M/s. Krishi Upaj Mandi Samiti, Dewas V. The I..T.O., Ujjain

ITA 16/IND/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2729 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 08-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MITRA
• Assessee Lawyers: S K AGRAWAL
• Keywords: Recovery proceedings; Business income; Reasonable cause
• Section: 273B; 143(3); 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NO.16/IND/2010 A.Y. - 2003-04 KRISHI UPAJ MANDI SAMITI, DEWAS PAN AAALK 0247 M APPELLANT VS INCOME TAX OFFICER, WARD-2(1), UJJAIN RESPONDENT APPELLANT BY : SHRI S.K. AGRAWAL, CA RESPONDENTS BY : SHRI P.K. MITRA, SR. DR O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-UJJAIN, DATED 6.11.2009 ON THE GROUND THAT O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN IMPOSING THE PENALTY U/S 271B OF THE ACT. 2. DURING THE COURSE OF THE HEARING, WE HAVE HEARD SHRI S.K. AGRAWAL, LD. COUNSEL FOR THE ASSESSEE AND SHRI P.K. MITRA, LD. SR. DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF KUMS, 2 KANNOD VS. ITO (ITA NO.504/IND/2007). THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. DURING HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE PO INTED OUT THAT IT WAS THE FIRST YEAR OF FILING OF RETURN BY THE ASSESSEE, THEREFORE, THE ASSESSEE WAS NOT AWARE THAT THE ACCOUNTS OF THE ASSESSEE ARE TO BE AUDITED UP TO A SPECIFIED DATE ON A PRESCRIBED FORM, THEREFORE, T HERE WAS A REASONABLE CAUSE WITH THE ASSESSEE. THIS FACTUAL MATRIX WAS NO T CONTROVERTED BY THE REVENUE. IN VIEW OF THESE FACTS, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL DATED 17.2.2010 IN THE CASE OF SHRI LAL SINGH (ITA NO.532/IND/2009): 2. FIRST WE SHALL TAKE UP THE APPEAL IN ITA NO. 532/IND/2009 WHEREIN THE IMPOSITION OF PENALTY U/S 271-B HAS BEEN CHALLENGED. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE IS A LIQUOR CONTRACTOR AND PRIOR TO ASSESSMENT YEAR 2005-06 WAS NOT ASSESSED TO TAX AS THERE WAS NO BUSINESS ACTIVITY BY THE ASSESSEE THE ASSESSEE WAS STAYING IN A VILLAGE AND LATER ON SHIFTED TO A NEARBY TOWN, PARTICIPATED IN A LIQUOR AUCTION AND A LIQUOR SHOP WAS ALLOTTED TO HIM IN VILLAGE TODI. IT WAS EXPLAINED THAT THE ASSESSEE IS LIABLE TO PAY TAX AT ORIGIN OF PURCHASE OF COUNTRY LIQUOR EVEN IF THERE IS NO EARNING TO THE ASSESSEE. IT WAS POINTED OUT THAT AFTER COMPLETION OF ASSESSMENT THE ASSESSEE WAS FOUND ELIGIBLE FOR REFUND OF RS.7,240/-. IT WAS CLAIMED THAT THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT SINCE FULL AMOUNT OF TAX HAS BEEN PAID BY HIM, THEREFORE, 3 HE DID NOT GET HIS ACCOUNTS AUDITED. IT WAS FAIRLY ADMITTED THAT AFTER RECEIPT OF NOTICE FROM THE DEPARTMENT, THE ASSESSEE GOT HIS ACCOUNTS AUDITED AND SUBMITTED BEFORE THE AO AND GOT IT ASSESSED WHICH FINALLY RESULTED INTO REFUND OF RS.7,240/-. THE CRUX OF ARGUMENTS IS THAT SINCE TAX WAS PAID PRIOR TO INCOME, THEREFORE, THE IMPOSITION OF PENALTY U/S 271B IS NOT JUSTIFIED FOR WHICH RELIANCE WAS PLACED ON THE DECISIONS IN CIT VS. IQBALPUR COOPERATIVE CANE DEVELOPMENT UNION LTD. (179 TAXMAN 27) (UTTARAKHAND), ITO VS. NANAK SINGH GULIANI (257 ITR 677) (MP) AND M/S. SHAPE-N-SIZE CASTING PVT. LTD. VS. ACIT (ITA NO. 281/IND/2005). ON THE OTHER HAND, THE LEARNED SR. DR STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT FIRSTLY THE CASES RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT APPEAL AND SECONDLY THE ASSESSEE DID NOT GET HIS ACCOUNTS AUDITED BEFORE ISSUANCE OF NOTICE BY THE DEPARTMENT. THE IMPUGNED ORDER WAS STRONGLY DEFENDED. 3. I HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED RESPECTIVE COUNSELS AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL, ORIGINALLY RESIDING IN A VILLAGE AND LATER ON SHIFT ED TO A TOWN IN DISTRICT UJJAIN. THE ASSESSEE GOT LICENCE FOR THE SALE OF LIQUOR IN VILLAGE TODI TEH. SANWER AND THE TOTAL SALES WERE TO THE TUNE OF RS. 82,32,797/-. SINCE THE TURNOVER OF THE ASSESSEE WAS MORE THAN RS. 40 LACS, HE WAS REQUIRED TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT BEFORE THE SPECIFIED DATE I.E. 31.10.2005. THE AO INITIATED PENALTY PROCEEDINGS U/S 271B. AS PER THE REVENUE, SINCE THE ASSESSEE DID NOT ATTEND THE PROCEEDINGS IN RESPONSE TO NOTICES, THEREFORE, HE WAS HELD TO BE ASSESSEE IN DEFAULT FOR NOT GETTING HIS ACCOUNTS AUDITED AS REQUIRED U/S 44AB OF THE ACT, THEREFORE, THE PENALTY OF RS. 41,200/- WAS IMPOSED. THE PENALTY ORDER WAS AFFIRMED IN APPEAL BY THE LEARNED CIT(A) WHICH IS UNDER CHALLENGED BEFORE THIS TRIBUNAL. 4 ADMITTEDLY, THIS IS THE FIRST YEAR OF BUSINESS OF T HE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE WAS UNDER A REASONABLE BELIEF THAT SINCE TAX HAS ALREADY BEEN DEPOSITED AND REFUND WAS ALLOWED, THEREFORE, THE ASSESSEE IS NOT OBLIGED TO FILE THE RETURN OR TO GE T THE ACCOUNTS AUDITED. BEFORE COMING TO ANY CONCLUSION, I AM REPRODUCING HEREUNDER THE RELEVANT PROVISION AS CONTAINED IN SECTION 271B OF THE ACT:- [ FAILURE TO GET ACCOUNTS AUDITED. 271B. IF ANY PERSON FAILS 66 [***] TO GET HIS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR OR YEARS RELEVANT TO AN ASSESSMENT YEAR OR 67 [FURNISH A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB ], THE 68 [ASSESSING] OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM EQUAL TO ONE- HALF PER CENT OF THE TOTAL SALES, TURNOVER OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS, OR OF THE GROSS RECEIPTS IN PROFESSION, IN SUCH PREVIOUS YEAR OR YEARS OR A SUM OF ONE HUNDRED THOUSAND RUPEES, WHICHEVER IS LESS.] THE AFORESAID PROVISION WAS INSERTED BY THE FINANCE ACT, 1984 W.E.F. 1.4.1985 WHEREAS THE PRESENT ASSESSMENT YEAR IS 2002-03, THEREFORE, THE AFORESAID PROVISION IS DULY APPLICABLE TO THE CASE OF THE ASSESSEE. AS PER THE PROVISION OF SECTION 271B THE ASSESSEE IS SUPPOSED TO GET ITS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR AND TO FURNISH THE AUDITED REPORT AS REQUIRED UNDER SECTION 44AB OF THE ACT FAILING WHICH THE PENALTY IS LIABLE TO BE IMPOSED AS PROVIDED IN THE SECTION. ADMITTEDLY, EVEN AFTER AUDITED ACCOUNTS FINALLY THE ASSESSMENT RESULTED INTO REFUND OF RS. 7240/- BUT THE FACT REMAINS THAT THE PROVISIONS OF SECTION 44AB WERE NOT COMPLIED WITH BY THE ASSESSEE WHICH RESULTED INTO IMPOSITION OF PENALTY U/S 271B. THIS IS ALSO A FACT THAT IT IS NO T THE CASE THAT THE ASSESSEE SUO MOTO GOT HIS ACCOUNTS AUDITED RATHER THE AUDIT WAS GOT DONE 5 AFTER RECEIPT OF NOTICE ISSUED TO THE ASSESSEE ON 23.8.2008 TO WHICH THERE WAS NO RESPONSE BY THE ASSESSEE. ANOTHER NOTICE DATED 16.9.2008 WAS ISSUED WHICH WAS ALSO NOT COMPLIED WITH AND THEREAFTER THE ASSESSEE WAS HELD TO BE IN DEFAULT FOR NOT GETTING THE TAX AUDIT REPORT AS REQUIRED U/ S 44AB OF THE ACT. HOWEVER, THE FACT REMAINS THAT IN SECTION 44A FOR IMPOSING PENALTY THERE IS DISCRETION WITH THE AO AND IT IS NOT MANDATORY IN NATURE. THE REASONABLENESS HAS TO BE CONSIDERED FOR THE ALLEGED NON-COMPLIANCE. EVEN IN THE ASSESSMENT FRAMED U/S 143(3) READ WITH SECTION 148 OF THE ACT, VIDE ORDER DATED 23.8.2008 I HAVE FOUND THAT IN ITNS-150 (INCOME TAX COMPUTATION FORM) THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS.5,90,500/- WHEREIN REFUND OF RS. 7,239/- WAS GRANTED TO THE ASSESSEE. THEREFORE, IT CAN BE SAID THAT THERE IS NO LOSS TO THE REVENUE. IN SUCH A SITUATION, IT CAN BE SAID THAT THE ASSESSEE WAS UNDER A REASONABLE BELIEF THAT SINCE THE TAX HAS ALREADY BEEN PAID BY THE ASSESSEE, THEREFORE, THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF THE ACT. EVEN OTHERWISE, THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE. AS PER PROVISIONS OF SECTION 271B A DISCRETION HAS BEEN GIVEN TO THE LEARNED AO TO LEVY PENALTY BY USING THE WORD MAY. IT IS NOT MANDATORY IN NATURE BUT DISCRETIONARY. VIDE FINANCE ACT, 1988 (CIRCULAR NO. 525 DATED 24 TH NOVEMBER, 1998) SECTION 206C WAS INTRODUCED IN THE ACT WHICH PROVIDES FOR COLLECTION OF TAX AT SOURCE. THE OBJECT OF INTRODUCTION OF THE NEW PROVISION FOR WORKING OUT THE PROFIT ON PRESUMPTIVE BASIS AND TO GET OVER THE PROBLEM FACED IN ASSESSING THE INCOME AND RECOVERY OF TAXES IN THE CASE OF PERSONS TRADING IN COUNTRY LIQUOR, TIMBER AND FOREST PRODUCE, WHEREIN LARGE NUMBER OF SUCH PERSONS EITHER DO NOT MAINTAIN ANY BOOKS OF ACCOUNTS OR THE BOOKS ARE MAINTAINED AS IRREGULAR OR INCOMPLETE. AFTER A CERTAIN PERIOD, I T IS VERY DIFFICULT TO LOCATE SUCH PERSONS AFTER THE AGREEMENT IS OVER. EVEN THE DEPARTMENT SOMETIMES FINDS IT DIFFICULT TO COLLECT THE TAXES 6 FROM THEM. IN VIEW OF THESE FACTS, THE PRESUMPTIVE RATE OF PROFIT IS APPLIED IN CASES EXCEPT PUBLIC SECTOR COMPANY WHICH PURCHASES THE SPECIFIED GOODS AND TRADES IN THE SAME. SECTION 44AC OF THE ACT APPLIES ONLY IN CASE OF PERSONS ENGAGED IN THE TRADING OF GOODS REFERRED TO THEREIN. IN THE PRESENT APPEAL, SINCE THE PRESUMPTIVE TAX HAS ALREADY BEEN DEPOSITED BY THE ASSESSEE AND ESPECIALLY A REFUND WAS ALLOWED BY THE DEPARTMENT THAT TOO U/S 143(3)/148 OF THE ACT, THEREFORE, IT CAN BE SAID THAT THE ASSESSEE WAS UNDER A REASONABLE BELIEF THAT HE HAS PAID THE REQUIRED TAXES. SINCE THERE IS NO LOSS TO THE REVENUE, THEREFORE, I AM OF THE CONSIDERED OPINION THAT NO PENALTY IS EXIGIBLE. THE RATIO LAID DOWN BY THE HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V. IQBALPUR COOPERATIVE CANE DEVELOPMENT UNIONS LIMITED (2009) 179 TAXMAN 27 WHEREIN THE ASSESSEE COULD NOT GET ITS ACCOUNTS AUDITED AS REQUIRED U/S 44AB OF THE ACT WITHIN THE PRESCRIBED TIME. THE AO IMPOSED PENALTY U/S 271B. SINCE NO TAX WAS PAYABLE BY THE ASSESSEE, THE TRIBUNAL WAS HELD TO BE JUSTIFIED IN DELETING THE PENALTY. LIKEWISE, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NANAKCHAND GULYANI (257 ITR 677) (M.P.) HELD THAT FOR NON-COMPLIANCE OF COMPULSORY AUDIT, THERE IS A DISCRETIONARY POWER WITH THE AO IN IMPOSING PENALTY AND THE SAME WAS HELD TO BE NOT MANDATORY. SINCE THERE WAS REASONABLE CAUSE FOR NON-COMPLIANCE, PENALTY WAS HELD TO BE NOT IMPOSABLE U/S 44AB READ WITH SECTION 271B AND 273B OF THE ACT. THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF SHAPE-N-SIZE CASTING PVT. LTD. (SUPRA) PLACED RELIANCE UPON THE DECISION FROM THE HONBLE JURISDICTIONAL HIGH COURT IN NANAK CHAND GULIANI (SUPRA) AND ALSO THE DECISION FROM THE HONBLE RAJASTHAN HIGH COURT IN BAJRANG OIL MILLS (207 CTR 1) AND ULTIMATELY, DELETED THE PENALTY IMPOSED U/S 271B. THIS DECISION OF THE TRIBUNAL HAS ATTAINED FINALITY AS NO CONTRARY DECISION WAS BROUGHT TO MY NOTICE. IN THE LIGHT OF THESE FACTS AND JUDICIAL 7 PRONOUNCEMENTS, THE PENALTY IMPOSED U/S 271B IS DELETED, CONSEQUENTLY, THIS APPEAL OF THE ASSESSEE IS ALLOWED. IN THE AFORESAID ORDER, A DETAILED DISCUSSION HAS B EEN MADE BY THE BENCH AND DUE DELIBERATION HAS BEEN MADE ON CERTAIN JUDICIAL PRONOUNCEMENTS VIZ-A-VIZ LANGUAGE CONTAINED IN SEC. 271B OF THE ACT. IDENTICALLY, AS ASSERTED BY THE LD. RESPECTIVE COUN SEL, THE TRIBUNAL VIDE ORDER DATED 11.4.2008 (ITA NO.504/IND/2007) ALLOWED IN FAVOUR OF THE ASSESSEE. IN THE PRESENT APPEAL, EARLIER THE STATUS OF THE ASSESSEE WAS LOCAL AUTHORITY AND AS SUCH, ITS INCOME DID NOT FOR M PART OF TOTAL TURNOVER AS PER SEC. 10(20) OF THE ACT. HOWEVER, BY THE FINA NCE ACT, 2002 W.E.F. 1.4.2003, EXPLANATION TO SEC. 10(20) WAS INSERTED A ND THE EXPRESSION LOCAL WAS DEFINED AS PANCHAYAT AND MUNICIPALITIES . THUS, THE EXEMPTION GRANTED TO THE ASSESSEE SAMITI WAS WITHDR AWN FOR THE ASSESSMENT YEAR BEGINNING FROM 2003-2004. SINCE THE APPEAL OF THE PRESENT ASSESSEE IS FOR ASSESSMENT YEAR 2003-04, TH EREFORE, IT IS FIRST YEAR OF ASSESSMENT AFTER AMENDMENT MADE BY THE FINA NCE ACT, 2002, CONSEQUENTLY, THERE IS A REASONABLE CAUSE WITH THE ASSESSEE AS PRIOR TO THIS ASSESSMENT, THE INCOME WAS EXEMPT. THE ASSESSE E COULD NOT ANTICIPATED CONSEQUENCES OF AMENDMENT IN THE ACT AN D AS SUCH THERE WAS DELAY IN GETTING THE AUDIT REPORT OR TO FILE SU CH REPORT BEFORE THE INCOME-TAX AUTHORITIES. IN SUCH A SITUATION, WE ARE OF CONSIDERED OPINION 8 THAT THERE IS REASONABLE CAUSE FOR FAILURE TO SUBMI T THE AUDIT REPORT WITHIN TIME I.E. UP TO 31.10.2004. THE RATIO LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. SKYLINE PRODUCTS P. LTD. (271 ITR 335), THOUGH ON THE ISSUE U/S 271(1)(C), SUPPORTS THE CASE OF THE A SSESSEE WHEREIN IT WAS HELD THAT WHEN MISTAKE IS BONA FIDE, NO PENALTY CAN BE IMPOSED. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS, ME NTIONED ABOVE, THIS APPEAL OF THE ASSESSEE IS ALLOWED AND THE PENALTY S O IMPOSED U/S 271B IS DELETED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF L EARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 29 TH JUNE, 2010. (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.6.2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE !VYAS!