APL INDIA P.LTD, MUMBAI V. JT CIT (OSD) 8(1), MUMBAI

ITA 4796/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71424 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 20-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: DOLLY H SUCHDEV
• Keywords: Reasonable cause
• Section: 273B; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 4796/M/2012 (ASSESSMENT YEAR:2008-09) APL(INDIA) PRIVATE LIMITED 247, PARK HINCON HOUSE, B WING, 8 TH FLOOR LBS MARG, VIKHROLI(W) MUMBAI-400 083. VS. JCIT (OSD)-8(1) ROOM NO.260A, 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. (APPELLANT) (RESPONDENT) P.A. NUMBER : AABCA 2731 N ASSESSEE BY : MS. DOLLY H. SUCHDEV REVENUE BY : SHRI S.S. RANA DATE OF HEARING : 02/09/2013 DATE OF PRONOUNCEMENT : 25/10/2013 O R D E R PER I.P. BANSAL, JM: THIS APPEAL IS FILED BY THE ASSESSEE AND IS DIRECTE D AGAINST THE ORDER PASSED BY THE LD. CIT(A) DATED 11.05.2012 FOR THE ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL READ AS UNDER :- IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED I) IN CONFIRMING THE LEVY OF PENALTY OF RS.1,00,000/- U/S. 271B OF THE INCOME TAX ACT, 1961 (THE ACT) LEVIED B Y THE AO WITHOUT APPRECIATING THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE AND JUSTIFIABLE REASO NS ITA NO.4796/M/12 A.Y.08-09 2 FROM OBTAINING AND FILING THE TAX AUDIT REPORT U/S. 44AB OF THE ACT. II) IN NOT CANCELLING OF PENALTY U/S. 271B OF THE ACT O F RS.1,00,000/- LEVIED BY THE AO. 1.1 THE RETURN OF INCOME IN RESPECT OF ASSESSMENT Y EAR 2008-09 WAS E- FILED BY THE ASSESSEE ON 03/09/2009 DECLARING INCOM E AT RS.15,26,85,450/-. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SHIPPING AGENTS. THE ASSESSEE HAS RECEIVED GROSS RE VENUE ON ACCOUNT OF COMMISSION TO THE TUNE OF RS.43,56,89,051/-, THEREF ORE, WAS REQUIRED TO OBTAIN TAX AUDIT REPORT UNDER THE PROVISIONS OF SEC TION 44AB OF THE ACT BEFORE THE SPECIFIED DATE AND ALSO TO FURNISH THE S AME BEFORE DUE DATE OF FILING THE RETURN WHICH WAS 30/09/2008. THE TAX AUD IT REPORT WAS OBTAINED BY THE ASSESSEE ON 26.06.2009 AND IT WAS F URNISHED ALONGWITH RETURN WHICH WAS FILED ON 03.09.2009. THERE BEING N ON-COMPLIANCE WITH THE PROVISIONS OF SECTION 44AB, THE AO INITIATED PE NALTY PROCEEDINGS UNDER SECTION 271B OF THE ACT. HE REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY UNDER SECTION 271B SHOULD NOT BE IMPOSED AS THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO OBTAIN AND FURNISH TAX AUDIT REPORT UNDER SECTION 44AB UNDER SECTION 44AB ON OR BEFORE 30/09/2008. IN RESPONSE TO SUCH NOTICE THE ASSESSEE FILED REPLY IN WHICH IT WAS MENTIONED THAT THE DELAY WAS ON ACCOUNT OF V ARIOUS REASONS. ONE OF SUCH REASONS WAS THAT THE PERSONNEL FROM THE STA TUTORY AUDITORS OFFICE WERE NOT CONVERSANT WITH THE ACCOUNTING SYSTEMS AND RECORDS MAINTAINED BY THE ASSESSEE COMPANY WHICH RESULTED I NTO DELAY FOR FINALIZATION OF THE AUDITED ACCOUNTS FOR THE YEAR. THE STATUTORY AUDIT WAS CONCLUDED BY THEM ON 21.04.2009. THEREAFTER, TAX AU DIT WAS COMPLETED AND SAME WAS SIGNED BY AUDITORS ON 25.06.2009. HOWE VER, THE AO DID NOT ACCEPT THIS AS A REASONABLE CAUSE AND LEVIED A PENALTY OF RS.1,00,000/- WHICH IS THE MAXIMUM PENALTY IMPOSABL E UNDER SECTION 271B OF THE ACT. ITA NO.4796/M/12 A.Y.08-09 3 1.2 SUBMISSIONS MADE BY THE ASSESSEE BEFORE AO WERE REITERATED IN THE APPEAL FILED BEFORE CIT(A). HOWEVER, THE LD. CI T(A) HAS UPHELD THE STAND OF THE AO. THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED APPEAL. 2. THE LD. AR AFTER NARRATING THE FACTS SUBMITTED T HAT THE DELAY IN STATUTORY AUDIT PREVENTED THE ASSESSEE TO OBTAIN TA X AUDIT REPORT AND SAME MAY BE CONSIDERED TO BE A REASONABLE CAUSE. SH E PLEADED THAT AS THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE THE LD. CIT(A) HAS ERRED IN UPHOLDING THE LEVY OF PENALTY. 2.1 ON THE OTHER HAND THE LD. DR RELIED UPON THE OR DER PASSED BY THE AO AND CIT(A). 3. WE HAVE HEARD BOTH PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. ACCORDING TO SECTION 273B, NO PENA LTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CAS E MAY BE FOR ANY FAILURE WHICH INTERALIA INCLUDE THE DEFAULTS MENTIONED IN SECTION 271B, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE S AID FAILURE. A PLAIN READING OF SECTION 273B MAKES IT CLEAR THAT THE SAM E IS A PROCEDURAL LAW WITH REGARD TO THE QUESTION OF IMPOSITION OF PENALT Y UNDER DIFFERENT SECTIONS WHICH INCLUDE SECTION 271B. SECTION 271B M AINTAINS IMPOSITION OF PENALTY ON THE FAILURE BUT, BY REASON OF RULE OF EVIDENCE PROVIDED UNDER SECTION 273B, SUCH IMPOSITION OF PENALTY IS DEPENDE NT ON THE PROOF THAT THERE WAS NO REASONABLE CAUSE FOR THE FAILURE. OMIS SION OF THE PARTICULAR PHRASE FROM THE SUBSTANTIVE LAW AND INCORPORATION T HEREOF IN THE PROCEDURAL LAW BEARS THE LEGISLATIVE INTENT TO MAKE THE PROVISION OF SECTION 271B COERCIVE INSTEAD OF PENAL. THE AMENDME NT WAS INTENDED TO REMOVE THE SCOPE OF ANY CONFUSION WITH REGARD TO TH E CHARACTERISTICS AND NATURE OF THE PROCEEDINGS UNDER SECTION 271B. THE W ORD MAY EMPLOYED UNDER SECTION 271B THOUGH MAY BE INTERPRETED AS DIS CRETIONARY YET THAT DISCRETION IS LIMITED WITHIN THE CONVENIENCE OF SEC TION 273B PROVIDING THE ITA NO.4796/M/12 A.Y.08-09 4 PROCEDURE THEREOF. THE WORD MAY HAS BEEN USED ONL Y TO ACCOMMODATE THE PROCEDURAL LAW ENABLING THE ASSESSEE TO PROVE T HAT THERE WAS A REASONABLE CAUSE FOR THE FAILURE. UNLESS IT IS PROV ED THAT THERE WAS REASONABLE CAUSE FOR THE FAILURE THERE IS NO ESCAPE FROM THE IMPOSITION OF PENALTY. SECTION 271B DOES NOT LEAVE ANY DISCRETION AT THE HANDS OF THE AUTHORITY EXCEPT AS PROVIDED IN SECTION 273B. IT IS ONLY WHEN REASONABLE CAUSE FOR THE FAILURE IS PROVED, THE PENALTY CAN BE AVOIDED. THEREFORE, THE LIABILITY IN THE FORM OF PENALTY CAN BE IMPOSED SIM PLY ON THE DEFAULT IF IT IS NOT EXPLAINED BY PROVING REASONABLE CAUSE FOR TH E DEFAULT. THERE CAN NOT BE ANY PROPOSITION CONCEIVED OF TO THE EXTENT T HAT IF THERE WAS A SUBSTANTIVE COMPLIANCE OR IF THERE WAS NO ABSOLUTE DEFAULT THEN PENALTY CAN NOT BE IMPOSED. BUT THE STATUTE HAS USED THE EX PRESSION MAY EMPLOYED IN 271B WHICH CAN NOT BE TREATED TO BE MAN DATORY. IT HAS LEFT A DISCRETION THAT THE TAXING AUTHORITY IN GIVEN FACTS AND CIRCUMSTANCES MAY NOT IMPOSE PENALTY IF THEY ARE SATISFIED THAT THERE WAS SUFFICIENT GROUND FOR NOT IMPOSING PENALTY. BUT IT DEPENDS ON THE FA CTS OF EACH CASE AND HAVING REGARD TO THE MATERIALS PLACED BEFORE IT OR WHERE THE FINDING IS SUCH THAT IT CAN CONCEIVE OF TWO ALTERNATE MEANING, THEN THE MEANING BENEFICIAL TO THE ASSESSEE HAS TO BE ACCEPTED. REFE RENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CAPITAL ELECTRONICS (261 ITR 4) . 3.1 IF THE FACTS OF THE PRESENT CASE ARE EXAMINED I N THE LIGHT OF LAW LAID DOWN IN THE AFOREMENTIONED DECISION THEN EVEN ACCOR DING TO FACTS AND CIRCUMSTANCES OF THIS CASE THERE IS MATERIAL ON REC ORD ACCORDING TO WHICH IT CAN BE SAID THAT THE ASSESSEE WAS PREVENTED BY S UFFICIENT CAUSE FOR NON-COMPLIANCE WITH THE PROVISIONS OF SECTION 44AB. THE REASON GIVEN IN THE PRESENT CASE FOR NON-COMPLIANCE WITH THE STATUT ORY PROVISIONS OF SECTION 44AB IS LATE COMPLETION OF STATUTORY AUDIT BY THE AUDITORS WHICH WAS COMPLETED ON 21.04.2009. AFTER COMPLETION OF TH E SAID STATUTORY AUDIT, WITHIN A REASONABLE TIME I.E. WITHIN A PERIO D OF LITTLE MORE THAN 2 ITA NO.4796/M/12 A.Y.08-09 5 MONTHS, THE ASSESSEE OBTAINED TAX AUDIT REPORT ON 2 5/06/2009 AND RETURN WAS E-FILED ON 03.09.2009. WITHOUT COMPLETIN G STATUTORY AUDIT, THE ASSESSEE COULD NOT HAVE OBTAINED TAX AUDIT REPO RT, WHICH CONSTITUTES REASONABLE CAUSE. THIS PLEA WAS RAISED BY THE ASSES SEE EVEN BEFORE THE AO AND AO HAS NOT DOUBTED SUCH CONTENTION OF THE AS SESSEE. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE LEATHER DEVELOPMENT CORPORATION LTD. (171 CTR 451) HAS HELD THAT DELAY IN COMPLETION OF STATUTORY AUDIT WAS REASONABLE CAU SE FOR NON- COMPLIANCE WITH SECTION 44AB AND IT WAS HELD THAT THE TRIBUNAL WAS RIGHT IN CANCELLING PENALTY LEVIED UNDER SECTION 27 1B. 4. IN VIEW OF OUR DISCUSSION, WE ARE OF THE OPINION THAT CIT(A) WAS NOT RIGHT IN UPHOLDING THE LEVY OF PENALTY UNDER SECTIO N 271B. PENALTY IS DIRECTED TO BE DELETED. 5. APPEAL BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2013. SD/- SD/- (SANJAY ARORA) ACCOUNTANT MEMBER (I.P. BANSAL ) JUDICIAL MEMBER MUMBAI, DATED: 25/10/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.