Paragon Industries, Trichy V. ITO, Trichy

ITA 1739/CHNY/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7454 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 31-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S KEERTHIRAJAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.1739(MDS)/2011 ASSESSMENT YEAR : 2006-07 M/S.PARAGON INDUSTRIES, NO.D-26, E-19 & 20, DEVELOPED PLOTS ESTATE, THUVAKUDI, TRICHY-620 015. PAN AAFFP4378K. VS. THE INCOME-TAX OFFICER, WARD IV(1), TIRUCHIRAPALLI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.KEERTHIRAJAN, FCA RESPONDENT BY: SHRI SHAJI P JACOB, IRS, ADDL . COMMISSIONER OF I NCOME-TAX. DATE OF HEARING : 19 TH JANUARY, 2012 DATE OF PRONOUNCEMENT : 19 TH JANUARY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS FILED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) AT TIRUCHIRAPALLI, DATED 8-9-2011 AND ARISES OUT OF TH E PENALTY ORDER - - ITA 1739 OF 2011 2 PASSED BY THE ASSESSING AUTHORITY UNDER SECTION 271 B OF THE INCOME-TAX ACT, 1961. 2. IT WAS NOTICED BY THE ASSESSING AUTHORITY THAT THE ASSESSEE HAS FAILED TO FURNISH AUDIT REPORT ALONGWI TH THE NECESSARY ENCLOSURES IN THE PRESCRIBED FORM WITHIN THE STIPULATED PERIOD, AS REQUIRED UNDER SECTION 44AB OF THE INCOM E-TAX ACT, 1961. ACCORDINGLY, THE ASSESSING AUTHORITY ISSUED A NOTICE UNDER SECTION 271B ON 29-12-2008 PROPOSING TO LEVY PENALT Y FOR THE DELAY IN FILING THE AUDIT REPORT AND THE CONNECTED ENCLOSURES. IN THE REPLY FILED BY THE ASSESSEE FIRM, IT WAS STATED THAT THE MANAGING PARTNER OF THE ASSESSEE WAS HELD UP AT WOR K SITE IN OTHER STATES AND IT WAS FOR THAT REASON THAT THE AU DIT REPORT GOT DELAYED. THE ASSESSEE REQUESTED FOR CONDONATION OF THE DELAY OCCURRED IN FILING THE AUDIT REPORT AND REQUESTED T O DROP THE PENALTY PROCEEDINGS. THE ASSESSING OFFICER FELT TH AT THE REPLY FURNISHED BY THE ASSESSEE FIRM WAS NOT AT ALL CONVI NCING. HE OBSERVED THAT THE MANAGING PARTNER ALONE WAS OUT OF STATION, WHEREAS THE OTHER THREE PARTNERS WERE AVAILABLE IN THE HEADQUARTERS, WHO COULD HAVE WELL TAKEN CARE OF THE MANDATORY FILING OF AUDIT REPORT AND THE OTHER ENCLOSURES WIT HIN THE - - ITA 1739 OF 2011 3 STIPULATED PERIOD. HE ALSO FOUND THAT THE ASSESSE E FIRM IS REGULARLY GUIDED AND ASSISTED BY A QUALIFIED CHARTE RED ACCOUNTANT WHO KNOWS VERY WELL THAT FILING OF AUDIT REPORT UNDER SECTION 44AB IS MANDATORY. HAVING FOUND THAT THERE IS NO SUBSTANCE IN THE REPLY FILED BY THE ASSESSEE, THE A SSESSING AUTHORITY CONVERTED HIS PROPOSAL TO ACTUAL PENALTY. A PENALTY OF ` 1 LAKH HAS BEEN LEVIED. 3. WHEN THE MATTER WAS TAKEN UP BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS), HE FOUND THAT THE ASSESSING OFFICER HAS LEVIED THE PENALTY ON JUST AN D PROPER REASONS. TO QUOTE THE WORDS OF THE COMMISSIONER OF INCOME- TAX(APPEALS) HIMSELF, HE HAS STATED THAT I STRONGL Y SUPPORT THE DECISION TAKEN BY THE ASSESSING OFFICER IN LEVYING THE PENALTY. 4. THE ASSESSEE FIRM IS AGGRIEVED AND THEREFORE TH E SECOND APPEAL BEFORE THE TRIBUNAL. 5. WE HEARD SHRI S.KEERTHIRAJAN, THE LEARNED CHART ERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND SHRI SHAJ I P JACOB, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FO R THE REVENUE. - - ITA 1739 OF 2011 4 6. THE LEARNED CHARTERED ACCOUNTANT EXPLAINED THAT THE MANAGING PARTNER OF THE ASSESSEE WAS AT KHAPERK EDA IN NAGPUR DISTRICT IN THE STATE OF MAHARSHTRA FOR COMP LETING THE EXECUTION OF 500 MW POWER PLANT AND, THEREFORE, HE COULD NOT ARRANGE TO FILE THE RETURN AND AUDIT REPORT IN TIME . THE PROJECT WAS A PRESTIGIOUS ORDER RECEIVED FROM BHEL, WHICH H AD TO BE COMPLETED IN RECORD TIME. ACCORDING TO THE LEARNED CHARTERED ACCOUNTANT, THIS FACT WAS BROUGHT BEFORE THE ASSESS ING OFFICER, ENDORSED BY A LETTER ISSUED BY THE BHEL. THE REMAI NING PARTNERS AVAILABLE IN THE STATION WERE ONLY FINANCI NG PARTNERS AND THEY WERE NOT CONVERSANT WITH THE BUSINESS AND THE ADMINISTRATIVE MATTERS OF THE ASSESSEE-FIRM. THE L EARNED CHARTERED ACCOUNTANT FURTHER EXPLAINED THAT THE AUD IT REPORT AND THE OTHER ENCLOSURES WERE MADE AVAILABLE TO THE ASS ESSING OFFICER BEFORE COMPLETING THE ASSESSMENT AND, THERE FORE, THE DELAY OCCURRED IN FILING THE AUDIT REPORT ALONGWITH THE ENCLOSURES WAS ONLY TECHNICAL IN NATURE AND, THEREFORE, ON THA T GROUND, THE PENALTY SHOULD HAVE BEEN DELETED BY THE COMMISSIONE R OF INCOME-TAX(APPEALS). HE ALSO HAS RELIED ON THE DEC ISION OF THE INCOME-TAX APPELLATE TRIBUNAL, D-BENCH, CHENNAI IN THE CASE OF - - ITA 1739 OF 2011 5 SHRI M.P.NARESH KUMAR VS. ITO, WARD III(3), TIRUCHI RAPALLI, DATED 12-6-2009 PASSED IN ITA NO.1767(MDS)/2008. 7. THE LEARNED COMMISSIONER OF INCOME-TAX, WHO APPEARED FOR THE REVENUE, ON THE OTHER HAND, SUBMIT TED THAT ACCORDING TO THE ASSESSEE, THE AUDIT REPORT WAS SIG NED ON 30-11-2006 ITSELF. BUT THE ACTUAL FILING WAS DELAY ED. THE LEARNED COMMISSIONER OF INCOME-TAX EXPLAINED THAT THIS POSI TION ITSELF IS DUBIOUS OR DOUBTFUL, WHICH GIVES A STRONG PRESUMPTI ON THAT THE ASSESSEE WAS PROPOSING TO BACK-DATE THE AUDIT REPOR T TO PLEAD MERCY IN THE CASE. THE LEARNED COMMISSIONER EXPLAI NED THAT THE REASONS SUCH AS THE MANAGING PARTNER WAS AWAY F ROM THE STATION, ETC. ARE JUST WORN OUT EXPLANATIONS IN THE PRESENT DAY TIME. COMMUNICATION AND LOGISTICS ARE VERY MUCH AV AILABLE TO ATTEND IMPORTANT WORKS EVEN WHEN THE AUTHORIZED PER SON IS OUT OF STATION. THE LEARNED COMMISSIONER OF INCOME-TA X EXPLAINED THAT THE DELAY OCCURRED IN FILING THE AUDIT REPORT AND THE OTHER ENCLOSURES WAS NOT BECAUSE OF ANY GENUINE REASON BU T ONLY BECAUSE OF THE CALLOUSNESS ON THE PART OF THE ASSES SEE FIRM. HE, THEREFORE, VEHEMENTLY CONTENDED THAT THE ORDERS OF THE LOWER AUTHORITIES MUST BE UPHELD IN THE INTERESTS OF JUST ICE. - - ITA 1739 OF 2011 6 8. WE CONSIDERED THE ISSUE IN DETAIL. THE MOST IMPORTANT ARGUMENT OF THE LEARNED CHARTERED ACCOUNT ANT THAT THE AUDIT REPORT AND THE OTHER ENCLOSURES WERE AVAILABL E BEFORE THE ASSESSING AUTHORITY EVEN BEFORE COMPLETING THE ASSE SSMENT, BY ITSELF IS NOT A REASON TO SUBSTANTIATE THE DELAY CA USED IN FILING SUCH A REPORT AND THE ENCLOSURES. SECTION 44AB OF THE INCOME- TAX ACT, 1961 BECAME OPERATIVE SINCE THE ASSESSMENT YEAR 1985-86 AND ANYHOW WE ARE CONCERNED WITH THE ASSESS MENT YEAR 2006-07. EVEN AFTER TWENTY YEARS OF INTRODUCI NG SUCH A SECTION IN THE INCOME-TAX ACT ALONGWITH SECTION 271 B, THE ASSESSEE IS STILL PLEADING THE CASE AS IF THIS IS A NEW PROVISION AND HE HAD HIS OWN DIFFICULTIES IN COMPLYING WITH T HE PROVISION. THE EXPLANATIONS THAT THE MANAGING PARTNER WAS AWAY , ETC. ARE EXPLANATIONS FOR THE SAKE OF EXPLANATION, WHICH OF COURSE, THE ASSESSEE MAY TAKE FOR ITS OWN DEFENCE. BUT, SUCH C OMMONPLACE EXPLANATIONS DO NOT CARRY ANY MORE CONVICTION. 9. IT IS TRUE THAT IN A MAJORITY OF CASES DIFFEREN T BENCHES OF THE TRIBUNAL HAVE TAKEN A LENIENT VIEW I N THE MATTER OF PENALTY LEVIED UNDER SECTION 271B ESPECIALLY WHE N THE REPORT AND THE ENCLOSURES WERE AVAILABLE BEFORE THE ASSESS ING OFFICER - - ITA 1739 OF 2011 7 EVEN BEFORE COMPLETING THE ASSESSMENT. BUT SUCH A LENIENCY SHOULD NOT BE OVER-EXPLOITED TO THE EXTENT THAT EVE N SECTION 271B ITSELF MIGHT BECOME OTIOSE. IN MANY CASES WE FIND THAT ASSESSEES CAUSED DELAY IN FILING AUDIT REPORTS AND OTHER ENCLOSURES AND THE ASSESSING AUTHORITY IMPOSED PENA LTIES AND FINALLY THE ASSESSEES COME BEFORE THE TRIBUNAL AND THE PENALTIES GOT DELETED. IF THIS BENEVOLENCY IS GOING TO BE DE LIVERED FOR ALL THE TIME TO COME, WHAT IS THE SANCTITY OF SECTION 2 71B REMAINING IN THE STATUTE BOOK? THE LAW ENACTED BY THE PARLIA MENT MUST BE RESPECTED AND MUST BE FOLLOWED. IF THE ACT SAYS TH AT PENALTY IS LEVIABLE IN CERTAIN CIRCUMSTANCES, PENALTY MUST BE LEVIED UNLESS THE VICTIM SHOWS THAT SUFFICIENT REASONS WERE PREVA LENT TO JUSTIFY THE OMISSION CAUSED. EVEN THOUGH EVIDENCES CANNOT BE PRODUCED IN ALL CASES, THE EXPLANATIONS OFFERED BY AN ASSESSEE MUST BE PLAUSIBLE AND CONVINCING AND ANSWERABLE TO THE REASONING OF A MAN OF ORDINARY PRUDENCE. WE ARE NO T EXPECTING SCIENTIFIC REASONS WITH MATHEMATICAL PRECISIONS. W E ARE EXPECTING WORLDLY BUT CONVINCING REASONS. 10. IN THE PRESENT CASE, WE DO NOT FIND THE REASON S AND CIRCUMSTANCES EXPLAINED BY THE ASSESSEE AS CONVINCI NG OR - - ITA 1739 OF 2011 8 PLAUSIBLE. WE FIND THAT THIS IS A FIT CASE TO LEVY PENALTY UNDER SECTION 271B. ACCORDINGLY, WE UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. 11. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY, THE 19 TH JANUARY, 2012 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 19 TH JANUARY, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.