Shree Umiya Earth Movers Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-8(3), Now Ward-4(1)(3), Ahmedabad

ITA 2570/AHD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94758 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 273B; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NOS.2569 & 2570/AHD/2015 (ASSESSMENT YEARS:2008-09) SHREE UMIYA EARTH MOVERS PVT. LTD. B-36, SAPTAK BUNGLOW, NR. SUKAN MALL, SCIENCE CITY ROAD, SOLA, AHMEDABAD - 380060 APPELLANT VS. INCOME TAX OFFICER, WARD-8(3), AHMEDABAD RESPONDENT PAN: AAKCS6799K /BY APPELLANT : NONE /BY RESPONDENT : SHRI ANIL KUMAR BHARDWAJ, SR. D.R. /DATE OF HEARING : 26.11.2015 /DATE OF PRONOUNCEMENT :30.11.2015 ORDER PER RAJESH KUMAR, A.M: THESE TWO APPEALS ARE ARISING OUT FORM THE ORDERS O F CIT(A)-8, AHMEDABAD, DATED 08.06.2015 FOR A.Y. 2008 -09. 2 ITA NOS. 2569 & 2570/AHD/15 FOR A.Y. 08-09 (SHREE UMIYA EARTH MOVERS P. LTD. VS. ITO) SO, THEY ARE BEING DISPOSED OF BY WAY OF THIS COMMO N ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 2569/AHD/2015, ASSESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GROS SLY ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE P ENALTY LEVIED U/S 271B OF 28,108 WHICH IS UNJUSTIFIED TAKIN G INTO CONSIDERATION THE UNIQUE CIRCUMSTANCES OF THE APPELLA NT COMPANY. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRO SSLY ERRED IN LAW AND ON THE FACTS OF THE CASE IN NOT APPRECIATIN G THAT SECTION 273B OF THE INCOME TAX ACT WHICH CLEARLY STIPU LATES THAT NO PENALTY SHALL BE LEVIED IF THE DEFAULT IS D UE TO REASONABLE CAUSE AND DEATH OF THE KEY MANAGERIAL PE RSON WOULD BE WITHIN THE AMBIT OF A REASONABLE CAUSE. 2.1 IN ITA NO. 2570/AHD/2015, ASSESSEE HAS FILED TH E APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GROS SLY ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE P ENALTY LEVIED U/S 271F OF 5000 WHICH IS UNJUSTIFIED TAKING INTO CONSIDERATION THE UNIQUE CIRCUMSTANCES OF THE APPELLA NT COMPANY. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRO SSLY ERRED IN LAW AND ON THE FACTS OF THE CASE IN NOT APPRECIATIN G THAT SECTION 273B OF THE INCOME TAX ACT WHICH CLEARLY STIPU LATES THAT NO PENALTY SHALL BE LEVIED IF THE DEFAULT IS D UE TO REASONABLE CAUSE AND DEATH OF THE KEY MANAGERIAL PE RSON WOULD BE WITHIN THE AMBIT OF A REASONABLE CAUSE. 3. AT THE OUTSET, WE WOULD LIKE TO STATE THAT ON TH E DATE OF HEARING ON 26.11.2015 NONE APPEARED ON BEHALF OF AS SESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED. THEREFOR E, THE APPEAL OF THE ASSESSEE IS BEING DISPOSED OF ON MERI T AFTER HEARING THE LD. D.R. 3 ITA NOS. 2569 & 2570/AHD/15 FOR A.Y. 08-09 (SHREE UMIYA EARTH MOVERS P. LTD. VS. ITO) 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE WA S A PRIVATE LTD. COMPANY WITH THREE DIRECTORS AND WAS E NGAGED IN THE BUSINESS OF CONTRACTUAL WORK AND THE GROSS R ECEIPTS AS PER FORM 26AS WAS RS.56,21,656/-. ONE OF THE DIREC TOR SHRI KALPESH V. PATEL WAS MURDERED FOLLOWING WHICH THE ASSESSEE COULD NOT GET ITS ACCOUNT AUDITED AND FILE D ITS RETURN OF INCOME. THE OTHER TWO DIRECTORS WERE DEC EASED DIRECTORS WIFE SMT. NITA KALPESH PATEL AND DECEASE D DIRECTORS FATHER SHRI VISHNUBHAI PATEL. THE ASSESS ING OFFICER UPON NOTICING THE FACT FROM FORM 26AS THAT THE ASSE SSEE HAD TURNOVER OF RS. 56,21,656/- AND TDS DEDUCTED DURING THE YEAR WAS RS. 72,98/- ISSUED NOTICE U/S 148. NO RETU RN OF INCOME WAS FILED IN RESPONSE TO THE SAID NOTICE ISS UED HOWEVER A REPLY DATED 18.12.2013 WAS FILED WITHOUT THE AUDIT REPORT U/S 44AB AN D RETURN OF INCOME. IN ABS ENCE OF THE ANNUAL ACCOUNT OF THE ASSESSEE AND OTHER INFORM ATION THE AO FRAMED THE ASSESSMENT U/S.144 OF THE ACT BY COMPUTING THE INCOME AT RS.4,49,730/- AND ISSUED NO TICE U/S 274 R.W.S. 271B OF THE ACT ON 31.12.2013. 4.1 IN ITS RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED ITS REPLY DATED 03.03.2014 WHEREIN THE LD CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS A PRI VATE LIMITED COMPANY HAVING THREE DIRECTORS, NAMELY, LAT E MR. KALPESH V. PATEL, NITA KALPESH PATEL (SPOUSE) AND V ISHNUBHAI PATEL (FATHER OF LATE KALPESH PATEL). LATEL SHRI K ALPESH V. PATEL WAS THE FOUNDER OF THE COMPANY AND LOOKED AFT ER THE MANAGEMENT OF THE COMPANY, MAINLY A KEY MANAGERIAL PERSON AND EXCLUSIVELY HANDLING AFFAIRS OF THE ASSE SSEE. 4 ITA NOS. 2569 & 2570/AHD/15 FOR A.Y. 08-09 (SHREE UMIYA EARTH MOVERS P. LTD. VS. ITO) UNFORTUNATELY, HE WAS ASSASSINATED ON 13.03.2008 AT THE PLACE OF WORK OF THE COMPANY AND AFTER MURDER, THE BODY WAS DUMPED IN THE WELL AND FOUND SUBSEQUENTLY AFTER THR EE DAYS. THE ASSESSEE FURTHER SUBMITTED THAT SINCE THE KEY MANAGERIAL PERSON WAS MURDERED AND OTHER TWO DIRECT ORS WAS DUMMY AND WERE NOT AWARE OF WITH THE LEGAL PROV ISIONS OF THE VARIOUS ACTS APPLICABLE TO THE COMPANY AND T HEREFORE, SUBMITTED THAT THIS CONSTITUTED A REASONABLE CAUSE WITHIN THE MEANING OF 273 OF THE ACT AND THEREFORE THE PRO CEEDINGS U/S.274 R.W. RULE 71B OF THE ACT MAY KINDLY BE WITH DRAWN. LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE COMPAN Y WAS HAVING THREE DIRECTORS AND OTHER EMPLOYEES AND IT W AS THE OBLIGATION OF THE ASSESSEE TO COMPLETE BOOKS OF ACC OUNT AND FILED THE RETURN OF INCOME OF THE ASSESSEE. HE FUR THER OBSERVED THAT IF ONE DIRECTOR EXPIRED, IT IS THE RE SPONSIBILITY OF STATUTORY COMPLIANCES SHIFT TO THE OTHER DIRECTO RS OF THE COMPANY AND THUS, THE COMPANY HAS COMMITTED DEFAULT ER U/S.271B OF THE ACT AND AS PER THE PROVISIONS OF TH E ACT, IF ANY PERSON FAILS TO GET HIS ACCOUNTS AUDITED IN RES PECT OF ANY PREVIOUS YEAR OR YEARS RELEVANT TO AN ASSESSMENT YE AR OR FURNISH AUDIT REPORT, THE ASSESSING OFFICER MAY DIR ECT TO THAT PERSON SHALL PAY, BY WAY OF PENALTY, A SUM EQUAL TO ONE-HALF PERCENT WAS RECEIVED AND THUS, ASSESSING OFFICER IM POSED THE PENALTY OF RS.28,108/- BEING % OF THE TURNOVER . 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE FILED APPEAL BEFORE THE CIT(A). HE ALSO DISMISSED THE APPEAL BY OBSERVING AS UNDER: 5 ITA NOS. 2569 & 2570/AHD/15 FOR A.Y. 08-09 (SHREE UMIYA EARTH MOVERS P. LTD. VS. ITO) 5. THE SUBMISSIONS ARE CONSIDERED. IT IS SEEN THAT O NE OF THE DIRECTORS EXPIRED ON 13/03/2008. IT IS FURTHER NOTE D THAT COMPANY WAS INCORPORATED JUST ONE YEAR BEFORE AND THIS WAS 1 ST YEAR OF THE BUSINESS OF THE COMPANY. IT IS SUBMITTED THAT THE OT HER DIRECTORS WERE CLOSE RELATIVES NAMELY THE FATHER AND WIFE OF EXPIRE D DIRECTOR. THERE SEEMS TO BE COMPLETE NEGLECT OF THE COMPANY'S WORK AS THE FATHER LATER PROCEEDED TO USA, AS PER THE APPELLANT, THE ACCO UNTS OF THE COMPANY WERE ITSELF NOT COMPLETED THEREAFTER. THERE I S NO MENTION ABOUT THE ACTIVITIES OF THIRD DIRECTOR. HOWEVER, TH E OTHER DIRECTORS CANNOT SHUN AWAY FROM OR ABDICATE THEIR RESPONSIBIL ITIES. ONCE THEY ARE DIRECTORS OF THE COMPANY WHICH IS CARRYING OUT A BUSINESS, THEY ARE WHOLLY RESPONSIBLE FOR ALL LEGAL COMPLIANCES ALSO , A COMPANY CANNOT BE WIPED AWAY JUST BY THE DEATH OF ONE PERSO N. IT IS ARTIFICIAL JURIDICAL ENTITY AND ITS EXISTENCE DOES NOT DEPEND U PON EXISTENCE OF ONE PROMOTER. THE SURVIVING DIRECTORS WERE COMPETENT TO AVAIL THE PROFESSIONAL ADVICE AVAILABLE AS THIS ADVICE WAS DEFI NITELY TAKEN AT THE TIME OF FORMATION OF THE COMPANY AND THE SURVIVI NG DIRECTORS WERE AWARE OF THE SAME. AS PER THE COMPANIES ACT, THE ST ATUTORY AUDITOR MUST HAVE BEEN APPOINTED AT THE BEGINNING OF CURRENT YEAR. IT IS FACT THAT THE ASSESSEE IS A COMPANY AND HAD THREE DIRECTO RS AND OTHER EMPLOYEES. IT IS FOR THE ASSESSEE TO COMPLETE THE BO OKS OF ACCOUNTS AND FOR THE FILING OF RETURN WITH ALL LEGAL OBLIGAT IONS. THIS IS NOT THE CASE OF LATE AUDIT BUT THE SAME WAS SIMPLY NOT DONE AT ALL EVEN TILL THE COMPLETION OF ASSESSMENT PROCEEDINGS AS REQUIRED UNDER SECTION 44 AB. THE ASSESSMENT WAS COMPLETED MUCH AFTER THE SA D EVENT. THE COMPANY HAS TO SUFFER FOR THE INACTION ON THE PART O F THE SURVIVING DIRECTORS. ONE DIRECTOR HAD EXPIRED AT THE END OF T HE FINANCIAL YEAR, BUT THE BUSINESS WAS EARNED ON. THERE WAS ENOUGH TI ME TO COMPLETE THE BOOKS OF ACCOUNTS AND GET THE BOOKS AUDITED BY TH E AUDITOR AS PER THE PROVISION OF COMPANIES ACT AS WELL AS U/S.4 4AB OF THE I.T. ACT. BUT THE SAME WAS NOT COMPLETED EVEN BELATEDLY. IN VIEW OF THIS, AFTER ADMISSION OF THE APPEAL, I HAVE NO HESITATION IN CONFIRMING THE ACTION OF ASSESSING OFFICER TO LEVY THE PENALTY. THE APPEAL IS DISMISSED. 6. WE HAVE PERUSED THE MATERIAL ON RECORD AND AFTER HEARING THE LD. D.R., WE FIND THAT THE ASSESSEE HAD DEFAULTED IN FILING ITS RETURN OF INCOME AND ALSO DID NOT GET ITS ACCOUNT AUDITED U/S.44AB OF THE ACT. IT IS NOTICED FROM TH E ORDERS OF AUTHORITIES BELOW THAT THE ASSESSEE IS A COMPANY W ITH THREE DIRECTORS ONE OF WHOM WAS MURDERED ON 13.03.2008 AN D THE REMAINING TWO DIRECTORS WIFE OF LATE DIRECTOR AND H IS FATHER WERE THE ONLY DIRECTORS WHO COULD NOT GET THE ACCOU NTS AUDITED AND FILED THE RETURN AS THE DECEASED DIRECT OR WAS THE 6 ITA NOS. 2569 & 2570/AHD/15 FOR A.Y. 08-09 (SHREE UMIYA EARTH MOVERS P. LTD. VS. ITO) KEY MANAGERIAL PERSON WHO WAS HANDLING ALL THE AFFA IRS OF THE COMPANY AND THIS BEING A SMALL COMPANY DID NOT HAVE THE REQUIRED MAN POWER TO HANDLE THIS MATTER. THIS IS ALSO CLEAR FROM THE TURNOVER OF THE COMPANY. THE ASSESSEE SUB MITTED BEFORE THE AUTHORITIES BELOW THAT THE NON AUDIT AND NON FILING OF RETURN WAS SOLELY DUE TO THE REASON THAT THE PER SON WHO WAS MANAGING THE AFFAIRS OF THE COMPANY WAS MURDERE D AND THE OTHER DIRECTORS WERE NOT AWARE WITH THE STATUTO RY FORMALITIES AND ALSO SUBMITTED THAT THIS CONSTITUTE D A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273 OF THE ACT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS CONSTITUTES A REASONABLE CAUSE W ITHIN THE MEANING OF SECTION 273 AND THEREFORE, THE PENALTY U /S.271B OF THE ACT CANNOT BE SUSTAINED. THEREFORE, WE DELE TE THE PENALTY IMPOSED BY THE A.O. U/S.271B OF THE ACT. A .O. IS DIRECTED ACCORDINGLY. ITA NO.2570/AHD/15 7. THE FACTS AND REPLY TO THE SHOW CAUSE NOTICE WER E SAME AS STATED IN ABOVE . THE ASSESSE DID NOT FILE THE RETURN OF INCOME FOR THE A.Y. 2008-09 FOLLOWING THE MURDER OF HIS DIRECTOR WHO WAS MANAGING THE AFFAIRS OF THE COMPAN Y. THE A.O. AFTER ISSUING A SHOW CAUSE NOTICE DATED 31.12 .2013 WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 03.03.2014 IMPOSED PENALTY OF RS.5000/- U/S.270F O F THE ACT. 7 ITA NOS. 2569 & 2570/AHD/15 FOR A.Y. 08-09 (SHREE UMIYA EARTH MOVERS P. LTD. VS. ITO) 7.1 IN VIEW OF OUR FINDING PARA 6, WE ARE OF THE VI EW THAT THERE WAS A SUFFICIENT AND REASONABLE CAUSE FOR NOT COMPLYING WITH THE PROVISION OF SECTION 139 OF THE ACT AND THEREFORE, WE DELETE THE PENALTY OF RS.5000/-. THE A.O. IS DIRECTED ACCORDINGLY. 8. IN RESULT, BOTH APPEALS FILED BY ASSESSEE ARE AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF NOVEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 30/11/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $ %&%'( ) / CONCERNED CIT 4 )- / CIT (A) , -./ 00'(1 '( 1 23& / DR, ITAT, AHMEDABAD 4 /56 / GUARD FILE. BY ORDER / 1 / 2 % '( 1 23&