Mrs. Geetha Sridhar, Bangalore V. ITO, Bangalore

ITA 241/BANG/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5216 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 02-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: K G M BHUSHAN
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.241/BANG/2010 ASSESSMENT YEAR : 2005-06 MRS. GEETHA SRIDHAR, PROP. PRAGATHI ENTERPRISES, A.29-KUDREMUKH COLONY, II BLOCK, KORAMANGALA, BANGALORE 560 034. : APPELLANT VS. THE INCOME TAX OFFICER, WARD 7(2), BANGALORE. : RESPONDENT APPELLANT BY : SHRI K.G.M. BHUSHAN, C.A. RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. C IT(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT (A)-III, BANGALORE, IN ITA NO: 8/ W 7(2)/CIT(A)-III /BNG/08-09 DATED: 30.11.2009 FOR THE ASSESSMENT YEAR 2005-06, CONFIR MING THE PENALTY IMPOSED U/S 271B OF THE ACT. 2. THE ASSESSEE RAISED SEVEN GROUNDS OF APPEAL WHIC H WERE IN THE NATURE OF ILLUSTRATIVE AND NARRATIVE MANNER. AS A MATTER OF FACT, THE GROUNDS ITA NO.241/BANG/10 PAGE 2 OF 8 SHOULD BE PRECISE AND IN CONCISE MANNER. ON A DILI GENT VIEW OF THE SAME, THE CRUX OF THE ISSUE IS THAT THE CIT(A) ERRED IN CONFIRMING THE PENALTY IMPOSED BY THE AO U/S 271B OF THE ACT ON THE FACT THAT THE DELAY IN RECEI PT OF THE AUDIT REPORT WAS NOT A REASONABLE CAUSE FOR NON-COMPLIANC E OF S.44AB OF THE ACT. 3. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL, WAS TRADING IN DISTRIBUTION OF CONSUMER PRODUCTS AS A PROPRIETARY CONCERN. THE TURNOVER DURING THE PERIOD UNDER DISPUTE WAS RS.2.67 CRORES. ACCORDING TO THE AO, AS THE ASSESSEE HAD FAILED TO FURNISH HER RETURN OF INCOME ALONG WITH THE AUDIT REPORT WITHIN THE DUE DATE, PENAL PROCEEDINGS U/S 2 71B OF THE ACT WERE INITIATED. 3.1. DURING THE PENAL PROCEEDINGS, IT WAS CONTENDED IN A CRYPTIC MANNER THAT WE ENTRUSTED THE WORK TO OUR STATUTORY AUDITOR, RA JAN & SRINIVASAN. AS THE DELAY IS CAUSED BY REASONS BEYOND OUR CONTRO L AND AS IT WAS NOT A WILLFUL DEFAULT, KINDLY CONDONE THE DELAY AND WAIVE THE PENALTY. 3.2. BRUSHING ASIDE THE CONTENTION OF THE ASSESSEE, THE AO MAINTAINED THAT THE OBLIGATION TO FILE THE AUDIT REPORT IS BASICALL Y ON THE ASSESSEE AND SHE CANNOT SHIFT THE SAME TO HER AUDITOR AND, THUS, HE IMPOSED A PENALTY OF RS.1 LAKH U/S 271B OF THE ACT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE ISSUE TO THE CIT(A) FOR REMEDY. AFTER DUE CONSIDERATION OF THE FORCEFUL ARGUMENTS COUPLED WITH JUDICIAL PRONOUNCEMENTS PUT FORTH BY THE ASSESSEE AND ALSO E XTENSIVELY ANALYZING ITA NO.241/BANG/10 PAGE 3 OF 8 THE PROVISIONS OF S.271B AND S.273B OF THE ACT, TH E LD. CIT(A) WAS OF THE VIEW THAT 5.5.THERE IS NO REASONABLE CAUSE FOR GETTING THE AUDIT IN TIME AND FURNISHING THE SAME WITHIN THE PRESCRIBED TIME LIMITS. THE APPELLANT HAS FAILED TO COMPLY WITH THE PROVISIONS OF S.44AB OF THE ACT. 5. AGITATED, THE ASSESSEE HAS COME UP WITH THE PRES ENT APPEAL. THE SUBMISSIONS MADE BY THE LD. A R DURING THE COURSE O F HEARING ARE SUMMARIZED AS UNDER: (I) FOR AUDITING OF ACCOUNTS AND FILING OF RETURN OF IN COME WERE ENTRUSTED TO ERSTWHILE AUDITORS AND DUE TO EXIGENCI ES PREVAILED, THERE WAS A DELAY IN FURNISHING THE RETURN FOR THE PERIOD UNDER DISPUTE. THUS, THERE WAS NO DIRECT NEXUS BETWEEN T HE ASSESSEE AND THE DELAY IN FURNISHING THE RETURN OF INCOME; (II) SINCE THERE WAS A HUGE LOSS, THE BUSINESS WAS CLOSE D IN THE YEAR 2007 AND THE ASSESSEE WAS UNDER THE BONA FIDE BELIE F THAT THE RETURN OF INCOME ALONG WITH THE STATUTORY AUDIT REP ORT HAD BEEN FURNISHED IN TIME AS THE TAX AUDIT REPORTS IN 3CB & 3CD WERE PREPARED AND AUTHENTICATED BY THE AUDITOR ON 31.10. 2005; (III) RELIES ON THE CASE LAWS: (A) AHMEDABAD CO-OPERATIVE DEPT. STORES (APNA BAZAR) V. ITO (2001) 73 TTJ (AHD) 784; (B) KRIPA INDUSTRIES (I) LTD. V. CIT (2002) 76 TTJ(PUNE ) 502; (C) DEEPAK JYOTI V. ITO (2001) 72 TTJ (JODH) 1030; (D) WOODWARD GOVERNORS INDIA (P) LTD. V. CIT (2001) 118 TAXMAN 433 (DELHI). 5.1. ON THE OTHER HAND, THE LD. D R WAS OF THE FIRM VIEW THAT SINCE NO REASONABLE CAUSE WAS ADDUCED FOR NOT GETTING THE AC COUNTS AUDITED IN TIME AND ALSO FURNISHING THE SAME WITHIN THE PRESCRIBED TIME LIMIT, THE ASSESSEE SHOULD HAVE NO GRIEVANCE TO AGITATE THE FINDINGS OF THE AUTHORITIES BELOW ON THIS COUNT. IT WAS, THEREFORE, PLEADED THAT THE FI NDING OF THE FIRST APPELLATE AUTHORITY REQUIRES TO BE SUSTAINED IN TOTO. ITA NO.241/BANG/10 PAGE 4 OF 8 6. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, S CRUPULOUSLY VIEWED THE RELEVANT RECORDS AND ALSO THE CASE LAWS ON WHIC H THE EITHER PARTY HAD PLACED THEIR STRONG RELIANCE. 6.1. AS COULD BE SEEN FROM THE FORM NO.3CB, THE AUD IT REPORT IN QUESTION WAS FINALIZED ON 31.10.2005. THIS VERY FACT HAS NO T BEEN DISPUTED BY THE REVENUE. THE STRONG PLEA OF THE ASSESSEE WAS THAT SHE WAS UNDER BONA FIDE BELIEF THAT HER ERSTWHILE AUDITORS WOULD HAVE FURNISHED THE RETURN OF INCOME ALONG WITH THE AUDIT REPORT IN TIME SINCE T HEY HAVE OBTAINED HER SIGNATURES AFFIXED ON 31.10.2005 ITSELF. HOWEVER, THE ASSESSEE, PERHAPS, CAME OUT OF SLUMBER WHEN SHE GOT A REMINDER FROM TH E DEPARTMENT TO THE EFFECT THAT NO RETURN WAS FILED ETC. IT IS PERTIN ENT TO NOTE THAT THERE WAS A CHANGE IN THE ASSESSEES TAX CONSULTANTS. NO DOUBT , IT WAS THE PRIMARY DUTY OF THE ASSESSEE TO ENSURE THAT THE RETURN OF I NCOME ALONG WITH NECESSARY DOCUMENTS/REPORT ETC. IS FURNISHED IN TIM E. SINCE SHE WAS INCURRING HEAVY LOSS IN HER VENTURE DUE TO PILFERAG E IN THE CONSUMER GOODS WHILE TRANSPORTING FROM HER BUSINESS PREMISES TO TH E CUSTOMERS END, SHE HAD TO WIND UP THE BUSINESS ITSELF IN 2007. HER SOL EMN PLEDGE WAS THAT SHE WAS UNDER BONA-FIDE BELIEF THAT THE ERSTWHILE TAX C ONSULTANTS WOULD HAVE FURNISHED THE RETURN OF INCOME WITHIN THE DUE DATE ETC. CANNOT BE BRUSHED ASIDE. THE LACKLUSTRE ATTITUDE OF HER ERSTWHILE TA X CONSULTANTS, ACCORDING TO THE ASSESSEE, HAD PLACED HER IN A PRECARIOUS POSITI ON THE DELAY IN FURNISHING OF THE RETURN OF INCOME AND THE AUDITED REPORT WHICH, IN OUR CONSIDERED VIEW, CANNOT BE PLACED AT THE DOOR STEP OF THE ASSESSEE AS WILLFUL AND INTENTIONAL AND SO ON SO FORTH. ITA NO.241/BANG/10 PAGE 5 OF 8 6.2. ON A DILIGENT VIEW OF THE PROVISIONS OF S. 271 B OF THE ACT, WE FIND THAT IF ANY PERSON FAILS TO GET HIS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR OR YEARS RELEVANT TO AN ASSESSMENT YE AR OR FURNISH A REPORT OF SUCH AUDIT AS REQUIRED U/S 44AB, THE AO MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY A SUM EQUAL TO ONE HALF PERC ENT OF THE TOTAL SALES, TURN OVER OR GROSS RECEIPTS AS THE CASE MAY BE, IN BUSIN ESS, OR OF THE GROSS RECEIPTS IN PROFESSION, IN SUCH PREVIOUS YEAR OR YE ARS OR A SUM OF ONE HUNDRED THOUSAND RUPEES, WHICHEVER IS LESS. 6.3. IN THE CASE ON HAND, THE ASSESSEE HAD ENTRUSTED HER TAX MATTERS TO BE DEALT WITH BY HER ERSTWHILE TAX CONSULTANTS WHO, ACCORDING TO THE ASSESSEE, FURNISHED THE RETURN OF INCOME AND THE AU DIT REPORT BELATEDLY WHICH, IN OUR CONSIDERED VIEW, CANNOT BE CONSTRUED AS WILLFUL OR INTENTIONAL ACT ON THE PART OF THE ASSESSEE. 6.4. REPRIEVE HAS ALSO BEEN PROVIDED IN THE ACT I TSELF - IN CASE IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FO R THE SAID FAILURE - IN THE SHAPE OF THE PROVISIONS OF S.273B WHICH UNAMBIG UOUSLY SAY THAT, 273BNO PENALTY SHALL BE IMPOSABLE ON THE PERSO N OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. 6.5. VIEWING THE PECULIAR CIRCUMSTANCES UNDER WHICH THE ASSESSEE WAS PLACED I.E., ON THE ONE HAND, SHE HAD TO ABANDON HE R BUSINESS DUE TO MOUNTING LOSSES AND ON THE OTHER HAND, THE ERSTWHIL E TAX CONSULTANTS, PERHAPS, DUE TO THEIR PROFESSIONAL COMPULSION, RET URN OF INCOME/AUDITED ITA NO.241/BANG/10 PAGE 6 OF 8 REPORT WAS FURNISHED BELATEDLY WHICH PLACED THE AS SESSEE IN A PRECARIOUS SITUATION TO FACE THE PROCEEDINGS U/S 271B OF THE A CT. 6.6. WE HAVE DULY CONSIDERED THE VARIOUS CASE LAWS ON WHICH THE ASSESSEE HAD PLACED HER RELIANCE AND OF THE VIEW TH AT THEY ARE NOT DIRECTLY APPLICABLE TO THE FACTS OF THE ISSUE ON HAND. IN T HE PRESENT CASE, THE AUDIT REPORT PURPORTED TO HAVE GOT PREPARED AND DULY AUTH ENTICATED BY THE ERSTWHILE TAX CONSULTANTS ON 31.10.2005 WHICH WAS E NDORSED BY THE ASSESSEE WITH HER SIGNATURE. THIS CRUCIAL DATE OF THE FINALIZATION OF AUDIT REPORT HAS NOT BEEN DISPUTED EITHER BY THE AO OR TH E FIRST APPELLATE AUTHORITY. THE ASSESSEES REASONING BEFORE THE AO WAS THAT THE DELAY IN FILING THE AUDIT REPORT IS THAT THE WORK WAS ENTRUS TED TO HER AUDITOR AND THERE HAPPENED A DELAY FOR WHICH THE AOS CRYPTIC REMARK WAS THAT THE EXPLANATION IS NOT SATISFACTORY. THE OBLIGATION TO FILE THE AUDIT REPORT IS BASICALLY ON THE ASSESSEE AND SHE CANNOT SHIFT THE SAME TO HER AUDITOR. NO DOUBT, THE ASSESSEE WAS OBLIGED TO FURNISH, UNDER T HE PROVISIONS OF THE ACT, THE AUDIT REPORT ALONG WITH THE RETURN OF INCOME WI THIN THE DUE DATE. HOWEVER, THE ASSESSEES PLEA WAS THAT SHE WAS PREVE NTED BY A REASONABLE CAUSE FOR THE SAID FAILURE, FOR WHICH, SHE TOOK SAN CTUARY UNDER THE PROVISIONS OF S.273B OF THE ACT. WHEN THE AO WAS I NCLINED TO SLAP A PENALTY OF WHOPPING SUM OF RS.1 LAKH AS PROVIDED UN DER THE ACT, HE SHOULD HAVE RECORDED HIS REASONING AS TO WHY THE ASSESSEE S EXPLANATION IS NOT SATISFACTORY WHICH REQUIRES TO BE REJECTED AND SO O N SO FORTH. THE STAND OF THE AO, TO VIEW IT GENTLY, WAS RATHER ARBITRARY. B EING AN ASSESSING ITA NO.241/BANG/10 PAGE 7 OF 8 AUTHORITY, HE SHOULD HAVE ENSURED THAT HIS FINDING STANDS THE TESTIMONY OF LAW WHEN IT SUBJECTS TO SCRUTINY BY THE APPELLATE A UTHORITIES ABOVE. 6.7. ON A GLIMPSE OF S.273B OF THE ACT, WE FIND THA T (AT THE COST OF REPETITION) NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE . 6.8. IN THE CASE ON HAND, THE ASSESSEE WAS PLAC ED IN A PECULIAR CIRCUMSTANCE WHICH, IN OUR PRAGMATIC VIEW, SHE HAD A REASONABLE CAUSE FOR FAILURE IN FURNISHING THE AUDIT REPORT WITHIN THE S TIPULATED TIME FRAME. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE ISSU E, WE ARE OF THE UNANIMOUS VIEW THAT THE ASSESSEES CASE FALLS WITHI N THE AMBIT OF S.273B OF ACT. WE, THEREFORE, DELETE THE PENALTY OF RS.1 LAKH IMPO SED U/S 271B OF THE ACT. IT IS ORDERED ACCORDINGLY . 6.9. WHILE TAKING THE ABOVE VIEW, WE HAVE DULY CONS IDERED THE FINDING OF THE HONBLE HIGH COURT OF GAUHATI IN THE CASE OF K HUDA WOOD PRODUCTS (P) LTD. V. CIT REPORTED IN 297 ITR 383 IN WHICH THE RE VENUE HAS PLACED ITS RELIANCE. WITH DUE REGARDS, WE WOULD LIKE TO POINT OUT THAT THE HONBLE COURT HAD RULED THAT THE CERTIFICATE ISSUED BY THE AUDITOR WOULD N OT CONSTITUTE REASONABLE CAUSE WITHIN THE MEANING OF S .273B FOR THE REASON THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT ANY EFF ORT WAS MADE BY THE ASSESSEE TO GET THE ACCOUNTS DULY AUDITED WITHIN TH E SCHEDULED TIME. HOWEVER, IN THE PRESENT CASE THE ISSUE IS ON A DIFF ERENT FOOTING AND, THUS, IN OUR CONSIDERED VIEW, THE APPLICABILITY OF THE AB OVE RULING IS RATHER REMOTE. ITA NO.241/BANG/10 PAGE 8 OF 8 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF JUNE, 2010. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 18 TH JUNE, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.