Krishi Utpanna Bazar Samittee, V. ITO wd- 2[2], Jalgaon

ITA 1798/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72245 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRASHANTH GODKAR
• Keywords: Reasonable cause; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1798 AND 1799/PN/2012 (ASSESSMENT YEARS 2004-05 & 2005-06) KRISHI UTPANNA BAZAR SAMITTEE, AGRICULTURAL PRODUCE MARKET COMMITTEE, BHADGAON ROAD, PACHORA 424201 PA N NO. AAAAK4068R .. APPELLANT VS. ITO, WARD-2(2), JALGAON .. RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI PRASHANTH GODKAR DATE OF HEARING : 10-10-2013 DATE OF PRONOUNCEMENT : 22-10-2013 ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE SEPARATE ORDERS DATED 17-07-2012 OF THE CIT(A)-II, NASHIK RELATING TO ASSESSMENT YEARS 1004-05 AND 2005-06 RESPECTIVELY. 2. LEVY OF PENALTY OF RS.63,106/- FOR A.Y. 2004-05 AND RS.56,028/- FOR A.Y. 2005-06 U/S.271B OF THE I.T. ACT BY THE ASSESS ING OFFICER AND UPHELD BY THE CIT(A) IS THE ONLY ISSUE IN THE GROUNDS OF A PPEAL BY THE ASSESSEE FOR BOTH THE YEARS. 3. FIRST WE TAKE UP THE APPEAL FOR A.Y. 2004-05. F ACTS IN BRIEF ARE THAT NOTICE U/S.148 WAS ISSUED TO THE ASSESSEE ON 26-03- 2010 SINCE NO RETURN OF INCOME WAS FURNISHED EITHER U/S.139(1) OR 139(4) OF THE I.T. ACT. IN RESPONSE TO THE SAME, THE ASSESSEE FILED RETURN OF INCOME ON 03-12-2010 2 DECLARING TOTAL LOSS AT RS.2,10,317/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAS FAILED TO AUDIT ITS BOOKS OF ACCOUNT AS REQUIRED U/S.44AB OF THE I. T. ACT AND FURNISH SUCH AUDIT REPORT ON OR BEFORE THE DUE DATE. HE, THEREF ORE, INITIATED PENALTY PROCEEDINGS U/S.271B R.W.S. 274 OF THE I.T. ACT AND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY U/S.271B SHOULD NOT BE LE VIED. IN RESPONSE TO THE SAME, IT WAS SUBMITTED THAT THE ASSESSEE APMC IS A STATUTORY BODY INCORPORATED UNDER MAHARASTRA AGRICULTURAL PRODUCE MARKETING (REGULATION), ACT, 1961 AND THUS IS A LOCAL AUTHORI TY. THE MAIN OBJECTS OF THE COMMITTEE IS TO PROVIDE THE SERVICE TO THE FARM ERS AND THERE IS NO PROFIT MOTIVE EVEN IF PROFIT IS EARNED INCIDENTALLY. THE ASSESSEE IS NEITHER ENGAGED IN BUSINESS ACTIVITIES NOR IN ANY PROFESSIONAL ACTI VITIES AND AS SUCH IT IS OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 44AB. IT WAS SUBMITTED THAT THE ASSESSEE MAINTAINS PROPER BOOKS OF ACCOUNTS ON THE BASIS OF HARVESTING YEAR ENDING 30 TH SEPTEMBER EVERY YEAR AND THE BOOKS OF ACCOUNTS ARE DULY AUDITED BY THE CO-OPERATIVE AUDITOR. SINCE THE INC OME OF THE ASSESSEE WAS EXEMPT UNDER THE PROVISIONS OF SECTION 10(20) OF TH E I.T. ACT IT WAS NOT REQUIRED/UNDER OBLIGATION TO FILE THE RETURN OF INC OME. 3.1 IT WAS SUBMITTED THAT THE DEFINITION OF LOCAL A UTHORITY WAS RESTRICTED BY THE FINANCE ACT, 2002 W.E.F. 01-04-2003 AND APMC WAS EXCLUDED FROM THE LOCAL AUTHORITY. SINCE THE ASSESSEE WAS IGNORA NT ABOUT THE AMENDMENT IN THE PROVISIONS OF SECTION 10(20) WITHDRAWING THE EXEMPTION AND SINCE NO TAX CONSULTANT WAS APPOINTED BY THE ASSESSEE LOCAL AUTHORITY, THEREFORE, IT WAS NOT AWARE OF THE PROVISIONS OF SECTION 44AB. O NLY AFTER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF AGRICULTUR AL PRODUCE MARKET COMMITTEE, NARELA VS. CIT AND ANOTHER REPORTED IN 3 05 ITR 1 ORDER DATED 3 21-08-2008 THAT IT BECAME CLEAR THAT THE APMC NO MO RE REMAINS A LOCAL AUTHORITY AND HENCE NOT ENTITLED TO EXEMPTION U/S. 10(20). THE CIRCULAR ISSUED BY CBDT VIDE CIRCULAR NO.387 DATED 06-07-198 6 CLARIFYING THE COMPULSORY AUDIT OF ACCOUNTS OF CERTAIN PERSONS WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER. IT WAS SUBMITTED THAT TH ERE IS NO TOTAL FAILURE ON THE PART OF THE ASSESSEE SINCE THE BOOKS OF ACCOUNT S WERE MAINTAINED AND DULY AUDITED BY THE COOPERATIVE DEPARTMENT AUDITORS . ONLY DUE TO IGNORANCE OF THE SAID PROVISIONS AND AMENDMENT THAT THE ASSESSEE WAS PREVENTED BY REASONABLE AND SUFFICIENT CAUSE FOR NO T OBTAINING AND FURNISHING THE AUDIT REPORT IN FORM NO.3CA AND 3CD. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT THE PENALTY PROCEED INGS INITIATED U/S.271B R.W.S.274 SHOULD BE DROPPED. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT S INCE THE PROVISIONS OF SECTION 10(20) WERE AMENDED FROM A.Y. 2003-04 THE A SSESSEE CANNOT CLAIM THAT HE WAS TOTALLY IGNORANT ABOUT THE AMENDMENT IN THE PROVISIONS OF SECTION 10(20). REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS AT DEFA ULT U/S.271B BY NOT GETTING ITS ACCOUNTS AUDITED AND OBTAIN SUCH AUDIT REPORT U /S.44AB OF THE I.T. ACT BEFORE THE DUE DATE WITHOUT ANY REASONABLE CAUSE AN D HENCE IT IS LIABLE FOR PENALTY U/S.271B. HE ACCORDINGLY LEVIED PENALTY OF RS.63,105/- U/S.271B. 5. IN APPEAL THE LD.CIT(A) UPHELD THE PENALTY LEVIE D BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : 8. I HAVE CAREFULLY GONE THROUGH THE SUBMISSION OF THE APPELLANT, PENALTY ORDER AND THE MATERIAL AVAILABLE ON RECORD. PRIOR TO 01/04/2003, INCOME OF ALL THE LOCAL AUTHORITIES WAS EXEMPT U/S 10(20) OF THE ACT. AGRICULTURAL PRODUCE MARKET COMMITTEE W AS ALSO ONE OF 4 THE LOCAL AUTHORITIES TILL 31/03/2003. HOWEVER, BY FINANCE ACT 2002, W.E.F. 01/04/2003, THE APMC CEASES TO BE A LOCAL AU THORITY. HON'BLE SC IN THE CASE OF APMC, NARELA, DELHI VS. CIT HAS H ELD THAT APMCS' ARE NOT LOCAL AUTHORITIES FOR TAX EXEMPTION AND ARE LIABLE TO PAY TAX. AS PER THE AMENDED SEC. 10(20) OF THE IT ACT 1961 A PPLICABLE W.E.F. A.Y. 2003-04, THE APPELLANT WAS NOT EXEMPTED FROM I NCOME TAX AND HENCE WAS LIABLE TO FILE RETURN. THE INCOME OF THE APPELLANT INTERALIA INCLUDES RENTAL INCOME, FEE/COMMISSION ON SALE OF A GRICULTURAL PRODUCE AND PAYMENTS RECEIVED FOR PROVIDING VARIOUS OTHER SERVICES RELATED TO STORAGE AND MARKETING OF THE AGRICULTURA L PRODUCE. IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 44AB OF THE IT ACT AND DID NO T FILE THE AUDIT REPORT BEFORE THE A.O, FOR ASSESSMENT YEAR 2004-05. AS PER THE AMENDED SEC.10(20) OF THE IT ACT 1961 APPLICABLE W. E.F. A.Y. 2003- 04, THE APPELLANT WAS NOT EXEMPTED FROM INCOME TAX AND HENCE WAS LIABLE TO FILE RETURN. SINCE THE RECEIPTS ARE HIGHER THAN THE MONETARY LIMIT PRESCRIBED IN SEC.44AB, THE APPELLAN T WAS REQUIRED AS PER IT ACT TO GET THE ACCOUNTS AUDITED BY A SPEC IFIED DATE WHICH IT FAILED TO UNDERTAKE. IGNORANCE OF THE I T PROVIS IONS ESPECIALLY FOR A STATUTORY BODY LIKE APMC IS NOT ACCEPTABLE. IGNOR ANCE OF LAW IS NOT A VALID EXCUS (IGNORANTIA JURIS NOT EXCUST) APP ELLANT CANNOT ESCAPE LIABILITY UNDER THE IT ACT MERELY BECAUSE IT WAS UNAWARE OF ITS PROVISIONS. IN VIEW OF THE ABOVE, I AM IN AGREE MENT WITH THE AO THAT THERE WERE NO SUFFICIENT REASONS FOR NOT FILIN G THE AUDIT REPORT IN THE PRESCRIBED FORM AS REQUIRED U/S. 44AB OF THE IT ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE DEFAULT AS CONTEMPLATED IN PROVISION OF SEC. 44AB IS CLEARLY ESTABLISHED FOR T HE A.Y. UNDER REFERENCE. I, THEREFORE, CONFIRM THE PENALTY LEVIED BY AO U/S. 271B FOR A.YS. 2004-05. 5.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSE SSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE APMC WAS A LOCAL AUTH ORITY TILL A.Y. 2002-03 AND ITS INCOME WAS EXEMPT U/S.10(20) OF THE I.T. AC T. IT MAY BE NOTED THAT PRIOR TO FINANCE ACT, 2002, THE INCOME TAX ACT, 196 1 DID NOT CONTAIN THE DEFINITION OF THE WORD LOCAL AUTHORITY. THAT WOR D CAME TO BE DEFINED FOR 5 THE FIRST TIME BY THE FINANCE ACT, 2002 W.E.F. 01-0 4-2003 VIDE THE EXPLANATION TO SECTION 10(20)/DEFINITION CLAUSE. S O, AFTER INSERTION OF EXPLANATION TO SECTION 10(20), APMC NO MORE REMAINS A LOCAL AUTHORITY, HENCE NOT ENTITLED TO EXEMPTION U/S.10(20). THIS W AS CLARIFIED BY THE HONBLE SUPREME COURT IN THE CASE OF AGRICULTURAL P RODUCE MARKET COMMITTEE, NARELA VS. CIT AND ANOTHER (SUPRA). UND ER THESE CIRCUMSTANCES, WE FIND MERIT IN THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT ALTHOUGH THE ACCOUNTS OF THE ASSESSEE ARE MAINTAINED AND AUDITED BY THE AUDITORS APPOINTED BY THE COOPERATIV E DEPARTMENT, HOWEVER, DUE TO CONFUSION AND BONA FIDE BELIEF THE ASSESSEE DID NOT GET ITS ACCOUNTS AUDITED U/S.44AB AND OBTAIN SUCH AUDIT REPORT BEFOR E THE DUE DATE. 6.1 WE FIND THE LD.CIT(A) UPHELD THE PENALTY LEVIED U/S.271B BY THE ASSESSING OFFICER ON THE GROUND THAT IGNORANCE OF L AW IS NOT A VALID EXCUSE AND THE ASSESSEE CANNOT ESCAPE LIABILITY UNDER THE INCOME TAX ACT MERELY BECAUSE IT WAS UNAWARE OF ITS PROVISIONS. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SCHELL INTERNATIO NAL REPORTED IN 288 ITR 630 HAS HELD THAT IN VIEW OF THE LAW LAID DOWN BY T HE HONBLE SUPREME COURT IT IS CLEAR THAT THERE IS A RULE THAT IGNORAN CE OF LAW IS NO EXCUSE BUT THERE IS NO PRESUMPTION THAT EVERY ONE KNOWS THE LA W. ACCORDINGLY, THE HONBLE HIGH COURT FOLLOWING THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISS A REPORTED IN 83 ITR 26 HAD DELETED THE PENALTY U/S.272A(2)(C). THE RELEVA NT OBSERVATION OF THE HONBLE HIGH COURT READ AS UNDER : 5. IN VIEW OF THE LAW LAID DOWN BY THE SUPREME COU RT, IT IS CLEAR THAT THERE IS A RULE THAT IGNORANCE OF LAW IS NO EX CUSE BUT THERE IS NO PRESUMPTION THAT EVERYONE KNOWS THE LAW. 6 6. IN THE HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26) WHICH WAS A MATTER UNDER ORISSA SALES-TAX ACT, THEIR LORDSHIPS OF THE SUPREME COURT OBSERVED AS FOLLOWS : UNDER THE ACT PENALTY MAY BE IMPOSED FOR FAILURE T O REGISTER AS A DEALER : S. 9(1) R/W. S. 25(1)(A) OF THE ACT . BUT THE LIABILITY TO PAY PENALTY DOES NOT ARISE MERELY UPON PROOF OF DEFAULT IN REGISTERING AS A DEALER. AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMI NAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS T HE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCR ETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY I S PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNIC AL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BR EACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE....' 7. IN VIEW OF THE ABOVEQUOTED AUTHORITIES FROM THE SUPREME COURT AND THE EXPLANATION GIVEN BY THE RESPONDENT, WE ARE SATISFIED THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES, THE TRIBUNAL W AS JUSTIFIED IN QUASHING THE ORDER OF PENALTY PASSED BY THE AO. 6.2 SINCE IN THE INSTANT CASE THE ASSESSEE APMC WAS EXEMPT FROM TAX UPTO A.Y. 2002-03 AND THE LAW WAS AMENDED W.E.F. 01 -04-2003, THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS BONA FIDE BELIEF ON THE PART OF ASSESSEE FOR NOT GETTING ITS ACCOUNTS AUDITED U/S.44AB AND OBTAIN SUCH AUDIT REPORT BEFOR E THE SPECIFIED DATE ALTHOUGH THE ASSESSEE MAINTAINS BOOKS OF ACCOUNTS A ND SUCH BOOKS OF ACCOUNTS ARE DULY AUDITED BY THE AUDITORS APPOINTED BY THE COOPERATIVE DEPARTMENT. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY LEVIED U/S.271B OF THE I.T. ACT, 1961. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCOR DINGLY ALLOWED. 7 ITA NO.1799/PN/2012 (A.Y. 2005-06): 7. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUND S RAISED BY THE ASSESSEE ARE IDENTICAL TO THE GROUNDS OF APPEAL IN ITA NO.1798/PN/2012 FOR A.Y. 2004-05. WE HAVE ALREADY DECIDED THE ISSUE AN D THE PENALTY LEVIED BY THE AO AND UPHELD BY THE CIT(A) HAS BEEN CANCELLED. FOLLOWING THE SAME RATIO, THE PENALTY LEVIED U/S.271B IS CANCELLED. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF OCTOBER, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R. K. PANDA) JUDICIAL MEMBER ACCO UNTANT MEMBER PUNE DATED: 22 ND OCTOBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, NASHIK 4. CIT-II, NASHIK 5 THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE