTE THAT THE AO LEVIED THE PEN ALTY FOR ALL THE SEVEN YEARS IN RESPECT OF ALL THE NOTICES ISSUED OF EVEN DATE AND FOR SAME DATE OF HEARING FOR ALL THE ASSESSMENT YEARS. THEREFORE, AT THE FIRST INSTANCE, WE FIND THAT WHEN THE AO HAS FIXED ONLY ONE DATE OF HEARING FOR ALL THE ASSESSMENTS AND ISSUED IDENTICAL NOTICES OF EVEN DA TE OF HEARING THEN THE DEFAULT ON THE PART OF THE ASSESSEE, IF ANY, DO ES NOT CONSTITUTES SEVEN DEFAULTS AT THE SAME TIME. THUS, AT THE OUTSE T, THE AO IS NOT JUSTIFIED IN TREATING SEVEN DEFAULTS FOR THE SAME D ATE OF HEARING AGAINST THE NOTICES OF EVEN DATES. AS FAR AS THE EXPLANATIO N AND REASONS FURNISHED BY THE ASSESSEE BEFORE THE AO FOR NON-COM PLIANCE OF THE NOTICE IS CONCERNED, THE AO HAS NOT GIVEN ANY FIND ING THAT THE EXPLANATION OF THE ASSESSEE WAS BOGUS OR ABSOLUTELY FALSE BUT THE AO REJECTED THE EXPLANATION ON THE GROUND THAT IT WAS NOT ACCEPTABLE TO HIM. SIMILARLY, THE CIT(A) HAS ALSO RECORDED THAT NO REASONABLE EXPLANATION WAS FURNISHED BEFORE THE AO AS WELL AS BEFORE THE CIT(A) AS TO WHY THE ASSESSEE FAILED TO COMPLY WITH THE NOTICES. FROM THE PROVISIONS OF SECTION 271(1)(B) IT IS CLEAR THAT TH E LEVY OF PENALTY FOR FAILURE TO COMPLY WITH THE NOTICES ISSUED UNDER SECTION 115WD OR ITA NOS. 1364 TO 1370/MUM/2010 SHRI ATUL A. SINGHVI 5 UNDER SUB-SECTION (2) OF SECTION 115WE OR] UNDER SU B-SECTION (1) OF SECTION 142 OR SUB-SECTION (2) OF SECTION 143 [OR F AILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF SECTION 142], IS NOT AUTOMATIC AND MANDATORY BUT IT IS DISCRETIONARY ON THE PART OF THE AO. THE FAILURE OR DEFAULT IF ANY ON THE PART OF THE AS SESSEE TO THE NOTICES ISSUED U/S 142(1) AND U/S 143(2) DOES NOT IPSO FACT O RESULT LEVY OF PENALTY BUT THE AO HAS TO CONSIDER ALL THE FACTS AN D CIRCUMSTANCES BEFORE EXERCISING THE DISCRETIONARY POWERS OF LEVY OF PENALTY. THE AO HAS TO EXERCISE HIS AUTHORITY AND JURISDICTION JUDI CIOUSLY WITH DUE REGARD TO THE PRINCIPLE OF LAW. IN THE CASE IN HAND , THE AO HAS NOT DISPUTED THAT THE ASSESSEE WAS BEING REPRESENTED B Y EARLIER AUTHORIZED REPRESENTATIVE MR. ANAND AND MR. HARISH MANIAR AND THEY DID NOT ATTEND THE ASSESSMENT PROCEEDINGS. THE AS SESSEE ENGAGED ANOTHER AR TO APPEAR BEFORE THE AO. WE FURTHER NOT E THAT THE ASSESSMENT ORDERS FOR ALL THESE YEARS HAVE BEEN FRA MED AFTER THE ASSESSEE APPEARED THROUGH THE REPRESENTATIVE AND CO MPLIED WITH ALL THE DIRECTIONS OF THE AO. THE ASSESSMENT ORDER HAS BEEN PASSED U/S 143(3). THEREFORE, THE COMPLIANCE WAS FINALLY MADE ON THE PART OF THE ASSESSEE WELL BEFORE THE EXPIRY OF TIME OF THE AS SESSMENT AND THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT FOUND AS BOGUS, VAGUE OR ABSOLUTELY FALSE. IN VIEW OF THE PROVISIONS OF S ECTION 273B OF THE ACT, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS EXPLAINED ALL REASONABLE CAUSE FOR FAILURE IN COMPLIANCE OF THE N OTICE ISSUED BY THE AO. THE PROVISIONS OF SECTION 273B READ AS UNDER: - [ PENALTY NOT TO BE IMPOSED IN CERTAIN CASES. 273B. NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISI ONS OF [CLAUSE (B) OF SUB- SECTION (1) OF] [SECTION 271, SECTION 271A, [SECTIO N 271AA,] SECTION 271B [, SECTION 271BA], [SECTION 271BB,] SECTION 271C, [SECTION 271 CA,] SECTION 271D, SECTION 271E, [SECTION 271F, [SECTION 271FA,] [SECTION 271FB,] [S ECTION 271G,]] CLAUSE (C) OR CLAUSE (D) OF SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 27 2A, SUB-SECTION (1) OF SECTION 272AA] OR [SECTION 272B OR] [SUB-SECTION (1) [OR SUB-SECTION (1A)] OF SECTION 272BB OR] [SUB-SECTION (1) OF SECTION 272BBB OR] CLAUSE (B) OF SUB-SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUB- SECTION (2) OF SECTION 273, NO PENALTY SHALL BE IMP OSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE.] 10. THE PROVISIONS OF SECTION 273B MANIFESTS THAT N O PENALTY SHALL BE LEVIED IF THE ASSESSEE PROVES THAT THERE WAS A REAS ONABLE CAUSE FOR FAILURE ON THE PART OF THE ASSESSEE WHICH WAS BEYON D HIS CAPACITY. THEREFORE, IN OUR VIEW WHEN THE FACTUM OF LAPSE ON THE PART OF THE AR OF THE ASSESSEE AND SUBSEQUENTLY, CHANGE OF THE A R BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE LOWER AUTHORITIES TH EN REFUSING TO ACCEPT THE EXPLANATION IS NOT JUSTIFIED. MOREOVER, THE AC TION OF THE AO IN IMPOSING THE PENALTY ON ALLEGED DEFAULT ON ONE DATE OF EVEN DATED NOTICE BY TREATING SEVEN DEFAULTS IS ALSO HIGHLY UNJUSTIFI ED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE EXP LANATION GIVEN BY THE ASSESSEE FOR NON COMPLIANCE OF THE NOTICE IS A REAS ONABLE AND BONAFIDE AND COVERED UNDER THE PROVISIONS OF SECTION 273B OF THE ACT. ACCORDINGLY, THE PENALTY LEVIED IN ALL THESE APPEAL S BE DELETED. WE ORDER ACCORDINGLY. ITA NOS. 1364 TO 1370/MUM/2010 SHRI ATUL A. SINGHVI 6 10. SINCE THE COORDINATE BENCH HAS ALSO CONSIDERED THE ISSUE ON MERITS AND THAT THE EXPLANATION GIVEN BY THE ASSESSEE FOR NON-COMPLIANCE OF THE NOTICE IS REASONABLE AND BONAFIDE AND COVERED BY TH E PROVISIONS OF SECTION 273B, WE ARE ALSO IN AGREEMENT WITH THE ABOVE FINDI NGS AND CONCLUDE THAT THERE IS REASONABLE AND BONAFIDE EXPLANATION FOR NO T ATTENDING ON THE RESPECTIVE DATES. ACCORDINGLY THE PENALTY LEVIED IN ALL THESE APPEALS IS TO BE DELETED. ASSESSEES GROUNDS IN ALL THE APPEALS ARE ALLOWED AND PENALTY LEVIED AT ` 50,000 IN EACH YEAR IS CANCELLED. 11. IN THE RESULT, ASSESSEES APPALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH NOVEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXVII, MUMBAI 4. THE CIT CENTRAL-I, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.