The Kakkoor Service Co-op Bank Ltd, Cochin V. ITO, Thodupuzha

ITA 519/COCH/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4554 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2009
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: T JOHN GEORGE
• Keywords: Reasonable cause
• Section: 273B; 142(1)

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.A. NO. 519/COCH/2009 ASSESSMENT YEAR : 2006-07 THE KAKOOR SERVICE CO-OPERATIVE BANK LTD., NO. 163, KAKKOOR-686 662. [PAN: AAAAS 4010R] VS. THE INCOME-TAX OFFICER, WARD-1, THODUPUZHA (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI T.JOHN GEORGE, AR. REVENUE BY SHRI T.J.VINCENT, DR O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE CO NFIRMATION OF THE PENALTY LEVIED U/S. 271B OF THE INCOME-TAX ACT, 1961 ('THE ACT' HE REINAFTER) VIDE ORDER DATED 10.10.2007 BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOC HI (CIT(A) FOR SHORT) VIDE HIS ORDER DATED 31.8.2009 FOR THE ASSESSMENT YEAR (A.Y. ) 2006-07. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED I N THE BUSINESS OF BANKING, SET UP IN THE CO-OPERATIVE SECTOR AS A PRIMARY CO-OPERATIV E SOCIETY FOR THE PROSPERITY OF ITS MEMBERS. IT FILED ITS RETURN OF INCOME FOR THE YEA R ON 15.12.2006, I.E., BEYOND THE DUE DATE (31.10.2006) FOR FILING THE SAME U/S. 139(1), DULY ACCOMPANIED BY THE ANNUAL ACCOUNTS AS WELL AS THE TAX AUDIT REPORT U/S. 44AB OF THE ACT. THE SAID REPORT IS, IN TERMS OF S. 44AB, REQUIRED TO BE FILED BY THE DUE DATE OF THE FILING OF THE RETURN AS APPLICABLE IN THE CASE OF THE ASSESSEE, FAILING WHICH THE PENALTY U/S. 271B IS ATTRACTED, I.E., WHERE NO REASONABLE CAUSE FOR THE NON-SUBMISSION OR THE DELA YED SUBMISSION IS SHOWN. THE PENALTY IS AT 0.5% OF THE TURNOVER (WHICH IN THE IN STANT CASE IS AT ` 202.12 LAKHS) OR ` 1 LAKH, WHICHEVER IS LESS. THE REASON ADVANCED IN TH E INSTANT CASE WAS THAT THE BANK SECRETARY WAS ON LEAVE. THE SAME WAS FOUND NOT ACC EPTABLE BY THE AO AS THE AUDIT ITA.NO.519/COCH/2009 2 REPORT HAD BEEN SIGNED ON 31.10.2006 ITSELF, SO THA T THE ABSENCE OF THE BANK SECRETARY, ASSUMING SO, HAD NOT CAUSED ANY DELAY IN EITHER PRE PARING THE AUDIT REPORT - IT BEING READY BY THE DUE DATE ITSELF - OR ITS SUBMISSION. THE SA ME STOOD CONFIRMED IN FIRST APPEAL, WITH THE LD. CIT(A) FINDING THAT THE LEAVE BY A FUNCTION ARY OF THE ASSESSEE-BANK WOULD NOT PRECLUDE THE FINANCIAL INSTITUTION FROM FULFILLING ITS DUE LEGAL OBLIGATIONS, WHICH RATHER IS EXPECTED TO EXHIBIT MUCH BETTER STANDARDS OF ADHERE NCE TO LAW AND PROCEDURE. 3. BEFORE US, IT WAS SUBMITTED BY THE LD. AR, THE A SSESSEES COUNSEL, THAT THE ENTIRE INCOME OF THE ASSESSEE IS EXEMPT FROM TAX U/S. 80P OF THE ACT. AS SUCH, NO MALA FIDES COULD BE ATTRIBUTED TO THE DELAYED SUBMISSION OF TH E RETURN OF INCOME FOR THE YEAR AS WELL AS THE TAX AUDIT REPORT. THE DELAY HAS BEEN CAUSED DUE TO THE BANK SECRETARY, WHO WAS LOOKING AFTER THE RELATED AFFAIRS OF THE BANK, BEIN G ON LEAVE (FOR THE PERIOD FROM 25.10.2006 TO 10.11.2006), ADVERTING TO THE MEDICAL CERTIFICATE DATED 17.11.2007 FROM A DOCTOR, STATED TO BE THE ATTENDING PHYSICIAN (PB PG . 12), DULY SUBMITTED BEFORE THE FIRST APPELLATE AUTHORITY. THE ASSESSEE IS A REGULAR ASS ESSEE, AND HAS BEEN FILING ITS RETURN IN TIME FOR THE PAST SEVERAL YEARS; ENCLOSING A CHART TABULATING DUE DATE AND THE ACTUAL DATE OF THE FILING OF THE RETURN FROM AY 2000-01 TO AY 2009 -10. UNDER THE CIRCUMSTANCES, PENALTY WOULD NOT BE EXIGIBLE AND, THEREFORE, BE DE LETED. THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THAT NO REASONABLE CAUSE STANDS ADVANC ED BY THE ASSESSEE FOR THE NON- SUBMISSION OF THE TAX AUDIT REPORT, WHICH WAS IN FA CT READY BY THE DUE DATE, SO THAT THE PENALTY STANDS CORRECTLY LEVIED AND SUSTAINED AND, ACCORDINGLY, MERITS CONFIRMATION. 4. WE HAVE HEARD THE PARTIES, AND CAREFULLY PERUSED THE MATERIAL ON RECORD, AS WELL AS THE CITED PRECEDENTS. 4.1 THE PRIMARY FACTS ARE NOT IN DISPUTE, AND THE DEFAULT IN FURNISHING THE AUDIT REPORT U/S. 44AB OF THE ACT, IN TERMS OF THE SAID SECTION, IS ADMITTED, I.E., BY THE SPECIFIED DATE MENTIONED THEREIN, BEING 31.10.2006 FOR THE RELEVAN T ASSESSMENT YEAR. SO HOWEVER, SECTION 273B SAVES PENALTY, OTHERWISE IMPOSABLE, I. E., WHERE THE PERSON CONCERNED PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAIL URE. AS SUCH, THE PURVIEW OF THE CONCERNED AUTHORITY AND, CONSEQUENTLY, OF THE APPEL LATE AUTHORITY, IS THE EXISTENCE OR OTHERWISE OF A REASONABLE CAUSE FOR THE ADMITTED FA ILURE. THE FACT THAT THE ASSESSEES ITA.NO.519/COCH/2009 3 INCOME IS NOT LIABLE TO TAX ON ACCOUNT OF DEDUCTION U/S. 80P IS TOTALLY IRRELEVANT, AS IS ALSO TO A LARGE EXTENT ITS FILING OF THE RETURN AND THE AUDIT REPORT IN TIME IN THE PAST OR IN THE FUTURE. THIS IS AS IT IS ONLY THE IMPUGNED DEFAULT FOR WHICH PENALTY IS LEVIED - THAT NEEDS TO BE REASONABLE EXPLAINED. THE ONLY INFERENCE SOU GHT TO BE ELICITED FROM THE SAID COMPLIANT BEHAVIOUR IS THE ABSENCE OF MALA FIDES , AND WHICH ARE NOT IN DOUBT. IN ANY CASE, WHERE THE DELAY IS REASONABLY EXPLAINED, THE SAME ITSELF CONFIRMS THE BONA FIDES . THE ONLY REASON FOR THE DELAY FURNISHED IS ON ACCOU NT OF THE LEAVE OF SHRI M.R.RAJENDRAN, SECRETARY OF THE BANK. HOWEVER, THE SAME IS OF NO CONSEQUENCE WHATSOEVER AS THE REPORT STOOD SIGNED BY THE AUDITOR ON 31.10.2006, THE DUE DATE, AND THUS OSTENSIBLY AVAILABLE FOR FURNISHING ON THAT DATE. EVEN IF IT WAS SIGNED IN T HE LATE HOURS OF 31.10.2006, THE SAME COULD BE FILED THE NEXT DAY. SHRI RAJENDRAN MAY BE LOOKING AFTER THE AFFAIRS OF THE BANK, BUT THEN HE COULD HAVE ALWAYS INSTRUCTED SOMEBODY I N THE ORGANISATION TO DO THE NEEDFUL, IF NOT THE TAX AUDITOR HIMSELF, WHO WOULD IN ANY CA SE BE AWARE OF THE DEFAULT, AND HIMSELF ADVISED HIS CLIENT FOR FURNISHING THE REPORT IN TIM E OR WITHOUT FURTHER DELAY, I.E., EVEN IF THE RETURN OF INCOME WAS YET TO BE PREPARED. IN FA CT, AS ENQUIRED BY THE BENCH, THE ASSESSEE HAS NOT EVEN SUBMITTED ANY PROOF FOR THE L EAVE OF SHRI RAJENDRAN FROM THE BANK FOR THE SAID PERIOD, I.E., 25.10.2006 TO 10.11.2006 , VIZ. THE ATTENDANCE REGISTER, THE LEAVE APPLICATION, DULY APPROVED, ETC. FURTHER STILL, TH ERE IS NO EXPLANATION FOR THE DELAY AFTER 10.11.2006; THE REPORT HAVING BEEN FILED ONLY ON 15 .12.2006, FIVE WEEKS LATER. THERE IS NO OBLIGATION TO FILE THE AUDIT REPORT TOGETHER WIT H THE RETURN OF INCOME, AS ALSO SOUGHT TO BE EMPHASIZED BY THE LD. DR BEFORE US; THE RELEVANT SECTION (S. 44AB) PRESCRIBING THE OBLIGATION IN TERMS OF THE SPECIFIED DATE, AND WHIC H UP TO A.Y. 2007-08 IS THE 31 ST DAY OF OCTOBER OF THE RELEVANT ASSESSMENT YEAR. UNDER THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS EXPLAINED, MUCH LESS PROVEN THE EX ISTENCE OF A REASONABLE CAUSE FOR, THE DELAY OF 1 MONTHS, MORE PARTICULARLY FOR THE PERI OD SUBSEQUENT TO 10.11.2006 (UP TO 15.12.2006), AND WHICH CONSTITUTES THE BULK OF THE IMPUGNED DELAY. 4.2 CONTINUING FURTHER, IT MAY BE APPRECIATED T HAT THE DEFAULT WHICH IS BEING SOUGHT TO BE PENALIZED, OCCURS AS SOON THE SPECIFIED DATE FOR FURNISHING THE AUDIT REPORT U/S. 44AB EXPIRES. THE LENGTH OF THE DELAY IN THE SUBMISSION OF THE AUDIT REPORT SUBSEQUENTLY, WOULD, THUS, ONLY BE A SUBJECT MATTER OF A `REASONA BLE CAUSE. THAT IS, THE DEFAULT OCCURS, ITA.NO.519/COCH/2009 4 AND IS THE SAME, WHETHER THE DELAY IS FOR ONE DAY O R FOR (SAY) 365 DAYS. THE EXTENT OF THE DELAY IS IMMATERIAL AS FAR AS THE COGNIZANCE OF THE DEFAULT UNDER THE LAW IS CONCERNED; THOUGH, WITHOUT DOUBT, THE SAME WOULD HAVE A CLEAR AND DIRECT BEARING INSOFAR AS THE EXPLANATION FOR THE DELAY, I.E., TOWARD THE REASONA BLE CAUSE, WHICH SAVES PENALTY, IS CONCERNED. THIS IS AS THE SAID EXPLANATION HAS NECE SSARILY TO BE FOR THE PERIOD OF DELAY. THE SAME NO DOUBT HAS TO BE CONSIDERED PRAGMATICALL Y, BUT IT HAS TO FOR THE ENTIRE PERIOD OF DELAY, AND IT CANNOT BUT BE OTHERWISE. THE CONCE PT OF `REASONABLE CAUSE STANDS SUBJECT TO ELUCIDATION BY THE HIGHER COURTS OF LAW TIME AND AGAIN, AND IS THUS ONE WHICH IS JUDICIALLY WELL-SETTLED, AND FOR WHICH ONE MAY REFE R TO THE DECISION IN THE CASE OF CWT V. SRI JADISH PRASAD CHOUDHARY , 211 ITR 472 (PATNA)(FB). WHAT IS A `REASONABLE CA USE IS ALWAYS A MATTER OF FACT, TO BE DETERMINED ON THE CO NSIDERATION OF THE ENTIRETY OF THE OBTAINING FACTS AND CIRCUMSTANCES. TO STATE SUCCINC TLY, IT CAN BE SAID TO BE SOMETHING THAT IS OUTSIDE THE CONTROL OF THE PERSON, I.E., ACTING WITH ORDINARY DILIGENCE UNDER THE GIVEN CIRCUMSTANCES. IN THE FACTS OF THE CASE, WE FIND T HAT THERE IS NO EXPLANATION WHATSOEVER; THE AUDIT REPORT BEING AVAILABLE ON 31/10/2006. THA T WOULD BE THE ONLY PRESUMPTION OR FACTUAL INFERENCE FOLLOWING IT BEING DATED 31/10/20 06. IT HAS NOWHERE BEEN STATED THAT IT WAS NOT SO, AND FOR WHICH, AGAIN, THERE WOULD HAVE TO BE VALID REASONS; A FACTUAL FINDING CANNOT BE ISSUED ON THE BASIS OF CONJECTURES AND SU RMISES. FURTHER, THE REPORT IS NOT SUBMITTED SOON AFTER, WHICH SHOULD BE THE CASE AS T HE INSTITUTION CAN ONLY BE CONSIDERED AS AWARE OF, AND RESPONSIVE TOWARD, ITS STATUTORY O BLIGATIONS, EVEN AS BORNE OUT BY THE FILING OF THE AUDIT REPORT IN TIME IN THE PAST. IT IS NOT EVEN SUBMITTED AFTER THE SECRETARY, WHO REPORTEDLY JOINED DUTY ON 10/11/2006, BUT ONLY FIVE WEEKS LATER, I.E., ON 15/12/2006. IN OTHER WORDS, THE ASSESSEES CASE QUA REASONABLE CAUSE IS SANS ANY EXPLANATION, PARTICULARLY FOR THE DELAY POST 10/11/2006, IN RESP ECT OF WHICH THE LD. AR WAS SPECIFICALLY QUERIED BY THE BENCH DURING THE HEARING. 4.3 WE ARE CONSCIOUS OF THE FACT THAT THE APE X COURT IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA (1972) 83 ITR 26 (SC) HAS EXPLAINED THAT PENALTY W OULD NOT ORDINARILY BE LEVIED MERELY BECAUSE IT IS LAWFUL TO DO SO, I.E., WHERE THERE IS NO DISREGARD OF ITS OBLIGATIONS BY THE ASSESSEE, OR WHERE IT HAD REASON TO ACT IN THE MANNER IT DID, I.E., AS WHERE IT CARRIED A BONA FIDE BELIEF AS TO ITS ACTION BEING VALID IN LAW. HOWEVE R, WE DO NOT ITA.NO.519/COCH/2009 5 FIND ANY SUCH EXCEPTING CIRCUMSTANCES, WHICH IS ESS ENTIALLY A MATTER OF FACT, IN THE PRESENT CASE. THE APPELLANT-BANK HAS BEEN REGULARLY GETTING ITS ACCOUNTS AUDITED, FURNISHING ITS RETURN IN TIME FOR THE PAST SEVERAL YEARS; RATHER, AS NOTED EARLIER, PLEADS ITS CASE ON THAT BASIS. AS SUCH, ITS PAST CONDUCT PROVES ITS KNOWLED GE OF THE LAW AND OF ITS STATUTORY OBLIGATIONS THERE-UNDER, IGNORANCE OF WHICH CAN EVE N OTHERWISE NOT BE A MATTER OF PRESUMPTION; IT BEING SERVICED BY A QUALIFIED ACCOU NTANT. 4.4 IN VIEW OF FOREGOING, WE CONSIDER THE IMP UGNED PENALTY AS RIGHTLY LEVIED IN THE PRESENT CASE. 4.5 THE ASSESSEE, WE FIND, HAS SOUGHT TO DRAW SUPPO RT FROM SOME DECISIONS. HOWEVER, IN EACH OF THESE CASES, THE ASSESSEE HAD OFFERED AN EXPLANATION FOR THE DELAY, WHICH WE HAVE FOUND AS ABSENT IN THE PRESENT CASE. THE MATT ER, AS AFORE-STATED, IS ESSENTIALLY ONE OF FACT, SO THAT THE CASE LAW IS EVEN OTHERWISE OF LIM ITED APPLICABILITY; THE PURVIEW OF THE APPELLATE AUTHORITY BEING LIMITED TO WHETHER THE AD MITTED DELAY STANDS REASONABLY EXPLAINED OR NOT. IT MAY ALSO BE ADDED THAT THE RE LIANCE THEREON IS ALSO MISPLACED FOR THE REASON OF THE AMENDMENT IN LAW; E.G. THE DECISION I N THE CITED CASE OF CIT V. K.K. SPUN PIPE , 284 ITR 301 (P&H), HOLDING THAT PENALTY U/S. 271B IS NOT ATTRACTED WHERE THE AUDIT REPORT IS OBTAINED BY THE SPECIFIED DATE, THOUGH FI LED LATER ALONG WITH THE BELATED RETURN U/S. 139(4) WHERE NO NOTICE U/S. 142(1) STANDS ISSU ED, PERTAINS TO THE ASSESSMENT YEARS 1989-90 & 1990-91. THE LAW STANDS AMENDED BY FINANC E ACT, 1995 W.E.F. 1/7/1995, SO THAT THE OBLIGATION CAST ON THE ASSESSEE U/S. 44AB, WHICH ERSTWHILE WAS LIMITED TO OBTAINING THE AUDIT REPORT BY THE SPECIFIED DATE, S TOOD EXTENDED TO ITS FURNISHING BY THE SAID DATE. THAT IS, WHILE PRIOR TO 1/7/1995 THE LAW ONLY MANDATED OBTAINING THE SAID REPORT BY THE DUE DATE OF FILING THE RETURN IN ITS CASE, T O BE FILED ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT YEAR, POST 1/7/1995, THE REQUIREME NT OF THE SECTION WOULD BE SATISFIED ONLY ON FURNISHING THE SAID REPORT BY THE DUE DATE OF FURNISHING THE RETURN OF INCOME, AND IRRESPECTIVE OF WHETHER THE RETURN OF INCOME IS FIL ED BY THAT DATE OR NOT, WITH WHICH OBLIGATION THE SAID OBLIGATION STANDS DELINKED. ITA.NO.519/COCH/2009 6 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMI SSED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 31ST MAY, 2011 GJ COPY TO: 1 . THE KAKOOR SERVICE CO-OPERATIVE BANK LTD., NO. 163, KAKKOOR - 686 662. 2. THE INCOME-TAX OFFICER, WARD-1, THODUPUZHA. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE.