Appeal Details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 7744 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-02-2017
Appeal Filed By
Assessee
Bench Allotted
C
Next Hearing Date
14-02-2017
Assessment Year
2010-2011
Appeal Filed On
15-06-2016
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ' # . $ & ' BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NO. 1799/MDS/2016 / ASSESSMENT YEAR : 2010-11 M/S. MAGICK WOODS EXPORTS P LTD., NO. A-8, INDUSTRIAL COMPLEX, MARAIMALAI NAGAR, CHENGALPET, CHENNAI - 603 209. [PAN: AADCM 6228N] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE - IV(1), CHENNAI. ( / APPELLANT) ( / RESPONDENT) ) * / APPELLANT BY : SHRI S. S RIDHAR, ADVOCATE -.) * / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT * /DATE OF HEARING : 14.02.2017 * /DATE OF PRONOUNCEMENT : 16.02.2017 /O R D E R PER M. BALAGANESH, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE ARISE OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 8, CHENNAI VI DE PROCEEDINGS IN ITA NO. 03/2012-13 DATED 31.03.2016, PASSED AGAINST THE ORDER OF THE LD. AO :-2-: I.T.A. NO. 1799/MDS/2016 U/S. 271BA OF THE INCOME TAX ACT DATED 24.02.2012 L EVYING PENALTY FOR THE SUM OF RS. 1 LAKH. 2. THE ONLY ISSUE TO BE DECIDED IN THE APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE LEVY OF PENAL TY U/S. 271BA OF THE ACT IN THE FACTS AND CIRCUMSTANCES IF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE FILED THE RETURN OF INCOME ELECTRONICALLY ON 14.10.2010 FOR THE ASSESSM ENT YEAR 2010-11 AND REPORT IN FORM 3CEB WAS NOT FILED BY THE ASSESSEE A LONG WITH THE RETURN OF INCOME AND THE SAME WAS NOT FILED BEFORE THE DUE DA TE ON FILING THE RETURN OF INCOME U/S. 139(1) OF THE ACT. THE CASE WAS SELECTE D FOR SCRUTINY AND IN VIEW OF THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY TH E ASSESSEE, THE CASE WAS REFERRED TO LD. TRANSFER PRICING OFFICER (TPO) AND THE LD. TPO PASSED AN ORDER U/S. 92CA(3) ON 22.01.2014 WITHOUT SUGGESTING ANY A DJUSTMENTS TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS CARR IED OUT BY THE ASSESSEE. THE ASSESSMENT WAS COMPLETED BY THE LD. AO U/S. 143 (3) OF THE ACT ON 18.03.2014, AFTER MAKING CERTAIN ADDITIONS ONLY ON CORPORATE ISSUES AND NO ADDITION WAS MADE BY THE ADJUSTMENT TO ARM LENGTH P RICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. LATER, THE LD. AO LEVIED PENALTY U/S. 271BA OF THE ACT VIDE ORDER DATED 24.04.2012 F OR NON-FILING OF AUDIT REPORT IN FORM 3CEB IN RESPECT OF THE INTERNATIONAL TRANSACTIONS ON OR BEFORE :-3-: I.T.A. NO. 1799/MDS/2016 THE DUE DATE OF FILING THE RETURN U/S. 139(1) OF TH E ACT AND LEVIED PENALTY FOR THE SUM OF RS. 1 LAKH THEREON. THE ASSESSEE CONTES TED THE LEVY OF PENALTY BEFORE THE LD. CIT(A) AND STATED THAT THE ASSESSEE WAS IN A BONAFIDE BELIEF THAT NO DOCUMENTS NEED TO BE FILED ALONG WITH THE R ETURN OF INCOME IN TERMS OF EXPLICIT PROVISIONS CONTAINED SECTION 139D(C) OF THE ACT. THE ASSESSEE PLEADED THAT IT WAS ACCORDINGLY ADVISED NOT TO FILE THE AUDIT REPORT OR ANY OTHER DOCUMENTS ALONG WITH THE RETURN OF INCOME. H ENCE, THE ASSESSEE HAD ADDUCED REASONABLE CAUSE IN TERMS OF SECTION 273B O F THE ACT AND IT WAS PLEADED THAT PROBABLY ONLY DUE TO MISTAKEN UNDERSTA NDING OF THE PROVISIONS OF LAW I.E., SECTION 139D(C) OF THE ACT, THE ASSESSEE HAD NOT FILED THE AUDIT REPORT IN FORM 3CEB, THOUGH THE SAME HAD BEEN DULY OBTAINE D FROM THE CHARTERED ACCOUNTANT ON 02.09.2010 ITSELF WHICH WAS MUCH BEFO RE THE DATE OF FILING THE RETURN OF INCOME. THESE ARGUMENTS WERE NOT APPRECI ATED BY THE LD. CIT(A) AND THE PENALTY LEVIED FOR THE SUM OF RS. 1 LAKH U/ S. 271BA OF THE ACT WAS UPHELD BY THE LD. CIT(A). AGGRIEVED, THE ASSESSSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) 8, CHENNAI DATED 31.03.2016 IN I.T.A.NO.03/2012-13 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS , AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271BA OF THE ACT FOR THE BELATED FILING OF FORM NO. 3CEB WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. :-4-: I.T.A. NO. 1799/MDS/2016 3. THE CIT (APPEALS} FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 271BA OF THE ACT HAD NO APPLICATION TO THE FACTS OF THE CASE AND OUGHT TO HAVE APPRECIATED THAT THE BELATED FURNISHI NG OF THE AUDIT REPORT WAS CONSEQUENT TO THE REASONS WHICH COULD BE CONSIDERED AS REASONABLE CAUSE WITHIN THE SCOPE OF SECTION 273B O F THE ACT THEREBY VITIATING THE ACTION TO SUSTAIN THE LEVY OF PENALTY . 4. THE CIT (APPEALS) FAILED TO' APPRECIATE THAT TH E FURNISHING OF AUDIT REPORT ALONG WITH THE RETURN OF INCOME SHOULD NOT BE CONSTRUED AS MANDATORY AND OUGHT TO HAVE APPRECIATED THAT THE AU DIT REPORT WAS AVAILABLE AT THE TIME OF FRAMING OF THE ASSESSMENT THEREBY VITIATING THE LEVY OF PENALTY FOR TECHNICAL REASONS OVERLOOKING T HE REASONABLE CAUSE SHOWN BY THE APPELLANT FOR BELATED FILING. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE SUSTENANCE OF THE LEVY OF PENALTY ON THE FADS OF THEE CASE WAS WR ONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ORDER IMPOSING PENALTY UNDER CONSIDERATION WAS PASSED OUT OF TIRNE , INVALID, PASSED WITHOUT JURISDICTION AND NOT SUSTAINABLE BOTH ON FA CTS AND IN LAW. 7. THE CIT (APPEALS) WENT WRONG IN RECORDING THE F INDINGS IN THIS REGARD IN PARA 4.1 OF THE IMPUGNED ORDER WITHOUT AS SIGNING PROPER REASONS AND JUSTIFICATION. 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE RE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPU GNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW.' :-5-: I.T.A. NO. 1799/MDS/2016 4. THE LD. AR ARGUED THE APPEAL ON PRESENTING THE B ASIC FACTS OF THE CASE IN TERMS OF SEQUENCE OF EVENTS WHICH ARE AS BELOW: 02.09.2010 DATE OF OBTAINING THE AUDIT REPORT IN F ORM 3CEB FROM THE CHARTERED ACCOUNTANT 30.11.2010 DUE DATE OF FILING THE RETURN OF INCOME 14.10.2010 DATE OF FILING THE RETURN OF INCOME 20.01.2012 DATE OF FILING FORM 3CEB BEFORE THE LD. TPO 22.01.2014 DATE OF ORDER U/S. 92CA(3) BY LD. TPO 18.03.2014 DATE OF ORDER BY THE LD. AO U/S. 143(3) OF THE ACT THE LD. AR ARGUED THAT THE AUDIT REPORT IN FORM 3CE B WAS OBTAINED FROM THE CHARTERED ACCOUNTANT WAY BACK ON 02.09.2010 WHICH W AS MUCH BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR THE ASS ESSMENT YEAR 2010-11. HE ARGUED THAT AS PER THE PROVISIONS OF 271BA OF THE A CT ON A PLAIN READING OF THE SAME STIPULATED THE LEVY OF PENALTY IF THE AUDI T REPORT IS NOT FILED WITHIN THE STIPULATED TIME. BUT IT CANNOT BE IGNORED THAT THE SAID SECTION USES THE WORD MAY WHEN IT COMES TO LEVY OF PENALTY. THIS EXPRESSION MAY IS GIVEN IN ORDER TO ENABLE THE ASSEESSEE TO ESCAPE FROM PEN ALTY IF HE IS ABLE TO ADDUCE REASONABLE CAUSE IN TERMS OF SECTION 273B OF THE ACT AND SAID EXPRESSION MAY SHOULD HAVE TO BE CONSTRUED ONLY A S DIRECTORY IN NATURE AND NOT MANDATORY IN NATURE. HE FURTHER ARGUED THAT TH E VERY PURPOSE OF THE ASSESSEE BEING DIRECTED TO FURNISH THE SAID AUDIT R EPORT IN FORM 3CEB IS TO :-6-: I.T.A. NO. 1799/MDS/2016 ENABLE THE LD. TPO TO HAVE NECESSARY ASSISTANCE WIT H REGARD TO THE VARIOUS INTERNATIONAL TRANSACTIONS ENTERED INTO BY ASSESSEE . IN THE INSTANT CASE, THE LD. TPO WAS MADE AVAILABLE OF THE SAID AUDIT REPORT ON 20.01.2012 AND HAD NOT SUGGESTED ANY ADJUSTMENT TO THE ARMS LENGTH PRI CE (ALP) OF THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSES SEE. ADMITTEDLY, THE SAID AUDIT REPORT WAS MADE AVAILABLE BEFORE THE LD. TPO BEFORE THE DATE OF COMPLETION OF HIS PROCEEDINGS ON 22.01.2014. IN TH ESE FACTS AND CIRCUMSTANCES, THE ASSESSEE SHOULD NOT BE INVITED W ITH THE BURDEN OF LEVY OF PENALTY. IN SUPPORT OF THIS ARGUMENTS HE PLACED RE LIANCE ON THE DECISIONS OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. A. N. ARUNACHALAM REPORTED IN 208 ITR 481 (1994). IN RESPONSE TO THIS, THE LD . DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND STATED THAT THE ASSESSEE DID NOT FILE THE AUDIT REPORT IN FORM 3CEB EVEN WHEN IT WAS DEMA NDED BY THE LD. AO IN THE SCRUTINY PROCEEDINGS. THE SAME WAS FILED BEFOR E THE LD. TPO ONLY ON A LATER DATE. MOREOVER, THE PROVISIONS OF SECTION 27 1BA OF THE ACT IN ITS UNAMBIGUOUS LANGUAGE WARRANTS LEVY OF PENALTY AS TH E AUTOMATIC MEASURE IF THE AUDIT REPORT IS NOT FILED WITHIN THE STIPULATED TIME 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE VARIOUS SEQUENCES OF EVENTS TOGETHE R WITH ITS RESPECTIVE DATES AS STATED HEREIN ABOVE ARE NOT IN DISPUTE. WE FIND THAT IN THE INSTANT CASE THAT THE ASSESSEE HAD MADE AVAILABLE THE AUDIT REPO RT IN FORM 3CEB ON :-7-: I.T.A. NO. 1799/MDS/2016 20.01.2012 WHICH WAS MUCH BEFORE THE COMPLETION OF PROCEEDINGS BY THE LD. TPO ON 22.01.2014. FOR THE SAKE OF CONVENIENCE THE PROVISIONS OF SECTION 271BA ARE REPRODUCED HERE UNDER:- ' IF ANY PERSON FAILS TO FURNISH A REPORT FROM AN ACCOUNTANT AS REQUIRED BY SECTION 92E, THE ASSESSING OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM OF ONE H UNDRED THOUSAND RUPEES.' IN THIS REGARD, THE EXPRESSION 'MAY' USED IN SECTIO N 271BA OF THE ACT, IN OUR CONSIDERED OPINION, NEEDS TO BE VIEWED LIBERALLY, I N VIEW OF THE REASONING GIVEN BY THE ASSESSEE DUE TO BONAFIDE MISTAKEN UNDE RSTANDING OF PROVISIONS CONTAINED IN SECTION 139D(C) OF THE ACT WHICH ITSEL F WOULD DETERMINE REASONABLE CAUSE IN TERMS OF SECTION 273B OF THE AC T. WE ALSO FIND THAT THE CASE LAW RELIED UPON BY THE LD. AR ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. A.N. ARUNACHALAM REPOR TED IN 208 ITR 481 WOULD CLEARLY SUPPORT THE FACTS OF THE CASE OF THE ASSESS EE, WHEREIN IT WAS HELD : ' 5. ON A CONSIDERATION OF THE SUBMISSIONS OF BOTH SIDES, WE ARE INCLINED TO TAKE THE SAME VIEW AS THE GUJARAT HIGH COURT, WHICH HAS DIFFERED FROM THE PUNJAB AND HARYANA HIGH COURT. TH E OPENING WORDS OF SUB-SO (6A) THEMSELVES INDICATE THE NECESSITY FO R SUBMITTING AN AUDIT REPORT INASMUCH AS THE ACCOUNTS OF COMPANIES ARE AU DITED AND ASSESSEES OTHER THAN COMPANIES WERE REQUIRED TO GET THE ACCOUNTS AUDITED FOR THE PURPOSE OF S. 80J. ADMITTEDLY, IN T HE CASE OF COMPANIES, THERE IS NO INSISTENCE ON THE AUDIT REPORT ACCOMPAN YING THE RETURN FOR THE PURPOSE OF OBTAINING THE RELIEF UNDER S. 8OJ. T HEREFORE, IF THE :-8-: I.T.A. NO. 1799/MDS/2016 PRESENT SECTION IS SO CONSTRUED AS TO MAKE THE FILI NG OF THE AUDIT REPORT ALONG WITH THE RETURN MANDATORY IT WOULD DISCRIMINA TE BETWEEN COMPANIES ON THE ONE HAND AND OTHER ASSESSEES ON TH E OTHER. IT HAS BEEN HELD BY THE SUPREME COURT IN K.P. VARGHESE VS. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) THAT A SECTI ON OF THE ACT SHOULD NOT BE SO CONSTRUED AS TO MAKE IT UNCONSTITU TIONAL. SECONDLY, THERE IS NO STIPULATION AS TO THE TIME WHEN THE AUD IT REPORT SHOULD BE FILED, EXCEPT THAT IT SHOULD BE FILED ALONG WITH TH E RETURN. SINCE THERE IS A PROVISION FOR EXTENDING THE TIME FOR FILING THE R ETURN, ALL THAT THE ASSESSEE WAS REQUIRED TO DO WAS TO DELAY THE FILING OF THE RETURN UNTIL THE AUDIT REPORT WAS MADE AVAILABLE. AS THE TRIBUNA L HAS OBSERVED, THE PREPARATION OF THE AUDIT REPORT WAS BEYOND THE CONT ROL OF THE ASSESSEE AND HENCE THE ASSESSEE COULD JUSTIFIABLY DELAY THE FILING OF THE RETURN ITSELF SO THAT IT IS ACCOMPANIED BY THE AUDIT REPOR T. IN SUCH AN EVENT, THE ITO COULD NOT DENY THE DEDUCTION SINCE THE PURP OSE OF THE SECTION WOULD HAVE BEEN FULFILLED EVEN THOUGH THE RETURN IT SELF WAS FILED BEYOND THE PRESCRIBED TIME. FOR INSTANCE, IN THE PRESENT C ASE, IF THE ASSESSEE HAD FILED THE RETURN WITH THE AUDIT REPORT ON 21ST OCT., 1977, THE RELIEF COULD NOT HAVE BEEN DENIED WHEREAS IT IS SOUGHT TO BE DENIED ONLY BECAUSE HE FILED THE RETURN ON 29TH JUNE, 1977, AND FILED THE AUDIT REPORT LATER ON 21ST OCT., 1977, WHEN IT WAS MADE A VAILABLE. THE SECTION CANNOT ALSO BE CONSTRUED TO GIVE SUCH AN IN CONGRUOUS RESULT. AS FAR AS WE CAN SEE, THE STRESS LAID BY THIS PROVISIO N WAS ONLY TO HAVE THE ACCOUNTS AUDITED AND TO MAKE THE AUDIT REPORT AVAIL ABLE FOR THE ITO TO MAKE A PROPER ASSESSMENT. HENCE, THE AUDIT REPORT W AS TO BE AVAILABLE BEFORE THE ASSESSMENT WAS MADE. WE AGREE WITH THE V IEW OF THE GUJARAT HIGH COURT THAT THE OBJECTIVE OF THE SECTIO N SHOULD BE CARRIED OUT BY GRANTING THE RELIEF RATHER THAN PICK OUT A V ENIAL FAULT FOR DENYING THE RELIEF, INTENDED TO BE GIVEN BY THE STATUTE. IN COMING TO THIS :-9-: I.T.A. NO. 1799/MDS/2016 CONCLUSION, WE HAVE IN MIND ALSO THE PRINCIPLES STA TED BY THE SUPREME COURT IN DIRECTOR OF INSPECTION OF INCOME-TAX (INVE STIGATION) VS. POORAN MALL & SONS 1974 CTR (SC) 243 : (1974) 96 ITR 390 ( SC), WHICH ARE AS FOLLOWS: 'IT IS NOT EVERY PROVISION OF A TAXING STATUTE THAT WILL FALL UNDER THE RULE OF STRICT INTERPRETATION. THE QUESTION WHE THER A CERTAIN PROVISION OF LAW IS DIRECTORY DOES NOT FALL TO BE D ECIDED ON DIFFERENT STANDARDS BECAUSE IT IS FOUND IN A TAXING STATUTE. THERE IS NO RULE THAT EVERY PROVISION IN A TAXING STATUTE IS MANDATORY. THE STRICT CONSTRUCTION THAT A CITIZEN DOES NOT BEC OME LIABLE TO TAX UNLESS HE COMES WITHIN THE SPECIFIC WORDS OF A STATUTE IS A DIFFERENT PROPOSITION. THAT A PERSON CANNOT BE TAXE D ON THE PRINCIPLE OF ESTOPPEL DOES NOT ADMIT OF MUCH ARGUME NT.' 6. WE, THEREFORE, AGREE WITH THE VIEW OF THE TRIB UNAL THAT THE PROVISIONS OF S. 80J(6A) OF THE IT ACT WERE NOT MAN DATORY AND WE ANSWER THE QUESTIONS IN THE AFFIRMATIVE AND AGAINST THE REVENUE, WITH COSTS. COUNSEL FEE RS. 500.' WE ALSO FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT AUDIT REPORT IN FORM 3CEB WAS NOT OBTAINED BY THE ASSESSEE ON 02.09.2010 . ACCORDINGLY, WE HOLD THAT THE ASSESSEE HAD SUBSTANTIVELY COMPILED WITH T HE PROVISIONS OF THE ACT BY OBTAINING THE AUDIT REPORT IN TIME, BY FILING THE S AME THOUGH BELATEDLY ON 20.01.2012 BUT BEFORE THE DATE OF COMPLETION OF ASS ESSMENT. 5. IN VIEW OF OUR AFORESAID FINDINGS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE RATIO HOLD DOWN BY THE HON'BLE MADRAS :-10-: I.T.A. NO. 1799/MDS/2016 HIGH COURT (SUPRA), WE HAVE NO HESITATION IN DIRECT ING THE LD. AO TO DELETE THE PENALTY U/S. 271BA OF THE ACT LEVIED IN THE SUM OF RS. 1 LAKH. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THURSDAY, THE 16TH DAY OF FEBRU ARY, 2017 AT CHENNAI. SD/ - ( ' # . $ ) (DUVVURU RL REDDY) /JUDICIAL MEMBER SD/- ( ) (M. BALAGANESH) / ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 16TH FEBRUARY, 2017 JPV * -&45 65 /COPY TO: 1. ) APPELLANT 2. -.) /RESPONDENT 3. 7 ( )/CIT(A) 4. 7 /CIT 5. 5 -&& /DR 6. 9 /GF
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