KANJAN MARKETING, MUMBAI V. ITO 25(3)(2), MUMBAI

ITA 1569/MUM/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0309 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Reasonable cause
• Section: 273B

Judgement Text

1 ITA NO.1569/MUM/2012 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.1569/MUM/2012 (ASSESSMENT YEAR 2007-08) KANJAN MARKETING E-403, 4 TH FLOOR, JYOTI ARCH S.V. ROAD, KANDIVALI (W) MUMBAI-67 PAN : AAFFK0340N VS ITO, WARD25(3)(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI SHAILESH PARMAR RESPONDENT BY SHRI RAJESH KUMAR YADAV DATE OF HEARING 27-07-2017 DATE OF PRONOUNCEMENT 16-08-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-35, MUMBAI DATED 26-07-2010 FOR THE ASSESSME NT YEAR 2007-08 CONFIRMING PENALTY LEVIED BY THE AO U/S 271B OF THE INCOME-TAX ACT, 1961 FOR FAILURE TO GET ACCOUNTS AUDITED U/S 44AB OF THE INC OME-TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 31-10-200 7 DECLARING TOTAL INCOME AT RS.97,787/-. THE ASSESSMENT WAS COMPLETED U/S 1 43(3) ON 24-12-2009 2 ITA NO.1569/MUM/2012 DETERMINING TOTAL INCOME AT RS.9,37,666 BY ESTIMATI NG NET PROFIT AT 7% OF THE TOTAL TURNOVER DECLARED BY THE ASSESSEE. WHILE COM PLETING THE ASSESSMENT THE AO INITIATED PENALTY PROCEEDINGS U/S 271B FOR FAILU RE TO GET ACCOUNTS AUDITED U/S 44AB OF THE INCOME-TAX AC, 1961 THOUGH ITS TURN OVER FOR THE RELEVANT FINANCIAL YEAR EXCEEDED THE PRESCRIBED LIMIT PROVID ED FOR AUDIT OF ACCOUNTS. ACCORDINGLY, A NOTICE U/S 274 R.W.S. 271B DATED 24- 12-2009 WAS ISSUED TO THE ASSESSEE AND ASKED TO EXPLAIN AS TO WHY PENALTY SHO ULD NOT BE LEVIED FOR FAILURE TO GET ACCOUNTS AUDITED U/S 44AB OF THE INCOME-TAX ACT, 1961. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE, VIDE ITS REPLY DAT ED 02-02-2010 SUBMITTED THAT THERE WAS A REASONABLE CAUSE FOR NOT FILING AU DIT REPORT AS REQUIRED U/S 44AB OF THE INCOME-TAX ACT, 1961 AS ITS BOOKS OF AC COUNT AND OTHER RELEVANT DOCUMENTS FOR THE IMPUGNED ASSESSMENT YEAR WERE DES TROYED BECAUSE OF FLOODS DUE TO HEAVY RAINS ON 30-06-2007. THE ASSES SEE FURTHER SUBMITTED THAT SINCE ITS BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUM ENTS ARE DESTROYED IT COULD NOT PRODUCE BOOKS OF ACCOUNT BEFORE THE AUDITOR FOR GETTING THE ACCOUNTS AUDITED. SINCE THERE WAS A REASONABLE CAUSE FOR NO T PREPARING THE BOOKS OF ACCOUNT AUDITED DUE TO FLOODS, THE ASSESSEE COULD N OT GET ITS BOOKS OF ACCOUNTS AUDITED FOR WHICH NO PENALTY CAN BE LEVIED U/S 271B OF THE INCOME-TAX ACT, 1961. THE AO, AFTER CONSIDERING THE RELEVANT SUBMI SSIONS OF THE ASSESSEE HELD THAT THE ASSESSEE HAS FAILED TO EXPLAIN REASONABLE CAUSE FOR NOT GETTING ITS 3 ITA NO.1569/MUM/2012 BOOKS OF ACCOUNT AUDITED AS REQUIRED U/S 44AB OF TH E INCOME-TAX ACT, 1961. THE AO, FURTHER OBSERVED THAT THOUGH ASSESSEE CLAIM ED THAT ITS BOOKS OF ACCOUNT ARE WASHED AWAY, FAILED TO SUBSTANTIATE THE CLAIM WITH NECESSARY EVIDENCE. ASSESSEE CLAIMED THAT THERE WAS A FLOOD ON 30-06-2007 BECAUSE OF WHICH BOOKS OF ACCOUNT COULD NOT BE MAINTAINED, BUT THE FINANCIAL YEAR ENDED FOR THE RELEVANT ASSESSMENT YEAR MUCH BEFORE THE DA TE OF FLOOD BY WHICH DATE THE ASSESSEE SHOULD HAVE MAINTAINED ITS BOOKS OF AC COUNT. IN THIS CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT IT HAS MAINTAINED BOO KS OF ACCOUNT AND THOSE BOOKS OF ACCOUNT WERE WASHED AWAY, BUT THE ASSESSEE HAS NOT AT ALL MAINTAINED BOOKS OF ACCOUNT AND HENCE, THERE IS NO REASONABLE CAUSE FOR THE ASSESSEE TO GET ITS BOOKS OF ACCOUNT AUDITED U/S 44 AB AND HENCE LEVIED PENALTY OF RS.1 LAKH U/S 271B OF THE INCOME-TAX ACT, 1961. AGGRIEVED BY THE PENALTY ORDER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 3. BEFORE CIT(A), ASSESSEE REITERATED ITS SUBMISSIONS TAKEN BEFORE AO. THE CIT(A), FOR THE DETAILED DISCUSSION IN HIS ORDER, C ONFIRMED PENALTY LEVIED BY THE AO U/S 271B BY HOLDING THAT THE ASSESSEE HAS FAILED TO EXPLAIN AS TO WHY THE BOOKS OF ACCOUNT WHICH WERE DAMAGED IN THE ALLEGED FLOOD WAS FINALLY RECONSTRUCTED TO FILE THE INCOME-TAX RETURN. AFTER THE AMENDMENT OF SECTION 271B WEF 10-09-1996, THE WORDS, REASONABLE CAUSE HAVE BEEN OMITTED, THEREFORE, THE ASSESSEE IS BOUND TO MAINTAIN BOOKS OF ACCOUNT, ONCE ITS GROSS 4 ITA NO.1569/MUM/2012 RECEIPTS FROM THE BUSINESS EXCEEDED PRESCRIBED LIMI T PROVIDED U/S 44AB OF THE INCOME-TAX ACT, 1961. SINCE THE ASSESSEE FAILED TO GET ITS ACCOUNTS AUDITED U/S 44AB, THE AO HAS RIGHTLY LEVIED PENALTY U/S 271B. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CI T(A) ERRED IN CONFIRMING THE ORDER OF THE AO LEVYING PENALTY U/S 271B, THOUGH THE ASSESSEE DEMONSTRATED WITH EVIDENCE THAT THERE WAS A REASONA BLE CAUSE FOR NOT GETTING THE ACCOUNTS AUDITED U/S 44AB OF THE INCOME-TAX ACT , 1961. THE LD.AR FURTHER SUBMITTED THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAD A REASONABLE AND SUFFICIENT CAUSE WITHIN THE MEANING OF SECTION 273B OF THE IT ACT, 1961, FOR ITS FAILURE TO GET ITS BOOKS OF ACCO UNT AUDITED AND FURNISH TAX AUDIT REPORT U/S 44AB OF THE ACT, AS THE BOOKS OF A CCOUNT WERE NOT AVAILABLE ON ACCOUNT OF NATURAL CALAMITIES ON 30-06-2007 AND THI S FACT WAS REPORTED TO THE AO WHILE FILING THE RETURN OF INCOME, VIDE LETTER D ATED 30-10-2007. THE LD.AR FURTHER SUBMITTED THAT THE CIT(A) FAILED TO APPRECI ATE THE FACT THAT THE ASSESSEE HAS FURNISHED STATEMENT OF AFFAIRS AT THE TIME OF F ILING RETURN OF INCOME AS WELL AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME WERE ACCEPTED EVEN IN THE QUANTUM APPELLATE PROCEEDINGS BEFORE C IT(A) AS BEING PREPARED IN ACCORDANCE WITH ACCOUNTING STANDARD-4 ISSUED BY INS TITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI, HEREINAFTER). THERE IS A REASONABLE CAUSE AS 5 ITA NO.1569/MUM/2012 PROVIDED IN SECTION 273B FOR FAILURE TO GET ACCOUNT S AUDITED U/S 44AB AND HENCE, THE AO WAS COMPLETELY ERRED IN LEVYING PENAL TY U/S 271B. 5. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO LEVIED PENALTY U/S 271B FOR FAILURE TO GET ACCOUNTS AUDITED U/S 44AB O F THE INCOME-TAX ACT, 1961. ACCORDING TO THE AO, THE ASSESSEE FAILED TO EXPLAIN REASONABLE AND SUFFICIENT CAUSE FOR NOT GETTING THE ACCOUNTS AUDITED EVEN THO UGH ITS GROSS RECEIPTS FROM BUSINESS EXCEEDED THE PRESCRIBED LIMIT PROVIDED FOR AUDIT OF ACCOUNTS. THE FACTS WITH REGARD TO APPLICABILITY OF THE PROVISION S OF SECTION 44AB OF THE INCOME-TAX ACT, 1961 IS NOT IN DISPUTE. THE ASSESS EES TURNOVER FROM ITS BUSINESS FOR THE RELEVANT FINANCIAL YEAR HAS EXCEED ED THE PRESCRIBED LIMIT PROVIDED FOR AUDIT OF ITS ACCOUNTS U/S 44AB OF THE ACT. BUT ASSESSEE CLAIMS THAT THERE IS SUFFICIENT AND REASONABLE CAUSE FOR NOT GE TTING ITS ACCOUNTS AUDITED AS ITS BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTS W ERE DESTROYED BY NATURAL CALAMITY, I.E. FLOOD ON 30-06-2007 BECAUSE OF WHICH IT COULD NOT PREPARED ITS BOOKS OF ACCOUNTS TO BE PRODUCED TO THE AUDITOR FOR AUDIT OF ACCOUNTS. THE ASSESSEE HAS FURNISHED RELEVANT DOCUMENTS IN SUPPOR T OF ITS CLAIM THAT THERE WAS FLOOD WHICH DESTROYED ITS BOOKS OF ACCOUNT. WE FIND THAT THE ASSESSEE HAS FILED DETAILS OF INSURANCE CLAIM MADE FOR LOS OF ST OCK AND OTHER ASSETS ON 6 ITA NO.1569/MUM/2012 ACCOUNT OF FLOOD ON 30-06-2007. ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE WE FIND THAT THERE WAS A FLOOD ON 30-06-2007. THIS FACT WAS NOT DISPUTED BY THE AO AS WELL AS CIT(A). THE AO IS ON THE POINT T HAT THE FLOOD WAS ON 30-06- 2007 WHEREAS THE FINANCIAL YEAR ENDED ON 31-03-2007 BY WHICH DATE, THE ASSESSEE OUGHT TO HAVE MAINTAINED ITS BOOKS OF ACCO UNT. SINCE THE ASSESSEE FAILED TO MAINTAIN BOOKS OF ACCOUNT, THERE IS A FAI LURE ON THE PART OF THE ASSESSEE TO GET ITS ACCOUNTS AUDITED U/S 44AB OF TH E ACT. WE FIND THAT THE ASSESSEE CLAIMS TO HAVE MAINTAINED BOOKS OF ACCOUNT , HOWEVER THOSE BOOKS OF ACCOUNT WERE DESTROYED IN FLOOD BECAUSE OF WHICH TH E ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT TO THE AUDITOR TO GET ITS BOOKS OF ACCOUNT AUDITED U/S 44AB OF THE ACT. THEREFORE, ONE HAS TO EXAMINE WHETHER THERE IS A REASONABLE CAUSE AS PROVIDED IN SECTION 273B, WHICH IMPLIEDLY EXONERATES ASSESSEE FROM COMPLYING WITH PROVISIONS OF CONCERNE D SECTIONS. 7. PROVISIONS OF SECTION 273B PROVIDES THAT NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, REF ERRED TO IN THE SAID PROVISIONS, IF HE PROVES THAT THERE IS A REASONABLE CAUSE FOR THE SAID FAILURE. SINCE THE PROVISIONS OF SECTION 273B COVERS THE PRO VISIONS OF SECTION 271B, IF ASSESSEE OR THE PERSON EXPLAINS THE REASONS FOR NOT GETTING ITS ACCOUNTS AUDITED, THEN CERTAINLY, THE CASE COMES WITHIN THE PURVIEW OF REASONABLE CAUSE AS PROVIDED IN SECTION 273B OF THE ACT. IN THIS CA SE, THE ASSESSEE HAS PROVED 7 ITA NO.1569/MUM/2012 BEYOND DOUBT WITH NECESSARY EVIDENCE THAT THERE WAS SUFFICIENT AND REASONABLE CAUSE FOR NOT GETTING ITS ACCOUNTS AUDIT ED U/S 44AB OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS ERRED IN IMPOSING THE PENALTY U/S 271B OF THE ACT. THE CIT(A), WITHOUT APPRECIAT ING THE FACTS, SIMPLY UPHELD PENALTY LEVIED BY THE AO. HENCE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND DIRECT THE AO TO DELETE PENALTY LEVIED U/S 271B OF THE INCOME-TAX ACT, 1961. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH AUGUST, 2017. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 16 TH AUGUST, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI