M/s. G.N. Diaries Ltd, New Delhi V. DCIT, New Delhi

ITA 4207/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5494 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 28-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: D V TANEJA
• Keywords: Reasonable cause
• Section: 142(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 4207/DEL/2009 ASSESSMENT YEAR : 2004-05 G.N. DIARIES LTD., 914, KIRTI SHIKAR DISTT., NEW DELHI. PAN: AACCG0016B VS. DCIT, CIRCLE 12(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.V. TANEJA, CA REVENUE BY : SHRI MANISH GUPTA, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER OF THE CIT (A) DATED 23 RD SEPTEMBER, 2009 FOR ASSESSMENT YEAR 2004-05. GROU NDS OF APPEAL READ AS UNDER:- 1. LD. CIT (A) HAS ERRED IN FACTS AND IN LAW IN CO NFIRMING PENALTY OF RS.1,00,000/- U/S 271 (B). 2. THE APPELLANT WAS PREVENTED BY A SUFFICIENT AND A REASONABLE CAUSE IN FILING AUDIT REPORT AND TAX AUD IT REPORT AS STAFF HAD LEFT AND AN AFFIDAVIT EXPLAINING THE R EASON FOR DELAY WAS FILED AND THUS CONFIRMATION OF PENALTY IM POSED IS BAD IN LAW. 3. THAT AUDIT REPORT AND TAX AUDIT REPORT WAS OBTA INED WITHIN STATUTORY TIME AND DELAY IN FILING WAS BEYON D CONTROL OF APPELLANT AND THUS CONFIRMATION OF PENALTY IMPOSED IS BAD IN LAW. ITA NO.4207/DEL/2009 2 2. THE ASSESSEE IN THE PRESENT APPEAL IS AGGRIEVED WITH THE LEVY OF PENALTY OF RS.1 LAC ON ACCOUNT OF ITS FAILURE TO SUBMIT AUD IT REPORT WITHIN THE STIPULATED TIME I.E., BY DUE DATE OF FILING THE INCOME-TAX RET URN. THE RETURN WAS FILED ON 29 TH MARCH, 2005 ALONG WITH AUDIT REPORT AND IT WAS SUBM ITTED TO THE AO THAT DUE TO CHANGE IN STAFF THE DULY PREPARED RETURNS COULD NOT BE FILED AS THE SAME WAS KEPT IN DRAWER BY THE MEMBER OF THE STAFF WHO LEFT THE S ERVICES. ON 29 TH MARCH, 2005 THE NEW STAFF WAS ENGAGED AND IT WAS NOTICED THAT R ETURN DULY PREPARED WAS NOT FILED AND IMMEDIATELY THE SAID RETURN WAS FILED ON 29 TH MARCH, 2005. THE AO DID NOT CONSIDER THE SAID EXPLANATION OF THE ASSESSEE S ATISFACTORY. ACCORDING TO THE AO IT WAS THE LEGAL OBLIGATION OF THE ASSESSEE TO F URNISH THE AUDIT REPORT WITHIN THE STIPULATED DATE AS PER PROVISIONS OF SECTION 44 AB AND HAVING FAILED TO DO SO, THE ASSESSEE HAS MADE ITSELF LILABLE FOR PENALTY U/ S 271-B. THE AO ALSO OBSERVED THAT ASSESSEE HAS ALSO FAILED TO FURNISH A NY DOCUMENTARY EVIDENCE WITH REGARD TO THE FACT THAT ITS STAFF WAS ABSENT OR LEF T THE OFFICE AND AS ASSESSEE HAS FAILED TO SUBSTANTIATE ITS EXPLANATION WITH PROPER EVIDENCE, EXISTENCE OF REASONABLE CAUSE COULD NOT BE ESTABLISHED AND, IN T HIS MANNER, HE LEVIED THE MAXIMUM PENALTY LEVIABLE U/S 271-B I.E., A SUM OF R S.1 LAC. THE SUBMISSIONS MADE BEFORE THE AO WERE REITERATED BEFORE THE CIT ( A) AND WITH THE HELP OF CERTAIN JUDICIAL DECISIONS IT WAS CONTENDED THAT PE NALTY COULD NOT BE LEVIED. LD. CIT (A) AFTER CONSIDERING THE SAME HAS OBSERVED THA T FOR NON-FILING THE AUDIT REPORT WITHIN THE STIPULATED DATE SHOULD HAVE BEEN SUPPORTED BY REASONABLE CAUSE AND IN THE CASE OF THE ASSESSEE THE REASON GI VEN BY IT THAT DUE TO OVERSIGHT AND DUE TO LEAVING OF THE CONCERNED STAFF THE RETURN COULD NOT BE FILED WAS NOT A SUFFICIENT CAUSE AND, IN THIS MANNER, AGR EEING WITH THE AO, THE LD. CIT (A) HAS UPHELD THE PENALTY. THE ASSESSEE IS AGGRIE VED, HENCE, IN APPEAL. 3. THE SUBMISSIONS OF THE ASSESSEE REMAINS THE SAME BEFORE US ALSO AND WITH THE HELP OF FOLLOWING DECISIONS IT WAS CONTEND ED THAT THE REASONS STATED BY THE ASSESSEE SHOULD HAVE BEEN CONSIDERED TO BE REAS ONABLE CAUSE. IT WAS SUBMITTED THAT A REASONABLE EXPLANATION HAS BEEN GI VEN BY THE ASSESSEE. THE AUDIT WAS OBTAINED WITHIN THE STIPULATED TIME, HOWE VER, THE REPORT COULD NOT BE ITA NO.4207/DEL/2009 3 FILED DUE TO THE CHANGE IN STAFF. LD. AR STATED TH AT HE IS THE AUDITOR OF THE COMPANY AND HE MAKE A STATEMENT THAT THE AUDIT WAS DONE WITHIN THE STIPULATED DATE I.E., ON 1 ST SEPTEMBER, 2004 AND, THUS, THERE WAS NO REASON TO DISBELIEVE THE DATE OF THE AUDIT. IT WAS SUBMITTED THAT IT IS ALSO NOT THE CASE OF THE REVENUE THAT SUCH AUDIT WAS OBTAINED LATER ON AND IT IS ANT E DATED. HE HAS ALREADY SUBMITTED THE AFFIDAVIT OF HIMSELF AND THE MANAGING DIRECTOR OF THE COMPANY STATING THE SIMILAR FACTS AS STATED IN THE AFFIDAVI T FILED BEFORE THE AO AND CIT (A) AND RELYING ON THE FOLLOWING CASE LAWS IT WAS SUBMI TTED THAT PENALTY SHOULD BE DELETED:- I) CIT V. K.K. SPUN PIPE (2006) 284 ITR 301/200 CTR 107 (PUNJ & HAR) WHERE ASSESSEE HAS GOT ACCOUNT AUDITED BEFORE SPECI FIED DATE, NO PENALTY CAN BE LEVIED UNDER SECTION 271B EVEN THOUG H ASSESSEE HAS NOT FILED SUCH AUDIT REPORT BEFORE ASSESSING OFFICE R BEFORE SPECIFIED DATE. II) CIT V. JAGAT RICE MILLS (2006) 150 TAXMAN 5 (AL L) WHEN ACCOUNT WERE AUDITED AND ALSO ASSESSEE GOT AUD IT REPORT, BUT SAME WAS FILED ALONG WITH RETURN WHICH WAS FILED BE LATEDLY, NO PENALTY COULD BE IMPOSED UNDER SECTION 271B III) CIT V. APEX LABORATORIES (P) LTD. (2006) 156 T AXMAN 385/284 ITR 364 (MAD) PENALTY UNDER SECTION 271B WAS NOT EXIGIBLE WHERE A UDIT REPORT OBTAINED WITHIN SPECIFIED PERIOD, WAS FILED LATE AL ONG WITH RETURN UNDER SECTION 139(4) AND NO NOTICE UNDER SECTION 142(1) H AD BEEN ISSUED. IV) CIT V. MITHAN LAL PURAN MAL (2006) 155 TAXMAN 7 (ALL) IF TAX AUDIT REPORT WAS OBTAINED WELL WITHIN PRESCR IBED TIME FROM CHARTERED ACCOUNTANT ON PRESCRIBED FORM, MERE LATE FILING OF SUCH REPORT WOULD NOT ATTRACT PENALTY. V) CIT VS. RAJ RICE MILLS DEOBAND (2006) 155 TAXMAN 5 (ALL) PENALTY WAS NOT LEVIABLE WHERE ASSESSEE FIRM, AS PE R REQUIREMENT OF SECTION 44AB, GOT ITS ACCOUNT AUDITED AND OBTAINED AUDIT REPORT WITHIN SPECIFIED TIME BUT FILED IT ALONG WITH RETURN UNDER SECTION 139 (4). ITA NO.4207/DEL/2009 4 VI) CIT V. PREMIER FUELS PRODUCTS (2006) 155 TAXMAN 231 (ALL) WHERE THOUGH ASSESSEE FIRM GOT ITS ACCOUNTS AUDITED BEFORE SPECIFIED DATE BUT FILED AUDIT REPORT ALONG WITH BELATED RETU RN, IMPOSITION OF PENALTY ON ASSESSEE WAS NOT JUSTIFIED. VII) CIT VS. NEEL KAMAL RUBBER INDUSTRIES (2006) 15 7 TAXMAN 49 ( PUNJ. & HAR.) EVEN THOUGH ASSESSEE HAS TO OBTAIN AUDIT REPORT AND FILE SAME ALONG WITH RETURN OF INCOME, FILING OF AUDIT REPORT ALONG WITH RETURN IS ONLY DISCRETIONARY; VERY PURPOSE OF FILING AUDIT REPORT IS TO ENABLE ASSESSING OFFICER TO COMPLETE ASSESSMENT, AND WHERE ASSESSEE FILES AUDIT REPORT ALONG WITH RETURN OF INCOME, THERE SHOULD BE NO IMP EDIMENT FOR ASSESSING OFFICER FOR COMPLETING ASSESSMENT BY TAKI NG NOTE OF AUDIT REPORT. VIII) STAR AGENCIES V. ITO (2006) 5 SOT 336 (COCH.) WHERE ACCOUNTS OF ASSESEE WERE AUDITED BEFORE PRESC RIBED PERIOD, EVEN THOUGH RETURN WAS FILED BELATEDLY WITHOUT AUDI T REPORT, PENALTY WAS NOT IMPOSABLE. IX) CIT V. PAWAN RICE MILLS (2005) 147 TAXMAN 507 ( PUNJ & HAR.) WHERE ASSESSEE FILED AUDIT REPORT ALONG WITH RETURN UNDER SECTION 139 (4) AFTER DELAY BUT ITS CONTENTION WAS THAT REP ORT WAS OBTAINED IN TIME, IN ABSENCE OF EVIDENCE TO CONTRARY, TRIBUNAL WAS JUSTIFIED IN DELETING PENALTY. X) CIT VS. S.S. RANGA (2005) 279 ITR 107 (PUNJ. & H AR.) WHERE ASSESSEE EXPLAINED DELAY IN FILING AUDIT REPO RT BY STATING THAT ITS PARTNERS WERE NOT WELL EDUCATED, THAT ITS ACCOUNTAN T HAD LEFT SERVICE AND THAT CHARTERED ACCOUNTANT HAD DELAYED PREPARATI ON OF AUDIT REPORT, TRIBUNAL WAS JUSTIFIED IN DELETING PENALTY. ITA NO.4207/DEL/2009 5 XI) CIT V. ASHOKA DAIRY (2005) 279 ITR 32/149 TAXMAN 73 2 (PUNJ. & HAR.) WHERE TRIBUNAL DELETED PENALTY AS IT FOUND THAT ACC OUNTS OF ASSESSEE HAD BEEN AUDITED UNDER PROVISIONS OF COMPANY LAW AN D THAT ASSESSING OFFICER HAD NOT OBTAINED NECESSARY APPROV AL OF DEPUTY COMMISSIONER BEFORE IMPOSING PENALTY, NO QUESTION O F LAW AROSE FROM TRIBUNALS ORDER DELETING PENALTY IMPOSED ON ASSESS EE. XI) CIT V. SREE MALATHI CHIT FUNDS (P) LTD. (2005) 278 ITR 258 (MAD) WHERE ASSESSEE CONTENDED THAT IT HAD OBTAINED AUDIT REPORT WITHIN STIPULATED TIME BUT DID NOT FILE SAME ALONG WITH RE TURN AS ITS INCOME WAS BELOW TAXABLE LIMIT AND, ON ENQUIRY, AUDITOR CL EARLY STATED THAT HE HAD GIVEN AUDIT REPORT AS REQUIRED UNDER SECTION 44 AB, PENALTY COULD NOT BE LEVIED ON TECHNICALITIES. 4. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. DR T HAT IT HAS BEEN CLEARLY BROUGHT OUT BY THE AO AND CIT (A) THAT THE EXPLANAT ION GIVEN BY THE ASSESSEE WAS NOT SUBSTANTIATED BY ANY DOCUMENTARY EVIDENCE, HENCE, THE AO AS WELL AS THE CIT (A) BOTH WERE RIGHT IN LEVYING AND UPHOLDIN G THE PENALTY AND THE ORDER OF THE CIT (A) SHOULD BE UPHELD. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. NO DOUBT A LEGAL OBLIGA TION HAS BEEN CAST UPON THE ASSESSEE NOT ONLY TO OBTAIN THE AUDIT REPORT WITHIN THE STIPULATED TIME I.E., WITHIN THE DUE DATE OF FILING THE INCOME-TAX RETURN BUT AL SO TO FILE THE SAME WITH THE DEPARTMENT. HOWEVER, IN THE PRESENT CASE THE ASSESS EE HAS FAILED TO SUBMIT THE AUDIT REPORT WITHIN THAT STIPULATED TIME. THE ASS ESSEE HAS OBTAINED THE AUDIT REPORT WITHIN THE STIPULATED TIME AND IT IS NOT EVE N THE CASE OF AO OR CIT (A) THAT AUDIT REPORT IS BACK DATED. IF IT IS SO, THEN, IT HAS TO BE SEEN THAT WHETHER IT IS A ITA NO.4207/DEL/2009 6 JUSTIFIED CASE FOR LEVY OF PENALTY. THE POWER VEST ED WITH THE AO TO LEVY PENALTY U/S 271-B IS NOT ABSOLUTE AS THE WORD USED IN SECTI ON 271-B IS MAY. THEREFORE, IT IS IN THE DISCRETION OF THE AUTHORITY LEVYING TH E PENALTY. IF THE FACTS AND CIRCUMSTANCES OF THE CASE WARRANTS THAT IT IS A JUS TIFIED CASE FOR LEVY OF PENALTY, ONLY THEN THE PENALTY CAN BE LEVIED. THE LAW IN TH IS REGARD HAS BEEN SET AT REST BY HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN S TEEL LTD. VS. STATE OF ORISSA 83 ITR 26 WHEREIN IT HAS BEEN OBSERVED THAT AN ORDE R IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT O F QUASI CRIMINAL PROCEEDINGS AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CO NDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OB LIGATION. IT WAS ALSO HELD THAT PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO AND WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM TH E STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCIS ED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. I T WAS OBSERVED THAT EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEREVER THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BR EACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN TH E MANNER PRESCRIBED BY THE STATUTE. IF THE FACTS OF THE PRESENT CASE ARE EXAMINED IN VI EW OF THE PRINCIPLES OF LAW LAID DOWN IN THE AFOREMENTIONED DECISION OF HONBLE APEX COURT, IT CAN BE HELD THAT FACTS AND CIRCUMSTANCES OF THE CASE DOES NOT WARRAN T ANY LEVY OF PENALTY. THE AUDIT REPORT WAS OBTAINED WITHIN THE STIPULATED TIM E. IT WAS NOT FILED WITHIN THE STIPULATED TIME DUE TO THE LAPSE ON THE PART OF STA FF, WHO LEFT THE ASSESSEE. IT IS TRUE THAT IN THE PRESENT CASE THE ASSESSEE HAS NOT SUBSTANTIATED SUCH AN EXPLANATION BY PROVIDING ANY DOCUMENTARY EVIDENCE, BUT, EVEN THEN, THE DEFAULT IN THE PRESENT CASE APPEARS TO BE ONLY A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT AS ON THE VERY SAME AUDIT REP ORT THE AO HAS FRAMED THE ASSESSMENT AND IT IS NOT THE CASE OF AO THAT NON-FI LING OF AUDIT REPORT WITHIN THE STIPULATED TIME WAS RESULT OF DELIBERATE DEFIANCE OF LAW OR AS A RESULT OF CONTUMACIOUS OR DISHONEST CONDUCT ON THE PART OF TH E ASSESSEE. IT IS ALSO NOT ITA NO.4207/DEL/2009 7 SHOWN THAT THE ASSESSEE HAS ACTED IN CONSCIOUS DISR EGARD OF LAW AS THE ASSESSMENT WAS FRAMED AFTER COOPERATION OF THE ASSE SSEE VIDE ORDER DATED 31 ST MARCH, 2007 A COPY OF WHICH WAS PLACED ON RECORD. THEREFORE, IN THE PRESENT CASE THE FAILURE OF THE ASSESSEE WAS NEITHER RESUL T OF GUILTY, CONTUMACIOUS OR DISHONEST CONDUCT AND THE ASSESSEE ALSO DID NOT ACT IN CONSCIOUS DISREGARD OF ITS OBLIGATION. TO SUPPORT SUCH EXPLANATION, AFFIDAVIT OF THE MANAGING DIRECTOR WAS ALSO FILED AND NO MATERIAL HAS BEEN BROUGHT ON RECO RD BY THE DEPARTMENT TO SHOW THAT SUCH AVERMENTS OF MANAGING DIRECTOR WERE EITHE R FALSE OR UNTRUE. IT HAS ALSO BEEN HELD BY HONBLE SUPREME COURT THAT THE AUTHORI TY VESTED WITH THE POWER TO IMPOSE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMP OSE PENALTY IN A CASE WHERE THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVIS IONS OF THE ACT. THUS, IT IS A CASE WHERE THE BREACH OF LAW IS TECHNICAL OR VENIA L IN NATURE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT PENALTY HAS WRONGLY BEEN CONFIRMED BY THE CIT (A) AND THE SAME IS ORDERED TO BE DELETED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. . THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.03.20 10. SD/- SD/- [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 19.03.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES