NATESAN RAVI, COIMBATORE V. ACIT, NCC-1, COIMBATORE

ITA 3279/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8189 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASHRI
• Assessee Lawyers: S SRIDHAR
• Keywords: Principle of natural justice
• Section: 143(3); 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . . , ! ' # , $ #% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.3279/CHNY/2018 & '& /ASSESSMENT YEAR: 2013-14 SHRI NATESAN RAVI, 214, PONNAIAH RAJAPURAM, COIMBATORE 641 001. VS. ASST. COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-1, COIMBATORE. [PAN: ACOPR 5390J ] ( () /APPELLANT) ( *+() /RESPONDENT) () , - / APPELLANT BY : SHRI S.SRIDHAR, ADVOCATE *+() , - /RESPONDENT BY : MS. SUBHASHRI, JCIT . , /$ /DATE OF HEARING : 04.03.2019 01' , /$ / DATE OF PRONOUNCEMENT : 27.03.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2, COIMBATORE (HEREINAFTER CALLED AS CIT(A)) DATED 08.11.2018 F OR THE ASSESSMENT YEAR (AY) 2013-14. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1) THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS IN LAW AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. ITA NO.3279/CHNY/2018 (AY: 2013-14) :- 2 -: 2) THE LEARNED CIT (A) ERRED IN NOT CONSIDERING THE GROUNDS OF APPEAL IN PROPER PERSPECTIVE. 3) THE LEARNED CIT (A) ERRED IN SUSTAINING THE PENA LTY ULS.27 1 B, WITHOUT CONSIDERING THE FACT THAT ONCE NO BOOKS OF ACCOUNTS ARE MAINTAINED, THEN THE OFFENCE IS COMPLETE THERE-ITSE LF AND THAT THE QUESTION OF GETTING THE ACCOUNTS AUDITED DOE NOT AR ISE. AND FOR OTHER REASONS THAT MAY BE ADDUCED AT THE TI ME OF HEARING, YOUR APPELLANT PRAYS THAT THE APPEAL BE ADMITTED, C ONSIDERED AND JUSTICE BE RENDERED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSI NESS OF REAL ESTATE. THE RETURN OF INCOME FOR THE AY 2013-14 WAS FILED ON 10.05.2014 DISCLOSING INCOME OF RS. 36,52,840. AGAINST THE SAI D RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 31.03 .2016 PASSED U/S. U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TAXABLE INCOME OF RS. 2,44,72,032/- AFTER MAKING CERTAIN DI SALLOWANCES. THE AO ALSO INITIATED PENALTY PROCEEDINGS U/S. 271B OF THE ACT FOR FAILURE TO GET THE ACCOUNTS AUDITED AS THE TURNOVER EXCEEDED RS. 1 CRORE BY ISSUING SHOW CAUSE NOTICE DATED 28.03.2016. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE APPELLANT HAD SUBMITTED THAT NO BOOKS O F ACCOUNTS WERE MAINTAINED AND THEREFORE, QUESTION OF GETTING THE A CCOUNTS AUDITED DOES NOT ARISE IN SUPPORT OF THIS HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: 1) SHERATON APPARELS V. ASST. CIT [2002] 256 ITR 20 (BOM) 2) SURAJMAL PARASURAM TODI V. CIT [1996] 222 ITR 69 (GAU) 3) NA NAK SINHGH GULIANI V. ITO [2002] 257 ITR 677 (MP) 4) CIT V. HEROS PUBL ICITY SERVICES [2001] 248 ITR 256 (BOM) . THE AO HAD NOT ACCEPTED THE ABOVE SUBMISSION AND ITA NO.3279/CHNY/2018 (AY: 2013-14) :- 3 -: PROCEEDED WITH LEVY OF PENALTY FOR RS. 1,50,000/- U /S. 271B OF THE ACT VIDE ORDER DATED 30.09.2016. EVEN ON APPEAL, THE L D. CIT(A) CONFIRMED THE LEVY OF PENALTY. 4. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFO RE US IN THE PRESENT APPEAL. 5. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE PENALTY U/S. 271B OF THE ACT FOR FAILURE TO GET THE BOOKS O F ACCOUNT IS LEVIABLE IN CASE THE BOOKS OF ACCOUNTS WERE NOT MAINTAINED AT A LL. WHEN NO BOOKS OF ACCOUNTS ARE MAINTAINED THE ASSESSEE COMMITS AN OFFENCE OF NOT MAINTAINING THE BOOKS OF ACCOUNTS AS CONTEMPLATED B Y S. 44AA OF THE ACT, AFTER THAT THERE CAN BE NO OFFENCE CONTEMPLATE D BY S. 44AB OF THE ACT. THE PENALTY CANNOT BE IMPOSED U/S. 271B OF TH E ACT FOR AN OFFENCE CONTEMPLATED BY S. 44AA OF THE ACT. RELIANCE IN TH IS REGARD CAN BE PLACED ON THE DECISIONS OF HONBLE HIGH COURT OF GA UHATI IN THE CASE OF SURAJMAL PARUSURAM TODI V. CIT [1996] 222 ITR 691 ( GAU) AND THE DECISION OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT V. BISAULI TRACTORS [2008] 299 ITR 219 (ALL) , WHEREIN IT WAS HELD AS FOLLOWS: 7. IT MAY BE MENTIONED HERE THAT SEPARATE PENALTY HAS BEEN PROVIDED FOR NON-MAINTENANCE OF ACCOUNTS, I.E., UND ER SECTION 271A OF THE ACT AND FOR NOT GETTING THE ACCOUNTS AUDITED AND NOT FURNISHING THE AUDIT REPORT I.E., UNDER SECTION 271B OF THE AC T. IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT IMPOSE PENALTY UNDER SECTION 271A OF THE ACT AND INSTEAD PROCEEDED TO IMPOSE PEN ALTY UNDER SECTION 271B OF THE ACT. IF A PERSON HAS NOT MAINTA INED THE ACCOUNTS BOOK OR ANY ACCOUNTS THE QUESTION OF ITS AUDIT DOES NOT ARISE. IN SUCH AN EVENT THE IMPOSITION OF PENALTY UNDER THE PROVIS ION CONTAINED IN ITA NO.3279/CHNY/2018 (AY: 2013-14) :- 4 -: SECTION 271A OF THE ACT FOR THE ALLEGED NON-COMPLIA NCE OF SECTION 44AA OF THE ACT MAY ARISE BUT THE PROVISIONS OF SEC TION 44AB OF THE ACT DOES NOT GET VIOLATED IN CASE WHERE THE ACCOUNT S HAVE NOT BEEN MAINTAINED AT ALL AND, THEREFORE, PENAL PROVISIONS OF SECTION 271B OF THE ACT WOULD NOT APPLY. IT IS WELL SETTLED BY THE APEX COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD. [1973] 88 IT R 192 THAT IF THE LANGUAGE IS AMBIGUOUS OR CAPABLE OF MEANINGS MORE T HAN ONE, THEN WE HAVE TO ADOPT THAT INTERPRETATION WHICH FAVOURS THE ASSESSEE, MORE PARTICULARLY SO BECAUSE THE PROVISION RELATES TO IMPOSITION OF PENALTY. THE CONSTITUTION BENCH OF THE APEX COURT I N THE CASE OF J.K. SYNTHETICS LTD. V. CTO [1994] 94 STC 422 HAS HELD T HAT PENALTY PROVISION IN A TAXING STATUTE HAS TO BE STRICTLY CO NSTRUED. PENALTY IS EXIGIBLE ONLY WHERE A PERSON FALLS WITHIN THE FOUR CORNERS OF THE PENAL PROVISIONS OTHERWISE NOT. FURTHER IN THE TAX MATTER INTERPRETATION IN FAVOUR OF THE ASSESSEE HAS TO BE ADOPTED. WE MAY ME NTION HERE THAT IN CASE WHERE THE RETURNS ARE NOT BEING FILED, THER E IS UNANIMOUS JUDICIAL VIEW THAT NO PENALTY CAN BE IMPOSED FOR CO NCEALMENT OF INCOME AND THAT IS WHY THE PARLIAMENT HAD TO MAKE S UITABLE AMENDMENT IN THE PENALTY PROVISION BY INSERTING EXP LANATION 3 TO SECTION 271 OF THE ACT AND EXPLANATION 3 TO SECTION 18 OF THE WEALTH- TAX ACT, 1957. 8. THE QUESTION AS TO WHETHER AN ASSESSEE HAS CONCEAL ED THE PARTICULARS OF HIS TURNOVER WHERE HE HAS NOT FILED THE RETURN CAME UP FOR CONSIDERATION BEFORE THE APEX COURT IN THE CASE OF NARAIN DAS SURAJ BHAN V. CST [1968] 21 STC 104. THE APEX COURT WHILE CONSIDERING THE PROVISIONS REGARDING THE IMPOSITION OF PENALTY PROVIDED UNDER CLAUSE (B) OF SECTION 15A(1) OF THE U.P. SALES TAX ACT HAS HELD AS FOLLOWS: 'IN OUR OPINION, CLAUSE (B) OF SECTION 15A(1) IS AT TRACTED AS SOON AS IT IS SHOWN THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS TURNOVER OR DELIBERATELY FURNISH ED INACCURATE PARTICULARS OF SUCH TURNOVER IN THE RETURN FILED UN DER SECTION 7 OF THE ACT. IT IS MANIFEST THAT FROM THE GRAMMATICA L POINT OF VIEW THE WORDS INACCURATE PARTICULARS OF SUCH TURN OVER IN CLAUSE (B) OF SECTION 15A(1) REFER BACK TO CLAUSE ( A) WHERE THE RETURN UNDER SECTION 7 IS SPECIFIED. IN OTHER WORDS , CLAUSE (B) REFERS TO DEFAULT IN RESPECT OF A RETURN FURNISHED UNDER SECTION 7 AND CANNOT POSSIBLY REFER TO ANY DEFAULT IN RESPE CT OF ANYTHING DONE BY THE ASSESSEE IN A PROCEEDING UNDER SECTION 21. AS THERE IS NO QUESTION OF FURNISHING A RETURN OF A TURNOVER IN A PROCEEDING UNDER SECTION 21, THE ASSESSEE CANN OT BE GUILTY OF CONCEALING PARTICULARS OF ITS TURNOVER FR OM, OR OF FURNISHING INACCURATE PARTICULARS IN A PROCEEDING U NDER SECTION 21. THE CONCEAL- MENT OR FURNISHING INACCURATE PART ICULARS MUST BE IN THE RETURN FURNISHED UNDER SECTION 7. CL AUSE (A) OF SECTION 15A(1) DEALS WITH THE FAILURE OF THE ASSESS EE TO FURNISH THE RETURN OF THE TURNOVER, WHICH HE IS REQUIRED TO FURNISH UNDER SECTION 7 OR THE FAILURE OF THE ASSESSEE TO FURNISH IT WITHIN THE TIME ALLOWED OR IN THE MANNER PRESCRIBED. CLAUSE (B ) OF THE ITA NO.3279/CHNY/2018 (AY: 2013-14) :- 5 -: SECTION DEALS WITH THE CONCEALMENT OR INACCURATE FU RNISHING OF PARTICULARS OF THE TURNOVER IN RESPECT OF WHICH THE RETURN WAS REQUIRED TO BE FILED AND WHICH IS REFERRED TO IN CL AUSE (A).' 9. THIS COURT, IN THE CASE OF CST V. SHAHID HUSSAIN R AKESH KUMAR [1977] 39 STC 520 HAS HELD THAT IN A CASE WHE RE NO RETURN HAS BEEN FILED PENAL PROCEEDINGS CAN BE INITIATED O NLY UNDER SECTION 15A(1)(A) AND NOT 15-A(1)(B) OF THE U.P. SALES TAX ACT, 1948. IT HAS HELD AS FOLLOWS : 'A PERUSAL OF THE TWO PARTS CLEARLY ESTABLISHES THA T SECTION 15A(1)(A) APPLIES IN A CASE WHERE THE DEALER HAS FA ILED TO FURNISH THE RETURN UNDER SECTION 7, WHERE SUB-CLAUS E (B) APPLIES IN A CASE WHERE THE RETURN HAS BEEN FURNISH ED BUT THERE IS DELIBERATE CONCEALMENT OR THE RETURN FURNI SHED IS INACCURATE. THE LEGISLATURE HAS IN THE TWO SUB-CLAU SES MENTIONED TWO DIFFERENT CATEGORIES AND HAS ALSO LAI D DOWN DIFFERENT PENALTIES IN SUB-CLAUSE (C). THEY DEAL WI TH DIFFERENT SITUATIONS, AND THE SALES TAX OFFICER IN THIS CASE PROCEEDED UNDER SECTION 15A(1)(B) AND FROM THE AMOUNT OF PENA LTY IMPOSED, IT IS CLEAR THAT HE EXERCISED HIS JURISDIC TION UNDER SECTION 15A(1)(B) AND NOT UNDER SECTION 15A(1)(A). THE LANGUAGE OF THE SECTION CLEARLY INDICATES THAT IN A CASE WHERE NO RETURN HAS BEEN FILED PENAL PROCEEDINGS CAN BE I NITIATED ONLY UNDER SECTION 15-A(1)(A). THERE ARE OBSERVATIO NS IN A DECISION OF THE SUPREME COURT IN NARAIN DAS SURAJ BHAN V. CST WHICH SUPPORTS THE VIEW THAT WE ARE TAK ING.' 10. IN THE CASE OF THOPPIL KUTTI EROOR V. CIT [1958] 3 4 ITR 850 THE KERALA HIGH COURT WHILE CONSIDERING THE QUESTION OF IMPOSITION OF PENALTY UNDER SECTION 38(1)(C) OF THE COCHIN INCOME -TAX ACT WHICH PROVIDES IMPOSITION OF PENALTY FOR CONCEALMENT OR F OR FURNISHING INACCURATE PARTICULARS HAS HELD AS FOLLOWS : 'IT IS IMPOSSIBLE TO SAY THAT WHEN A PERSON HAS FAI LED TO FURNISH ANY RETURN AT ALL WHAT HE HAS DONE IS TO CONCEAL TH E PARTICULARS OF INCOME OR TO DELIBERATELY FURNISH INACCURATE PAR TICULARS OF SUCH INCOME WITHIN THE MEANING OF CLAUSE (C) OF SEC TION 38(1) OF THE ACT. WE ENTERTAIN NO DOUBT THAT THE OFFENCE IN SUCH A CASE SHOULD BE CONSIDERED AS ONE COMING UNDER CLAUS E (A) AND NOT UNDER CLAUSE (C) OF SUB-SECTION (1) OF SECT ION 38.' 11. IN THE CASE OF S. NARAYANAPPA & BROS. V. CIT [1961 ] 41 ITR 125 THE MYSORE HIGH COURT HAS HELD AS FOLLOWS : 'WHAT WAS URGED BEFORE US WAS THAT IN A CASE WHERE AN ASSESSEE HAS FURNISHED NO RETURN AT ALL BEFORE THE INCOME-TAX OFFICER, IT SHOULD BE PRESUMED FOR THE PURPOSES OF SECTION 28(1)(B) THAT HE HAS FURNISHED A RETURN OF HIS INCO ME INTIMATING THE INCOME-TAX OFFICER THAT HIS INCOME ISNIL. IT SE EMS TO ME THAT THE LANGUAGE OF SECTION 28(1) DOES NOT ADMIT O F ANY SUCH CONSTRUCTION SINCE THE CLEAR REQUIREMENT OF THE PRO VISIONS OF THIS SUB-SECTION IS THAT AN ASSESSEE ON WHOM A PENA LTY IS ITA NO.3279/CHNY/2018 (AY: 2013-14) :- 6 -: PROPOSED TO BE IMPOSED UNDER SECTION 28(1)(B) SHOUL D HAVE IN THE FIRST INSTANCE FURNISHED HIS RETURN. THAT, IN M Y OPINION, IS THE ORDINARY AND GRAMMATICAL MEANING OF THE WORDS O CCURRING IN THE ACT. TO INTERPRET THE LANGUAGE OF THIS PROVI SION IN THE MANNER SUGGESTED BY THE LEARNED GOVERNMENT PLEADER WOULD, IN MY OPINION, BE TOO ARTIFICIAL AND TOO FAR-FETCHE D TO COMMEND ITSELF FOR ACCEPTANCE. ALTHOUGH IT IS TRUE THAT THE PROVISIONS OF A STATUTE LIKE THOSE CONTAINED IN SECTION 28(1)(B) HA VE TO RECEIVE TO CONSTRUCTION SO AS TO PROMOTE THE OBJECT OF THE STATUTE, IT IS CLEAR THAT WHEN WE INTERPRET A PENAL PROVISION LIKE THAT CONTAINED IN SECTION 28(1)(B), THE INTERPRETATION W E SHOULD PLACE UPON IT MUST ACCORD WITH REASON AND JUSTICE A ND MUST BE IN ACCORDANCE WITH THE PLAIN ORDINARY AND RATIONAL MEANING OF THE WORDS CONTAINED IN THOSE PROVISIONS. SO INTERPR ETED, I WOULD NOT, IN MY OPINION, BE RIGHT IN PLACING ON SE CTION 28(1)(B) THE CONSTRUCTION FOR WHICH THE LEARNED GOV ERNMENT PLEADER CONTENDS.' (P. 133) 12. THE MADRAS HIGH COURT IN THE CASE S. SANTHOSA NADA R V. FIRST ADDL. ITO [1962] 46 ITR 411 HAS GONE TO THE EXTENT THAT A VOLUNTARY RETURN FILED AFTER THE PERIOD OF FOUR YEARS FROM TH E CLOSE OF THE ASSESSMENT YEAR IS NOT A VALID RETURN AND SUCH A CA SE SHOULD BE REGARDED AS IF NO RETURN HAS BEEN FILED AT ALL AND IT CANNOT BE SAID IN SUCH A CASE THAT THERE HAS BEEN A CONCEALMENT OF TH E PARTICULARS OF INCOME OR DELIBERATE FURNISHING OF INACCURATE PARTI CULARS AND SECTION 28(1)(C) OF THE INCOME-TAX ACT, 1922 WOULD NOT BE A PPLICABLE. THE MADRAS HIGH COURT HAS HELD AS FOLLOWS : 'WHEN WE COME TO SECTION 28(1)(C ), IT DEALS SPECIF ICALLY WITH THE CONCEALMENT OF PARTICULARS OF INCOME OR THE D ELIBERATE FURNISHING OF INACCURATE PARTICULARS OF INCOME. I N THE SETTING IN WHICH THIS SUB-SECTION FINDS PLACE IT IS IMPOSSIBLE TO CONSTRUE SECTION 28(1)(C) EXCEPT AS RELATING TO A CASE WHERE A RETURN HAS BEEN FILED BUT FROM WHICH RETURN PARTICULARS OF INCOME HAVE BEEN OMITTED OR ANY PARTICULARS HAVE BEEN DELI BERATELY INACCURATELY FURNISHED. THE USE OF THE EXPRESSION PARTICULARS OF HIS INCOME AND PARTICULARS OF SUCH INCOME WOU LD BE WHOLLY INAPPOSITE IN A CASE WHERE NO RETURN HAS AT ALL BEE N FILED; SUCH A CASE WOULD CLEARLY COME WITHIN THE SCOPE OF SECTI ON 28(1)(A) ALONE.' 13. THIS COURT IN CWT V. YADU RAJ NARAIN SINGH [2006] 286 ITR 564 ALSO TAKEN THE SAME VIEW. IT HAS HELD AS FOLLOW S : 'THUS APPLYING THE STRICT CONSTRUCTION OF PENALTY P ROVISIONS CONTAINED IN CLAUSE (1) OF SUB-SECTION (C) OF SECTI ON 18 OF THE ACT, WE FIND THAT PRIOR TO THE AMENDMENT IN EXPLANA TION 3 BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 WITH EFFE CT FROM 1-4-1989 IN A CASE WHERE THE PERSON WHO HAS PREVIOU SLY BEEN ASSESSED UNDER THE ACT DOES NOT FILE ANY RETURN IN RESPONSE TO THE NOTICE OR EVEN WHERE TIME FOR FILING THE RETURN HAS EXPIRED ITA NO.3279/CHNY/2018 (AY: 2013-14) :- 7 -: HAS NOT FILED ANY RETURN THERE CANNOT BE ANY CONCEA LMENT FOR WHICH PENALTY PROVISION CAN BE IMPOSED. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE CONSIDERED OPI NION THAT IN THE PRESENT CASE THE RESPONDENT ASSESSEE HAS NOT CO NCEALED THE PARTICULARS OF HIS INCOME FOR WHICH WEALTH NO P ENALTY UNDER CLAUSE (1) OF SUB-SECTION (C) OF SECTION 18 OF THE ACT IS EXIGIBLE. 14. THEREFORE, SECTION 271B OF THE ACT IS NOT ATTRACTE D IN A CASE WHERE NO ACCOUNT HAS BEEN MAINTAINED AND INSTEAD RE COURSE UNDER SECTION 271A CAN BE TAKEN. 6. RESPECTFULLY FOLLOWING THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE HELD THAT LEVY OF PENALTY U/S. 27 1B OF THE ACT IS NOT JUSTIFIED IN CASE NO BOOKS OF ACCOUNTS WERE MAINTAI NED. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE PENALTY. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 27 TH DAY OF MARCH, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' # ) (INTURI RAMA RAO) $ /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 27 TH MARCH, 2019. EDN, SR. P.S , */34 54'/ /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. . 6/ ( )/CIT(A) 4. . 6/ /CIT 5. 47 */ /DR 6. & 8 /GF