R.K.Katadi, Kakinada V. The Deputy Commissioner of Income Tax, Circle-1, , Kakinada

ITA 146/VIZ/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2527 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Keywords: Business income; Reasonable cause
• Section: 273B; 143(3); 133A; 250; 145; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 145/VIZ/2019 & 146 /VIZ/201 9 ( / ASSESSMENT YEAR : 20 08 - 09 ) M/S R.K.KATADI D.NO.16 - 23 - 62, ROAD NO.3 PALLAM RAJU NAGAR KAKINADA [PAN : A AFFR1746R ] VS. DY.COMMISSIONER OF INCOME TAX CIRCLE - 1 KAKINADA ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI , AR / RESPONDENT BY : S HRI D.K.SONOWAL , CIT DR / DATE OF HEARING : 1 8 . 0 6 . 201 9 / DATE OF PRONOUNCEMENT : 21 .06 . 201 9 / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 6 HYDERABAD VIDE APPEAL NO.0114/2010 - 11/B1/CIT(A) - 6 AND 10575/2018 - 19/B3 CIT(A) - 6 DATED 18.02.2019 FOR THE ASSESSMENT YEAR (A.Y.) 2008 - 09. FOR THE SAKE OF 2 I.T.A. NO S . 145 & 146 /VIZ/2019 M/S R.K.KATADI , KAKINADA CONVENIENCE, THE APPEALS ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF IN A COMMON ORDER AS UNDER. I.T.A. 145/VIZ/2019, A.Y.2008 - 09 2. GROUND NO.3 IS RELATED TO THE ADDITION OF RS.16,23,563/ - TOWARDS DISALLOWANCE OF BOAT REPAIRS AND MAINTENAN CE EXPENDITURE. 4. GROUND NO.4 IS RELATED TO THE ADHOC DISALLOWANCE OF 10% OF WAGES PAID TO BOAT STAFF. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.10,89,018/ - ON 11.12.2008. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.26,96,277. THE ASSESSING OFFICER(AO) MADE THE FOLLOWING ADDITIONS TO THE RETURNED INCOME. INCOME AS PER THE RETURN OF INCOME RS.2,11,230 ADD : DISALLOWANCE U/S 40A(I A) AS DISCUSSED ABOVE 3,86,072 ADD : DISALLOWANCE OF EXPENDITURE UNDER THE HEAD PROVISIONS TO CREW MEMBERS 3,77,772 ADD : DISALLOWANCE OF EXPENDITURE UNDER THE HEAD WAGES FOR OTHER BOAT STAFF 97,640 ADD : DISALLOWANCE OF PAYMENTS MADE TO PARTNERS TOWARDS BOAT REPAIRS AND MAINTENANCE 16,23,563 3 I.T.A. NO S . 145 & 146 /VIZ/2019 M/S R.K.KATADI , KAKINADA 6. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A), BUT NONE REPRESENTED FOR THE ASSESSEE. HENCE, THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE FOR NON PROSECUTION WITHOUT GOING INTO THE MERITS. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE CIT(A) HAD PASSED THE ORDER FOR NON PROSECUTION WITHOUT GOING INTO THE MERITS. AS P ER THE PROVISIONS OF I.T.ACT, T HE LD.CIT(A) IS NOT PERMITTED TO PASS ORDER FOR NON PROSECUTION. AS PER THE PROVISIONS OF SECTION 250 SUB SECTION 6 OF THE INCOME TAX ACT, THE CIT(A) HAS TO PASS THE REASONED ORDER STATING POINTS FOR DETERMINATION. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT RELEVANT PART OF SECTION 250, SUB SECTION 6 OF THE INCOME TAX ACT. PROCEDURE IN APPEAL 250 (6) THE ORDER OF THE COMMISSIONER (APPEALS) DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATION, THE DECISION THEREON AND THE REASON FOR THE DECISION. 7.1. IN THE INSTANT CASE, AS DISCUSSED EARLIER, THE CIT(A) HAS PASSED THE ORDER EX - PARTE FOR NON PROSECUTION. THEREFORE, IN THE INTEREST OF JUSTICE, WE REMIT THE MATTER BACK TO THE FIL E OF THE LD.CIT(A) WITH A DIRECTION TO DECIDE THE APPEAL ON MERITS AND THE LD.AR HAS BEEN DIRECTED TO COMPLY WITH THE 4 I.T.A. NO S . 145 & 146 /VIZ/2019 M/S R.K.KATADI , KAKINADA NOTICES ISSUED BY THE LD.CIT(A). ACCORDINGLY, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. I.T.A. 146/VIZ/2019, A.Y.2008 - 09 8. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE PENALTY LEVIED BY THE AO U/S 271B OF THE ACT FOR THE A.Y.2008 - 09. THE ASSESSEE FIRM FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.10,98,018/ - ON 11.12.2008. THE ASSESSEE DECLARED BUSINESS RECEIPT S OF RS.1,99,78,829/ - REPRESENTING BOAT HIRE CHARGES AND INCOME FROM FISH SALES. SINCE THE ASSESSEES GROSS RECEIPTS EXCEED RS.40,00,000/ - AS PER THE PROVISIONS OF SECTION 44AB OF THE ACT, THE ASSESSEE IS REQUIRED TO GET IT S ACCOUNTS AUDITED AND SUBMIT T HE COPY OF THE AUDIT REPORT IN THE PRESCRIBED FORMAT BEFORE THE DUE DATE I.E. 30.09.2008. BUT THE ASSESSEE FIRM FAILED TO GET ITS ACCOUNTS AUDITED AND FURNISH ITS REPORT BEFORE THE AO BEFORE THE DUE DATE. THEREFORE, THE AO ISSUED NOTICE U/S 271B R.W.S.27 4 ASKING THE ASSESSEE TO SHOW CAUSE, WHY THE PENALTY SHOULD NOT BE LEVIED FOR ITS FAILURE TO COMPLY WITH SECTION 44AB OF THE ACT. NOTICE WAS ALSO SERVED ON THE ASSESSEE AND IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED EXPLANATION STATING THAT A SURVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE IN THE MONTH OF JANUARY, 2008 AND THE PART TIME ACCOUNTANT COULD NOT SUMMARISE THE TRANSACTIONS BEFORE THE DUE 5 I.T.A. NO S . 145 & 146 /VIZ/2019 M/S R.K.KATADI , KAKINADA DATE. THE ASSESSEE FURTHER STATED IN ITS EXPLANATION THAT THE PARTNERS ARE ILLITERAT E, DEPENDEN T ON PART TIME ACCOUNTANT, HENCE, THE ASSESSEE REQUESTED TO DROP THE PENALTY PROCEEDINGS. NOT BEING CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE AO LEVIED PENALTY U/S 271B OF THE ACT. 9. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) CONFIRMED THE PENALTY AND BEFORE THE CIT(A) ALSO, THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO. THE LD.CIT(A) OBSERVED THAT THE REASONS ASSIGNED FOR FAILURE OF THE ASSESSEE IN CAPACITY OF PART TIME ACCOUNTANT, SURVEY U/S 133A AND ILLITERA CY OF PARTNERS ARE NOT THE SUFFICIENT GROUNDS FOR NOT GETTING THE ACCOUNTS AUDITED BY THE QUALIFIED ACCOUNTANT . THE LD.CIT(A) FURTHER OBSERVED THAT THE NOTICE U/S 271B WAS ISSUED TO THE ASSESSEE. THE ASSESSEE D ID NOT EVEN BOTHER TO FULFIL THE REQUIREMENT OF GETTING THE ACCOUNTS AUDITED EVEN BELATEDLY. THEREFORE, THE LD.CIT(A) HELD THAT THERE IS NO REASONABLE CAUSE FOR NOT GETTING THE ACCOUNTS AUDITED AND ACCORDINGLY CONFIRMED THE PENALTY LEVIED BY THE AO. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT RELEVANT PART OF THE ORDER OF LD.CIT(A) IN PARA NO.6.7 AND 6.8 OF THE ORDER WHICH READS AS UNDER : 6 I.T.A. NO S . 145 & 146 /VIZ/2019 M/S R.K.KATADI , KAKINADA 6.7. I HAVE PERUSED THE REASONS SUBMITTED BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF PENALTY PROCEE DINGS AND GROUNDS RECORDED BY THE AO FOR REJECTION OF THE SAME. ACCORDINGLY, I AM OF THE CONSIDERED OPINION THAT NONE OF THE REASONS ADDUCED BY THE ASSESSEE SUCH AS SURVEY ACTION U/S 133A OF THE ACT, ACCOUNTANT IS NOT CAPABLE OF MAINTAINING THE ACCOUNTS, ILLITERACY OF THE PARTNERS ETC. WOULD NOT QUALIFY THE MEANING OF REASONABLE CAUSE AS ENVISAGED U/S 273B OF THE ACT, SO AS TO BAIL OUT THE ASSESSEE FROM THE MISCHIEF OF THE PROVISIONS OF SEC.271B OF THE ACT. 6.8. AT THIS JUNCTURE, IT IS PERTINENT TO NOTE THAT, AS SEEN FROM THE FACTS OF THE CASE, EVEN AS ON THE DATE OF PASSING THE IMPUGNED PENALTY ORDER AND AS ON THE DATE OF FILING THE APPEAL I.E. 19.01.2011, THE ASSESSEE HAS NOT FULFILLED THE REQUIREMENT OF GETTING THE ACCOUNTS AUDITED EVEN BELATEDLY. FU RTHER, THE ASSESSEE HAS FAILED TO MAKE OUT A CASE TO DEMONSTRATE THAT THERE WAS REASONABLE CAUSE FOR ITS FAILURE TO GET THE ACCOUNTS AUDITED PERMANENTLY. 10. AGAINST THE ORDER OF THE LD.CIT(A), THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAS ASSIGNED REASONS FOR FAILURE TO GET THE ACCOUNTS AUDITED SUCH AS SURVEY U/S 133A WAS CONDUC TED, PART TIME ACCOUNTANT IS INCAPABLE OF SUMMARIZING THE TRANSACTIONS AND THE PARTNERS IGNORANCE. SURVEY U/S 133A WAS CONDUCTED IN JANUARY 2008, WHEREAS, THE TIME LIMIT FOR FILING THE APPEAL WAS 30.09.2008. IT IS THE MANDATORY OBLIGATION OF THE ASSESSEE TO GET THE ACCOUNTS AUDITED AND SUBMIT THE AUDIT REPORT BEFORE THE DUE DATE. THE ILLITERACY OR IGNORANCE OF THE PARTNERS IS NOT A SUFFICIENT REASON. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. 7 I.T.A. NO S . 145 & 146 /VIZ/2019 M/S R.K.KATADI , KAKINADA 11 . IN THE RESULT, THE APPEAL OF THE ASSESSEE BEARING N O .145/ V I Z/2019 IS ALLOWED FOR STATISTICAL PURPOSE AND APP E AL N O . 146/ V IZ/2019 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE 2019. S D/ - S D/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 21 .06.2019 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - M/S R.K.KATADI, D.NO.16 - 23 - 62, ROAD NO.3, PALLAM RAJU NAGAR, KAKINADA 2. / THE REVENUE DY.COMMISSIONER OF INCOME TAX, CIRCLE - 1, KAKINADA 3. THE PR. COMMISSIONER OF INCOME TAX - 2, VISAKHAPATNAM 4. THE COMMISSIONER OF TAX (APPEALS) - 6, HYDERABAD 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM