PREM PRAKASH GUPTA, Jaipur V. ITO, Jaipur

ITA 287/JPR/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9041 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Assessee Lawyers: RAJENDRA KR GUPTA CA DH R LS
• Keywords: Bonafide belief
• Section: 143(3); 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES SMC, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA- @ ITA NO. 287/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 PREM PRAKASH GUPTA, 977B, KISHAN MARG, BARKAT NAGAR, TONK ROAD, JAIPUR. CUKE VS. THE I.T.O., WARD-6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: ABOPG 3665 J VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI RAJENDRA KR. GUPTA (CA) JKTLO DH VKSJR LS @ REVENUE BY : MRS. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 28/01/2015 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 29/01/2015 VKNS'K @ ORDER PER: R.P. TOLANI, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 17/12/2013 BY THE LEARNED CIT(A)-II, JAIPUR FOR A. Y. 2008-09. THE SOLE GROUND OF APPEAL RAISED IS AS UNDER:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL-II), JAIPUR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND ITA 287/JP/2014_ PREM PRAKASH GUPTA VS. ITO 2 CIRCUMSTANCES OF THE CASE BY SUSTAINING IMPOSITION OF PENALTY U/S 271B OF RS. 1,00,000/- FOR NON CONDUCTI NG OF TAX AUDIT U/S 44AB WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE IS A LICENSED STAMP VENDOR WHO IS SELLING STAMP RECEIVED FROM TREASURY AFTER DEDUCTING COMMISSION A ND THEREFORE AMOUNT RECEIVED AGAINST STAMP IS NOT A PA RT OF HIS SALES AND THUS THE SAID PENALTY IMPOSED U/S 271 B SHOULD BE DELETED. 2. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT T HE ASSESSEE IS A GOVERNMENT APPOINTED LICENSED VENDOR FOR SALE OF ST AMPS. AS PER THE STAMP ACT, THE ASSESSEE IS ELIGIBLE ONLY TO COMMISS ION ON THE RATES SPECIFIED BY THE I.G. STAMPS, WHICH ARE MENTIONED IN THE WRITTEN SUBMISSIONS. THE RELATIONSHIP BETWEEN THE ASSESSEE AN D THE GOVERNMENT IS NOT OF SELLER AND PURCHASER, WHICH IS EVIDENT FROM THE PROVISIONS OF INDIAN STAMP ACT. SINCE THE ASSESSEE S COMMISSION DID NOT EXCEED THE PRESCRIBED LIMIT PROVIDED BY SECTION 44A B, THE ASSESSEE DID NOT GET THE ACCOUNTS AUDITED. THE ASSESSMENT ALSO IS FRAMED U/S 143(3) MERELY MAKING AN ADDITION OF RS. 27,000/-. THE ASSE SSING OFFICER, HOWEVER, WAS OF THE VIEW THAT TOTAL VALUE OF THE STAMP S WAS ASSESSEES TURNOVER AND WAS LIABLE FOR AUDIT U/S 44AB, CONSEQUE NTLY ISSUED NOTICE FOR PENALTY U/S 271B. THE ASSESSEE REPLIED THAT IT WA S ELIGIBLE ONLY TO COMMISSION, THE VALUE OF STAMPS WAS NOT HIS TURNOVER , CONSEQUENTLY THE ITA 287/JP/2014_ PREM PRAKASH GUPTA VS. ITO 3 CASE WAS NOT COVERED BY THE PROVISIONS OF SECTION 44 AB AS PER STAMP ACT AS WELL AS THE CBDT CIRCULAR NO. 452 DATED 17/03/ 1986. THE ASSESSING OFFICER, HOWEVER, HELD THAT THE ASSESSEE I S NOT A COMMISSION AGENT AND WAS LIABLE FOR AUDIT U/S 44AB, PENALTY WAS IMPOSED. 3. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WH ERE PENALTY WAS CONFIRMED BY THE LEARNED CIT(A) BY HOLDING AS UNDER :- I HAVE CONSIDERED THE FACTS OF THE CASE; PENALTY O RDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER LE VIED PENALTY UNDER SECTION 271B ON THE GROUND THAT APPELLANT HAD TURNOVER EXCEEDING RS. 40 LAKHS BUT DID NOT GET ACCOUNTS AUD ITED. APPELLANT SUBMITTED THAT HE WAS WORKING AS STAMP VEND OR ON COMMISSION. HE SUBMITTED THAT COMMISSION ON STAMP S ALE IS FIXED AND HAS INTEREST ONLY TO THE EXTENT OF COMMIS SION. HE ALSO REFERRED CBDT CIRCULAR ON THIS ISSUE WHICH WAS ALSO REFERRED BY ASSESSING OFFICER. AS PER THE CIRCULAR, IF ASSESSEE IS ACTING AS KACHHA ARAHTIA, THEN HIS TURNOVER WILL BE RESTRICTED TO COMMISSION INCOME ONLY BUT IF HE IS ACTING AS PACCA ARAHTIA THEN THE GROSS SALE WILL BE IS HIS TURNOVER. THE APPE LLANT SUBMITTED THAT HE WAS NOT TAKING ANY RISK AND SELLI NG STAMP PAPERS AS PER RATE FIXED BY GOVERNMENT THEREFORE HE WAS ACTING AS KACHHA ARAHTIA ONLY. AS AGAINST THIS, A.O . MENTIONED THAT APPELLANT WAS PURCHASING STAMP PAPERS AND SELLI NG THE SAME BY REALIZING THE FULL VALUE. IN CASE OF SPOILA GE OF STAMP PAPERS, THE MONEY IS NOT REIMBURSED BY THE GOVERNME NT ITA 287/JP/2014_ PREM PRAKASH GUPTA VS. ITO 4 DEPARTMENT AND THE LOSS ON ACCOUNT OF THIS IS BORNE BY THE APPELLANT. CONSIDERING THIS, APPELLANT WAS ACTING AS PACCA ARAHTIA. I FIND SUBSTANCE IN A.OS ARGUMENT. ALTHOU GH APPELLANT WAS MAINLY EARNING COMMISSION INCOME BUT HE WAS ALSO TAKING RISK IN THE BUSINESS AND HE WAS NOT HOLDING STAMP PA PERS ON BEHALF OF GOVERNMENT. THEREFORE, NATURE OF HIS BUSIN ESS APPEARS TO BE OF PACCA ARAHTIA. ACCORDINGLY, HE WAS SUPPOSED TO GET ACCOUNTS AUDITED UNDER SECTION 44AB. VIOLATI ON OF THE SAME RESULTS IN LEVY OF PENALTY. ACCORDINGLY, ASSES SING OFFICER IS JUSTIFIED IN LEVY OF PENALTY AND THE SAME IS CONFIR MED. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE ME. 5. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THA T NEVER IN THE PAST OR SUBSEQUENT ASSESSMENTS SEC. 44AB HAS BEEN H ELD TO BE APPLICABLE, IT IS FURTHER PLEADED THAT:- (I) THE STAMP AND STAMP PAPERS ARE SOLD AT ALL THE T REASURIES IN THE STATE AS PER RULE 14A & 14H OF STAMP ACT AND BY LICENSED VENDORS. IN CASE WHERE STAMPS ARE RETURN BY THE LICENSEE ON HIS APPLICATION FOR LEAVE TO RESTORE AN Y OTHER STAMPS THE VALUE OF STAMPS RETURN SHALL BE PAID; IF TREASURY OFFICER IS SATISFIED THAT THE STAMPS RETURNED ARE N OT SPOILED OR DAMAGED AND ARE IN A FIT CONDITION FOR BEING REU SED. (II) THE CBDT BY CIRCULAR NO. 452 DATED 17/03/1986 HA S CLARIFIED THAT THE ABOVE DISTINCTION BETWEEN A KACHH A ARAHTIA AND A PACCA ARAHTIA MAY ALSO BE RELEVANT FO R THE ITA 287/JP/2014_ PREM PRAKASH GUPTA VS. ITO 5 DETERMINATION THE APPLICABILITY OF SECTION 44AB IN THE CASE OF OTHER TYPE OF AGENTS. IN THE CASE OF AGENTS WHOSE POSITION IS SIMILAR TO THAT OF KACHHA ARAHTIA, THE TURNOVER IS ONLY THE COMMISSION AND DOES NOT INCLUDE SALE VALUE ON BEHALF OF THE PRINCIPAL. (III) THE GUIDANCE NOTE ON TAX AUDIT BY ICAI IS AS UN DER: THE QUESTION MAY ALSO ARISE AS TO WHETHER THE SALES BY A COMMISSION AGENT OR BY A PERSON ON CONSIGNMENT BASI S FORMS PART OF TURNOVER OF THE COMMISSION AGENT AND/ OR CONSIGNEE AS THE CASE MAY BE, IN SUCH A CASE IT WILL BE NECESSARY TO FIND OUT WHETHER THE PROPERTY IN THE GO ODS OR ALL SIGNIFICANT RISKS, REWARD OF OWNERSHIP OF GOODS B ELONGS TO THE COMMISSION AGENT OR THE CONSIGNEE IMMEDIATEL Y BEFORE THE TRANSFER BY HIM TO THIRD PERSON. IF THE PROPERTY IN THE GOODS OR ALL SIGNIFICANT RISKS AND REWARD OR OWNERSHIP OF GOODS CONTINUE TO BE BELONG TO THE PRINCIPAL, TH E RELEVANT SALE PRICE SHALL NOT FORM PART OF SALES/TU RNOVER OF THE COMMISSION AGENT AND/OR THE CONSIGNEE AS THE CA SE MAY BE. IF, HOWEVER, THE PROPERTY IN THE GOODS, SIGN IFICANT RISK AND REWARDS OF OWNERSHIP BELONGS TO THE COMMISSI ON AGENT AND/OR THE CONSIGNEE AS THE CASE MAY BE, THE SALE PRICE RECEIVED/RECEIVABLE BY HIM SHALL FORM PART OF HIS SALES/TURNOVER. THE GUIDANCE NOTE ON TAX AUDIT BY ICAI ALSO CLARIFIE S THAT FROM THE LEGAL STATUS OF THE ASSESSEE, IT NEVER RETAINS PROFITS OV ER THE GOODS AS THE ITA 287/JP/2014_ PREM PRAKASH GUPTA VS. ITO 6 SALE OF STAMPS IS A TREASURY FUNCTION AND MERELY A LICENSE IS GIVEN TO THE ASSESSEE TO FACILITATE TO THE SALE OF STAMPS ON BEH ALF OF THE GOVERNMENT AT AGREED COMMISSION. THEREFORE, THE ASSESSEES CASE IS NOT COVERED U/S 44AB ALTERNATIVELY HE WAS UNDER BONAFIDE BELIEF THAT AUDIT U/S 44AB WAS NOT REQUIRED; THE PENALTY MAY E DELETED. 6. THE LEARNED SR.D.R. SUPPORTED THE ORDER OF THE L OWER AUTHORITIES AND CONTENDS THAT IN CASE OF STAMP PAPERS BEING DAM AGED OR SPOILED, THE CORRESPONDING AMOUNT IS NOT REIMBURSED BY THE G OVERNMENT, WHICH IS TO BE BORNE OUT BY THE ASSESSEE. THIS INDICATES T HAT THE PROPERTY IN GOODS I.E. STAMPS STOOD TRANSFERRED TO THE ASSESSEE AS CONTEMPLATED BY THE SALE OF GOODS ACT. THE LEARNED CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE ACTING AS A PUCCA ARAHTIA. 7. I HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE SA LE OF STAMP PAPERS BY LICENSED VENDORS IS A GOVERNMENT ASSIGNED FUNCTI ON TO FACILITATE THE STAMP SALES AT VARIOUS LOCATIONS. THE GOVERNMENT APP OINTS LICENSED AGENTS WHICH ARE REMUNERATED AT A PRESCRIBED FEE SCA LE/COMMISSION, WHICH IS MENTIONED IN THE WRITTEN SUBMISSIONS AND THE STAMP RULES. THE STAMPS ARE SOLD BY THE ASSESSEE ON BEHALF OF THE GO VERNMENT, WHICH IS FURTHER REFLECTED BY THE FACT THAT IF THE LICENSE I S CANCELLED FOR ANY ITA 287/JP/2014_ PREM PRAKASH GUPTA VS. ITO 7 REASON, ALL THE UNSOLD STAMP, STAMP PAPERS, SEALS E TC. ARE TO BE RETURNED TO THE TREASURY WHICH ARE REIMBURSED, THUS THE GOVERNMENT RETAINS OVER ALL CONTROL OVER THE STAMPS. THE CBDT C IRCULAR AND ICAI GUIDELINES FURTHER CORROBORATE THE STAND TAKEN BY T HE ASSESSEE. IN ANY CASE, IT CANNOT BE DENIED THAT THE ASSESSEE WAS ANY BONA FIDE BELIEF THAT HIS CASE IS NOT LIABLE TO AUDIT OF THE BOOKS A S THE VALUE OF STAMP IS NOT HIS TURNOVER AND HAS A ROLE OF COMMISSION AGENT . UNDER THESE FACTS AND CIRCUMSTANCES, I HOLD THAT THE ASSESSEE WAS UNDE R A BONA FIDE BELIEF OF BEING NOT LIABLE FOR AUDIT OF ACCOUNTS U/ S 44AB; THEREFORE, THE PENALTY IMPOSED U/S 271B IS DELETED. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2015. SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 29 TH JANUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- PREM PRAKASH GUPTA, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE I.T.O., WARD-6(2), JAIPUR. ITA 287/JP/2014_ PREM PRAKASH GUPTA VS. ITO 8 3. VK;DJ VK;QDR @ CIT(A)-II, JAIPUR 4. VK;DJ VK;QDR @ CIT, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 287/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR