UTSAV COTFAB P. LTD., JETPUR V. The ITO Ward-1 (2) (3), Rajkot, Rajkot

ITA 15/RJT/2022

AI Insights

The case involves M/s. Utsav Cotfab Pvt. Ltd., which appealed against the penalty imposed by the Income Tax Officer for non-compliance with notices during the assessment proceedings for the year 2014-15. The penalty was initially confirmed by the Commissioner of Income-tax (Appeals) at the National Faceless Appeal Centre, Delhi. The Tribunal examined the circumstances under which the non-compliance occurred, including the directors' involvement in multiple criminal proceedings and their subsequent inability to manage the company's affairs or respond to the notices. The Tribunal concluded that these circumstances constituted a sufficient cause for the non-compliance, leading to the decision to delete the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301462 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-04-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 01-02-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 142(1); 250; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MRS. MADHUMITA ROY, JUDICIAL MEMBER (through web-based video conferencing platform) ITA No. 15/Rjt/2022 िनधा榁रणवष榁/Assessment Year: 2014-15 M/s. Utsav Cotfab Pvt. Ltd., R Survey No. 603P/3/P/1, Khirsara Road, Nr. Jodia Hanuman Mandir, Jetpur, Rajkot – 360370 PAN : AABCU 3825 F Vs. Income Tax Officer, Ward- 1(2)(3), Rajkot अपीलाथ牸 अपीलाथ牸अपीलाथ牸 अपीलाथ牸/ (Appellant) 灹瀄 灹瀄 灹瀄 灹瀄 यथ牸 यथ牸यथ牸 यथ牸/ (Respondent) Assessee by : Shri Samir Bhuptani, AR Revenue by : Shri B.D. Gupta, Sr. DR सुनवाई क琉 तारीख/Date of Hearing : 12.04.2023 घोषणा क琉 तारीख /Date of Pronouncement: 11.07.2023 आदेश आदेशआदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: Present appeal has been filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as "CIT(A)" for short] dated 23.11.2021 confirming the levy of penalty under Section 271(1)(b) of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the Assessment Year (AY) 2014-15. 2. The grounds raised by the assessee are as under:- “1. Ld. CIT(A) erred in law as well as on facts in confirming the penalty u/s 271(1)(b) of the Income-tax Act, 1961 of Rs.50,000/-. 2. Ld. CIT(A) erred in law as well as on facts in passing the appellate order u/s 250 of the Act without considering submission made by the appellant during the physical hearing before local jurisdictional CIT(A). 2 ITA No. 15/Rjt/2022 Utsav Cotfab Pvt. Ltd. Vs. ITO AY : 2014-15 3. Ld. CIT(A) erred in law as well as on facts in contending that the appellant had not made any submission. 4. Ld. CIT(A) erred in law as well as on facts in passing the appellate order in haste.” 3. Penalty under Section 271(1)(b) of the Act was levied for non- compliance of notices issued during assessment proceedings. The non- compliance of the following notices, as reproduced at page no.5 of the CIT(A)’s order, led to levy of penalty of Rs.10,000/- for each non-compliance, amounting in all Rs.50,000/-:- Sr. No. Notice issue u/s Date of issue Mode of service Dt. Of hearing fixed status 1 142(1) alongwith s/c of penalty u/s 271(1)(b) 20.06.2016 By RPAD 01.07.2016 Not complied 2 142(1) alongwith s/c of penalty u/s 271(1)(b) 05.07.2016 By RPAD 19.07.2016 Not complied 3 142(1) alongwith s/c of penalty u/s 271(1)(b) 02.09.2016 By RPAD 16.09.2016 Not complied 4 142(1) alongwith s/c of penalty u/s 271(1)(b) 07.11.2016 By RPAD 22.11.2016 Not complied 5 142(1) alongwith s/c of penalty u/s 271(1)(b) 23.11.2016 By RPAD 01.12.2016 Not complied 4. Before the Assessing Officer in penalty proceedings, we have noted from the order passed , the assessee had sought time to file reply stating that his representative was busy in tax audit work, but the Assessing Officer did not give any further time and passed order levying penalty for non- compliance with the above stated notices. The order passed by the ld. CIT(A) reveals that the assessee did not avail various opportunities given to it by the ld. CIT(A) for representing its case and accordingly the ld. CIT(A) confirmed the penalty levied by the Assessing Officer of Rs.50,000/-. 5. Before us, the ld. Counsel for the assessee filed submissions in writing and, referring to the same, he pointed out that the ld. CIT(A) had wrongly 3 ITA No. 15/Rjt/2022 Utsav Cotfab Pvt. Ltd. Vs. ITO AY : 2014-15 noted that the assessee had not co-operated in the appellate proceedings. His contention was that, earlier, the hearing before the ld. CIT(A) was being done in physical manner and was thereafter transferred to the faceless regime with the National Faceless Appeal Centre (NFAC) finally passing the order under Section 250 of the Act. His contention was that during the course of physical hearing before the ld. CIT(A), the assessee had complied to the notices and had filed submissions also before him; but they were not considered by the order passed by the NFAC. As evidence, the copies of the reply filed to the ld. CIT(A) was filed before us and it was pointed out that he had received notices from the ld. CIT(A)-1, Rajkot for physical presence dated 03.04.2019 - placed before us at paper-book page no. 1, to which the assessee had filed reply – reproduced before us at paper-book page nos. 2-67. He referred to the reply filed before the ld. CIT(A) pointing out that the assesse had adduced sufficient cause for non-compliance with the notices issued by the Assessing Officer for which the penalty was levied on him, pointing out that the assessee was in a bad financial position and was embroiled in numerous litigations – both criminal and civil proceedings, against the Directors of the company ,with FIR’s lodged against them and their anticipatory bail being rejected ,during the period the assessment proceedings were going on and, therefore, the assessee was unable to comply with the notices. Evidences in this regard were also filed before us. The relevant contents of the pleadings made by the assessee before the ld. CIT(A), as mentioned in the written submissions filed before us, are as under:- “1.1 The appellant-company was having reasonable reasons for non- compliance of the statutory notices issued by ld. AO. 1.2 While levying the penalty u/s. 271(1)(b) of the act Id. AO entirely ignored the factual aspects and the existence of reasonable reasons in this case. 1.3 The reasonable reasons for non-compliance to statutory notices issued u/s. 142(1)of the act are submitted hereunder: 4 ITA No. 15/Rjt/2022 Utsav Cotfab Pvt. Ltd. Vs. ITO AY : 2014-15 1.3.1 The appellant-company has started to experience critical liquidity crunch since F. Y. 2014-15. 1.3.2 The appellant-company, therefore, closed down the business in F.Y. 2014-15 1.3.3 Since, the salary was also not possible to pay, all the staff have left the appellant-company. 1.3.4 The accounting data was also erased by the accounting staff of the appellant-company while leaving the job, as the salary was unpaid for long time. 1.3.5 The cheques issued by the appellant-company were also returned by the banker for want of sufficient fund. 1.3.6 The creditors were also .remained overdue and the payment was also not being made to them and hence they have also initiated legal proceedings against the directors of the appellant-company. 1.3.7 Several complains have been lodged against the directors of the appellant company and FIR have been registered by the Police Department. 1.3.8 One of the business associate of the appellant-company committed suicide and the allegation was placed on director of the company. 1.3.9 Under these circumstances the directors were absconded from the city and were not contactable. 1.3.10 Police department also issued warrant on the name of the directors of the appellant-company. 1.3.11 The directors of the appellant-company moved anticipatory bail application before various courts, till high court. 1.3.12 There have been multiple criminal proceedings initiated against the directors of the appellant-company. 1.3.13 On rejection of the bail the directors were sent to the jail even. 5 ITA No. 15/Rjt/2022 Utsav Cotfab Pvt. Ltd. Vs. ITO AY : 2014-15 1.3.14 To support and substantiate the above, the appellant-company herewith submits following documents: 1.3.14.1 FIR dated 17/05/2016, which is based on the complaint dated 03/08/2015. 1.3.14.2 Anticipatory bail application before Session Court, Greater Bombay dated 01/07/2016. 1.3.14.3 Anticipatory bail granted by Session Court, Greater Bombay on 09/08/2016. 1.3.14.4 The director arrested on 31/08/2016. 1.3.14.5 FIR has been registered by Police Department, Jetpur on 01/09/2016. 1.3.14.6 Anticipatory bails rejected by Session Court on 18/11/2016 1.3.14.7 Bail Application moved to Hon’ble High Court, Gujarat on 08/12/2016 1.3.14.8 Bail granted on 23/12/2016. 1.4 It may kindly be appreciated from the above that right from 03/08/2015 the appellant has been facing lot of pressure of criminal proceedings. The ultimate bail was granted on 23/12/2016. It may please be appreciated that the dates of default also fall in the said tenure only. 1.5 During the course of the assessment proceedings the AR of the appellant has furnished details on more than one occasion viz. vide letter dated 22/07/2015, 11/01/2016 and again on 04/03/2016. The appellant has filed various details through these letters viz. shareholding details, return of income of all sister concerns, bank statements, fixed assets details, TDS details and returns, GP details, expenditure ledgers etc. Thus, the appellant made level best efforts to comply to the notices and submit the required details. However, when the matter has reached beyond reach and when the criminal proceedings one by one commenced against the appellant, it was not possible for the directors of the appellant to stay in the town and hence to avoid the arrest they have been absconded and in the absence of directors and any other employee, accounting staff and any person who can gather the details and supply the same, it was not possible to comply with the notices.” 6 ITA No. 15/Rjt/2022 Utsav Cotfab Pvt. Ltd. Vs. ITO AY : 2014-15 6. Evidences of all the litigations were also filed before us in the paper- book from page Nos. 7-27 as under:- Sr. No. Description Page No. 1 First Information Report (FIR) dated 17.05.2016 7 – 8 2 Anticipatory bail application before Cession Court, Grater Bombay dated 01.07.2016 9 – 13 3 Anticipatory bail granted by Sessions Court, Greater Bombay on 09.08.2016 14 – 15 4 Date of event filed before High Court 16 – 17 5 FIR registered with Police Department, Jetpur on 01.09.2016 18 – 19 6 Bail Application moved to Hon’ble High Court, Gujarat on 08.12.2016 20 – 24 7 Order of High court granting bail dated 23.12.2016 25 – 27 7. The ld. DR was unable to controvert the contention of the learned Counsel for the assessee that the assessee had participated in appellate proceedings and had explained the reasons for non-compliance of notices issued by the Assessing Officer. Considering the explanation of the assessee as stated before us for non-compliance with the notices issued by the Assessing Officer for which the penalty was levied amounting to Rs.50,000/- and taking note of the evidences also filed by the assessee, we find that there were sufficient reasons with the assessee for non-compliance with the notices. The notices, which were listed by the Assessing Officer as remaining uncomplied with by the assessee, pertained to the period June 2016 to November 2016. The assessee has adduced evidences before us showing that during this period there were FIRs lodged against the Directors of the company and they had moved anticipatory bail application before the Sessions Court which was rejected and the assessee had moved to the High Court – both Hon’ble Bombay High Court and Hon’ble High Court of Gujarat. The assessee surely was deeply embroiled in litigations and, therefore, had 7 ITA No. 15/Rjt/2022 Utsav Cotfab Pvt. Ltd. Vs. ITO AY : 2014-15 plausible reasons for not complying with the notices, since there were criminal proceedings initiated against the directors of the assessee company who were trying to escape from being put behind the bars on account of the same. In view of the same, and considering that sufficient cause has been adduced by the assessee for non-compliance to the notices, we hold that there is no case for levying penalty under Section 271(1)(b) of the Act. The penalty of Rs.50,000/- levied under Section 271(1)(b) of the Act is, therefore, directed to be deleted. 8. In effect, the appeal of the assessee is allowed. Order pronounced in the open Court on 11/07/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 11/07/2023 **bt आदेश क琉 灹ितिलिप अ灡ेिषत/Copy of the Order forwarded to : 1. अपीलाथ牸 / The Appellant 2. 灹瀄यथ牸 / The Respondent. 3. संबंिधत आयकर आयु猴 / Concerned CIT 4. आयकर आयु猴)अपील (/ The CIT(A)- 5. िवभागीय 灹ितिनिध ,आयकर अपीलीय अिधकरण/DR,ITAT, Rajkot, 6. गाड榁 फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण ITAT, Rajkot 1. Date of dictation ......10.07.2023........ 1. Date on which the typed draft is placed before the Dictating Member 10.07.2023.......... 2. Other Member...10.07.2023..................... 3. Date on which the approved draft comes to the Sr.P.S./P.S...10.07.2023....................... 4. Date on which the fair order is placed before the Dictating Member for pronouncement...11.07.2023 5. Date on which the fair order comes back to the Sr.P.S./P.S...11.07.2023................ 6. Date on which the file goes to the Bench Clerk...11.07.2023............. 7. Date on which the file goes to the Head Clerk....... 8. The date on which the file goes to the Assistant Registrar for signature on the order............ 9. Date of Despatch of the Order..................