M/s. Paras Sales, V. The Income Tax Officer, Ferozepur

ITA 351/ASR/2010

• Counselvise Citation: 35120914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-12-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Keywords: Business income; Bonafide belief; Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, HONBLE VICE PRESIDENT AND SH. D.K. SRIVASTAVA, ACCOUNTANT MEMBER I.T.A. NO. 351(ASR)/2010 ASSESSMENT YEAR: 2008-09 M/S. PARAS SALES VS. THE INCOME-TAX OFFICER, FEROZERPUR CANTT. WARD-III(2), FEROZEPUR. PAN:AAIFO1520G (APPELLANT) (RESPONDENT) APPELLANT BY:WRITTEN SUBMISSION RESPONDENT BY: AMRIK CHAND, DR DATE OF HEARING :09.12.2011 DATE OF PRONOUNCEMENT:12.12.2011 ORDER PER H.L. KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A) BHATINDA, DATED 21.05.2010, IN CONFIRMING TH E PENALTY OF RS.22,960/- LEVIED UNDER SECTION 271B OF THE INCOME -TAX ACT, 1961 ( IN SHORT, THE ACT) FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT F OR THE ASSESSMENT YEAR 2008-09, THE ASSESSEE FILED ITS RETURN OF INCOME ON 26.03.2009 DECLARING TOTAL INCOME AT RS.11,700/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT, ON 2 26.05.2009. IN THE PROFIT & LOSS ACCOUNT, THE ASSES SEE HAD SHOWN SALES/GROSS RECEIPTS OF BUSINESS OR PROFESSION AT RS.38,94,276/ - AND COMMISSION AT RS.6,97,711/-. ACCORDING TO THE AO, THE TOTAL TURNO VER OF THE BUSINESS WAS CONSIDERED AT RS.45,91,938.38 AND THE ASSESSEE WAS REQUIRED TO GET ITS ACCOUNTS AUDITED AS REQUIRED UNDER SECTION 44AB OF THE ACT. A SHOW CAUSE DATED 28.05.2009 WAS ISSUED TO THE ASSESSEE REQUIRI NG IT TO STATE AS TO WHY PENALTY U/S 271B SHOULD NOT BE IMPOSED. THE ASSESSE E FURNISHED WRITTEN REPLY ON 30.06.2009. THE ASSESSEE IN ITS REPLY DATE D 30.06.2009 STATED THAT TOTAL SALES AS A DEALER OF TRACTORS AND SPARE PARTS WERE RS.38,94,276.38 AND IT WAS UNDER THE BONAFIDE BELIEF THAT HE WAS NOT OBLIG ED TO GET ITS ACCOUNTS AUDITED SINCE SALES DID NOT EXCEED RS.40 LAC AND TH OUGHT THAT COMMISSION INCOME OF RS.6,97,711/- WAS INCOME FROM OTHER SOURC ES. THE ASSESSEE RELIED ON THE DECISION OF ITAT, AHMEDABAD BENCH IN THE CAS E OF PATEL AMBALAL SOMNATH SARKAR VS. ITO, 100 TTJ 735 (2006). THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE STATING THAT IN THIS CA SE, THE COMMISSION ARISING ON CARRYING ON THE BUSINESS IS VERY MUCH PART OF THE TOTAL TURNOVER OF THE ASSESSEE. THE ASSESSEE HAS NOT FURNISHED ANY EVIDEN CE WITH REGARD TO THE FACT THAT COMMISSION INCOME WAS INCOME FROM OTHER SOURCE S. THE AO, THEREFORE, HELD THAT THE PLEA TAKEN BY THE ASSESSEE THAT IT WA S UNDER BONAFIDE BELIEF THAT 3 COMMISSION INCOME WAS CONSIDERED AS INCOME FROM OTH ER SOURCES CANNOT BE ACCEPTED. CONSEQUENTLY, THE A.O. LEVIED PENALTY OF RS.22,960/-. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE PENALTY AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. IN THIS CASE, THE ASSESSEE HAS SUBMITTED DETAILE D WRITTEN SUBMISSIONS DATED 03.12.2011, WHICH ARE AVAILABLE ON RECORD. 5. WE HAVE HEARD THE LEARNED DR AT LENGTH. IT IS AP PARENT FROM THE RECORD THAT THE ASSESSEE-FIRM WAS CARRYING ON THE BUSINESS OF SALES, SPARES AND REPAIR OF TRACTORS AT G.T. ROAD, FEROZEPUR CANTT. S INCE ITS VERY INCEPTION I.E. DATED 16.04.2005. SINCE ITS SALES OF TRACTORS USED TO EXCEED RS.40 LACS, IT USED TO GET ITS ACCOUNTS AUDITED U/S 44AB OF THE AC T FOR THE ASSESSMENT YEARS 2006-07 & 2007-08. IN THE WRITTEN SUBMISSION, IT IS STATED THAT THE FIRM DISCONTINUED ITS TRACTOR SALES BUSINESS SOMEWHERE I N THE MONTH OF JUNE, 2007 AND AT THAT TIME, ITS GROSS SALES WAS BELOW RS.40 L ACS AND ACCORDINGLY THE PARTNERS WERE UNDER THE BONAFIDE BELIEF THAT THE AU DIT PROVISIONS WERE NOT APPLICABLE IN THAT YEAR I.E. F.Y. 2007-08 RELEVANT TO A.Y. 2008-09. IT IS AN ADMITTED FACT THAT THE GROSS SALES OF TRACTOR WAS R S.38,94,276.38 AND, THEREFORE, THE FIRM DID NOT GET ITS ACCOUNTS AUDITE D FROM THE CHARTERED ACCOUNTANT. IT IS ALSO CLAIMED THAT THE BALANCE SHE ET WAS FINALIZED VERY LATE AND THE RETURN OF INCOME WAS FILED ON 26.03.2009. I T IS ALSO CLAIMED BY THE 4 ASSESSEE THAT THE FIRM IN THE SAME YEAR EARNED COMM ISSION INCOME TO THE EXTENT OF RS.69771/- AND THE AO ADDED THE AMOUNT OF COMMISSION INCOME WITH THE AMOUNT OF SALES WHICH EXCEEDED RS.40 LACS AND ACCORDINGLY LEVIED PENALTY U/S 271B OF THE ACT. IN THE WRITTEN SUBMISS ION, THE ASSESSEE HAS DEFINED THE TERM SALES AS UNDER: BY THE TERM SALES, THE PARTNERS UNDERSTOOD SALE OF TRACTORS/SPARE PARTS ONLY, IN WHICH THEY USED TO DE AL IN ROUTINE PART OF BUSINESS AND THEY NEVER THOUGHT COMMISSION INCOME AS BUSINESS INCOME. THE PARTNERS WERE UNDER THE BELIEF THAT SALES MEANS SOMETHING WHICH IS SOLD/EXCHANGE FOR MONEY AND ACCORDINGLY WITH THAT VIEW IN MIND, NEVER THOUG H COMMISSION INCOME WOULD BE INCLUDED IN THE FIGURE OF SALES. IF THEY KNEW THIS, THEY MIGHT HAVE GOT THEIR ACCOUN TS AUDITED LIKE IN ALL THOSE YEARS IN WHICH THEIR SALES USED T O EXCEED RS.40 LACS. MOREOVER, THEY HAD NO HITCH IN GETTING THE AC COUNTS OF THEIR FIRM AUDITED HAD THEY KNOWN THAT THE COMMISSI ON INCOME WOULD BE INCLUDED IN THE FIGURE OF SALES. 5.1. SECTION 273B PROVIDES THAT NO PENALTY U/S 271B SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISION, IF HE PROVES THAT THERE WAS REA SONABLE CAUSE FOR THE SAID FAILURE. IT IS SETTLED LEGAL POSITION THAT BONAFIDE BELIEF CONSTITUTES REASONABLE CAUSE. IN THE CASE OF PATEL AMBALAL SOMNATH SARKAR VS. ITO, 100 TTJ 735 (2006), THE ITAT, AHMEDABAD BENCH, HELD THAT THE AS SESSEE WHOSE TOTAL SALES WAS LESS THAN RS.40 LAKHS BUT TOTAL RECEIPTS INCLUSIVE OF INTEREST RECEIPT EXCEEDED RS. 40 LAKHS HAVING FAILED TO GET THE ACCO UNTS AUDITED ENTERTAINING A BONA FIDE BELIEF THAT THE ACCOUNTS ARE TO BE AUDI TED ONLY IF THE TURNOVER OF 5 THE ASSESSEE EXCEEDS RS.40 LAKHS, THERE WAS SUFFICI ENT CAUSE FOR DEFAULT AND, THEREFORE, LEVY OF PENALTY U/S 271B WAS NOT JUSTIF IED. 5.2. IN THE INSTANT CASE ALSO, PARTNERS OF THE ASSE SSEE FIRM WERE UNDER THE BONA FIDE BELIEF THAT SALES MEANS SOMETHING WHICH IS SOLD/EXCHANGED FOR MONEY AND ACCORDINGLY WITH THAT VIEW IN MIND, NEVER THOUGHT COMMISSION INCOME WOULD BE INCLUDED IN THE FIGURE OF SALES. ADMITTEDLY, IN THIS CASE, THE ASSESSEE FIRM DISCONTINUED ITS TRACTOR SALES BU SINESS SOMEWHERE IN THE MONTH OF JUNE, 2007 AND THAT TIME ITS GROSS SALES W ERE BELOW RS. 40 LAKHS AND ACCORDINGLY THE PARTNERS WERE UNDER THE BONAFID E BELIEF THAT THE AUDIT PROVISIONS WERE NOT APPLICABLE FOR THE YEAR UNDER C ONSIDERATION. IN OUR VIEW, THERE IS MERIT IN THIS CONTENTION OF THE ASSESSEE T HAT GROSS SALES WERE OF RS.38,94,276.38 AND ACCORDINGLY THE FIRM DID NOT GE T ITS ACCOUNTS AUDITED FROM THE CHARTERED ACCOUNTANT. IT IS ALSO TRUE THAT THE ASSESSEE EARNED COMMISSION INCOME TO THE EXTENT OF RS.6,97,711/-. I F BOTH ARE TAKEN TOGETHER, THE TOTAL SALES EXCEED RS.40 LAKHS. BUT THE ASSESSE E ENTERTAINED THE BONAFIDE BELIEF THAT IF THE TURNOVER OF THE ASSESSEE EXCEEDS RS.40 LAKHS, THEN THE ACCOUNTS ARE TO BE AUDITED. IN THAT VIEW OF THE MA TTER, THE ASSESSEE DID NOT GET THE ACCOUNTS AUDITED. THUS, IT IS CLEAR THAT TH E ASSESSEE ENTERTAINED THE BONAFIDE BELIEF THAT THE ASSESSEE IS REQUIRED TO GE T ITS ACCOUNTS AUDITED ONLY WHEN ITS SALES EXCEEDED RS.40 LAKHS. 6 5.3. AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE, WE CONCLUDE THAT WHEN A PERSON IS PREVENTED B Y A REASONABLE AND SUFFICIENT CAUSE TO DO OR NOT TO DO A THING, THEN H E SHOULD NOT BE PUNISHED FOR HIS ACT DONE UNDER SUCH A BELIEF AND THE SAME VIEW IS ENSHRINED IN SECTION 273B OF THE ACT. IN OUR OPINION, THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM GETTING ITS ACCOUNTS AUDITED UNDER SECTI ON 44AB OF THE ACT AND, HENCE, IT IS NOT A FIT CASE WHERE PENALTY U/S 271B OF THE ACT, SHOULD BE LEVIED. ACCORDINGLY, WE CANCEL THE PENALTY AND ALLO W THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH DECEMBER, 2011. SD/- SD/- (D.K.SRIVASTAVA) (H.L. KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 12TH DECEMBER, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. PARAS SALES FEROZEPUR CANTT. 2. THE ITO WARD III(2), FEROZEPUR. 3. THE CIT(A), 4. THE CIT, 5. THE SR DR TRUE COPY 7 BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.