FOAM TECHNIQUES LTD ( INDIAN BRANCH OFFICE), MUMBAI V. ADDL DIT (*IT) RG -3, MUMBAI

ITA 174/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3734 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: HINAL SEJPAL
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, F, MUMBAI BEFORE SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) FOAM TECHNIQUES LTD (INDIAN BRANCH OFFICE), C/O MS DC SEJPAL AND CO. CHARTERED ACCOUNTANT, BIG THREE BLDG, 2 ND FL, 88-ANANDILAL PODAR MARG, MUMBAI-400703 PAN: AAACF7053K . APPELLANT VS ADDL.DIT (IT) RG-3, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI-400038 ..RESPONDENT APPELLANT BY : MS.HINAL SEJPAL RESPONDENT BY : SHRI SUMEET KUMAR O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24.11.2009 OF THE LEARNED CIT(A)-, ARI SING FROM THE PENALTY ORDER PASSED UNDER SECTION 271B OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2006-07. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE FILED HIS MANUAL RETURN OF INCOME ON 21.11.2006. HOWEVER, NO AUDIT REPORT U/S 44AB W AS FILED ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) 2 ALONG WITH THE RETURN. ACCORDINGLY, THE PENALTY PR OCEEDINGS U/S 271B WERE INITIATED AND THE PENALTY OF RS.1 L AKH WAS LEVIED VIDE ORDER DATED 29.04.2009. 3. ON APPEAL, THE CIT(A) HAS CONFIRMED THE PENALTY LEVIED BY THE AO VIDE IMPUGNED ORDER. 4. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE INITIALLY FILED E RETURN ON 15 .11.2006 AND HE HAS FILED A COPY OF THE ACKNOWLEDGMENT OF THE E RETURN. THE LEARNED AR OF THE ASSESSEE HAS FURTHER CONTENDE D THAT THE ASSESSEE HAS ALSO FILED MANUAL RETURN OF INCOME ON 21.11.2006. SHE HAS FILED A COPY OF THE FORM NO.1 ALONG WITH THE MANUAL RETURN. IT WAS POINTED OUT BY THE LEAR NED AR THAT AS PER THE COLUMN 15 OF THE FORM NO.1, THE ASSES SEE HAS DULY MENTIONED THAT AUDIT REPORT U/S 44AB WAS READ Y ON 10.10.2006 AND THE ASSESSEE HAS ANNEXED AUDIT REPOR T ALONG WITH THE OTHER REPORT INCLUDING FROM NO. 3CA, 3CD AND AUDIT REPORT AS WELL AS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. THE LEARNED AR OF THE ASSESSEE HAS FURTHER CONTENDE D THAT EVEN OTHERWISE WHEN THE ASSESSEE FILED THE E RE TURN, THE AUDIT REPORT WAS NOT REQUIRED TO BE FILED ALONG WIT H THE RETURN AND THE SAME MAY BE FURNISHED IN THE ORIGINAL DURIN G ASSESSMENT PROCEEDINGS. SHE HAS REFERRED THE CIRCU LAR NO.9 OF 2006 DATED 10.10.2006 AND SUBMITTED THAT AS PER THE ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) 3 CLAUSE (1) OF PARAGRAPH 6 OF THE CIRCULAR, THE AUD IT REPORT U/S 44AB IS NOT REQUIRED TO BE ATTACHED WITH THE RETUR N AND NO PENALTY SHALL BE IMPOSED U/S 271B FOR NOT FURNISHIN G THE AUDIT REPORT ON OR BEFORE THE DUE DATE. THE ONLY REQUIR EMENT AS PER THE SAID CIRCULAR IS THAT THE AUDIT REPORT SHOULD HAVE BEEN OBTAINED BEFORE THE DUE DATE FAILING WHICH THE PR OVISIONS OF SECTION 271B SHALL BE ATTRACTED. THUS, THE LEARNE D AR HAS SUBMITTED THAT WHEN NO AUDIT REPORT IS REQUIRED TO BE ATTACHED WITH THE RETURN OF INCOME, THE AO WAS NOT JUSTIFIE D IN LEVY OF THE PENALTY. SHE HAS RELIED UPON THE DECISION OF T HE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF IMRAN-UR-REHM AN KIDWAI RAM V/S CIT REPORTED IN 58 TTJ 537. 5. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEE RIGHT FROM THE ASSESSMENT PROCEEDING S TILL THE APPEAL BEFORE THE CIT(A) THE ASSESSEE HAS TAKEN A P LEA THAT THE ASSESSEE FILED THE AUDIT REPORT U/S 44AB ALONG WITH THE RETURN FILED ON 21.11.2006 AND THE ASSESSEE HAS TAK EN A FRESH PLEA BEFORE THIS TRIBUNAL THAT NO AUDIT REPORT IS REQUIRED TO BE FILED IN VIEW OF THE CIRCULAR NO. 9 OF 2006 DATED 1 0.10.2006. HE HAS POINTED OUT THAT IN THE COLUMN, 2(1) OF T HE RETURN OF INCOME IN FORM NO.1 REQUIRES THE DETAILS OF PROOF OF DOCUMENTS /STATEMENT ATTACHED WITH THE RETURN AND AGAIN THE SUB-COLUMN B MEANT FOR AUDIT REPORT. THE ASSESSEE HAS NOT MARKED THAT ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) 4 THE AUDIT REPORT WAS ATTACHED ALONG WITH THE RETURN . THEREFORE, WHEN THE ASSESSEE HAS NOT FILED ANY AUDI T REPORT ALONG WITH THE RETURN OF INCOME, THE AO IS JUSTIFI ED IN LEVYING THE PENALTY U/S 271B. HE HAS RELIED UPON THE ORDER OF THE CIT(A). 6. IN REBUTTAL, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE AUDITOR HAS FILED AN AFFIDAVIT AND STATED ON OATH THAT THE RETURN OF INCOME FILED ON 21.11.2006 ACCOMPANIED BY PAPER BOOK IN GRAY COVER CONTAINI NG ALL THE DOCUMENTS ALONG WITH THE AUDIT REPORT. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE FI ELD E RETURN ON 15.11.2006. ONCE THE ASSESSEE HAS FILED E R ETURN THEN AS PER THE INSTRUCTION OF CIRCULAR NO.9 OF 2006, DA TED 10.10.2006 THE AUDIT REPOT U/S 44AB IS NOT REQUIRE D TO BE ATTACHED WITH THE RETURN AS PER CLAUSE(1) OF PARAG RAPH 6 OF THE SAID CIRCULAR. THE ASSESSEE WAS REQUIRED TO O BTAIN THE AUDIT REPORT ON OR BEFORE THE DUE DATE. THE AUDIT REPORT MAY BE FURNISHED IN ORIGINAL DURING THE ASSESSMENT PROC EEDING. THE CIRCULAR ALSO PROVIDES IMMUNITY FROM PENALTY U/ S 271B IF THE AUDIT REPORT HAS ALREADY BEEN OBTAINED BEFORE THE DUE DATE OF FILING OF THE RETURN. UNDISPUTEDLY, THE AS SESSEE HAS MENTIONED IN COLUMN NO.15 OF THE FORM NO.1 OF T HE RETURN ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) 5 FILED THAT THE AUDIT REPORT WAS OBTAINED ON 10.10. 2006. THE AO HAS NOT DISPUTED THAT THE AUDIT REPOT U/S 44AB WAS READY BY 10.10.2006. THUS CLAUSE (1) OF THE PARAGRAPH 6 OF THE CIRCULARS READS AS UNDER : NEW RETURN FORM FOR ASSESSMENT YEAR 2006-07-MATTE RS CONNECTED THERETO (I) FORM NO.2F II). 2. 3.. 4.. 5,. 6. . FOLLOWING CLARIFICATIONS ARE HEREBY ISSUED IN RESPECT OF CERTAIN ISSUES ARISING FROM FURNISHING THE RETUR NS IN ABOVE MENTIONED FORMS: (I) THE REPORT OF AUDIT UNDER SECTION 44AB IS NOT T O BE ATTACHED WITH THE RETURN. IT SHOULD NOT BE FURNISHE D SEPARATELY ALSO BEFORE OR AFTER THE DUE DATE. HOWEV ER, AN ASSESSEE SHOULD GET THE REPORT OF AUDIT FROM AN ACC OUNTANT UNDER SAID SECTION BEFORE THE DUE DATE OF THE FURNI SHING OF THE RETURN AND SHOULD FILL OUT THE RELEVANT COLUMNS OF THESE FORMS ON THE BASIS OF SUCH REPORT. THE ASSESSEE SHO ULD RETAIN THE REPORT WITH HIMSELF. IT MAY BE FURNISHED IN ORIGINAL DURING THE ASSESSMENT PROCEEDINGS. NO PENALTY UNDER SECTION 271B SHALL BE INITIATED OR LEVIED FOR NOT FURNISHING THE TAX AUDIT REPORT ON OR BEFORE THE DU E DATE. HOWEVER, IF THE AUDIT REPORT HAS NOT BEEN OBTAINED BEFORE THE DUE DATE, PROVISIONS OF SECTION 271B SHA LL BE ATTRACTED. (II) . ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) 6 8. THUS, THE AUDIT REPORT WAS NOT REQUIRED TO BE AT TACHED WITH THE E RETURN OF INCOME, IN VIEW OF THE CIRC ULAR NO.9/2006. THE AO WHILE PASSING THE ASSESSMENT ORDE R HAS MADE THE OBSERVATIONS IN PARAGRAPH 4 WHICH ARE AS U NDER : 4. THE ASSESSEE FILED HIS MANUAL RETURN OF INCOME ON 21.11.2006. HOWEVER, NO AUDIT REPORT U/S 44AB WAS FILED ALONG WITH THAT RETURN OF INCOME. ACCORDINGLY, PENALTY PROCEEDINGS U/S 271B ARE BEING SEPARATELY INITIATED 9. IN THE PENALTY ORDER ALSO THE AO HAS GIVEN REASONI NG IN PARAGRAPH 4 WHICH READS AS UNDER : 4. THUS, THE PERUSAL OF RECORDS CLEARLY SHOWS THA T THE CONTENTION OF THE ASSESSEE, THAT THE AUDIT REPORTS WERE FILED ALONG WITH RETURN OF INCOME ON 24.11.2005 IS NOT CORRECT AND THE ASSESSEE HAS COMMITTED FAILURE U/S 44AB OF THE IT ACT AND HAS FAILED TO GET HIS ACCOUNT AUDITED WITHIN THE PRESCR IBED TIME AND IS LIABLE FOR PENALTY U/S 271B. SECTION 27 1B STATES AS UNDER : IF ANY PERSON FAILS TO GET HIS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR OR YEARS RELEVANT TO A N ASSESSMENT YEAR OR FURNISH A REPORT OF SUCH AUDIT A S REQUIRED UNDER SECTION 44AB , THE ASSESSING OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM EQUAL TO ONE-HALF PER CENT OF THE TO TAL 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. ONE-HALF PER CENT OF THE TOTAL TURNOVER OF THE ASSE SSEE COMES TO RS.1,62,063. THUS, AS PER SECTION 271B, TH E ASSESSEE IS LIABLE FOR A PENALTY OF RS.1,00,000 ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) 7 10. THUS, FROM THE ABOVE IT IS CLEAR THAT THE AO H AS LEVIED THE PENALTY DUE TO NON-FILING OF THE RETURN ALONG WITH THE AUDIT REPORT U/S 44AB AND NOT BECAUSE OF NON- PRODUCTION OF THE AUDIT REPORT DURING THE ASSESSMENT PROCEEDINGS. WH EN THE AUDIT REPORT WAS NOT REQUIRED TO BE FILED ALONG WIT H THE E RETURN OF INCOME FILED AND IN VIEW OF THE CIRCULA R NO.9/2006 THEN NO PENALTY CAN BE LEVIED U/S 271B ON THE GROU ND OF NON-FILING OF THE AUDIT REPORT. MOREOVER, THE CON DITIONS PRESCRIBED IN THE CIRCULAR ARE ALSO FULFILLED BY TH E ASSESSEE BY OBTAINING THE AUDIT REPORT BEFORE THE DUE DATE. T HEREFORE, IN OUR CONSIDERED OPINION, THE PENALTY IS NOT JUSTIFIE D THE SAME IS DELETED THE APPEAL BY THE ASESEEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.11.2010 SD SD (S V MEHROTRA ) (VIJAY PAL R AO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 10 TH NOV 2010 SRL:81110 ITA NO. 174/MUM/2010 (ASSESSMENT YEAR 2006-07) 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI