R R Enterprise, Surat V. Dy. Commissioner of Income Tax, CC-2 , Surat, Surat

ITA 407/SRT/2022

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The case involves R.R. Enterprise, which faced penalties under Section 272A(1)(d) of the Income Tax Act for non-compliance with notices issued under Section 142(1) during the assessment years 2017-18 to 2019-20. The penalties were imposed following a search and seizure operation under Section 132 and subsequent notices under Section 153A. The assessee argued that the non-compliance was due to the severe Covid-19 pandemic, which affected their ability to respond timely. The Commissioner of Income Tax (Appeals) initially upheld the penalties, but the Tribunal found that the penalties were not warranted as the assessee had eventually complied and no additions were made to the returned income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302857 (ITAT-SURAT)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 12-12-2022
• Other Referred Cases: Centaur Pharmaceuticals Ltd. and Ors. Vs Stanford Laboratories Ltd., Shree Granite Vs DCIT, Akash Manganlal Patel Vs DCIT, Jayantilal Arjunbhai Patel Vs DCIT, Sanjaybhai Arjunbhai Patel Vs DCIT, Sanskruti Mega Structure Pvt. Ltd. Vs DCIT, Shri Puremswarup Jethabhai Patel Vs ACIT, Smt. Devyaniben P Patel Vs ACIT, Akhil Bhartiya Prathmik Shmshak Sangh Bhagwan Trust Vs ACIT, Shibani Malhotra Vs ACIT, Smt. Swati Jigneshjain Vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Period of limitation; Reasonable cause
• Section: 132; 143(3); 142(1); 153A; 274

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 407, 408 & 409/Srt/2022 (Assessment Years: 2017-18 to 2019-20) (Hearing in Virtual Court) R.R. Enterprise, White Pearl, Near Galaxy Circle, B/h Galaxy Aventura, Pal, Surat-395009 PAN No. AAUFR 6898 R Vs. D.C.I.T., Central Circle-2, Surat. Appellant/ assessee Respondent/ revenue Appellant represented by Shri P.M. Jaggasheth, CA Respondent represented by Shri Vinod Kumar Sr. DR Date of hearing 31/01/2023 Date of pronouncement 31/01/2023 Order under section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These set of three appeals by the single assessee are directed against the separate orders of the learned Commissioner of Income Tax (Appeals)-4, Surat [in short, the ld. CIT(A)] all dated 26/09/2022 for the Assessment years (AY) 2017-18 to 2019-20 respectively. 2. In all these appeals, certain facts are common, the assessee has raised common grounds of appeal, therefore, with the ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 2 consent of parties, all the appeals were clubbed, heard together and are decided by this consolidate order to avoid the conflicting decision. In all these appeals the assessee has challenged the penalty levied under Section 272A(1)(d) of the Income Tax Act, 1961 (in short, the Act). For appreciation of fact, the appeal in ITA No. 407/Srt/2022 for A.Y. 2017-18 is treated as ‘lead’ case, wherein, the assessee has raised following grounds of appeal: “1. On the f acts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in conf irming the action of the assessing Officer in levying penalty of Rs. 10,000/- U/s 272A(1)(d) of the I.T. Act, 1961. 2. It is theref ore prayed that the above penalty may please be deleted as learned members of the tribunal may deem it proper. 3. Appellant craves leave to add, alter or delete any ground(s) either bef ore or in the course of the hearing of the appeal.” 3. Brief facts of the case are that a search and seizure action under Section 132 of the Act was carried out on 16/08/2018 in case of Pearl Group Surat. The assesse was also covered in the said search action. Consequent upon such search action, notice under Section 153A was issued to the ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 3 assessee on 29/10/2020 to file return of income for A.Y. 2017-18. In response to notice under Section 153A, the assessee filed his return of income on 20/01/2021 declaring NIL income. The assessment was allegedly completed on 04/10/2021 accepting the returned income under Section 143(3) r.w.s. 153A of the Act. 4. The Assessing Officer initiated and levied penalty under section 272A(1)(d) of Rs. 10,000/- vide his order dated 24.02.2021. The assessing officer while passing the penalty order under Section 272A(1)(d) recorded that the assessee failed to company notice under Section 142(1) dated 13/02/2021 for A.Y. 2017-18. The Assessing Officer issued notice under Section 274 r.w.s. 272A(1)(d) of the Act dated 20/02/2021 asking the assessee as to why penalty be not levied for non-compliance of notice under Section 142(1) of the Act. The Assessing Officer recorded that no reply was filed by assessee. The Assessing officer levied penalty of Rs. 10,000/- for non-compliance of notice under Section 142(1) of the Act dated 24/02/2021. Aggrieved by the order of ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 4 Assessing Officer, in levying penalty, the assessee filed appeal before the ld. CIT(A). The assessee also filed appeal against the levy of similar penalty levied vide order dated 19/03/2021 and 13/05/2021 for A.Y. 2017-18. All three appeals were clubbed by ld. CIT(A) and was heard in a consolidated manner. Before the ld. CIT(A), the assessee in all three appeals, submitted that all details were submitted from time to time to the Assessing Officer. For non- compliance for 13/02/2021, the assessee stated that there was delay due to Covid-19 pandemic due to second wave everywhere and everyone was doing work with proper safety measure. Thus, such non-compliance should not be considered as default for penalizing the assessee. Otherwise the assessee always cooperated during the assessment and finally order under Section 143(3) r.w.s. 153A in accepting return of income was passed. The ld. CIT(A) after considering the submission of assessee held that on perusal of submissions of assessee he noticed that complete details were filed by assessee and subsequently assessment was finally passed under Section 143(3) r.w.s. 153A which proves ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 5 that necessary compliance were eventually made before Assessing Officer. The ld. CIT(A) also noted that it is not a case where the assessee totally ignored the notices. The penalty could be imposed for first default and not for each and every notices which remained non-complied. The ld. CIT(A) in consolidated order in three appeals. In appeal against the order dated 24/02/2021, the ld. CIT(A) upheld the penalty of Rs. 10,000/-. However, in other two appeals, the assessee was granted relief in a consolidated order dated 26/09/2022. Further aggrieved, the assessee has fled the present appeal before this Tribunal. 5. I have heard the submissions of the learned authorised representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) of the Revenue and have also perused the orders of the lower authorities carefully. The ld. AR of the assessee submits that he has filed fresh Form-36 by correcting certain typographical mistakes/errors, which occurred unintentionally while preparing the similar appeal. In column related to date of ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 6 service of order he has mentioned the date as 07/10/2022, though, the correct date of receipt is 14/10/2022. The wrong date was mentioned/typed due to cut-paste of various details in similar appeals in assessee’s group cases. Considering the submission of assessee, fresh Form-36 (appeal Form) is stating on record. On merit, the ld. AR of the assessee submits that assessment order was allegedly passed by Assessing Officer on 04/10/2021, no addition was made in the assessment order. The Assessing Officer while passing the alleged assessment order accepted the returned income without any variation. The Assessing Officer levied penalty under Section 272A(1)(d) for non-compliance of notice dated 13/02/2021. The ld. AR submits that in the month of February, 2021, it was a severe period of Covid-19 infection throughout the country and the assessee could not file his response before the Assessing Officer. The assessee subsequently made full compliance, the explanation offered by assessee on various issues was accepted and ultimately no addition was made by the Assessing Officer in final assessment order allegedly passed on 04/10/2021. Before ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 7 the ld. CIT(A), the assessee explained that there was reasonable cause for non-filing/response to the notice dated 13/02/2021, the ld. CIT(A), though accepted that complete details were filed by assessee, yet the penalty order for alleged single default, was passed in levying penalty of Rs. 10,000/-. The ld. AR by inviting my attention on the order of Hon’ble Apex Court in suo moto writ petition No. 3/2020 dated 23/03/2020 which was modified from time to time and finally on 10/01/2022 directed to explore period of limitation for various compliances from 15/03/2020 to 28/02/2022 before various forums/authorities. The ld. AR further submits that the Hon’ble Supreme Court in Centaur Pharmaceuticals Ltd. and Ors. Vs Stanford Laboratories Ltd. in Special Leave to appeal (C) No. 17298/2021 dated 04/01/2022 held that High Court has not committed any error in extending the period of limitation in filing written statement and consequently taking on record filed by respondent-original defendant. The Hon’ble Supreme Court further held that by subsequent order (by Apex Court), the period of limitation which could have been extended and/or ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 8 condoned by the Tribunal/Court is excluded and/or extended even up to 07/10/2021. The ld. AR for the assessee further submits in similar appeal against the penalty levied under Section 271(1)(b) in assessee’s group case, this Bench has already deleted similar penalties in Shree Granite Vs DCIT in ITA No. 362 to 368/Srt/2022 order dated 23/01/2023. 6. The ld. AR submits that the Coordinate Benches of the Tribunal in a series of decisions held that when the assessment has been made under Section 143(3) and not under Section 144, it means that subsequent compliance in the assessment proceedings was considered as a good compliance and the defaults committed earlier were ignored by the Assessing Officer and therefore, there is no cause for levying of such penalty under Section 271(1)(b) of the Act. The ld. AR of the assessee accordingly prayed for deleting the penalty. To support his submission, the ld. AR has relied upon the following decisions: ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 9  Akash Manganlal Patel Vs DCIT ITA No. 141 to 147/Srt/2022 order dated 26/09/2022  Jayantilal Arjunbhai Patel Vs DCIT ITA No. 134 to 140/Srt/2022 order dated 26/09/2022  Sanjaybhai Arjunbhai Patel Vs DCIT ITA No. 148 to 154/Srt/2022.  Sanskruti Mega Structure Pvt. Ltd. Vs DCIT ITA No. 28/Srt/2018 order dated 19/05/2021,  Shri Puremswarup Jethabhai Patel Vs ACIT ITA No. 2658 to 2664/Ahd/2016 order dated 19/01/2018,  Smt. Devyaniben P Patel Vs ACIT ITA No. 2658 to 2664/Ahd/2016 order dated 19/01/2018,  Akhil Bhartiya Prathmik Shmshak Sangh Bhagwan Trust Vs ACIT (2008) 115 TTJ 419 (Delhi),  Shibani Malhotra Vs ACIT 2022 ITL 409 (Delhi Trib),  Smt. Swati Jigneshjain Vs ITO ITA No. 1971/Mum/2021 order dated 14/06/2022. 7. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR submits that acceptance of return of income has no effect on non- compliance of notice during the assessment. The penalty under Section 271(1)(b) or 272A(1)(d) is levied for non- ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 10 compliance of notice issued by Assessing Officer or by ld. CIT(A). The alleged subsequent compliance was made by assessee when penalty was levied by Assessing Officer. Before levying penalty, the assessee was given full opportunity before levying penalty under Section 271(1)(b) or under Section 272A(1)(d) of the Act as the case may be. From the order of lower authorities, it is clearly discernible that assessee is in habit for non-compliance. This is a fit case for levy of penalty, as has been levied by Assessing Officer and confirmed by the ld. CIT(A). 8. I have considered the rival submissions of both the parties and have gone through the orders of lower authorities. I have also deliberated upon the various case laws relied by the ld. AR of the assessee. I find that the Assessing Officer allegedly passed the assessment order on 04/10/2021. The Assessing Officer accepted returned income without any variation or addition. I noted that the Assessing officer levied the penalty of Rs. 10,000/- vide his order dated 24/02/2021 i.e. prior to passing the assessment order. I find that the ld. ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 11 CIT(A) while confirming the action of Assessing Officer held that it is not a case where the assessee totally ignored the notices. The penalty could be imposed for first default and not for each and every notices which remained non- complied. Before me, the ld. AR of the assessee vehemently submitted that in February, 2021, it was a nationwide severe pandemic of Covid and everyone was taking proper care and caution, due to which the assessee could not make compliance of notice dated 13/02/2021. I find convincing force in the submission of ld. AR of the assessee that corresponding period during which the assessee could not make compliance of notice issued by Assessing Officer was a severe Covid-19 pandemic period. However, thereafter the assessee made full compliance of various notices issued by Assessing officer and ultimately the explanation or submission furnished by assessee was accepted and no variation/addition in the returned income was made. 9. I further find that Division Bench of Delhi Tribunal in Akhil Bhartiya Prathmik Shmshak Sangh Bhawan Trust Vs ADIT ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 12 (supra) held that where assessee had not complied with notice under Section 142(1) but assessment order was passed under Section 143(3) and not under Section 144, that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and, therefore, penalty under Section 271(1)(b) was not justified. I further find that similar view was followed in a series of decisions as has been relied by the ld. AR for the assessee in his submission. Thus, considering the fact that assessment in the present case was completed under Section 153A/143(3) in accepting return of income, I find that it was sufficient compliance, merely because the assessee could not make compliance due to some bonafide reason, no penalty under Section 272A(1)(d) of the Act could be levied on the assessee. 10. In view of aforesaid factual and legal position, I direct the Assessing Officer to delete the impugned penalty. In the result, ground of appeal raised by assessee is allowed. ITA No.407 to 409/Srt/2022 RR Enterprise Vs DCIT 13 11. In ITA No. 408 & 409/Srt/2022 for the A.Y. 2018-19 and 2019-20, the facts are identical. The Assessing Officer levied penalty with similar reasons. Considering our decision in ITA No. 407/Srt/2022 for the A.Y. 2017-18, the penalties in both the appeals are deleted. 12. In the result, all these appeals of the assessee are allowed. Order pronounced in the open court on 31 st January 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 31/01/2023 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr. Private Secretary, ITAT, Surat