KILLICK NIXON LTD, MUMBAI V. DCIT CEN CIR 3 & 5, MUMBAI

ITA 2874/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2187 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 19-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Reasonable cause
• Section: 273B; 201; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI VIJAY PAL RAO (J M) I.T.A.NO. 2874 /MUM/2009 (A.Y. 2005-06) M/S. KILLICK NIXON LTD., PLOT NO.7, CHANDIVALI FARMS ROAD, CHANDIVALI, MUMBAI-400 072. PAN: AAACK 8526 A VS. DY. COMMR. OF INCOME-TAX, 3 & 5, 9 TH FLOOR, OLD CGO BLDG., MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHR I VIJAY KOTHARI. RESPONDENT BY SHRI S .M. KESHKAMAT. O R D E R PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY CIT(A) ON 18-02-2009 UPHOLDING THE IMPOSITION OF PENALTY AMOU NTING TO RS.1,00,000/- IMPOSED BY THE A.O. U/S.271B OF THE ACT IN RELATION TO THE A.Y. 2005-06. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED RETURN WITHOUT TAX AUDIT REPORT AS REQUIRED ACCORDING TO T HE PROVISIONS OF SEC. 271B. THE A.O. NOTED THAT THE TURNOVER OF THE ASSESSEE WAS TO THE TUNE OF RS.8.84 CRORES. IN THE ABSENCE OF ANY AUDIT REPORT HAVING BEEN FILE D BY THE ASSESSEE, THE A.O. ISSUED NOTICE FOR THE IMPOSITION OF PENALTY U/S.271 B. IN RESPONSE, THE ASSESSEE STATED, VIDE ITS REPLY DATED 27-05-2008, THAT THE ASSESSEE COMPANY BECAME A SICK INDUSTRIAL UNIT AND CUSTODIAN WAS APPOINTED. I T WAS ALSO CLAIMED THAT THE STATUTORY AUDITOR AND TAX AUDITOR M/S. ABHISHEK AGA RWAL & CO., C.AS., REFUSED TO COMPLETE THE AUDIT WORK WITHOUT PAYMENT OF FEES. TH EREAFTER, A NEW C.A. WAS APPOINTED TO COMPLETE THE AUDIT WORK AND UNDERTOOK TO FILE THE AUDIT REPORT. NOT CONVINCED WITH THE ASSESSEES CONTENTION, THE AO IM POSED PENALTY, WHICH WAS UPHELD IN THE FIRST APPEAL. ITA 2874/MUM/09 KILLICK NIXON LTD. 2 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT THE ASSESSMENT YEAR UND ER CONSIDERATION IS 2005-06. THE TAX AUDIT WAS TO BE COMPLETED AND THE REPORT W AS TO BE FURNISHED WITHIN THE YEAR 2005 AS PER THE DUE DATE U/S 139(1) AT THE MA TERIAL TIME. THE LD. A.R. SUBMITTED THAT THERE WAS A FINANCIAL CRUNCH AS A RE SULT OF WHICH THE ASSESSEE COULD NOT MAKE THE PAYMENT OF AUDIT FEES, WHICH LED TO THE NON-COMPLIANCE WITH THE LEGAL REQUIREMENT. HE ALSO REFERRED TO CORRESP ONDENCE OF THE ASSESSEE WITH M/S. ABHISHEK AGARWAL & CO., C.AS., DATED 29-03-20 08 TENDERING THEIR RESIGNATION. IT IS SEEN THAT THE ASSESSEE ACHIEVED TURNOVER OF RS.8.84 CRORES IN THE CURRENT YEAR. IN SUCH A SITUATION THE ALLEGED PROBLEM OF FINANCIAL DIFFICULTIES IN MAKING PAYMENT TO THE AUDITOR CANNOT BE ENTERTA INED. IT IS THE DUTY OF EVERY ASSESSEE TO COMPLY WITH THE STATUTORY REQUIREMENTS WHICH ARE IMPOSED ON HIM. HERE IS A CASE IN WHICH THE ASSESSEE IS PLEADING TH AT THERE WAS A REASONABLE CAUSE FOR NOT GETTING THE ACCOUNTS AUDITED IN TERMS OF NON-CO-OPERATION FROM THE AUDITORS. WE ARE NOT CONVINCED WITH THIS SUBMISSION FOR THE REASON THAT THE ASSESSEE DID NOT TAKE ANY ACTION TILL 2008 IN COMPL YING WITH THE STATUTORY REQUIREMENTS IMPOSED ON IT, WHICH WERE SUPPOSED TO BE COMPLIED WITH IN THE YEAR 2005. IF THE AUDITOR WAS NOT DOING HIS JOB OR THERE WAS SOME NON-CO- OPERATION, THEN THE ASSESSEE COMPANY COULD HAVE RE MOVED SUCH AUDITOR AND APPOINTED ANOTHER ONE IN THE EXTRA-ORDINARY GENERAL MEETING, WHICH HAS NOT BEEN DONE IN THE INSTANT CASE. THE RESIGNATION LET TER FROM M/S.ABHISHEK AGRAWAL & ASSOCIATES, CHARTERED ACCOUNTANTS DATED 29-03-20 08 IS AFTER TO THE DATE OF THE ORDER PASSED BY THE AO ON 30-06-2008 IMPOSING P ENALTY U/S.271B OF THE ACT. THE LAW REQUIRES THE ASSESSEE TO WORK DILIGENTLY AN D KEEP TRACK OF ITS RESPONSIBILITIES. REASONABLE CAUSE SHOULD NOT BE CONFUSED WITH INACTION. THE FORMER CONTEMPLATES A SITUATION IN WHICH THE CIRCU MSTANCES ARE SUCH THAT THE ITA 2874/MUM/09 KILLICK NIXON LTD. 3 COMPLIANCE IS NOT POSSIBLE IN THE HANDS OF THE ASSE SSEE. IT DOES NOT COVER A CASE OF INACTION ON THE PART OF THE ASSESSEE. THE ASSESS EE CANNOT BE EXPECTED TO SLEEP OVER ITS DUTIES AND THEN COME FORWARD WITH L AME EXCUSES TO ESCAPE THE PENAL CONSEQUENCES FLOWING FROM ITS OWN CONDUCT. EXCEPT FOR THE ASSERTION THAT THE AUDITOR REFUSED TO UNDERTAKE THE AUDIT WOR K, THERE IS NO POSITIVE EVIDENCE ON RECORD TO INDICATE THAT THE ASSESSEE IM PRESSED UPON THE AUDITOR TO CONTINUE WITH THE AUDIT WORK, WHICH WAS NOT ACTED UPON FOR THE REASONS BEYOND CONTROL OF THE ASSESSEE. THERE IS NO EVIDENCE OF AN Y CORRESPONDENCE WITH THE AUDITOR AT THE MATERIAL TIME REQUESTING THEM TO UN DERTAKE THE AUDIT WORK. IN OUR CONSIDERED OPINION NO REASONABLE CAUSE WITHIN MEANI NG OF SEC. 273B OF THE ACT HAS BEEN PROVED IN THE GIVEN CIRCUMSTANCES OF THE C ASE FOR ALLOWING IMMUNITY FROM PENALTY U/S 271B. WE, THEREFORE, APPROVE THE I MPUGNED ORDER. 4. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THE 20TH DAY OF APRIL, 201 0. SD/ SD/- (VIJAY PAL RAO) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI: 20 TH APRIL , 2010 COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A), CENTRAL-I,MUMBAI. 4 CIT(CENTRAL)-I,MUMBAI. 5.DR,G BENCH,MUMBAI. 6.GUARD FILE. (TRUE COPY) BY ORDER, NG: ASST.REGISTRAR, ITAT, MUMBAI. ITA 2874/MUM/09 KILLICK NIXON LTD. 4 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 19-4-2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 19-4-2010 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 20-4-2010 SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER *