AP State Agro Industries Development Corpn. Ltd., Hyd, Hyderabad V. DCIT, Circle-1(1), Hyd, Hyderabad

ITA 370/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2637 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 22-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Reasonable cause
• Section: 273B; 115JB

Judgement Text

1 ITA.NO.370/HYD/2016 A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.370/HYD/2016 ASSESSMENT YEAR 2011-2012 A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD. PAN AABCA7378R VS. THE DCIT, CIRCLE-1(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SMT. U. MINICHANDRAN DATE OF HEARING : 23.03.2017 DATE OF PRONOUNCEMENT : 12.04.2017 ORDER PER S. RIFAUR RAHMAN, A.M. THIS APPEAL BY THE ASSESSEE-CORPORATION IS ADMITTED LY BARRED BY LIMITATION BY 11 DAYS. LEARNED COUNSEL FOR THE ASSESSEE ADVERTED OUR ATTENTION TO THE REASONS GIVEN IN THE PETITIO N EXPLAINING THE REASONS FOR THE DELAY IN FILING THE APPEAL. HAVIN G REGARD TO THE EXPLANATION AND CONSIDERING THE SMALLNESS OF THE DELAY , WE ADMIT THE APPEAL AND PROCEED TO DISPOSE OF THE MATTER ON MERITS. 2. PENALTY LEVIED BY THE A.O. UNDER SECTION 271B OF THE ACT HAVING BEEN CONFIRMED BY THE CIT(A), ASSESSEE IS IN APPEAL BEFORE US. ASSESSEE IS A GOVERNMENT COMPANY DEALING IN AGRICULTU RAL IMPLEMENTS, FERTILIZERS AND AGRICULTURAL LAND DEVELOPMENT ACTIVITI ES. IN RESPECT OF THE PREVIOUS YEAR 2010-2011 THE DUE DATE FOR OBTAINING THE AUDIT REPORT IS 30.09.2011. ON 29.09.2011 THE ASSESSEE DECLARED NIL INCOME AFTER 2 ITA.NO.370/HYD/2016 A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD SETTING-OFF BROUGHT FORWARD LOSSES AND ALSO FURNISHED COMPUTATION UNDER SECTION 115JB OF THE ACT. 2.1. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, IT WAS NOTICED THAT THERE WAS NO CLAIM OF BROUGHT FORWARD L OSSES TO BE CARRIED FORWARD TO THIS YEAR AND THEREFORE IT WAS REJEC TED. IT WAS ALSO NOTICED THAT ASSESSEE OBTAINED THE AUDIT REPORT AFTER THE DUE DATE PROVIDED UNDER SECTION 44AB OF THE ACT. ACCORDINGLY, U PON COMPLETION OF THE ASSESSMENT, A.O. INITIATED PENALTY PROCEEDINGS U NDER SECTION 271B OF THE ACT. 2.2. IT IS NOT IN DISPUTE THAT ASSESSEE-COMPANY OBTAINE D AUDIT REPORT ON 24.02.2012 WHEREAS THE DUE DATE FOR OBTAININ G THE AUDIT REPORT, UNDER SECTION 44AB, WAS 30 TH SEPTEMBER, 2011 FOR THE A.Y. 2011-2012. THE A.O. COMMENTED THAT THE ASSESSEE-COMPAN Y BEING MANAGED BY SENIOR GOVERNMENT OFFICERS, WHO ARE WELL -VERSED WITH THE PROVISIONS OF LAW, THEY OUGHT TO HAVE COMPLIED WITH THE LAW PROMPTLY, TO GET THE ACCOUNTS AUDITED WITHIN THE DUE DATE WHEREAS A UDIT REPORT IN FORM NO.3CA AND 3CD WAS OBTAINED BELATEDLY AND FILED BELATEDLY WITHOUT GIVING ANY REASONS FOR THE DELAY IN GETTING THE ACCOUNTS AUDITED. THE A.O. ACCORDINGLY LEVIED PENALTY OF RS.1,50,000. 3. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) TH AT THE ASSESSEE-COMPANY SUBMITTED EXPLANATION WITH REGARD TO DE LAY BUT THE SAME WAS NOT CONSIDERED BY THE A.O. IT WAS ALSO CONTEND ED THAT AT THE TIME OF FILING RETURN OF INCOME ASSESSEE DID NOT ANNEX THE AUDIT REPORT SINCE THE SAME WAS OBTAINED ON 24.02.2012. DURING THE COURSE OF APPELLATE PROCEEDINGS, WRITTEN SUBMISSIONS WERE FILED WHEREIN IT WAS STATED THAT ASSESSEE BEING A WHOLLY OWNED GOVERNMENT COM PANY THE DIRECTORS OF THE COMPANY AND THE AUDITORS ARE TO BE APP OINTED BY THE GOVERNMENT. REGULAR AUDIT REPORT WAS CONCLUDED ON 13.0 1.2012 AND SUCH FINAL ACCOUNTS WERE APPROVED IN THE AGM HELD ON 10.02.2012 AND 3 ITA.NO.370/HYD/2016 A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD THEREAFTER, BOOKS WERE HANDEDOVER TO THE CHARTERED ACC OUNTANT FOR AUDIT AS REQUIRED UNDER SECTION 44AB OF THE ACT. IT WAS ALSO SUBMITTED THAT CERTAIN CLARIFICATIONS WERE REQUIRED FROM THE GOVER NMENT WITH REGARD TO THE PROVISION OF INTEREST IN ITS BOOKS OF ACCO UNT AS ON 31.03.2010 ON WHICH THE STATE GOVERNMENT ISSUED CLARIF ICATION ON 26.06.2011 WHICH WAS FINALLY COMMUNICATED TO THE ASSES SEE ON 13.07.2011. THEREAFTER, THE FINAL ACCOUNTS OF THE YEA R ENDED 31.03.2010 WERE FINALISED. THE ACCOUNTS FOR THE YEAR ENDED 31.03 .2011 WERE AUDITED AND AUDIT REPORT WAS FINALISED AFTERWARDS. IT W AS CONTENDED THAT ASSESSEE BEING A GOVERNMENT COMPANY THERE WAS NO INTE NTION TO DELAY THE PROCESS OF FILING THE AUDIT REPORT. 4. LD. CIT(A) OBSERVED THAT THE STATUTORY AUDIT IN MOST O F THE GOVERNMENT COMPANIES ARE ALWAYS DELAYED DUE TO APPOIN TMENT OF TAX AUDITORS BY THE GOVERNMENT, AS THEY ARE APPOINTED IN RO TATION. EVERY YEAR THIS BEING A COMMON FEATURE, WHICH IS WELL-KNOWN TO THE BOARD OF DIRECTORS, THEY OUGHT TO HAVE TAKEN PROPER PRECAUTION TO APPOINT AUDITORS FOR STATUTORY AUDIT. A GOVERNMENT ORGANISATION CANNOT CLAIM AN EXCEPTION ON THIS MATTER. PLACING RELIANCE ON CERTA IN CASE LAWS REFERRING TO GOVERNMENT CORPORATIONS, THE LD. CIT(A) DI SMISSED THE APPEAL FILED BY ASSESSEE. 5. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. IT IS NOT IN DISPUTE THAT THERE IS A DELAY IN OBTAINING THE AUDIT REPORT AND ALSO IN FURNISHING THE SAME. STATUTE IMPOSED AN OBLIGATION UPON A COMPANY, BE IT A GOVERNMENT ORGANISATION OR OTHER JURISTIC ENTIT Y, TO OBTAIN AUDIT REPORT WITHIN THE TIME PERMITTED UNDER SECTION 44AB OF TH E ACT AND FAILURE TO OBTAIN SUCH AUDIT REPORT AND FURNISHING/FILI NG OF THE SAME WITHIN THE STIPULATED TIME WOULD AUTOMATICALLY INVITE LE VY OF PENALTY UNDER SECTION 271B OF THE ACT UNLESS THERE IS A REASONA BLE CAUSE FOR THE DELAY IN OBTAINING THE AUDIT REPORT. LEARNED COUNSEL FO R THE ASSESSEE 4 ITA.NO.370/HYD/2016 A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD SUBMITTED THAT BEING A GOVERNMENT COMPANY THE STATUTORY AU DITORS WERE TO BE APPOINTED BY THE GOVERNMENT; THE FINAL ACCOU NTS WERE APPROVED IN THE AGM ON 10.02.2012 AND WITHIN A SHORT S PAN THEREOF THE ACCOUNTS WERE HANDEDOVER TO THE CHARTERED ACCOUNTANT FOR AUDIT AS REQUIRED UNDER SECTION 44AB OF THE ACT. THUS, THE DELAY IS ONLY TECHNICAL OR VENIAL IN NATURE. LEARNED COUNSEL FOR THE ASSESSE E PLACED BEFORE US COPY OF THE ANNUAL REPORT TO SUBMIT THAT THE AGM APPROVED THE ACCOUNTS ONLY ON 10 TH FEBRUARY, 2012 AND IMMEDIATELY THEREAFTER, THE BOOKS OF ACCOUNT HAVING BEEN FORWARDED TO THE STATUTORY A UDITOR FOR OBTAINING A REPORT UNDER SECTION 44AB OF THE ACT, THE D ELAY CANNOT BE ATTRIBUTABLE TO THE COMPANYS NEGLIGENCE. 6. ON THE OTHER HAND, LD. D.R. SUBMITTED THAT THE STATE GOVERNMENT UNDERTAKINGS ARE WELL AWARE OF THE STATUTORY PROVISIONS UNDER THE I.T. ACT AND THEREFORE, THEY ARE DUTY BOUND TO HONOUR THE TIME LIMIT PRESCRIBED UNDER LAW AND THEY HAVE TO OBTAIN THE STATUTORY AUDIT REPORTS WELL INTIME. MERELY BECAUSE THEY WERE NEGLIGE NT IN CONDUCTING THE AGM, IT CANNOT TAKEN AS A REASONABLE CAUSE FOR THE D ELAY IN OBTAINING THE AUDIT REPORT UNDER SECTION 44AB OF THE ACT . 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. AS PER SECTION 44AB OF THE ACT, THE AUDIT REPORT HAS TO BE OBTAINED ON OR BEFORE 30.09.2011 AND IT HAS TO B E FILED ALONG WITH THE RETURN OF INCOME. IN THE EVENT OF FAILURE TO OBTAIN T HE AUDIT REPORT AND FILING OF THE SAME WITHIN THE STIPULATED TIME, SECTION 271B PROVIDES FOR LEVY OF PENALTY. AT THE SAME TIME, SECTION 273B PRO VIDES AN EXCEPTION WHEREBY THE A.O. WAS GIVEN A DISCRETION NOT TO LEVY PE NALTY IN A CASE WHERE THE ASSESSEE HAS A REASONABLE CAUSE IN OBTAININ G THE AUDIT REPORT AFTER THE STIPULATED TIME AND IN FURNISHING THE SAME BEF ORE THE A.O. BEYOND THE PERIOD PRESCRIBED UNDER LAW. IN THE INSTAN T CASE, THE ASSESSEE MERELY SUBMITS THAT THERE WAS DELAY IN CONDU CTING THE AGM 5 ITA.NO.370/HYD/2016 A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD WHICH CONSTITUTES A REASONABLE CAUSE. THE FACT REMAIN S THAT THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2011-2012 ENDED ON 31.03.2011 AND EVEN AS PER ASSESSEE, THE CLARIFICATIONS WITH REGARD TO CERTAIN PROVISIONS OF INTEREST ETC., WERE OBTAINED BY 29.06.2011 AND ATLEAS T AT THAT STAGE THE DIRECTORS OF THE COMPANY OUGHT TO HAVE TAKEN IMMEDIAT E STEPS TO FORWARD THE BOOKS TO THE STATUTORY AUDITOR SO AS TO OBTAIN REPORTS UNDER SECTION 44AB OF THE ACT. HOWEVER, EXCEPT STATING THAT AGM W AS CONDUCTED ONLY IN 2012 NO OTHER REASON WAS FURNISHED FOR THE DELAY IN OBTAINING THE AUDIT REPORT. ASSESSEE BEING A GOVERNMENT COMPANY IT CANNOT CLAIM TO HAVE PRIMACY OVER OTHER TAX PAYERS IN THE FORM OF TAKING THEIR OWN SWEET TIME TO OBTAIN AUDIT REPORTS, PARTICULARLY WHEN A STATUTE PRESCRIBES A TIME LIMIT. THE RETURN OF INCOME WAS FILE D ON 29.09.2011 WHICH REQUIRES THE SIGNATURE OF THE MANAGING DIRECTOR AND BEFORE FINALISING THE RETURN OF INCOME IT IS THEIR DUTY TO VE RIFY THE CORRECTNESS OF THE RETURN OF INCOME AND FOR THAT PURPOSE THEY HAVE TO OBTAIN NECESSARY STATUTORY AUDIT REPORTS. HAVING FILED THE RETURN OF INCOME, IT HAS TO BE ASSUMED THAT THE BOOKS OF ACCOUNT ARE IN ORDER , BASING ON WHICH THE PROFIT/LOSS WAS DECLARED AND IF THAT BE THE C ASE, THERE IS NO NEED TO WAIT TILL THE AGM IS CONDUCTED. WE ARE, THEREFOR E, OF THE VIEW THAT THERE IS NO CONNECTION BETWEEN CONDUCTING OF THE AGM AND PLACING THE BOOKS OF ACCOUNT BEFORE THE STATUTORY AUDITOR FOR THE PURPOSE OF OBTAINING THE TAX AUDIT REPORT UNDER SECTION 44AB OF THE ACT. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE TAX AUTHOR ITIES WERE JUSTIFIED IN HOLDING THAT THERE WAS NO REASONABLE CAUSE IN NOT OBTAINING THE AUDIT REPORT WITHIN THE STIPULATED TIME, APART FROM THE FACT THAT THERE WAS DELAY IN FILING THE AUDIT REPORT ALONG WITH THE RE TURN OF INCOME. WE, THEREFORE, DISMISS THE APPEAL FILED BY THE ASSESSEE C OMPANY. 6 ITA.NO.370/HYD/2016 A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD ORDER PRONOUNCED IN THE OPEN COURT ON 12.04.2 017. SD/- SD/- (D.MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH APRIL, 2017. VBP/- COPY TO 1. A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD C/O. SHRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO.9, HIMAYATNAG AR, HYDERABAD 500 029. 2. DCIT, CIRCLE - 1(1), AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. CIT(A) - 1, 2 ND FLOOR ANNEXE, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 4. PR. CIT - 1, HYDERABAD. 5. D.R. ITAT, HYDERABAD B BENCH, HYDERABAD. 6. GUARD FILE