Agricultural Produce Market Committee, Jalgaon V. Income-tax Officer,

ITA 2020/PUN/2013

• Counselvise Citation: 202024514 RSA 2013
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: N O N E
• Keywords: Reasonable cause; Difference of opinion; Benefit of exemption; Ignorance of law
• Section: 273B; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS. 2020 & 2024/PN/2013 ASSESSMENT YEAR S : 200 7 - 08 & 2008 - 09 AGRICULTURAL PRODUCE MARKET COMMITTEE, JALGAON ROAD, JAMNER, DISTT.-JALGAON VS. INCOME TAX OFFICER, WARD 2(3), JALGAON (APPELLANT) (RESPONDENT) PAN NO. AAALA0828L APPELLANT BY: N O N E RESPONDENT BY: SHRI B.C. MALAKAR DATE OF HEARING : 14-10-2014 DA TE OF PRONOUNCEMENT : 21-10-2014 ORDER PER R.S. PADVEKAR, JM:- THESE TWO APPEALS ARE FILED BY THE ASSESSEE WHICH IS AGRIC ULTURAL PRODUCE MARKET COMMITTEE (APMC) CHALLENGING THE IMPUGNED O RDERS OF THE LD. CIT(A)-II, NASHIK DATED 10-10-2013 FOR THE A.YS. 2007-08 AND 2008-09 IN WHICH THE CIT(A) HAS CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271B OF THE ACT. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS WHICH ARE COMMON IN BOTH THE APPEALS: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LEARN ED CIT(A) ERRED IN SUSTAINING THE PENALTY LEVIED BY THE AO [ITO WARD 2(3), JALGAON] U/S. 271B FOR DELAY IN TAX AUDIT U/S. 44AB WITHOUT APPRE CIATING THE EXPLANATIONS AND SUBMISSIONS OF THE ASSESSEE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNE D CIT(A) ERRED IN SUSTAINING THE PENALTY LEVIED BY THE AO U/S. 271B WITHOUT APPRECIATING THE REASONABLE CAUSES FOR DELAY IN TAX A UDIT U/S. 44AB WITHIN THE MEANING OF SECTION 273B AS EXPLAINED & SUBSTANTIATED BY THE ASSESSEE. 2 ITA NOS. 2020 & 2024/PN/2013, AGRICULTURAL PRODUCE MARKET COMMITTEE, JALGAON 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDE R. THE ASSESSEE IS AGRICULTURAL PRODUCE MARKET COMMITTEE CONSTIT UTED UNDER THE AGRICULTURAL PRODUCE MARKETING (REGULATION) ACT, 1963 . THE ASSESSEE WAS TREATED AS A LOCAL AUTHORITY TILL THE A.Y. 2002-03 AND WAS ENJOYING THE BENEFIT OF EXEMPTION U/S. 10(20) OF THE INCOME- TAX ACT. THE ASSESSEE DID NOT FILE THE RETURN OF INCOME FOR THE A.Y. 2007 -08 NOR FILE THE TAX AUDIT REPORT AS PER THE TIME PRESCRIBED U/S. 44 AB OF THE INCOME-TAX ACT. THE ASSESSING OFFICER ISSUED THE NOTICES U/S. 148 TO THE ASSESSEE AND THE ASSESSEE FILED THE RETURNS OF INCOME FOR THE A.YS. 2007- 08 AND 2008-09 ON 27-12-2011. THE ASSESSEE FILED THE T AX AUDIT REPORT U/S. 44AB ALONG WITH THE RETURNS OF INCOME IN BOTH THE ASSESSMENT YEARS. THE ASSESSING OFFICER LEVIED THE PENALTY U/S. 271B OF THE ACT OF RS.1,00,000/- FOR EACH ASSESSMENT YEAR. THE ASSESSEE CH ALLENGED THE PENALTY ORDER BEFORE THE CIT(A) AND MADE THE FOLLOWING SUBMISSIONS: 1) FOR A.Y. 2007-08 WE FILED RETURN OF INCOME ALONG WITH TAX AUDIT REPORT, ON 27/12/2011. 2) APMCS' WERE EXEMPT FROM TAX U/S 10 (20) AS A 'LOCA L AUTHORITY' UP TO A.Y. 2002-03. EVEN AFTER AMENDMENT MADE BY FINANCE ACT 2002 IN SECTION 10(20), OUR APEX BODY I.E. KRUSHI PANAN MAHAMANDAL, INFORMED US THAT STILL WE CAN ENJOY THE SAID BEN EFIT. 3) THERE WAS DIFFERENCE OF OPINION AMONGST LEGAL EXP ERTS THAT, WHETHER AFTER INCLUSION OF SAID EXPLANATION, AGRICULT URAL COMMITTEES ARE LOCAL AUTHORITIES OR NOT TO ENJOY BENEFIT OF SECT ION 10(20). OUR LEGAL ADVISORS OPINED THAT EVEN AFTER THE AMENDMENT, A PMCS' ARE STILL LOCAL AUTHORITIES U/S 10(20). THE INTERPRETATION O F S, 10(20) WAS ULTIMATELY DECIDED BY SUPREME COURT IN AUGUST 2008 A GAINST THE APMCS'. [OPINION OF OUR THEN ADVOCATE ON THE ISSUE I S ATTACHED AS EXHIBIT-1] 4) FURTHER, SINCE OURS IS A GOVT. & STATE OWNED NONPR OFIT ORGANIZATION WORKING FOR THE BENEFIT OF MARGINAL FAR MERS, WE WERE UNDER BONA-FIDE BELIEF THAT WE ARE NOT ASSESSABLE TO TAX AND 3 ITA NOS. 2020 & 2024/PN/2013, AGRICULTURAL PRODUCE MARKET COMMITTEE, JALGAON CONSEQUENTLY NOT APPOINTED TAX AUDITOR. THEREFORE THE DEFAULT IS NOT WILLFUL AS SUCH. 5) IT IS PERTINENT TO NOTE HERE THAT, GOVT. AUDIT OF T HE COMMITTEE WAS CONDUCTED FROM TIME TO TIME BY THE DEPUTY REGISTR AR OF CO- OPERATIVE SOCIETIES, WHO NEVER GUIDED US ON THE ISSU E OF TAXABILITY/ TAX AUDIT, WHICH LED US TO BELIEVE THAT PROVISIONS OF TAX AUDIT ARE NOT APPLICABLE TO US. 6) THUS, SINCE THE ISSUE OF TAXABILITY WAS NOT CLEAR/ DISPUTED AND WE WERE UNDER BONA FIDE BELIEF THAT TAX AUDIT I S NOT APPLICABLE TO US, FOR WANT OF PROPER CLARITY IN INTERPRETING THE AMENDED PROVISION OF THE ACT, WE WERE PREVENTED BY REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B TO GET OUR BOOKS AUDITED WITHIN TIME. THUS PENALTY U/S 271B, IF LEVIED WOULD BE UNFAIR. OUR VIEW STANDS FORTIFIED BY THE DECISION OF HON'BLE ITAT IN CASE OF ACIT V. VINMAN FINANCE & LEASING LTD. (2008) (ITA NO. 03/VIZAG/2002) WHEREIN, IT WAS HELD THAT, 'THE PROVISIONS OF THE INCOME-TAX ACT ARE AMENDED S O FREQUENTLY THAT IT IS IMPOSSIBLE NOT ONLY FOR THE TAX PAYER, BUT ALSO TH E TAX EXPERTS TO KNOW ALL THE PROVISIONS OF THE ACT AT ANY GIVEN POIN T OF TIME, HENCE, IGNORANCE OF LAW CAN BE TAKEN AS AN EXCUSE AND PENAL TY SHOULD NOT BE LEVIED MERELY ON THE GROUND THAT THE ASSESSES OUG HT TO HAVE KNOWN THE CORRECT PROVISIONS OF LAW.' FURTHER, SINCE IT WAS CONSISTENT JUDICIAL OPINION THAT, BON A FIDE BELIEF THAT SECTION 44AB WAS NOT APPLICABLE BASED ON LEGAL OP INION CONSTITUTES A REASONABLE CAUSE WITHIN THE MEANING OF S ECTION 273B, PENALTY U/S 271B, IF LEVIED WOULD BE UNFAIR. (BUILDWELL CON STRUCTION CO. VS. ITO (27 BCAJ 231) (BOM). 7) FURTHER, UP TO 30/09/2008 OUR FINANCIAL YEAR WAS F ROM OCTOBER TO SEPTEMBER AS PER RULE OF OUR APEX BODY. IT TOOK TIME TO CAREFULLY CONVERT THE CONSOLIDATED FINANCIAL STATEMENTS OF OUR INSTITUTION WITH ITS BRANCHES IN FORMAT REQUIRED BY SE CTION 44AB OF THE IT. ACT (I.E. APRIL TO MARCH), COMPLETE & CORRECT IN ALL RESPECTS. THIS WAS ALSO ONE OF THE MAJOR FACTORS CONTRIBUTING IN DELAY IN AUDITING BOOKS U/S 44AB OF THE IT. ACT. MOREOVER, GOV T. AUDIT FOR 4 ITA NOS. 2020 & 2024/PN/2013, AGRICULTURAL PRODUCE MARKET COMMITTEE, JALGAON PERIOD ENDING ON 30/09/2007 & SI/OB/ZOOS WAS COMPLET ED ON 14/07/2009, NATURALLY RESULTING IN TO DELAY IN FINALIZ ING TAX AUDIT AFTER DUE DATES, WHICH WAS BEYOND OUR CONTROL THIS AM OUNTS TO REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ATT AS HELD BY- RAJASTHAN CO-OP, DAIRY LTD. V. DCIT [259 ITR 126 (RAJ.)] PENALTY UNDER S. 271BFAILURE TO GET ACCOUNTS AUDITED REASONA BLE CAUSEACCOUNTS OF THE ASSESSEE, A COOPERATIVE SOCIET Y, ARE REQUIRED TO BE AUDITED BY THE AUDITOR APPOINTED BY THE REGISTR AR, COOPERATIVE SOCIETIESREGISTRAR HAD NOT APPOINTED AN AUDITOR TO AUDIT THE ACCOUNTS OF THE ASSESSEE IN SPITE OF REPEATED REQUES TSIN THE ABSENCE OF SUCH APPOINTMENT IT WAS-NOT POSSIBLE FOR TH E ASSESSEE TO GET ITS ACCOUNTS AUDITED BEFORE THE SPECIFIED DATESN O MATERIAL TO SHOW THAT THE DELAY IN AUDITING OF ACCOUNTS TOOK PLA CE BECAUSE OF ANY FAULT OF THE ASSESSEEPENALTY NOT SUSTAINABLE BOMBAY MERCANTILE CO-OP. BANK V. CBDT [332 ITR 87 (BOM. )] (2011) RETURNCONDONATION OF DELAYDELAY IN APPOINTMENT OF AUDITOR BY GOVERNMENTCENTRAL REGISTRAR APPOINTED CHARTERED ACC OUNTANTS AS STATUTORY AUDITORS IN PLACE OF THE DEPARTMENTAL AUDITOR S ON 3RD SEPT., 2001, PURSUANT TO A POLICY DECISIONSAID STATUT ORY AUDITORS WERE ABLE TO COMPLETE THE AUDIT ONLY ON 15TH NOV., 2001 AND THE TAX AUDIT UNDER S. 44AB WAS COMPLETED ON 28TH NOV., 2001 A ND THE RETURN WAS FILED THE VERY NEXT DAY THUS, PETITIONER C ANNOT BE BLAMED FOR THE DELAY IN CONDUCTING ITS AUDIT2001 THER EFORE, SAID REASON FOR THE DELAY DESERVES TO BE ACCEPTED. CIT V. MATHANA CO-OP CREDIT SERVICE SOCIETY [299 ITR 70(P & H)] (2008) PENALTY UNDER S. 271B DELAY IN FILING AUDIT RE PORT- REASONABLE CAUSEASSESSEE, CO-OPERATIVE SOCIETY BEING B OUND BY LAW TO GET ITS ACCOUNTS AUDITED BY AUDITOR APPOINTED B Y REGISTRAR OF CO-OPERATIVE SOCIETIES, FAILURE BY REGISTRAR TO APPOIN T AUDITOR IN TIME CONSTITUTED REASONABLE CAUSE FOR FAILURE TO GET ACCOU NTS AUDITED, HENCE PENALTY UNDER S. 271B WAS NOT ATTRACTEDCONTEN TION OF REVENUE THAT IN SUCH CIRCUMSTANCE, THE ASSESSEE OUGH T TO HAVE GOT ITS ACCOUNTS AUDITED BY SOME OTHER CHARTERED ACCOUNTA NT IS NOT SUSTAINABLE. 5 ITA NOS. 2020 & 2024/PN/2013, AGRICULTURAL PRODUCE MARKET COMMITTEE, JALGAON 8) IT IS PERTINENT TO NOTE HERE THAT, HON'BLE CIT(A)-II, NASIK HAD ALREADY DELETED THE PENALTY U/S 271B IN OUR CASE FOR A.Y. 2006-07 UNDER THE IDENTICAL FACTS & CIRCUMSTANCES OF THE CAS E, VIDE ORDER DATED 17.09.09 (APPEAL NO. JAL/ITO. WD. 2(3)/312/09-10). WE, THEREFORE, IN THE LIGHT OF THE ABOVE MENTIONED FA CTS HUMBLY SUBMIT THAT THE DELAY IN COMPLETING TAX AUDIT WAS DUE TO THE UNAVOIDABLE CIRCUMSTANCES. WE URGE THAT THE DELAY WAS NOT OCCASIONED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEG LIGENCE, OR ON ACCOUNT OF MALAFIDES AND ACCORDINGLY REQUEST YOUR H ONOUR TO DELETE THE PENALTY LEVIED U/S 271B& OBLIGE. THE APPELLANT ONCE AGAIN CRAVES BEFORE YOUR HONOUR T HAT GRAVE INJUSTICE WOULD BE CAUSED TO THE APPLICANT & ULTIMATEL Y TO THE MARGINAL FARMERS FOR THE BETTERMENT OF WHOM THE APMC IS ENTRUSTED WITH THE MONITORY FUNDS, IF THE PENALTY IS NOT WAIVED. 3. THE CIT(A) WAS NOT IMPRESSED WITH THE SUBMISSIONS OF TH E ASSESSEE AND HE CONFIRMED THE PENALTY LEVIED BY THE ASSE SSING OFFICER U/S. 271B OF THE ACT. NOW, THE ASSESSEE IS IN APPEAL BEFOR E US. WE HAVE HEARD THE LD. DR. NONE WAS PRESENT FOR THE ASSESSEE. 4. SO FAR AS THE ASSESSEE IS CONCERNED, IT IS CONSTITUTED UNDER THE AGRICULTURAL PRODUCE MARKETING (REGULATION) ACT, 1963 FOR TH E BENEFIT OF THE FARMERS FOR HELPING THEM TO DIRECTLY SALE THEIR AGRICU LTURE PRODUCE BY AVOIDING THE BROKERS AND AGENTS. THE AGRICULTURAL PRODUC E COMMITTEE IS LIKE NODAL AGENCIES PROVIDING THE BASIC INFRASTRUCTURE TO TH E FARMERS TO SALE THEIR AGRICULTURAL PRODUCE. IT IS ALSO CLAIMED THAT IT IS NON-PROFIT ORGANIZATION. IN THIS CASE THE ASSESSEE WAS TREATED AS A LOCAL AUTHORITY TILL THE A.Y. 2002-03 BUT DUE TO THE AMENDMENT OF SEC. 10(2 0) OF THE INCOME-TAX ACT, THE ASSESSEE WAS SUBJECTED TO TAX. SUBSEQUENTLY, THE PARLIAMENT AGAIN EXEMPTED THE INCOME OF THE APMC I.E. THE ASSESSEE, BY INTRODUCING SEC. 10(26AAB) OF THE INCOME-TAX ACT BY THE FINANCE ACT, 2008. THE LITIGATION WAS GOING ON IN THE SUPREME COURT AFTER AMENDME NT 6 ITA NOS. 2020 & 2024/PN/2013, AGRICULTURAL PRODUCE MARKET COMMITTEE, JALGAON TO SECTION 10(2) OF THE ACT. THERE WAS CONFLICTING OPINIONS IN RESPECT OF THE TAXABILITY OF THE INCOME OF THE APMCS. SO FAR AS THE C HARGE OF FAILURE ON FILING OF THE TAX AUDIT REPORT U/S. 44AB OF THE INCOME- TAX ACT IS CONCERNED IT IS SEEN THAT THE TAX AUDIT REPORT IS PREPA RED BY AUDITORS APPOINTED BY THE DY. REGISTRAR OF THE CO-OPERATIVE SOCIET Y. IT IS NOT IN THE HANDS OF THE ASSESSEE HENCE, IT CANNOT BE SAID THAT IT IS DELIBERATE ACT ON THE PART OF THE ASSESSEE FOR NOT FILING THE TAX A UDIT REPORT. IN THE CASE OF HINDUSTAN STEEL LIMITED VS. STATE OF ORISSA 83 ITR 26 (SC) IT IS HELD AS UNDER: AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDIN G, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED , EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF COND UCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DIS REGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECA USE 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 CONSIDER ATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS P RESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BRE ACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO A CT IN THE MANNER PRESCRIBED BY THE STATUTE. 5. IN THE PRESENT CASE NOWHERE IT IS A CASE OF THE REV ENUE THAT IN THE CASE OF THE PRESENT ASSESSEE, THERE IS A SPECIFIC CHARGE BY THE AUTHORITIES BELOW, THAT THE ASSESSEE HAS DELIBERATELY FAILED TO FILE THE TAX AUDIT REPORT WITHIN THE TIME LIMIT PRESCRIBED U/S. 44AB OF THE AC T. IT IS ALSO SEEN THAT THE TAX AUDITORS ARE APPOINTED BY THE GOVT. UNDER THE CONTROL OF THE DY. REGISTRAR OF THE CO-OPERATIVE SOCIETY IN SUCH S ITUATION IN OUR OPINION IT IS HIGH HANDED ACTION OF THE AUTHORITIES BELOW LEVY ING THE PENALTY U/S. 271B OF THE ACT. WITHOUT EXAMINING AND CONSID ERING THE 7 ITA NOS. 2020 & 2024/PN/2013, AGRICULTURAL PRODUCE MARKET COMMITTEE, JALGAON EXPLANATION OF THE ASSESSEE APMC AS REASONABLE CAUSE U/ S.273B FOR NOT FILING TAX AUDIT REPORT WITHIN SPECIFIED TIME LIMIT. WE, ACCORDINGL Y, DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER IN BOTH T HE ASSESSMENT YEARS AND GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21-10-2014 SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS/SATISH PUNE, DATED: 21 ST OCTOBER, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 4 THE CIT(A) - II , NASHIK THE CIT-II, NASHIK 5 THE DR, ITAT, A BENCH, PUNE. 6 GUARD FILE. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE