Saral Plastics Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-8(1), Ahmedabad

ITA 2686/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9700 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Keywords: Unexplained investment; Reasonable cause; Corroborative evidences
• Section: 273B; 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2686/AHD/2013 (ASSESSMENT YEAR: 2008-09) SARAL PLASTICS PVT. LTD. SHREE PAL, ABOVE INDIAN BANK, NR. PUROHIT HOTEL KHADIA AHMEDABAD- 380001 V/S INCOME TAX OFFICER, WARD- 8 (1), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AADCS 0480 N APPELLANT BY : SHRI P. M. MEHTA, AR RESPONDENT BY : SHRI PRASOON KABRA, SR. D.R. ( )/ ORDER DATE OF HEARING : 20-12-2016 DATE OF PRONOUNCEMENT : 21-12-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-XIV, AHMEDABAD DATED 12.09.2013 PERTAINING TO A.Y. 2008- 09. ITA NO. 2686 /AHD/2013 . A.Y. 2008- 09 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 1,00,000/- U/S. 271B OF THE ACT. 3. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. A SKED THE ASSESSEE TO FURNISH TAX AUDIT REPORT AS REQUIRED U/S. 44AB OF T HE ACT. IN SPITE OF SEVERAL NOTICES THE ASSESSEE DID NOT FURNISH THE REQUIRED T AX AUDIT REPORT WHICH PROMPTED THE A.O. TO INITIATE PENALTY PROCEEDINGS U /S. 271B OF THE ACT. 4. DURING THE COURSE OF THE PENAL PROCEEDINGS, THE ASS ESSEE WAS ASKED TO SHOW CAUSE AS TO WHY AN ORDER IMPOSING A PENALTY U/ S. 271B SHOULD NOT BE MADE. ASSESSEE FILED A DETAILED REPLY WHICH READS A S UNDER:- 1.1 IN RESPONSE TO THE SAME, IT IS SUBMITTED THAT THE A SSESSEE HAS PREFERRED AN APPEAL BEFORE HON'BLE CIT(A). COPY OF FORM NO. 3 5 IS ENCL OSED HEREWITH AND MARKED THE SAME AS ANNEXURE-1. THE ASSESSEE HERE ALSO RELIES O N THE PROVISION OF SECTION 275 OF THE I.T. ACT. FOR NOT IMPOSING THE SAID PENALTY, TI LL ORDER OF CIT(A) IS RECEIVED. 1.2 WITHOUT PREJUDICE TO ABOVE, THE ASSESSEE FURTHER SU BMITS THAT THE A.O. HAS OBSERVED IN ITS IMPUGNED ORDER THAT THE ASSESSEE CO MPANY HAS NOT FURNISHED THE AUDIT REPORT U/S 44AE OF THE I.T .ACT DURING THE AS SESSMENT PROCEEDINGS AND DRAWN A CONCLUSION THAT THE IT HAS NOT GOT ITS BOOKS OF A CCOUNT AUDITED AND THEREBY INITIATED THE PENALTY UNDER SECTION 271 B OF I.T. A CT. 1.3. IN THIS CONNECTION, THE ASSESSEE SUBMITS THAT IT HAS FILED ITS RETURN OF INCOME FOR CURRENT ASSESSMENT YEAR ON 28/9/2008 ELECTRONICALLY IN ITR-6. IT IS FURTHER SUBMITTED THAT AS PER SUCH FORM, ASSESSEE IS REQUIRED TO MENT ION WHETHER ASSESSEE IS LIABLE TO TAX AUDIT REPORT OR NOT, WHEREIN ASSESSEE HAS MENTI ONED THAT 'YES'. ITA NO. 2686 /AHD/2013 . A.Y. 2008- 09 3 FURTHER, IT HAD SUBMITTED THE FOLLOWING DETAILS AS REQUIRED IN ITR-6. (I) NAME OF THE AUDITOR SIGNING TAX AUDIT REPO RT. (II) MEMBERSHIP NUMBER OF THE AUDITOR (III) NAME OF THE AUDITOR (PROPRIETORSHIP /FIRM) (IV) PAN OF THE PROPRIETORSHIP/FIRM (V) DATE OF THE AUDIT REPORT IT IS EVIDENT FROM SUCH DETAILS THAT ASSESSEE HAS O BTAINED TAX AUDIT REPORT REQUIRED U/S 44AB OF THE ACT HENCE ASSESSEE CANNOT BE TREATE D AS ASSESSEE IN DEFAULT FOR NON OBTAINING THE TAX AUDIT REPORT BEFORE DUE DATE OF F ILING RETURN. IT IS THEREFORE STATES THAT THERE CANNOT BE ANY INITIATION OF PENALTY FOR NON SUBMISSION OF TAX AUDIT REPORT. WITH REFERENCE TO LETTER DATED 18/11/2010 REQUIRING ASSESSEE TO FILE AUDIT REPORT U/S 44AB BY 26/11/2010, ASSESSEE SUBMITS THAT MOTHE R OF AUTHORIZED REPRESENTATIVE WAS DIED ON 24/11/2010, SO HE WAS UN ABLE TO ATTEND HEARING ON 26/11/2010 AND ON THE SAME DAY, ASSESSEE HAS REQUES TED YOUR GOOD SELVES FOR ADJOURNMENT UP TO 30/11/2010 WHICH WAS DENIED BY YO UR GOOD SELVES. THUS THE ASSESSEE COMPANY HAS REASONABLE CAUSE FOR NON SUBMI SSION OF DETAILS CALLED FOR. CONSIDERING THIS, ASSESSEE REQUESTS YOUR GOOD SELVE S TO KINDLY DROP THE PENALTY PROCEEDINGS INITIATED IN CASE OF IT THUS LOOKING TO THE PROVISION OF SECTION 271 B IT I S NOT CORRECT TO SAY THAT ONCE THE DEFAULT IN COMPLYING THE PROVISIONS OF SECTION 44AB IS FOUND, THE LEVY OF PENALTY IS OBLIGATORY, MANDATORY AND AUTOMATIC. IT IS FURTHER STATED THAT THE USE OF THE WORD 'MAY DIRECT' CLEARLY REVEALS THAT THE ASSESSING OFF ICER IS VESTED WITH THE DISCRETION TO IMPOSE OR NOT TO IMPOSE PENALTY KEEPING IN MIND THE FACTS AND CIRCUMSTANCES IN EACH CASE. REF: INDIAN HANDLOOM TEXTILES VS ITO (19 99) 68 1TD560, ASST. CIT VS GAYATRI TRADERS (1996) 58ITD 121. ITA NO. 2686 /AHD/2013 . A.Y. 2008- 09 4 1.5 WITHOUT PREJUDICE., IT IS FURTHER SUBMITTED THA T THE AFORESAID SECTION 27IB IS GOVERNED BY SECTION 273B WHICH BEARS A HEAD ING 'PENALTY NOT TO BE IMPOSED IN CERTAIN CASES' AND STARTS WITH A NON OBSTANTE CLA USE. OMITTING THE IRRELEVANT PARTS, THAT SECTION WOULD READ AS FOLLOWS: '273B. NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 27IB, 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 W AS REASONABLE CAUSE FOR THE SAID FAILURE.' (EMPHASIS SUPPLIED) THUS, PENALTY U/S. 271 B SHALL NOT BE IMPOSABLE IF THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR NOT GETTING ACCOUNTS AUD ITED. IN THE EPOCH MAKING DECISION IN HINDUSTAN STEEL LTD. VS STATE OF ORISSA (1972) 83 1TR 26 (SC) THE SUPREME COURT HAS INTERALIA HELD THAT 'THE AUTHORIT Y COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PEN ALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE '. WITHOUT PREJUDICE, IT IS FURTHER SUBMITTED THAT IT IS IN THE DISCRETION OF THE ADJUDICATING AUTHORITY -WHETHER TO LEVY PENALTY OR NOT. THIS IS OBVIOUS FROM THE PHRASEOLOGY USED IN THE MAIN PART OF SECTION 271 B AND THE RELEVANT PART OF IT IS 'THE ASSESSING OFFICER MAY DIRECT THAT SUCH PERSON S HALL PAY BY WAY OF PENALTY'. THUS, THE ASSESSING OFFICER MAY (OR MAY NOT) DIRECT THAT THE ASSESSEE 'SHALL PAY BY WAY OF PENALTY...' IT IS SUBMITTED THAT THE USER OF WORD 'MAY' THEREIN IS SIGNIFICANT INSOFAR AS IT GIVES DISCRETION TO THE A SSESSING OFFICER TO LEVY OR NOT LEVY PENALTY. ON THE ASPECT OF SUCH USER OF WORD 'MAY' WE NOW HAVE THE BENEFIT OF THE SUPREME COURT DECISION IN P. K. NOORJEHAN (1999 ) 237 ITR 570 (SC) WHEREIN ITA NO. 2686 /AHD/2013 . A.Y. 2008- 09 5 THE POINT INVOLVED WAS WHETHER IN TERMS OF SECTION 69 FOR UNEXPLAINED INVESTMENT THE ASSESSING OFFICER WAS BOUND TO INCLUDE IT IN TA XABLE INCOME. THE SUPREME COURT HELD THAT EVEN WHEN THE ASSESSEE'S EXPLANATIO N WAS NOT SATISFACTORY, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN NOT UPHOLDING THE ADDITION U/S.69. IT IS SUBMITTED THAT IF THE USER OF WORD 'MAY' IN SECTION 69 HAS BEEN VIEWED BY THE SUPREME COURT IN THAT FASHION THERE IS NO QUESTION OF NOT VIEWING THE USER OF WORD 'MAY' IN S ECTION 271B IN THAT VERY FASHION. IF ANYTHING ASSESSEE'S THIS PLEA IS STILL STRONGER INSOFAR AS SECTION 69 ENVISAGES ONLY LEVY OF TAX WHILE SECTION 271B ENVIS AGES LEVY OF PENALTY. 5. THE CONTENTIONS OF THE ASSESSEE WAS DISMISSED BY TH E A.O. BY MAKING THE FOLLOWING OBSERVATIONS:- 1. THE CONTENTION OF THE ASSESSEE THAT IT HAS PREFERRE D AN APPEAL BEFORE HONBLE CIT(A) IS NOT ACCEPTED AS THE APPEAL FILED AGAINST THE ORDER U/S. 143(3) HAS NO RELEVANCE WITH PROCEEDINGS INITIATED U/S. 271B OF T HE I.T. ACT FOR VIOLATION OF PROVISIONS OF SECTION 44AB OF THE I.T. ACT. 2. THE ANOTHER CONTENTION OF THE ASSESSEE THAT IT HAS FILED ITS RETURN OF INCOME FOR CURRENT ASSESSMENT YEAR ON 28.9.2008 ELECTRONICALLY IN ITR-6 AND HAD CONFIRMED IN ITS RETURN OF INCOME THAT IT HAD GOT ITS ACCOUNT AUDITED BY FILLING APPROPRIATE COLUMNS WHILE SUBMITTED THE DETAILS AS REQUIRED IN ITR-6, DOES NOT HOLD ANY WATER IN ABSENCE OF ANY CORROBORATIVE EVIDENCES. MERELY B ECAUSE IT HAS BEEN STATED BY THE ASSESSEE THAT IT HAD CLAIMED IN ITS RETURN OF I NCOME THAT IT HAD GOT ITS ACCOUNT AUDITED U/S 44AB OF THE I.T.ACT AND IT HAD CITED TH E NAME OF THE AUDITOR AND THEREFORE IT IS NOT LIABLE TO FURNISH THE SAME BEFO RE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDING IS NOT SUFFICIE NT COMPLIANCE OF THE SECTION 44AB OF THE ACT. IT IS NOT OUT OF CONTEXT TO MENTIO N HERE THAT IN THIS CASE THE CHARTERED ACCOUNTANT WHO HAS ATTENDED THE ASSESSMEN T PROCEEDING ALONG WITH ITA NO. 2686 /AHD/2013 . A.Y. 2008- 09 6 THE DIRECTOR/DIRECTORS OF THE COMPANY IS THE SAME P ERSON WHOSE NAME HAD BEEN MENTIONED BY THE ASSESSEE COMPANY IN THE ELECTRONIC ALLY FILED RETURN OF INCOME. THEREFORE IT IS PROVED THAT ALL THE REQUESTS MADE F OR FURNISHING OF THE AUDIT REPORT WERE THE REQUESTS TO HIM ALSO, BUT BOTH OF T HEM FAILED TO FURNISH IT. FURTHER, WHILE FILING THE ELECTRONIC RETURN OF INCO ME A ASSESSEE FILL UP SO MANY DATA AND INFORMATION, IF THE SAME CONTENTION IS APP LIED THEN NO DETAIL WILL BE FURNISHED BY ANY OF THE ASSESSEE AT THE TIME OF SCR UTINY ASSESSMENT, THAT WILL FINISH THE VERY PURPOSE OF THE SCRUTINY. ACTUALLY T HE ASSESSEE HAD TO FURNISH A COPY OF THE AUDIT REPORT IF THERE IS ANY AUDIT HAD BEEN MADE AS STIPULATED IN SECTION 44AB OF THE ACT, IN WHICH THE ASSESSEE PROVED FAIL. BY FURNISHING THESE BASELESS CONTENTION IS NOTHING BUT JUST A FACE SAVING EFFORT . 3. THE ASSESSEE'S CONTENTION THAT MOTHER OF THE AUTHOR IZED REPRESENTATIVE DIED ON 24.11.2010 AND WAS UNABLE TO ATTEND HEARING ON 26.1 1.2010 AND ON THE SAME DAY THE ASSESSEE HAD REQUESTED FOR ADJOURNMENT UP T O 30.11.2010 WHICH WAS DENIED BY THE AO. THUS THE COMPANY HAS REASONABLE C AUSE FOR NON SUBMISSION OF DETAILS CALLED FOR. CONSIDERING THIS THE ASSESSEE C OMPANY REQUESTED TO KINDLY DROP THE PENALTY PROCEEDING INITIATED. THIS CONTENTION O F THE ASSESSEE IS ALSO HOLD NO WATER AS FOR FILING REPORT U/S. 44AB OF THE I T ACT THE PRESENCE OF AR IS NOT REQUIRED THE DIRECTOR OR THE PRINCIPAL OFFICER COUL D HAVE FILED THE REPORT BEFORE THE AO. FURTHER AS PER THE ACT THE ASSESSEE OUGHT TO HA VE' GOT AUDITED ITS BOOKS OF ACCOUNT ON BEFORE THE DATE OF FILING OF RETURN OF I NCOME AS STIPULATED BY THE ACT AND AT THE TIME WHEN THE ASSESSMENT PROCEEDING WAS GOING ON MORE THAN ONE YEAR HAD BEEN PASSED, IT IS VERY SURPRISING TO NOTE THAT THE ASSESSEE COULD NOT HAVE OBTAINED THE SAID AUDIT REPORT FROM THE AUDITO R. AS THE A.O. HAS NOT GRANTED THE ADJOURNMENT, THEREFORE, REPORT COULD NO T BE FILED IS TOTALLY INCORRECT ILLOGICAL ONE. ITA NO. 2686 /AHD/2013 . A.Y. 2008- 09 7 6. THE A.O. COMPLETED THE PENAL PROCEEDINGS BY LEVYING PENALTY OF RS. 1,00,000/-. 7. THE ASSESSEE UNSUCCESSFULLY APPROACHED THE FIRST AP PELLATE AUTHORITY WHO CONFIRMED THE LEVY OF PENALTY. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE 57 OF THE PAPER BOOK AND STATED THAT THE ASSESSEE HAD OBTAINED THE AUDIT REPORT U/S. 44AB OF THE ACT ON 02.09.2008 AND THE RETURN WAS ELECTRONICALLY FILED ON 28.09.20 08. IT IS THE SAY OF THE LD. COUNSEL THAT THE ASSESSEE HAS OBTAINED THE AUDIT RE PORT BEFORE FURNISHING THE RETURN OF INCOME. THE LD. COUNSEL FURTHER STATE D THAT SINCE THE ELECTRONIC RETURN WAS PAPERLESS RETURN, THEREFORE, THERE IS NO REQUIREMENT TO SUBMIT THE AUDIT REPORT ALONG WITH THE RETURN OF INCOME. THE LD. COUNSEL CONTINUED BY STATING THAT SINCE THE ASSESSEE WAS PR EVENTED BY REASONABLE AND SUFFICIENT CAUSE IN NOT FURNISHING THE AUDIT RE PORT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, PENALTY CANNOT BE LEVIE D. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. THE UNDISPUTED FACT IS THAT THE RETURN OF INCOME WAS FI LED ELECTRONICALLY AND BEING A PAPERLESS RETURN, THERE WAS NO REQUIREMENT TO FILE THE AUDIT REPORT ALONG WITH THE RETURN OF INCOME. IT IS ALSO AN UNDI SPUTED FACT THAT COMPLETE DETAILS OF AUDITORS WERE FURNISHED IN THE RETURN OF INCOME ITSELF. DETAILS AS REQUIRED IN FORM 3CD WERE ALSO FURNISHED WITH THE E -RETURN SO FILED WHICH IS EVIDENT FROM THE COPY OF RETURN EXHIBITED AT PAGES 54 TO 80 OF THE PAPER BOOK. MERELY BECAUSE DUE TO SOME UNFORESEEN CIRCUMS TANCES, THE ASSESSEE ITA NO. 2686 /AHD/2013 . A.Y. 2008- 09 8 COULD NOT FURNISH THE PHYSICAL AUDIT REPORT BEFORE THE A.O. THAT WOULD NOT JUSTIFY THE LEVY OF PENALTY U/S. 271B OF THE ACT. M ORE SO, BECAUSE THE DETAILS OF THE AUDITORS, THE DETAILS OF THE AUDIT REPORT AN D THE AUDITED FINANCIAL STATEMENTS WERE PLACED BEFORE THE A.O. IN THE FORM OF E -RETURN OF INCOME. 9. CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND T HIS TO BE A FIT CASE FOR THE LEVY OF PENALTY. WE ACCORDINGLY SET ASIDE THE FINDI NGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE PENALTY OF RS. 1,00,0 00/-. 10. APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 21 - 12- 20 16. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 21 /12/2016 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD