Jupalli Ramachandra Rao & Co., Eluru V. ITO, Ward-1, Eluru

ITA 436/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5182 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings; Reasonable cause
• Section: 273B

Judgement Text

ITA NO.436 /VIZAG/2017 JUPALLI RAMACHANDRA RAO SONS & CO., ELURU 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.436/VIZAG/2017 ( / ASSESSMENT YEAR: 2006-07) JUPALLI RAMACHANDRA RAO SONS & CO., ELURU ITO, WARD - 1, ELURU [PAN NO. AABFJ7189E ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR / DATE OF HEARING : 04.07.2018 / DATE OF PRONOUNCEMENT : 1 1 .07.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, GUNTUR, CAM P: VISAKHAPATNAM {CIT(A)} VIDE APPEAL NO.212/2011-12 D ATED 14.3.2017 FOR THE ASSESSMENT YEAR 2006-07. ITA NO.436 /VIZAG/2017 JUPALLI RAMACHANDRA RAO SONS & CO., ELURU 2 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE LEV Y OF PENALTY U/S 271FB OF THE FRINGE BENEFIT TAX (FBT). THE A.O. IS SUED NOTICE U/S 271FB (HEREINAFTER CALLED AS 'THE ACT') ON 2.12.201 0 DIRECTING THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHOULD NOT BE LEVIED AGAINST THE ASSESSEE FOR FAILURE OF THE ASSESSEE TO FILE THE FB T RETURN FOR THE A.Y.2006-07. THE SAID NOTICE COULD NOT BE SERVED O N THE ASSESSEE, SINCE THE ASSESSEE FIRM HAS DISCONTINUED THE BUSINE SS, HENCE THE A.O. SERVED THE NOTICE BY AFFIXTURE ON 22.6.2011 IN THE RESIDENTIAL PREMISES OF THE MANAGING PARTNER MR. S. RAMA KRISHNA RAO AND TH ERE WAS NO RESPONSE FROM THE ASSESSEE. THEREFORE, THE A.O. IM POSED PENALTY OF ` 1,79,300/- @ ` ` 100/- PER DAY FROM1.8.2006 TO 28.6.2011 FOR A TOTAL PERIOD OF 1793 DAYS OF DEFAULT. 3. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND MADE WRITTEN SUBMISSION STAT ING THAT THE ASSESSEE HAS CARRIED ON THE BUSINESS DURING THE PRE VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2006-07 AND SUBSEQUENTLY CLO SED THE BUSINESS DUE TO UNFAVORABLE CONDITIONS. FRINGE BENEFIT TAX ACT WAS INTRODUCED IN THE YEAR 2006-07 AND FBT PAYABLE WORKS OUT TO ` 542/- AGAINST WHICH THE PENALTY LEVIED WAS ` 1,79,300/- AND THE SAME IS BEYOND THE CAPACITY OF THE ASSESSEE. ASSESSEE FILED WRITTEN SUBMISSION S BEFORE THE CIT(A) STATING AS UNDER: ITA NO.436 /VIZAG/2017 JUPALLI RAMACHANDRA RAO SONS & CO., ELURU 3 1. THE APPELLANT WAS A WHOLESALE TOBACCO MERCHANT, THE FIRM DID BUSINESS TILL THE ASSESSMENT YEAR 2007-08 AND CLOSE D ITS BUSINESS DUE TO UNFAVOURABLE CONDITIONS. THEREAFTER THE PLACE OF BU SINESS WAS SURRENDERED TO ITS OWNER AND ALL THE PARTNERS LEFT THE PLACE AND S ETTLED PERMANENTLY AT HYDERABAD. 2. FRINGE BENEFIT TAX (FBT) WAS INTRODUCED FROM THE ASSESSMENT YEAR 2006-07.. IN VIEW OF THE FIRST YEAR, THE FILING OF FBT RETURN WAS NOT DONE BY INADVERTENCE. FOR THE ASSESSMENT YEAR 2007-08 FBT R ETURN WAS FILED AND TAX WAS PAID. THE FBT AMOUNT PAID WAS RS 377 OR THE ASS ESSMENT YEAR 2007-08. FOR THE ASST. YEAR 2006-07, FBT PAYABLE COMES TO RS 542 AS PER THE FOLLOWING CALCULATION. EXPENDITURE AMOUNT RATE FRINGE BENEFIT TELEPHONE ` 3,445 @ 20% 689 TRAVELLING ` 18,417 @ 5% 921 TOTAL 1610 FBT @ 30% 483 ADD: SC @10% 48 ADD: CESS@ 2% 11 TOTAL PAYABLE 542 3. AS THE FIRM WAS CLOSED AND THE PARTNERS LEFT THE PLACE, NOTICE U/S 274 READ WITH SEC 271FB, DATED 0212201-0 WAS NOT SERVED ON T HE APPELLANT OR ITS PARTNERS. HENCE, A PENALTY OF RS 1,79,300/- (@ RS 1 00 PER DAY FOR 1,793 DAYS) WAS LEVIED FOR FAILING TO FURNISH FEY RETURN WITHIN THE TIME PRESCRIBED U/S 115 WD(1). 4. APPELLANT SUBMITS THAT IN VIEW OF THE CIRCUMSTAN CES MENTIONED, IT COULD NOT FILE THE RETURN OF FBI AS IT WAS THE FIRST YEAR OF INTRODUCTION OF FBT AND THE IMPLICATIONS WERE NOT FULLY UNDERSTOOD. THE APPELLANT HAD NO INTENTION TO AVOID TAKING NOTICES BUT THE NOTICE CO ULD NOT BE SERVED AS ALL THE PARTNERS LEFT THE PLACE FOR HYDERABAD PERMANENT LY AFTER CLOSING THE BUSINESS. THE RETURN FOR THE LAST BUSINESS YEAR 200 7-08 AND THE FBT RETURN WERE FILED AND TAXES WERE DULY PAID IN TIME. DURING THE ENTIRE PERIOD OF ITS EXISTENCE APPELLANT COOPERATED WITH T HE DEPARTMENT AND THERE WERE NO TAX ARREARS ANY TIME EARLIER, APPELLA NT ALSO SUBMITS THAT THE PENALTY LEVIED OF RS. 1,79,300 WAS VERY HUGE COMPAR ED TO THE FBT PAYABLE OF RS.542. IT IS HENCE PRAYED THAT IT MAY B E KINDLY TREATED TO HAVE BEEN PREVENTED BY A REASONABLE CAUSE AS PER PR OVISIONS OF SEC 273B IN NOT FILING THE RETURN WITHIN THE TIME PRESCRIBED ITA NO.436 /VIZAG/2017 JUPALLI RAMACHANDRA RAO SONS & CO., ELURU 4 THE CASE WAS POSTED FOR HEARING BY THE CIT(A) BUT NONE APPEARED BEFORE THE CIT(A). HENCE, THE CIT(A) UPHE LD THE PENALTY. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE FILED APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, TH E LD. A.R. ARGUED THAT THE ASSESSEE HAD CARRIED ON THE BUSINESS DURING THE YEAR 2006-07 AND THE FBT PAYABLE WAS ` 542/-. THE FIRM WAS CLOSED SUBSEQUENTLY. SINCE, IT WAS THE FIRST YEAR OF INTRODUCTION OF FBT, THE A SSESSEE WAS NOT UNDERSTOOD THE PROVISIONS OF FBT FULLY AND THERE WA S NO WILLFUL INTENTION TO EVADE OR NOT TO FILE THE RETURN. SINCE THE AMOU NT INVOLVED IS VERY PALTRY AMOUNT OF RS.542/- AND THE PENALTY IMPOSED W AS ` 1,79,300/- WHICH IS HIGHLY UNJUSTIFIED, THE LD. A.R. REQUESTED TO CANCEL THE PENALTY IMPOSED BY THE A.O. THE LD. A.R. ALSO ARGUED THAT THE A.O. HAS ISSUED PENALTY NOTICES AFTER LAPSE OF 5 YEARS OF TIME FROM THE DUE DATE OF FILING THE RETURN WHICH RESULTED IN INCREASED QUANTUM OF P ENALTY. 6. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE OR DERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, THE ASSESSMENT YEAR INVOLVED IS 2006-07 AND T HE PENALTY U/S 271FB OF THE ACT WAS INITIATED BY THE A.O. BY ISSUE OF NOTICE U/S 271FB ITA NO.436 /VIZAG/2017 JUPALLI RAMACHANDRA RAO SONS & CO., ELURU 5 ON 2.12.2010 AFTER THE LAPSE OF 3 YEARS AND THE NOT ICE WAS SERVED ON 22/06/2011 I.E AFTER THE LAPSE OF 4 YEARS WHICH RES ULTED IN INCREASE OF QUANTUM OF PENALTY. HAD THE AO WOKE UP IN TIME AND ISSUED THE NOTICE REQUIRING THE ASSESSEE TO FILE THE FBT RETURN AS R EQUIRED UNDER SECTION 115WD(2), THE SITUATION WOULD NOT HAVE WORSENED LIK E THIS. INACTION OF THE ASSESSING OFFICER COUPLED WITH THE IGNORANCE OF THE ASSESSEE RESULTED IN LEVY SUBSTANTIAL AMOUNT OF PENALTY ON THE TAX PA YER. AS PER THE PROVISIONS OF SECTION 115WD OF THE ACT , THE ASSESSEE REQUIRED TO FILE THE FBT RETURN BEFORE THE DUE DATE I.E. 31 ST JULY OF THE ASSESSMENT YEAR AND IN CASE THE RETURN WAS NOT FILE D BEFORE THE DUE DATE THE ASSESSEE IS ALLOWED TO FILE THE RETURN WI THIN ONE YEAR FROM THE END OF THE RELEVANT A.Y. AS PROVIDED IN SECTION 115 WD(3) OF THE ACT. IN CASE THE A.O. IS OF THE OPINION THAT THE ASSESSE E IS RESPONSIBLE FOR PAYING THE FBT AND HAS NOT FURNISHED THE RETURN UND ER SUB-SECTION (1) OF SECTION 115WD OF THE ACT, THE AO REQUIRED TO ISSU E THE NOTICE AFTER THE DUE DATE OF FILING THE FBT RETURN CALLING FOR T HE RETURN. IN THE INSTANT CASE, THE DUE DATE WAS 31 ST JULY OF 2006 FOR FILING THE RETURN OF FBT AND THE A.O. REQUIRED TO ISSUE NOTICE CALLING FOR THE R ETURN AND THE A.O. HAS NOT ISSUED ANY NOTICE REQUIRING THE ASSESSEE TO FIL E THE FBT RETURN AS REQUIRED UNDER SUB-SECTION (2) OF SECTION 115WD OF THE ACT. FOR IMPOSING THE PENALTY, THE A.O. SHOULD GIVE A FINDIN G THAT THE ASSESSEE IS ITA NO.436 /VIZAG/2017 JUPALLI RAMACHANDRA RAO SONS & CO., ELURU 6 LIABLE FOR PAYMENT OF FBT AND REQUIRED TO FILE THE FBT RETURN BY INITIATING PROCEEDINGS FOR NON-FURNISHING OF THE FBT RETURN AN D FOR NON-PAYMENT OF FBT. IN THIS CASE, THE A.O. NEITHER INITIATED P ROCEEDINGS FOR NON FILING OF THE RETURN NOR FOR PAYMENT OF FBT AND THERE WAS NO FINDING WITH OF THE A.O. WITH REGARD TO THE LIABILITY FOR FBT OF TH E ASSESSEE. IN THE ABSENCE OF ANY PROCEEDINGS AGAINST THE ASSESSEE FOR THE ASSESSEES LIABILITY FOR FBT, THERE IS NO CASE FOR INITIATION OF PENALTY PROCEEDINGS AND FOR NON FURNISHING THE FBT RETURN. 8. FURTHER, THE LD. A.R. HAS PRODUCED A COPY OF PEN ALTY NOTICE ISSUED BY THE A.O. U/S 271FB OF THE ACT DATED 2.12.2010, W HICH WAS SERVED BY AN AFFIXTURE ON 22.6.2011 FIXING DATE FOR HEARING O N 13.6.2011. THE NOTICE WAS SERVED ON THE ASSESSEE AFTER THE DATE OF HEARING WAS OVER, HENCE THE NOTICE ISSUED ON 02/12/2010 IS INVALID AN D THERE IS NO VALID NOTICE ISSUED BY THE DEPARTMENT CALLING FOR THE EXP LANATION OF THE ASSESSEE FOR THE ASSESSEES FAILURE TO FILE THE FBT RETURN. HENCE, PENALTY LEVIED ON IN VALID NOTICE IS UNSUSTAINABLE AND ACCO RDINGLY, WE CANCEL THE PENALTY IMPOSED ON THE ASSESSEE U/S 271FB. ITA NO.436 /VIZAG/2017 JUPALLI RAMACHANDRA RAO SONS & CO., ELURU 7 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH JUL18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 11.07.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT JUPALLI RAMACHANDRA RAO SONS & C O., C/O JUPALLI RAMAKRISHNA RAO, FLAT NO.302, DWARAKA CASTLE, OPP. KPTD HIGH SCHOOL ROAD, ASHOK NAGAR, ELURU-534 005, W.G. DIST. 2. / THE RESPONDENT THE ITO, WARD-1, ELURU 3. + / THE PR. CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A) THE CIT(A)-2, GUNTUR, CAMP: VISAKHA PATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR 05.07.2018 SR.P S 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 06.07.2 018 SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS