Sri. Lalanath Reddy, Bangalore V. ACIT, Bangalore

ITA 270/BANG/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8597 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G KAMALADHAR
• Keywords: Bonafide belief; Question of law; Revised return
• Section: 273B; 153A; 145; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NOS.270, 271 & 272/BANG/2014 ASSESSMENT YEARS : 2006-07, 2007-08, 2008-09 SHRI. LALANATH REDDY, NO.1, WHITE HOUSE, GNR ENCLAVE, BABUSAPALYA, AGARA MAIN ROAD, BANGALORE 560 043. PAN : AHPPR3768J VS. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 1(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SMT. JINITA CHATTERJEE, ADVOCATE REVENUE BY : SHRI. G. KAMALADHAR, STANDING COUNSEL DATE OF HEARING : 06.02.2017 DATE OF PRONOUNCEMENT : 07.02 .2017 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER THESE ARE THE THREE APPEALS ARISING OUT OF THE COMM ON ORDER PASSED BY THE CIT DATED 28.11.2013 CONFIRMING THE I MPOSITION OF THE PENALTY FOR VIOLATION OF SECTION 44AB UNDER SECTION 271B OF THE INCOME TAX ACT. ITA NOS.270, 271 & 272/BANG/2014 PAGE 2 OF 7 2. BRIEF FACTS OF THE CASE IN ITA NOS.270/BANG/2014 AND ASSESSMENT YEAR : 2006-07 A SEARCH WAS CONDUCTED UNDER SECTION 132 OF THE INC OME TAX ACT ON 16.09.2008 AND THE AO FOUND THAT THE GROSS R ECEIPTS ON SALE OF SITE OF G. L. RESIDENCY PROJECTS WAS RS.65,06,118/- AND FOR AIR CITY PROJECTS IS RS.1,49,22,440/- FOR THE FINANCIAL YEAR ENDING 31.03.2007. THE AO ALSO NOTED THAT THE ASSESSEE WAS REQUIRED TO GET THE ASSESSEES ACCOUNT AUDITED UNDER SECTION 44AB OF THE ACT AND H OWEVER ASSESSEE HAD FAILED TO DO SO. THEREFORE, THE NOTICE WAS ISS UED ON 31.12.2010 AND 28.01.2011. 3. THE ASSESSEE, IN RESPONSE TO THE NOTICE FILED RE PLY TO THE SHOW CAUSE NOTICE AND IN THE REPLY IT WAS SUBMITTED BY T HE ASSESSEE THAT THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AN D THE RECEIPTS WERE BELOW THE LIMITS PRESCRIBED UNDER SECTION. HO WEVER, WITH A VIEW TO MITIGATE THE LITIGATION, THE ASSESSEE HAD DECLAR ED THE INCOME BEFORE THE AO AND THE REVISED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WAS FILED BEFORE THE AO. IT WAS SUBMITTED ON BEHALF OF ASSESSEE THAT HE WAS UNDER GENUINE BELIEF THAT THE ACCOUNTS ARE NOT REQUIRED TO BE AUDITED AND IT IS ONLY REQUIRED TO BE AUDITED AT TH E END OF THE PROJECT AS THE ASSESSEE WAS CONSISTENTLY FOLLOWING THE PROJECT COMPLETION METHOD. THE ASSESSEE RELIED UPON THE FOLLOWING JUDGMENTS FO R THE PURPOSE OF PROVING THE CASE: ITA NOS.270, 271 & 272/BANG/2014 PAGE 3 OF 7 1. KORAMANGALA CLUB VS. ITO IN ITA NO. 279&280/2010 DATED 26.02.2016. 2. CIT VS. TEA KING (2000) 158 CTR 0413 3. APL (INDIA) PVT. LTD., VS. JCIT IN ITA NO.4796/M/2012 DATD 25.10.2013. 4. NANDI HOUSING (P) LTD., VS. DCIT (2003) 80 TTJ 0750. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE R EVENUE HAS SUBMITTED THAT THE ASSESSEE HAS NOT COMPLIED WITH T HE PROVISION OF SECTION 44AB AND HAS THUS SUBJECTED FOR THE PENALTY UNDER SECTION 271B OF THE ACT WERE RIGHTLY LEVIED ON HIM AND LD DR RELIED UPON FOLLOWING 2 JUDGMENTS. 1 DCIT VS. GOPAL KRISHAN BUILDERS (2004) 91 ITD 124 LUCK 2 CIT VS. S. C NAREGAL (2010 )329 ITR 615 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTI ES AND PERUSED THE RECORD. . THE SEARCH HAS TAKEN PLACE UNDER SE CTION 132 OF THE IT ACT ON 16.09.2008 AND THE NOTICE UNDER SECTION 153A WAS ISSUED FOR THE AY 2006-07 ON 02.02.2010 AND THEREAFTER THE ASS ESSEE IN RESPONSE TO THE NOTICE HAD FILED THE RETURN OF INCOME UNDER SECTION 153A ON 29.07.2010. THE ORIGINAL RETURN OF INCOME WAS FILE D ON 31.07.2007. IN THE REVISED RETURN FILED PURSUANT TO SECTION 153A, THE ASSESSEE HAD DECLARED AN ADDITIONAL INCOME OF RS.32,43,094/-. T HE ASSESSEE HAS SHOWN TO US THE AUDITED REPORT AT PAGE 93 DATED 30. 09.2009 AND DURING THE COURSE OF ARGUMENT, IT WAS SUBMITTED THAT THE A UDITED REPORTS WERE FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEED INGS OR IN THE PENALTY PROCEEDINGS OF THE AO. WE HAVE GONE THROUG H THE ASSESSMENT ORDER DATED 31.12.2010 ASSED UNDER SECTION 153A WHE REIN THERE IS NO WHISPER OF THE FILING OF AUDITED REPORT DATED 30.09 .2009 BEFORE THE AO. THE AO IN THE ASSESSMENT ORDER HAS CATEGORICALLY ME NTIONED FOR ITA NOS.270, 271 & 272/BANG/2014 PAGE 4 OF 7 INITIATION OF PENALTY UNDER SECTION 271(1)(C) AND 2 71B SEPARATELY. THE IMPOSITION OF PENALTY UNDER SECTION 271B PROVIDES A S UNDER: IF ANY PERSON FAILS 5 [* * *] TO GET HIS ACCOUNTS AUDITED IN RESPECT OF A NY PREVIOUS YEAR OR YEARS RELEVANT TO AN ASSESSMENT YE AR OR 6[FURNISH A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB], THE 7 [ASSESSING] OFFICER MAY DIRECT THAT SUCH PERSONAL SHALL PAY, BY WAY OF PENALTY, A SUM E QUAL TO ONE-HALF PER CENT OF THE TOTAL SALES, TURNOVER OR GROSS RECEIPTS, AS THE CAS E MAY BE, IN BUSINESS, OR OF THE GROSS RECEIPTS IN PROFESSION, IN SUCH PREVIOUS YEAR OR YEARS OR A SUM OF 8 [ONE HUNDRED FIFTY THOUSAND RUPEES], WHICHEVER IS LESS.] 6. THE PENALTY UNDER SECTION 271B IS IMPOSABLE UNDE R THE ACT IF THE ASSESSEE FAILS TO PROVE THAT THERE WAS A REASON ABLE CAUSE FOR FAILURE ON THE PART OF THE ASSESSEE FOR NOT COMPLYING THE M ANDATORY PROVISION OF SECTION 44AB IN TERMS OF 273B OF THE ACT. IN OU R VIEW, THE ASSESSEE WAS REQUIRED TO GET ITS ACCOUNTS AUDITED AT THE TIM E OF FILING OF THE RETURN OF INCOME AT THE FIRST INSTANCE I.E., ON 30. 07.2007 AND IN ANY CASE THE ASSESSEE WAS HAVING AN OPPORTUNITY TO FILE THE AUDITED REPORTS AFTER RECEIPT OF THE NOTICE UNDER SECTION 153A OF THE ACT WHEN THE ASSESSEE WAS CALLED UPON TO FILE THE RETURN OF INCOME. HOWE VER, DESPITE RECEIPT OF NOTICE ISSUED UNDER SECTION 153A, THE ASSESSEE H AD FAILED TO FILE THE AUDITED ACCOUNTS REPORT. IN OUR VIEW, THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE WAS FOLLOWING THE PROJECT COMPLETION METHO D, THEREFORE THE ASSESSEE HAD BONAFIDE BELIEF FOR NOT GETTING ITS AC COUNTS AUDITED, IS NOT SUSTAINABLE AS THE APPLICATION OF SECTION 44AB IS I NDEPENDENT AND IS NOT DEPENDED UPON THE METHOD OF ACCOUNTS ADOPTED BY THE ASSESSEE UNDER SECTION 145 OF THE ACT WHETHER IT IS PROJECT COMPLETION METHOD OR PERCENTAGE COMPLETION METHOD. IN OUR VIEW, THE REQUIREMENT UNDER SECTION 44AB IS BASED ON THE TOTAL SALES, TURNOVER OR GROSS RECEIPT AS THE CASE MAY BE OF THE ASSESSEE AND . IF IT EXCEEDS THE THRESHOLD LIMIT AS PROVIDED UNDER THE ACT, THEN THE ASSESSEE IS REQ UIRED TO COMPULSORILY GET ITS ACCOUNTS AUDITED BEFORE THE SP ECIFIC DATE. SINCE, THE ASSESSEE HAS FAILED TO DO SO, THEREFORE, WE HAV E NO OTHER OPTION BUT TO CONFIRM THE ORDER PASSED BY THE CIT IN IMPOSING THE PENALTY. EVEN OTHERWISE, THE CASE OF THE REVENUE (CONFIRMING THE IMPOSITION OF ITA NOS.270, 271 & 272/BANG/2014 PAGE 5 OF 7 PENALTY) IS ALSO COVERED BY THE JUDGMENT OF THE LUC KNOW TRIBUNAL IN THE MATTER OF DCIT VS. GOPAL KRISHAN BUILDERS (2004 ) 91 ITD 124 LUCK WHEREIN THE TRIBUNAL HAS NOTED AS UNDER: 8. THE OTHER PLEA OF THE LD. COUNSEL FOR THE ASSESS EE WAS IN RESPECT OF THE VERY OBJECT, FOR WHICH SECTION 44AB OF THIS ACT WAS BROUGHT ON STATUTE. THE PHILOSOPHY BEHIND THE COMPULSORY AUDIT IS STATED IN PARA 17.2 OF CIRCULAR 387 DATED 6.7.1984 AND REPRODUCED BY LD. CIT(A). THERE IS NO DISPUTE ABOUT THE VERY OBJECT OF BRINGING PROVISIONS OF SECTION 44AB AND THE SAME HAD FURTHER BEEN LAID DOWN IN THE CASE OF RAJKOT ENGINEERING ASSOCIATION AND ORS. V. UNION OF INDIA (SUPRA) TO THE EFFECT THAT OBJECT OF SECTION 44AB OF THE ACT READ WITH RULE 6G OF INCOME TAX RULES IS TO SAFEGUARD AGAINST TAX EVASIO N AND TAX AVOIDANCE WHICH WILL ENSURE THAT THE ECONOMIC SYSTEM DOES NOT RESULT IN CONCENTRATION OF WEALTH TO THE COMMON DETRIMENT. THE LD. CIT(A), WHILE DISPOSING O FF THE APPEAL OF THE ASSESSEE, HAD REFERRED TO THE GUIDELINES ISSUED BY THE INSTIT UTE OF CHARTERED ACCOUNTANTS. THE SAME IS QUOTED IN PARA 6 OF HER ORDER. THE LD. COUN SEL HAS NOT BROUGHT BEFORE ME THE SAID AUDIT GUIDELINES. EVEN IF, FOR THE SAKE OF ARGUMENT, THE SAME MAY BE TREATED AS IN EXISTENCE, THEN THE SAME WILL BE AGAI NST THE VERY OBJECT BEHIND SECTION 44AB OF THE ACT. IN CASE IT IS TAKEN THAT ASSESSEE IS F OLLOWING THE SYSTEM IN WHICH INCOME IS RETURNED ON COMPLETION OF THE PROJECT AND IN CASE PROJECT GOES ON FOR MORE THAN 5 YEARS AND ASSESSEE GETS ITS BOOKS OF AC COUNT AUDITED FOR LAST YEAR IN WHICH PROJECT IS COMPLETED, THEN FROM WHERE A.O. WI LL BE ABLE TO VERIFY THE FIGURES OF EXPENSES AND RECEIPTS ETC. OF EARLIER YEARS. SO, IT IS AGAINST THE VERY PRINCIPLE OF SECTION 44AB THAT IN PROJECT COMPLETION ASSESSEE WOULD GET THE BOOKS OF ACCOUNT AUDITED IN THE LAST YEAR AND NOT IN EARLIER YEARS W HEN HE IS DEBITING THE EXPENSES AND SHOWING SUNDRY DEBITS AND DIFFERENT TYPES OF RE CEIPTS ARE ALSO THERE. ON THE BASIS OF ABOVE, I AM OF THE VIEW THAT ASSESSEE AT T HE OUTSET HAD NOT BEEN ABLE TO BRING BEFORE ME THE AUDIT GUIDELINE AND EVEN IF SUC H GUIDELINE IS THERE, THE SAME IS AGAINST THE VERY PROVISIONS OF SECTION 44AB . 7. MOREOVER, THE JUDGMENT OF THE JURISDICTIONAL HIG H COURT IN THE MATTER OF CIT VS. S. C NAREGAL (2010 )329 ITR 615IS SQUARELY APPLICABLE TO THE CASE IN HAND . IN THE SAID JUDGM ENT THE JURISDICTIONAL HIGH COURT HELD AS UNDER: ITA NOS.270, 271 & 272/BANG/2014 PAGE 6 OF 7 THIS SUBSTANTIAL QUESTION OF LAW DOES NOT ARISE FOR CONSIDERATION IN THIS APPEAL AS IT IS CLEAR FROM THE PROVISIONS OF S ECTION 44AB OF THE ACT THAT WHENEVER THE TURNOVER EXCEEDS RUPEES FORTY LAKHS, T HE ACCOUNTS ARE REQUIRED TO BE AUDITED AND THE QUESTION AS TO WHETHER THE ASSESSEE WAS RECEIVING COMMISSION AND NOT PROFIT WOULD NOT IN ANY WAY AFFECT THE LIABILIT Y OF THE ASSESSEE IN GETTING THE ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT. 8. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS REQUIRED TO BE DISMISSED. WE MAY NOTICE THAT NONE OF THE JUDGMENT CITED BY THE ASSESSEE DEALS WITH THE ISSUE OF IMPOSITION OF PENA LTY UNDER SECTION 271B FOR NOT GETTING ITS ACCOUNTS AUDITED UNDER SEC TION 44AB. ITA NOS. 271, 272/BANG/2014 9. THE APPEAL NOS. 271 AND 272 HAS THE FACTS SIMILA R TO THE FACTS OF THE APPEAL NO. 270 WHICH WE HAVE DECIDED HEREIN ABO VE. THEREFORE, THESE 2 APPEALS ARE ALSO DISMISSED BY FOLLOWING THE ANALOGY AND RATIO WHICH WE HAVE LAID DOWN IN THE APPEAL ITA NO. 270/2 014. ACCORDINGLY, THESE TWO APPEALS ARE ALSO DISMISSED. 10. IN THE RESULT, THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 7 TH FEBRUARY, 2017. SD/- SD/- (A. K. GARODIA) (LALI ET KUMAR) ACCOUNTANT MEMBER JUDI CIAL MEMBER BANGALORE. DATED: 07 TH FEBRUARY, 2017. /NS/ ITA NOS.270, 271 & 272/BANG/2014 PAGE 7 OF 7 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.