Manoj S. Gugale, Ahmednagar V. Income-tax Officer,

ITA 417/PUN/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6983 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHAI
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B; 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM / ITA NO.417/PUN/2016 / ASSESSMENT YEAR : 2011-12 M ANOJ S. GUGALE, 652, SHANTISADAN, TOPKHANA, AHMEDNAGAR. PAN NO.ADZPG9595N. . / APPELLANT V/S INCOME TAX OFFICER, WARD 3, AHMEDNAGAR. . / RESPONDENT / APPELLANT BY : SHRI SUHAS BORA / RESPONDENT BY : SHRI SANJEEV GHAI / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL OF THE ASSESSEE IS EMANATING OUT OF THE ORDE R OF COMMISSIONER OF INCOME TAX (A) II, PUNE DATED 13.11.2015 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- / DATE OF HEARING : 21.02.2017 / DATE OF PRONOUNCEMENT: 03.03.2017 2 ITA NO.417/PUN/2016 AY.NO.2011-12 2.1 ASSESSEE IS AN INDIVIDUAL STATED TO BE CARRYING ON THE BUSINESS OF ADVERTISING AGENCY. ASSESSEE FILED ITS RETURN OF INCOME FO R A.Y. 2011-12 ON 23.12.2011 DECLARING TOTAL INCOME OF RS.4,52,640 /-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMEN T WAS FRAMED AND TOTAL INCOME WAS DETERMINED AT RS.20,05,450/-. AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS INTER-ALIA NOTICED THAT AS PER 26AS STATEMENT, THE ASSESSEES TOTAL RECEIPTS WAS OF RS.4,40,25 ,087/- BUT THE SAME WAS NOT CONSIDERED BY ASSESSEE WHILE COMPUTING THE INCOME. ON BEING CONFRONTED, IT WAS SUBMITTED BY THE ASSESSEE TH AT ASSESSEE BEING IN THE BUSINESS OF ADVERTISING AGENCY ONLY COMMISSIO N CAN BE CONSIDERED AS INCOME AND NOT THE TOTAL RECEIPTS OF RS.4.4 CRORES. THE SUBMISSIONS OF ASSESSEE WAS NOT FOUND ACCEPTABLE TO AO. AO WAS OF THE VIEW THAT SINCE THE RECEIPTS OF ASSESSEE WAS TO THE EXTENT OF RS.4,40,25,087/- WHICH WAS IN EXCESS OF THE LIMIT PRESCRIBED B Y SEC.44AB OF THE ACT, THE ASSESSEE WAS UNDER AN OBLIGATIO N TO GET HIS BOOKS OF ACCOUNTS AUDITED U/S 44AB OF THE ACT AND FILE T HE AUDIT REPORT. SINCE THE ASSESSEE HAS NOT GOT THE ACCOUNTS AUDITED, HE WAS OF THE VIEW THAT ASSESSEE WAS LIABLE FOR PENALTY U/S 271B OF THE ACT. HE THEREFORE, VIDE ORDER DT.22.08.2014 PASSED U/S 271B, LEVIED PENALTY OF RS.1,50,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CAR RIED THE MATTER BEFORE LD. CIT(A), WHO UPHELD THE ORDER OF AO BY HO LDING AS UNDER :- 4.1.1 THE SUBMISSION ON BEHALF OF THE APPELLANT T HAT IT IS ONLY EARNING COMMISSION FROM ADVERTISING RECEIPT CA NNOT BE ACCEPTED. ON A PERUSAL OF THE ASSESSING OFFICER'S O RDER, AS WELL AS SUBMISSION FILED, IT IS OBSERVED THAT BILLS ARE BEI NG INDEPENDENTLY RAISED BY THE APPELLANT ON VARIOUS CLIENTS. THEREFO RE THE CLAIM OF THE APPELLANT THAT THE AMOUNT IS RECEIVED ONLY BY W AY OF REIMBURSEMENT IS NOT ACCEPTABLE. THE APPELLANT HAS BOOKED ADVERTISING SPACE IN VARIOUS NEWS PAPERS AND THE BI LLS ARE DIRECTLY RAISED BY THESE NEWS PAPERS ON THE APPELLA NT. IN NONE OF SUCH BILLS ANY REFERENCE SUCH AS THAT THE APPELLANT IS ACTING AS AN AGENT ON BEHALF OF NEWS PAPERS FOR PROCURING ADVERT ISEMENT, IS MENTIONED. THE SPACE BOOKED BY THE APPELLANT IS SPE CIFICALLY 3 ITA NO.417/PUN/2016 AY.NO.2011-12 GIVEN TO DIFFERENT CLIENTS AND FOR THAT SEPARATE BI LLS ARE RAISED BY THE ASSESSEE ON SUCH CLIENT. IT IS NOT A CASE OF RE IMBURSEMENT AS IS BEING ARGUED ON BEHALF OF THE APPELLANT. IN FACT , PROVISION OF SEC.44AB CLEARLY STATES THAT ANY PERSON CARRYING ON BUSINESS, IF HIS TOTAL SALES, TURN OVER, GROSS RECEIPTS AS THE C ASE MAY BE EXCEEDS THE PRESCRIBED LIMIT OF RS. 40 LAKHS (IN THE RELEVANT YEAR) THEN SUCH PERSON HAS TO GET HIS ACCOUNTS AUDITED. T HE ASSESSEE'S GROSS RECEIPTS CONTAINS OF ALL THE BILLS RAISED BY HIM ON DIFFERENT CLIENTS WHICH IS CLEARLY OVER AND ABOVE THE LIMIT P RESCRIBED U/S 44AB OF THE IT ACT AND THEREFORE HE IS LIABLE FOR P ENAL PROVISION U/S 271B OF THE IT ACT, AS IT HAS FAILED TO GET HIS ACCOUNTS AUDITED. 4.2 THE APPELLANT IN THE WRITTEN SUBMISSION HAS PLA CED RELIANCE ON THE GUIDANCE NOTE ON TAX AUDIT U/S 44AB ISSUED B Y THE ICAI. ON A PERUSAL OF THIS GUIDANCE NOTE IN PARA 5.10(A), IT CAN BE CLEARLY SEEN THAT IT APPLIES ONLY TO CONSIGNMENT AG ENT OR COMMISSION AGENT. IN THE SAID NOTE IT HAS BEEN STAT ED THAT IF THE PROPERTY IN WHICH ALL THE SIGNIFICANT RISKS AND REW ARDS OF OWNERSHIP OF GOODS CONTINUE TO BELONG TO THE PRINCI PAL THEN RELEVANT SALE PRICE SHALL NOT FORM PART OF THE SALE S/TURNOVER OF THE COMMISSION AGENT OR THE CONSIGNMENT AGENT AS THE CA SE MAY BE. IN THE PRESENT CASE, THERE IS NO TRANSFER OF GOODS, THEREFORE THE QUESTION OF TRANSFER OF RISKS AND REWARDS OF GOODS DOES NOT ARISE AT ALL. THEREFORE THIS GUIDANCE IS OF NO HELP TO TH E APPELLANT AS THE SAME APPLIES ON SALE OF GOODS AND ON CONSIGNMENT BA SIS. HOWEVER, THE BUSINESS OF THE APPELLANT IS THAT OF R UNNING ADVERTISING AGENCY. 4.2.1 SUPPORT HAS ALSO BEEN DRAWN BY THE APPELLANT FROM CBDT CIRCULAR NO. 452 DATED 17.03.1986. ON A PLAIN READI NG OF THE CIRCULAR IT TRANSPIRES THAT THE SAME HAS BEEN ISSUE D IN THE CONTEXT OF KACHHA AND PUCCA ARAHTIA. THE APPELLANT IS NOT A ARHATIYA BUT RUNNING AN ADVERTISING BUSINESS THEREFORE CONTENTS OF THE CIRCULAR IS NOT APPLICABLE ON THE APPELLANT. 4.2.2 THE APPELLANT HAS ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HERO PUBLICITY SERVICES (248 ITR 256) (BOM.). ON READING OF THIS CASE, IT APPEARS THAT THE FACTS ARE DISTINGUISHABLE IN THE C ASE OF THE ASSESSEE. IN THE CITED CASE, THE ASSESSEE WAS ACTIN G AS AN AGENT BETWEEN THE MEDIA AND THE PRINCIPAL. THE MEDIA HAD INSISTED ON CONTRACTS BEING ENTERED INTO WITH THE ASSESSEE (ADV ERTISING AGENT) MAINLY TO SECURE PAYMENTS. NOT ONLY THAT, IN THAT CASE THE ASSESSEE HAD OBTAINED LETTER OF AUTHORITY FROM THEI R ADVERTISERS TO ENTER INTO THE CONTRACT WITH THE MEDIA. THUS IN THE CITED CASE THE ROLE OF THE ASSESSEE WAS MERELY COMMISSION AGENT AS IT WAS JUST ACTING AS A LINK BETWEEN THE MEDIA AND THE ADVERTIS ERS FOR SECURING PAYMENTS ON THE INSISTENCE OF THE MEDIA. H OWEVER, IN THE PRESENT CASE, NO SUCH FACTS ARE AVAILABLE. IN FACT, THE APPELLANT IS WORKING INDEPENDENTLY AND BOOKING ADVERTIZING SPACE HIMSELF IN VARIOUS NEW PAPERS AND ALSO RAISING BILLS HIMSELF O N VARIOUS CLIENTS. THEREFORE THE RATIO OF THIS DECISION IS NO T APPLICABLE TO THE PRESENT CASE. 4.2.3 IN THE LIGHT OF THE AFORESAID DISCUSSION, ON FACTS OF THE CASE, AS WELL A DECISIONS CITED, I HOLD THAT THE APPELLAN T WAS CLEARLY LIABLE FOR GETTING HIS ACCOUNTS AUDITED U/S 44AB OF THE I T ACT. THE ASSESSEE NOT ONLY SUPPRESSED THE RECEIPT IN THE RET URN BUT ALSO DID NOT GET HIS ACCOUNTS AUDITED IN SPITE OF ITS TU RN OVER BEING RS. 4,40,25,087/-, WHICH IS MUCH MORE THAN THE PRESCRIB ED LIMIT OF RS. 40 LAKHS IN THE RELEVANT YEAR. SINCE, THE APPEL LANT HAS FAILED 4 ITA NO.417/PUN/2016 AY.NO.2011-12 TO GET HIS ACCOUNTS AUDITED, THEREFORE HE WAS LIABL E FOR PENALTY U/S 2718 OF THE I T ACT. THE ASSESSING OFFICER HAS RIGHTLY LEVIED PENALTY AT RS. 1,50,000/- U/S 271 B OF THE I T ACT. ACCORDINGLY, THE ORDER OF THE ASSESSING OFFICER IS CONFIRMED AND THE APPEAL IS DISMISSED AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN AP PEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1 . THE LD CIT (A) HAS ERRED IN CONFIRMING PENALTY OF RS.150000/- LEVIED U/S 271B BY THE AO ONLY ON THE CONCLUSIONS D RAWN BY HIM IN THE PENALTY ORDER DISREGARDING THE SUBMISSION GI VEN BY THE APPELLANT. 2. THE LEARNED CIT (A) WHILE CONFIRMING THE PENALTY LEVIED BY THE AO U/S 271B HAD ERRED IN NOT APPRECIATING THE FOLLO WING IMPORTANT FACTS: A. THE APPELLANT WAS ENGAGED IN THE ADVT AGENCY BUSINESS AND HIS COMMISSION INCOME FROM ADVT. AGENC Y BUSINESS WAS AT RS.2971880.00, WHICH IS BELOW THE TURNOVER AS REQUIRED U/SEC.44AB. B. CBDT CIRCULAR NO. 452 DATED 17.03.1986, CLARIFYING THE QUESTION OF APPLICABILITY OF SEC. 44AB IN THE CASE OF COMMISSION AGENT, ARHATIAS ETC IS NOT APPRECIATED. C. THE APPELLANT HAS FOLLOWED THE PRACTICE OF RECORDIN G THE NET COMMISSION FROM THE ADVT, AGENCY BUSINESS IN EARLIER YEARS ALSO AND THE AO IN PAST AS WELL AS SUBSEQUENT YEARS HAS NOT INITIATED THE PENALTY PROCEEDINGS U/SEC.271B. D. THE LD AO HAD ACCEPTED THE FINANCIAL ASSESSMENT AND THE ASSESSMENT WAS COMPLETED WITHOUT AUDIT REPORT U/SEC. 143(3) OF THE ACT THUS THERE WAS BONAFIDE BE LIEF THAT THE PROVISIONS OF SEC.44AB ARE NOT APPLICABLE TO THE APPELLANT. E. PARA 5.6 5.7 AND 5.10(A) OF GUIDANCE NOTE ON TAX A UDIT U/SEC.44AB OF THE ACT BY ICAI IS NOT APPRECIATED CORRECTLY. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLITARY ISS UE IS WITH RESPECT TO LEVY OF PENALTY U/S 271B OF THE ACT. 5 ITA NO.417/PUN/2016 AY.NO.2011-12 4. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD. CIT(A) AND SUBMITTED THAT ASSESSEE IS HAVING THE ONLY ADVERTISING AGENCY BUSINESS, WHICH INCLUDES PROVIDING THE S ERVICES OF RELEASING NEWSPAPER AND MAGAZINE ADVERTISEMENTS AND CRE ATING DESIGNS OF ADVERTISEMENTS, LOGO, LETTER HEAD ETC. HE POINT ING TO THE COPIES OF BILLS PLACED IN PAPER BOOK SUBMITTED THAT ASSESSE E HAD NOT RESERVED THE SPACE IN NEWSPAPER IN ADVANCE AT A PARTIC ULAR RATE AND THEN ALLOTTED THE SPACE TO INDIVIDUAL CUSTOMERS. HE SUBMI TTED THAT EVEN THE BILLS RAISED BY THE ASSESSEE STATES THE COMMISS ION AMOUNT. HE THEREFORE SUBMITTED THAT THE ENTIRE RECEIPTS CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE AND ONLY THE COMMISSION EARNE D CAN BE CONSIDERED AS INCOME. HE FURTHER SUBMITTED THAT IF THE CO MMISSION INCOME IS CONSIDERED, THEN IT DOES NOT EXCEED THE LIMIT PRE SCRIBED U/S 44AB FOR GETTING HIS ACCOUNTS AUDITED AND THEREFORE ASSE SSEE IS NOT LIABLE FOR KEEPING HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT . HE FURTHER SUBMITTED THAT THE ASSESSEE WAS UNDER THE BON AFIDE BELIEF THAT ASSESSEE IS ENGAGED IN THE ADVERTISING AGENCY WHO EARNED THE INCOME FROM COMMISSION, ONLY THE COMMISSION CAN BE CONSIDE RED AS INCOME AND NOT THE TOTAL RECEIPTS AND THEREFORE WAS NOT REQUIRED TO GET HIS ACCOUNTS COMPULSORILY AUDITED U/S 44AB OF THE AC T AND THE BREACH WAS A TECHNICAL BREACH. HE PLACED RELIANCE ON T HE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. HERO PUBLICITY S ERVICES (2001) 248 ITR 0256 AND ALSO RELIED UPON THE CIRCULAR NO.45 2 DT.17.03.1986 OF CENTRAL BOARD OF DIRECT TAXES (CBDT). HE T HEREFORE PRAYED THAT PENALTY BE DELETED. LD.D.R. ON THE OTHER HAN D, SUPPORTED THE ORDER OF AO AND LD. CIT(A). 6 ITA NO.417/PUN/2016 AY.NO.2011-12 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IS WITH RESPECT TO LEVY OF PENALTY U/ S 271B OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF ADVERTISING AGENCY AND DURING THE YEAR UNDER CONSIDER ATION THE COMMISSION EARNED FROM THE ADVERTISING AGENCY WAS NOT IN EXCESS OF THE LIMITS PRESCRIBED U/S 44AB FOR THE PURPOSE OF GETTING THE BOOKS AUDITED. BEFORE US, IT IS ASSESSEES SUBMISSION THAT THE E NTIRE RECEIPTS WILL NOT FORM PART OF TURNOVER AND THEREFORE HE HAD NOT GOT THE BOOKS AUDITED AND FOR WHICH RELIANCE WAS PLACED ON CBDT CIRCULAR AND ALSO ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF HERO PUBLICITY SERVICES (SUPRA). THE AFORESAID SUBMISSION OF THE ASSESSE E PRIMA FACIE APPEARS TO BE BONAFIDE BELIEF ON HIS PART AND REVENUE HAS NOT BROUGH T ANY MATERIAL ON RECORD TO SUPPORT THAT THE BELIEF OF THE ASSESSEE WAS NOT BONAFIDE. AO HAS LEVIED PENALTY U/S 271B OF THE ACT FO R NOT GETTING THE BOOKS AUDITED U/S 44AB OF THE ACT. A READING OF SECTION 271B MAKES IT CLEAR THAT THE IMPOSITION OF PENALTY IS NOT M ANDATORY AS THE WORD USED IS MAY MEANING THEREBY THAT A DISCRETIO N IS CONFERRED ON THE A.O TO IMPOSE OR NOT TO IMPOSE THE PENALTY. FURTH ER THE PROVISION WITH RESPECT TO IMPOSITION OF PENALTY IS NOT MANDA TORY IN VIEW OF THE PROVISION CONTAINED IN SECTION 273B OF THE ACT WHICH INTER- ALIA PROVIDES THAT NOTWITHSTANDING THE PROVISIONS OF SECTION 271B, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE , AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE FAILURE. IN THE P RESENT CASE, THE ASSESSEE WAS HAVING A BONA FIDE BELIEF THAT HE WAS N OT REQUIRED TO GET HIS BOOKS AUDITED UNDER 44AB IN VIEW OF THE DECISION IN BOMBAY HIGH COURT IN THE CASE OF HERO PUBLICITY SERVICES (SUPRA) AND THE CBDT CIRCULAR (SUPRA). IN SUCH A SITUATION, WE ARE OF THE VIEW TH AT THERE WAS 7 ITA NO.417/PUN/2016 AY.NO.2011-12 A REASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR NOT GETTING THE BOOKS AUDITED. FURTHER IT IS A SETTLED LAW THAT WHEN THER E IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF LAW, THE ENDS OF JUS TICE REQUIRES THAT DISCRETION SHOULD NOT BE EXERCISED IN FAVOUR OF PUNISH ING A MINOR DEFAULT AND FOR THE AFORESAID PROPOSITION WE GET SUPPORT FROM THE DECISION OF HONBLE APEX COURT IN THE CASE OF HINDUSTAN ST EEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC) WHEREIN THE HONBLE APEX COURT HAS HELD AS UNDER:- 'EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORIT Y COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS A TECHNICAL OR VENIAL B REACH OF THE PROVISIONS OF THE ACT OR WERE THE BREACH FLOW S FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE.' 6. CONSIDERING THE TOTALITY OF THE FACTS AND RELYING ON THE AFORESAID DECISION OF HONBLE APEX COURT, WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE LEVY OF PENALTY U/S. 271B OF THE ACT WAS NOT JU STIFIED AND THEREFORE DIRECT ITS DELETION. THUS THE GROUNDS OF ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON THE 3 RD DAY OF MARCH, 2017. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER PUNE; ! DATED : 3 RD DAY OF MARCH, 2017. YAMINI 8 ITA NO.417/PUN/2016 AY.NO.2011-12 '#$%&'&$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5 6. PR.CIT-1, PUNE. CIT(A)-I, PUNE. #$% &&'(, * '(, / DR, ITAT, B PUNE; %+, - / GUARD FILE. / BY ORDER, // TRUE COPY // // TRUE COPY // // TRUE COPY // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.