KORPUS FINANCIAL SERVICES P.LTD, MUMBAI V. DCIT C C 44, MUMBAI

ITA 4324/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3086 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Reasonable cause
• Section: 273B; 143(3); 27; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI BEFORE SHIR RAJENDRA, ACCOUNTANT MEMBER AND SHRI SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NOS.4324 TO 4328/MUM/2015 ( / ASSESSMENT YEARS: 2007-08 TO 2011-12 M/S. KORPUS FINANCIAL SERVICES PVT. LTD., 16,GUNDECHA CHAMBERS, N.M. ROAD,FORT, MUMBAI-400 023 / VS. THE DCIT, C.C. - 44 , MUMBAI ./ ./ PAN/GIR NO. AACCK 4562A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI NEELKANTH KHANDELWAL / RESPONDENT BY: SHRI MANJUNATHA SWAMY / DATE OF HEARING :26.07.2016 ! / DATE OF PRONOUNCEMENT : 21.09.2016 / O R D E R PER C.N. PRASAD, JM: ALL THESE APPEALS ARE FILED BY THE ASSESSEE AGAIN ST THE COMMON ORDER OF THE LD. CIT(A)-50, MUMBAI DATED 31.03.2015 PERTAINING TO ASSESSMENT YEARS 2007-08 TO 2011-12. 2. THE ONLY ISSUE IN ALL THESE APPEALS IS THAT THE LD. CIT(A) ERRED IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER I N LEVYING PENALTY U/S. 271F OF THE ACT. ITA NOS. 4324 TO 4328/M/2015. 2 3. BRIEF FACTS ARE THAT A SEARCH WAS CONDUCTED ON 4 .2.2011 IN THE CASE OF M/S. JIK INDUSTRIES AND AT THE PREMISES OF CMD SHRI R.G. PARIKH. THE ASSESSEE COMPANY IS A SUBSIDIARY AND A GROUP COMPANY OF THE JIK INDUSTRIES LTD. , THEREFORE IT WAS COVER ED U/S. 153C OF THE ACT AS SEARCH DOCUMENTS AND COMPUTER BACK UP WAS F OUND AND SEIZED IN THE COURSE OF SEARCH PROCEEDINGS NOTICES U/S. 153C WERE ISSUED TO THE ASSESSEE ON 30.4.2012 FOR FILING RET URN OF INCOME ON OR BEFORE 30 DAYS FOR ALL THESE ASSESSMENT YEARS I.E. 2005-06 TO 2011-12. THE ASSESSEE FILED RETURNS WITH THE DELAY OF 3 TO 4 MONTHS I.E. BEYOND THE DATE SPECIFIED IN THE NOTICE ISSUED U/S. 153C O F THE ACT. THE ASSESSMENTS WERE COMPLETED U/S. 143(3) R.W. SEC. 15 3C ON 22.3.2012. 3.1. SINCE THE ASSESSEE FILED RETURNS BEYOND THE TI ME SPECIFIED IN THE NOTICE ISSUED U/S. 153C, NOTICE U/S. 271F WAS I SSUED REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S. 271F SHOULD NOT BE IMPOSED FOR DELAY IN FILING THE RETURNS. IN RESPON SE TO THE NOTICE, ASSESSEE FILED LETTER DATED 22.7.2013 STATING THAT THERE WERE 8 ASSESSEES IN ITS GROUP AND TOTAL 55 SEARCH ASSESSM ENTS WERE IN PROGRESS AND THE RETURNS OF THE ENTIRE GROUP WERE A LSO REQUIRED TO BE FILED AND THEREFORE THERE IS LITTLE DELAY IN FILIN G THE RETURNS. IT WAS ALSO CONTENDED THAT CHAIRMAN/CHIEF PROMOTER OF THE GROUP WAS UNWELL/SICK AND WAS NOT ATTENDING TO THE BUSINESS R EGULARLY AND HE WAS HOSPITALIZED TWICE. THEREFORE, IT WAS CONTENDE D THAT THERE WAS NO WILLFUL AND DELIBERATE DELAY ON THE PART OF THE ASSESSEE IN FILING THE RETURNS BELATEDLY. IT WAS ALSO CONTENDED THAT ASSE SSEE HAS REDUCED ITS ACCOUNTING STAFF AS WAS NO MUCH BUSINESS AND TH EREFORE NO SUFFICIENT STAFF WAS LEFT TO DEAL WITH HUGE RETURN FILING WORK. IT WAS ITA NOS. 4324 TO 4328/M/2015. 3 ALSO CONTENDED THAT THE ASSESSEE WAS REGULAR AND P ROMPT IN FILING ITS RETURNS SINCE INCEPTION EXCEPT ON THIS OCCASION WHI CH WAS BEYOND ITS CONTROL. THEREFORE IT WAS CONTENDED THAT NO PENALT Y U/S. 271F SHOULD BE LEVIED AS THE ASSESSING OFFICER HAS DISCRETION T O IMPOSE THE PENALTY U/S. 271F OF THE ACT AND IT IS NOT MANDATOR Y AND AUTOMATIC. HOWEVER, NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER PROCEEDED TO LEVY PENALTY U/S. 27 1F OBSERVING THAT THE ASSESSEE HAS FAILED TO FILE THE RETURNS WITHIN THE SPECIFIED TIME WITHOUT ANY REASONABLE CAUSE. 4. ON APPEAL, THE LD. CIT(A) SUSTAINED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITS THAT THERE IS NO WILLFUL DEFAULT IN FILING THE RETURN BELATEDLY AND THE DELAY WAS OCCURRED FOR THE FOLLOWING REASONS: A. APPELLANT WERE REGULAR AND PROMPT IN FILING THEIR R ETURN OF INCOME, SINCE INCEPTION EXCEPT THIS STRAY INCIDENT, THAT TOO BEYOND THE CONTROL OF THE APPELLANT. B. APPELLANT AND THEIR GROUP COMPANIES WERE REQUIRED T O FILE A TOTAL NUMBER OF 55 RETURNS, FOLLOWED BY SEARCH PROCEEDINGS WHICH NECESSARILY REQUIRED TIME. C. CHAIRMAN OF THE GROUP/CHIEF PROMOTOR OF THE GROUP W AS UNWELL/SICK AND WAS NOT ATTENDING BUSINESS REGULARL Y AND HAD TO BE HOSPITALIZED TWICE. D. THERE WERE NO WILLFUL/DELIBERATE DELAY ON THE PART OF THE APPELLANT. ITA NOS. 4324 TO 4328/M/2015. 4 E. PROVISION OF SEC. 271F WERE NOT APPLICABLE ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IF IT IS CONSIDERED T O BE APPLICABLE, IT MAY BE APPRECIATED THAT THE ALLEGED DELAY WAS ON ACCOUNT OF REASONABLE GROUNDS AND DOES NOT WARRA NTED LEVY OF PENALTY U/S. 271B R.W. SEC. 273. 5.1. THE LD. COUNSEL FOR THE ASSESSEE FURTHER RELYI NG ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUST AN STEEL LTD., VS STATE OF ORISSA (83 ITR 26) SUBMITS THAT LEVY OF PE NALTY IS NOT AUTOMATIC. THE ASSESSING OFFICER HAS THE DISCRETIO N TO IMPOSE PENALTY AND SUCH DISCRETION IS TO BE EXERCISED JUDI CIOUSLY AND NO PENALTY SHOULD BE IMPOSED WHERE THERE IS A TECHNICA L OR VENIAL BREACH OF THE PROVISIONS OF THE ACT. THE LD. COUNSE L FOR THE ASSESSEE SUBMITS THAT HERE THERE IS A REASONABLE CAUSE WITHI N THE MEANING OF SEC. 273B FOR NOT FILING THE RETURNS WITHIN THE TIM E STIPULATED IN THE NOTICE U/S. 153C. THEREFORE HE SUBMITS THAT PENALTY BE DELETED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY S UPPORTS THE ORDERS OF THE AUTHORITIES BELOW. 7. HEARD BOTH PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER IN THIS CASE LEVIED P ENALTY U/S. 271F FOR DELAY IN FILING THE RETURN OF THE ASSESSEE I.E. BE YOND THE STIPULATED PERIOD MENTIONED IN THE NOTICE ISSUED U/S. 153C OF THE ACT. THE ASSESSEE SUBMITTED BEFORE THE AUTHORITIES BELOW THA T: A. APPELLANT WERE REGULAR AND PROMPT IN FILING THEI R RETURN OF INCOME, SINCE INCEPTION EXCEPT THIS STRAY INCIDE NT, THAT TOO BEYOND THE CONTROL OF THE APPELLANT. ITA NOS. 4324 TO 4328/M/2015. 5 B. APPELLANT AND THEIR GROUP COMPANIES WERE REQUIRED T O FILE A TOTAL NUMBER OF 55 RETURNS, FOLLOWED BY SEARCH PROCEEDINGS WHICH NECESSARILY REQUIRED TIME. C. CHAIRMAN OF THE GROUP/CHIEF PROMOTOR OF THE GROUP W AS UNWELL/SICK AND WAS NOT ATTENDING BUSINESS REGULARL Y AND HAD TO BE HOSPITALIZED TWICE. D. THERE WERE NO WILLFUL/DELIBERATE DELAY ON THE PART OF THE APPELLANT. E. PROVISION OF SEC. 271F WERE NOT APPLICABLE ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IF IT IS CONSIDERED T O BE APPLICABLE, IT MAY BE APPRECIATED THAT THE ALLEGED DELAY WAS ON ACCOUNT OF REASONABLE GROUNDS AND DOES NOT WARRA NTED LEVY OF PENALTY U/S. 271B R.W. SEC. 273. 8. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. HINDUSTAN STEEL L TD VS STATE OF ORISSA (SUPRA) IN SUPPORT OF ITS CONTENTION THAT PE NALTY IS NOT LEVIABLE IN CASE OF TECHNICAL AND VENIAL BREACH. THE SUBMIS SIONS OF THE ASSESSEE WERE NOT APPRECIATED BY THE AUTHORITIES BE LOW AND THE PENALTY WAS LEVIED BY THE ASSESSING OFFICER U/S. 27 1F WHICH WAS SUSTAINED BY THE LD. CIT(A). IT WAS THE SUBMISSION OF THE ASSESSEE THAT RETURNS WERE FILED REGULARLY AND PROMPTLY SINC E INCEPTION EXCEPT ON THIS OCCASION WHICH WAS BEYOND THE CONTROL OF TH E ASSESSEE. IT WAS THE SUBMISSION OF THE ASSESSEE THAT ITS GROUP COMPA NIES REQUIRED TO FILE A TOTAL NO. OF 55 RETURNS FOLLOWED BY SEARCH P ROCEEDINGS WHICH NECESSARILY REQUIRED TIME AND THE CHAIRMAN/CHIEF PR OMOTOR OF THE GROUP WAS UNWELL/SICK AND WAS NOT ATTENDING BUSINES S REGULARLY AND WAS HOSPITALIZED TWICE. ALL THESE SUBMISSIONS OF T HE ASSESSEE WERE NOT DISPUTED OR DISBELIEVED BY THE REVENUE. THEREF ORE, WE ARE OF THE VIEW THAT THERE WAS NO WILLFUL OR DELIBERATE DELAY ON THE PART OF THE ASSESSEE IN FILING THE RETURNS. THEREFORE, THERE I S REASONABLE CAUSE ITA NOS. 4324 TO 4328/M/2015. 6 FOR DELAY IN FILING THE RETURNS. THE ASSESSEE WAS PREVENTED WITH REASONABLE CAUSE IN NOT FILING THE RETURNS IN TIME, ULTIMATELY THE RETURNS WERE FILED AND THE ASSESSMENTS WERE COMPL ETED U/S. 143(3) R.W. SEC. 153C OF THE ACT. 9. THE HONBLE SUPREME COURT IN THE CASE OF HINDUST AN STEEL LTD (SUPRA) HELD AS UNDER: AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEE DING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBL IGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CO NDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF IT S OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFU L TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORI TY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVA NT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHOR ITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF T HAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE S TATUTE . THE HONBLE SUPREME COURT HELD THAT AN ORDER IMPO SING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGA TION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS AND PENALTY SHOULD NOT B E IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. IT WAS ALSO HELD THAT PENALTY ALSO WILL NOT IMPOSED MERELY BECAUSE IT IS LAWFUL T O DO SO. IN THIS CASE THE ASSESSEE FILED RETURNS BELATEDLY AND THERE IS R EASONABLE CAUSE IN FILING THE RETURN IN TIME AS STATED ABOVE AND FURTH ER THE RECORD DOES NOT SHOW THAT ASSESSEE HAS ACTED EITHER DELIBERATEL Y IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHON EST OR ACTED IN ITA NOS. 4324 TO 4328/M/2015. 7 CONSCIOUS DISREGARD OF ITS OBLIGATION. IN THE CIRC UMSTANCES, WE HOLD THAT ASSESSEE WAS PREVENTED WITH REASONABLE CAUSE I N FILING THE RETURNS AND THERE IS NO DELIBERATE ATTEMPT TO FILE THE RETURNS BELATEDLY. THUS, WE DELETE THE PENALTY LEVIED U/S. 271F OF THE ACT. 10. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2016. SD/- SD/- (RAJENDRA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED 21 ST SEPTEMBER, 2016 . % . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI