M/s.Jeena Hotel & Udaya Bar, Alappuzha V. The aCIT, Circle-1, Alappuzha

ITA 265/COCH/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6527 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-07-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: R KRISHNAN
• Keywords: Business income; Reasonable cause
• Section: 273B; 143(3); 201; 27

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO . 265 / COCH/ 2 01 8 ASSESSMENT YEAR : 20 08 - 09 M/S. JEENA HOTEL & UDAYA BAR, DANAPADY, HARIPPAD, ALAPPUZHA [P AN:A ACFJ 8657N] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1, ALA PPUZHA. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SS ESSEE BY SHRI R. KRISHNAN , CA REVENUE BY SMT. A.S. BINDHU, SR. DR D ATE OF HEARING 2 4 / 0 7 / 201 9 DATE OF PRONOUNCEMENT 1 ST /0 8 /2019 O R D E R PER CHANDRA POOJARI, AM: TH IS APPE AL FILED BY THE ASSESSEE IS DI RECTED AGAINST T HE ORDER OF THE CIT (A), KOTTAYAM DATED 26/12/2017 AND PERTAIN TO THE A SSESSMENT YEAR 2 0 08 - 09 . 2 . THERE WAS A DELAY OF 71 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. THE LD. AR HAS FILED CO NDONATION PETITION ACCOMPANIED BY AN AFFIDAVIT STATING THAT THE ORDER OF THE PENALTY U/S. 271B WAS SERVED ON THE ASSESSEE ON 17/01/2018 AND AN APPEAL OUGHT TO HAVE BEEN FILED ON OR BEFORE 18/03/2018. IT WAS SUBMITTED THAT AT THAT TIME, THE ASSESSEE APPROA CHED A CHARTERED ACCOUNTANT AT ALLEPPEY I.T.A. NO . 265 /COCH/ 201 8 2 AND BEING THE END OF MARCH, THE OFFICE OF THE CHARTERED ACCOUNTANT WAS BUSY IN FILING THE RETURNS, WHICH WERE GETTING BARRED BY LIMITATION IN MARCH, 2018. THEREAFTER IT APPEARED THAT THE CHARTERED ACCOUNTANT WAS NOT KEEPING GOOD HEALTH AND WAS OFTEN INDISPOSED. MEANWHILE, IT WAS SUBMITTED THAT ON ACCOUNT OF TERMITE ATTACK IN THE OFFICE OF THE CHARTERED ACCOUNTANT, THERE WAS A TEMPORARY SHIFTING RESULTING IN THE DISRUPTION OF THE PAPERS AND FILE F R OM THE TABLE OF THE PRINCIPAL PARTNER WHICH HAD TO BE DONE IMMEDIATELY AND THE PREMISES WAS SUBJECT TO PESTICIDE TREATMENT TO PREVENT LOSS OF DOCUMENTS. BY THE TIME NORMALCY WAS RESTORED, SOME TIME HAD ELAPSED AND A DELAY OF 71 DAYS HAD OCCURRED AND THE DELAY IN FILING THE APPEAL WAS UNAVOIDABLE AND DUE TO REASONS BEYOND THE CONTROL OF THE ASSESSEE. THEREFORE, IT WAS PRAYED THAT THE DELAY MAY BE CONDONED AND THE APPEAL ADMITTED. 2.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE REASONS ADVANCED BY THE ASSESSE E FOR FILING THE APPEAL BELATEDLY BEFORE THIS TRIBUNAL. SINCE THE DELAY WAS ON ACCOUNT OF THE CHARTERED ACCOUNTANTS INABILITY TO FILE THE APPEAL BEFORE THE TRIBUNAL IN TIME AND THE CONCERNED CA, SHRI R. KRISHNAN HAS FILED AFFIDAVIT TO THIS EFFECT, WE CON DONE THE DELAY OF 71 DAYS IN FILING THE APPEAL AND ADMIT THE APPEAL FOR ADJUDICATION. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) ERRED IN CONFIRMING THE PENALTY OF RS.1 LAKH LEVIED U/ S. 271B OF THE INCOME TAX ACT. I.T.A. NO . 265 /COCH/ 201 8 3 2. THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) ERRED IN REJECTING THE EXPLANATION OF THE APPELLANT THAT THE CAUSE FOR DELAY IN FILING THE AUDIT REPORT U/S. 44AB WAS DUE TO DELAY IN FINALIZATION AND CONSOLIDATION OF ACCOU NT. HE OUGHT TO HAVE HELD THAT IT IS A REASONABLE CAUSE FOR THE DELAY IN FILING THE AUDIT REPORT. 3. THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) WENT WRONG IN REJECTING THE EXPLANATION OF THE APPELLANT ON THE GROUND THAT THE APPELLANT FAILED TO STATE THE REASONABLE CONSTRAINT WHICH PREVENTED THE APPELLANT FROM FINALIZING THE ACCOUNTS. 4. AT ANY RATE, THE EXPLANATION OF THE APPELLANT THAT THIS BEING THE FIRST YEAR OF THE NEW CONCERN OUGHT TO HAVE BEEN ACCEPTED AS A REASONABLE CAUSE FOR THE DELAY IN FILING THE AUDIT REPORT. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF RUNNING HOTEL AND RETAIL SALES OF INDIAN MADE FOREIGN LIQUOR. THE ASSESSEE'S TURNOVER FOR THE AY 2008 - 09 WAS RS. 2,31,73,825 / - AND THEREFORE, REQUIRED TO GET ACCOUNTS AUDITED WITHIN THE SPECIFIED DATE PROVIDED UNDER SECTION 44AB OF THE ACT . HOWEVER, THE ASSESSING OFFICER NOTICED THAT T HE SPECIFIED DATE FOR FILING THE AUDIT REPORT U7S 44AB FOR THE ASST. YEAR 2008 - 09 WAS 30.09.2008 AND THE ASSESSEE FIRM F IL E D ITS AUDITED ACCOUNTS ONLY ON 20.3.2009. THEREFORE, THERE WAS A DELAY OF 5 MONTHS AND 20 DAYS IN FILING ITS AUDITED REPORT U / S . 44AB OF THE ACT. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY FILED BY THE ASSESSEE AND LEVIED PENALTY U/S. 271B O F THE ACT AND DIRECT ED THE ASSESSEE TO PAY A SUM EQUAL TO ONE HALF PER CENT OF THE TOTAL SALES OF RS. 2,31,73,825 / - RESTRICTED TO RS. 1,00,000 / - AS PENALTY U / S 271B OF THE ACT. I.T.A. NO . 265 /COCH/ 201 8 4 5. ON APPEAL, THE CIT(A) REFERRED TO THE PROVISIONS OF SEC. 271B WHICH READ S AS UNDER : - FAILURE TO GET ACCOUNTS AUDITED 271B. IF ANY PERSON FAILS TO GET HIS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR OR YEARS RELEVANT TO AN ASSESSMENT YEAR OR FURNISH A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB. THE ASS ESSING OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM EQUAL TO ONE - HALF PER CENT OF THE TOTAL SALES, TURNOVER OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS, OR OF THE GROSS RECEIPTS IN PROFESSION, IN SUCH PREVIOUS YEAR OR YEAR S OR A SUM OF ONE HUNDRED FIFTY THOUSAND RUPEES, WHICHEVER IS LESS.' 5 . 1 ACCORDING TO THE CIT(A), AS PER SECTION 271B, PENALTY IS LEVIABLE ON FAILURE TO GET ACCOUNT AUDITED BEFORE THE SPECIFIED DATE UNDER SECTION 44AB , I.E. DUE DATE FOR FILING RETURN OF INCOME U/S 139(1 ) OF INCOME TAX ACT, 1961. HOWEVER, THIS IS SUBJECT TO THE PROVISIONS OF SECTION 273B OF INCOME TAX ACT, 1961. SECTION 273B READS AS UNDER: 'PENALTY NOT TO BE IMPOSED IN CERTAIN CASES 273B. NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVI SIONS OF CLAUSE (B) OF SUB - SECTION (1) OF SECTION 271, SECTION 27 1A, SECTION 271AA, SECTION 271 B, SECTION 271BA, SECTION 271BB, SECTION 271C, SECTION 271CA, SECTION 271D, SECTION 271E, SECTION 271F, SECTION 271 FA, SECTION 271 FAB, SECTION 271FB, SECTION 27 1G, SECTION 271GA,SECT I ON 271GB, SECTION 271H, SECTION 271 - 1, SECTION 271J, CLAUSE (C) OR CLAUSE (D) OF SUB - SECTION ( 1 ) OR SUB - SECTION (2) OF SECTION 272A, SUB - SECTION (1) OF SECTION 272AA OR SECTION 272B OR SUB - SECTION (1) OR SUB - SECTION (1A) OF SECTION 2 72BB OR SUB - SECTION (1) OF SECTION 272BBB OR CLAUSE (B) OF SUB - SECTION ( 1) OR CLAUSE (B) OR CLAUSE (C) OF SUB - SECTION (2) OF SECTION 273, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SA ID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE.' I.T.A. NO . 265 /COCH/ 201 8 5 5. 2 A CCORDING TO THE CIT(A), AS PER THE PROVISIONS OF SECTION 273B, IT IS FOR THE ASSESSEE TO PROVE THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO GET THE ACCOUNT AUDITED A S REQUIRED UNDER SECTION 44AB AND AS THE ASSESSEE FAILED TO SHOW ANY REASONABLE CAUSE BEFORE THE ASSESSING OFFICER FOR THE DELAY IN GETTING ITS ACCOUNTS AUDITED, THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271B OF THE ACT. 5. 3 BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE DELAY IN OBTAINING/FILING THE TAX AUDIT REPORT WAS ON ACCOUNT OF DELAY IN FINALIZATION OF CONSOLIDATION OF ACCOUNTS. THE ASSESSEE ALSO SUBMITTED THAT EVEN THOUGH THE BOOK RESULTS SHOW HUGE NET L OSS THE ASSESSEE ESTIMATED I TS INCOME AT RS. 3,00,000 / - AND FILED THE RETURN OF INCOME. FURTHER, IT WAS SUBMITTED THAT IT HAD ALSO NOT FILED ANY APPEAL AGAINST THE ORDER U/S. 143(3) WHEREIN AN ADDITION OF RS. 15 LAKHS WAS MADE AND THERE WAS NO REVENUE LOSS TO THE GOVERNMENT ON ACCOUN T OF ITS FAILURE TO GET THE ACCOUNTS AUDITED. HOWEVER, THE CIT(A) OBSERVED THAT NEITHER THE FACT THAT THE ASSESSEE DID NOT DISPUTE THE ADDITIONS MADE IN THE ASSESSMENT NOR THE FACT THAT THERE WAS NO REVENUE LOSS TO GOVERNMENT CAN BE HELD TO BE REASONABLE CAUSE UNDER SECTION 273B OF THE ACT AND THE ONLY OTHER REASON THE ASSESSEE PLACED RELIANCE ON IS THAT THERE WAS DELAY IN FINALIZATION AND CONSOLIDATION OF ACCOUNTS. BUT, THE ASSESSEE FAILED TO STATE THE REASONABLE CONSTRAINT WHICH PREVENTED THE ASSESSEE FR OM FINALIZING THE ACCOUNTS. IN VIEW OF THIS, THE CIT(A) CONFIRMED THE I.T.A. NO . 265 /COCH/ 201 8 6 ORDER OF THE ASSESSING OFFICER UNDER SECTION 271B LEVYING PENALTY OF RS.1,00,000/ - . 6 . AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. T HE ASSESSEE REITERATED THE SUBMISSIONS MAD E BEFORE THE CIT(A). 7 . ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THIS CASE, THE ASSESSEE WAS REQUIRED TO GET HIS BOOKS OF ACCOUNT AUDITED AND FIL ED ALONG WITH THE RETURN OF INCOME U/S. 44AB WITH THE DUE DATE OF 31/10/2008 FOR THE ASSESSMENT YEAR 20 08 - 09 . HOWEVER, THE AUDIT REPORT WAS FURNISHED ONLY ON 2 0 /0 3 /20 09 . THE CONTENTION OF THE LD. AR WAS THAT THE DELAY OF 5 MONTHS AND 20 DAYS IN FILING I TS AUDITED REPORT U / S . 44AB OF THE ACT WAS DUE TO DE LAY IN FINALIZATION OF CONSOLIDATION OF ACCOUNTS WHICH TOOK PLACE MORE TIME THAN EXPECTED AND ALSO THIS WAS THE INITIAL YEAR OF THE NEW CONCERN WHICH IS A REASONABLE CAUSE AS PRESCRIBED U/S. 273B OF THE I . T. ACT. THE LD. AR RELIED ON THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS CONTENTIONS: I) CIT VS. MALAYALAM PLANTATIONS LTD. (1976) (103 ITR 835) (KER.) II) ACIT VS. AMAR CHAND RAJ KUMAR (2004) (89 ITD 96)(ITAT, CHANDIGARH) III) PREM PRAKASH SENAPATI VS. ITO (ITA NO.459&185/CTK/2017 DATED 17/04/2018) )(ITAT, CUTTACK) . I.T.A. NO . 265 /COCH/ 201 8 7 8 .1 FROM THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEE GOT HIS BOOKS OF ACCOUNTS AUDITED ON 11/03/2009 WHICH WAS MADE AVAILABLE T O THE ASSESSING OFFICER BEFORE PA SSING THE ASSESSMENT ORDER ON 09/12/2010 U/S. 143(3) OF THE ACT AND NO PREJUDICE HAS BEEN CAUSED TO THE REVENUE. NOW THE SHORT QUESTION THAT ARISES IS WHETHER IN THIS SCENARIO, PENALTY U/S. 271B OF THE ACT CAN BE LEVIED OR NOT. IN OUR CONSIDERED OPINION , THE ASSESSEE HAD ONLY COMMITTED TECHNICAL VENIAL BREACH WHICH DOES NOT CREATE ANY LOSS TO THE EXCHEQUER AS THE AUDIT REPORT WAS AVAILABLE TO THE ASSESSING OFFICER BEFORE THE COMPLETION OF THE ASSESSMENT PROCEEDINGS. THE MADRAS HIGH COURT IN THE CASE OF CIT VS. A.N. ARUNACHALAM (208 ITR 481) IN THE CONTEXT OF FILING OF AUDIT REPORT FOR CLAIMING DEDUCTION U/S. 80J OF THE ACT, OBSERVED THAT ONCE AUDIT REPORT HAS BEEN MADE AVAILABLE BEFORE THE LD. ASSESSING OFFICER BEFORE THE COMPLETION OF ASSESSMENT PROCEE DINGS, THE ASSESSEE SHOULD BE GRANTED DEDUCTION U/S. 80J OF THE ACT. WE OBSERVE THAT TH IS JUDGMENT WAS RENDERED IN THE CONTEXT OF ADJUDICATION OF QUANTUM OF DEDUCTION CLAIMED BY THE ASSESSEE. HENCE, THE SAID ANALOGY CAN VERY WELL BE DRAWN AND USED IN THE P ENALTY PROCEEDINGS LIKE THAT OF THE ASSESSEE. TO SUM UP, WE HOLD THAT THE ASSESSEE HAD COMMITTED ONLY TECHNICAL VENIAL BREACH FOR WHICH HE CANNOT BE PENALIZED. IN VIEW OF THE ABOVE, WE ARE INCLINED TO DELETE THE PENALTY MADE BY THE ASSESSEE U/S. 271B OF THE ACT. I.T.A. NO . 265 /COCH/ 201 8 8 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST AUGUST , 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: AUGUST , 2019 GJ COPY TO: 1 . M/S. JEENA HOTEL & UDAYA BAR, DANAPADY, HARIPPAD, ALAPPUZHA. 2. T HE ASSISTANT COMMISSI ONER OF INCOME - T AX , CIRCLE - 1, ALAPPUZHA. 3 . THE COMMISSIONER OF INCOME - TAX (AP P EALS) , KOTTAYAM . 4 . THE PR. COMMISSIONER OF INCOME - TAX, KOTTAYAM. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN