SAKARWADI TRADING CO., P. LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 5589/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55366 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2000-2001
• Appeal Filed On: 09-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Keywords: Business income; Bonafide belief; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI R.K. PANDA, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 5589/MUM/2010 ASSESSMENT YEAR : 2000-01 SAKARWADI TRADING CO. PVT. LTD., APPELLANT 20, YUSUF BUILDING, 43 MG ROAD, FORT, MUMBAI 400 001. VS. ASSTT. COMMISSIONER OF INCOME TAX-2(3), RESPON DENT 5 TH FLOOR, AAYAKAR BHAVAN, MK ROAD, MUMBAI 400 020. APPELLANT BY : MR. APURVA SHAH RESPONDENT BY : MR. G.P. TRIVEDI DATE OF HEARING : 29/09/2011 DATE OF PRONOUNCEMENT : ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF CIT(A)- 6, MUMBAI, PASSED ON 17/05/2010 FOR THE ASSESSMENT YEAR 2000-01. 2. THE SOLITARY GROUND RAISED IN THIS APPEAL IS IN RESPECT OF LEVY OF PENALTY OF RS. 1,00,000/- U/S 271B OF THE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT CO NSEQUENT TO NON- FILING OF TAX AUDIT REPORT IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 44AB, THE AO IMPOSED A PENALTY OF RS. 1,00,000/- U/ S 271B OF THE ACT, WHICH WAS CONFIRMED BY THE CIT(A). ON APPEAL T O ITAT, THE MATTER HAD BEEN SET ASIDE TO THE AO BY THE ITAT WITH A DIR ECTION TO ALLOW THE ASSESSEE A FRESH OPPORTUNITY BEFORE PASSING THE ORD ER. CONSEQUENTLY ITA NO. 5589/MUM/2010 SAKARWADI TRADING CO. PVT. LTD. 2 AFTER ALLOWING THE ASSESSEE SUFFICIENT OPPORTUNITY, THE AO PASSED A FRESH ORDER, WHICH IS THE SUBJECT MATTER OF APPEAL. 4. ON APPEAL, BEFORE THE CIT(A) IT WAS SUBMITTED TH AT THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT NO TAX AUDIT REPORT WAS REQUIRED TO BE FILED SINCE THEIR GROSS RECEIPTS, ACCORDING TO THE AR DID NOT EXCEED RS. 40 LAKHS. IT WAS ALSO STATED THAT THE OMISSION WAS NOT MOTIVATED. THE LEARNED AR CLAIMED THAT THE DIVIDEND ON INVESTMENT AND CERTAIN OTHER INCOME COULD NOT BE TREATED AS GROSS TURNOVER. THE LEARNED AR PLACED RELIANCE ON A NUMBER OF JUDICIAL PRONOUNCEMENTS AND THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTAN TS OF INDIA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) CONFIRMED THE PENALTY LEVIED BY THE AO U/S 271B OF THE ACT. AGGR IEVED, THE ASESSSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT AS PER THE ADVICE OF THE CA, THE ASSESSEE WAS UNDER THE BONAF IDE BELIEF THAT NO TAX AUDIT REPORT IS REQUIRED TO BE FILED SINCE THEI R GROSS RECEIPTS DID NOT EXCEED RS. 40 LAKHS. TO THIS EFFECT, THE LEARNE D COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE PAPER BOO K AT PAGE NO. 36, WHEREIN A LETTER DATED 07/09/1999 ADDRESSED TO THE DIRECTION OF THE ASSESSEE COMPANY ISSUED BY THE CHARTERED ACCOUNTANT S OF THE ASSESSEE COMPANY. THE CONTENTS OF THE SAID LETTER A RE EXTRACTED BELOW:- AS PER THE DETAILS FURNISHED BY YOU FOR THE YEAR 19 99-2000 WE ARE OF THE OPINION THAT YOUR COMPANY IS NOT COVERED BY SECTION 44AB OF THE INCOME TAX ACT, 1961. THE INCOME DERIVED BY THE COMPANY IS FROM INTEREST DIVIDEND ETC. WHICH ARE NOT COVERED BY THE DEFINITION OF SECTION 44AB. THE SAID SECTION IS APPLICABLE ONLY TO THE COMPANIES WHOSE T URNOVER, (WHICH EXPRESSION MEANS, SALES, TURNOVER, GROSS REC EIPTS FROM CARRYING ON THE BUSINESS ) EXCEEDS RS. 40 LAKHS. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE IS NOT DOING ANY BUSINESS AND ITS SOURCE O F INCOME WAS ONLY FROM INTEREST, DIVIDEND, SHARE OF PROFIT FROM PARTN ERSHIP FIRM AND ITA NO. 5589/MUM/2010 SAKARWADI TRADING CO. PVT. LTD. 3 SERVICE CHARGES AND, THEREFORE, HE WAS UNDER THE BO NAFIDE BELIEF THAT THERE IS NO OBLIGATION TO FILE TAX AUDIT REPORT U/S 44AB OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON TH E FOLLOWING CASE LAWS IN SUPPORT OF ASSESSEES CASE: 1. CIT VS. DEEPAK KUMAR [2010] 38 DTR 118) (P&H) WH EREIN IT IS HELD THAT IT IS NOT UNKNOWN THAT IT RETURNS ARE FILED THROUGH THE EXPERTS IN THE LAWS AND, THEREFORE, THE ADVISE GIVEN BY COUNSEL CAN BE ACTED UPON BONAFIDE BELIEF TO BE COR RECT. THERE IS NO FINDING OF INTENTIONAL AND MOTIVATED MISTAKE WHI CH MIGHT HAVE BEEN RESORTED TO BY THE ASSESSEE A POSSIBLE VIEW DELETING PENALTY HAS BEEN TAKEN BY THE APPELLATE FORUM. 2. INCOME TAX OFFICER VS. SACHINAM TRUST, 320 ITR 4 45 (GUJARAT) WHEREIN IT WAS HELD THAT THE ASSESSEE COU LD BE SAID TO HAVE BEEN PREVENTED BY REASONABLE CAUSE ON THE BASI S OF A LEGAL OPINION PUBLISHED, WHICH WAS PRODUCED BEFORE THE FI RST APPELLATE AUTHORITY. THE CANCELLATION OF PENALTY WA S VALID. 3. CIT VS. SAJUMA CO-OP CREDIT AND SERVICE SOCIETY LTD., 307 ITR 340 (&H) WHEREIN IT WAS HELD THAT THE TRIBUNAL HAD RECORDED A FINDING OF FACT TO THE EFFECT THAT IN THE FACTS A ND CIRCUMSTANCES OF THE CASE, THE ASSESSEE UNDER A BONAFIDE BELIEF D ID NOT GET ITS ACCOUNTS AUDITED FROM THE CHARTERED ACCOUNTANT OR F ROM THE INSPECTOR OF CO-OPERATIVE SOCIETIES BECAUSE THE SAL ES TURNOVER OF THE ASSESSEE WAS LESS THAN RS. 40 LAKHS. SINCE A PU RE FINDING OF FACT HAD BEEN RECORDED, PENALTY COULD NOT BE IMPOSE D. 7. ON THE OTHER HAND, THE LEARNED DR BESIDES RELYIN G UPON THE ORDERS OF THE AUTHORITIES BELOW SUBMITTED THAT ONCE INTEREST INCOME IS SHOWN AS BUSINESS INCOME, THE ASESSSEE OUGHT TO HAV E FILED THE TAX AUDIT REPORT AS PER THE PROVISIONS OF SECTION 44AB OF THE ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W AS WELL AS THE DECISIONS CITED. WE FIND THAT THE EXPLANATION OFFER ED BY THE ASSESSEE, THAT THE ASSESSEE IS NOT DOING ANY BUSINESS AND ITS SOURCE OF INCOME WAS ONLY FROM INTEREST, DIVIDEND, SHARE OF PROFIT F ROM PARTNERSHIP FIRM AND SERVICE CHARGES AND, THEREFORE, HE WAS UNDER T HE BONAFIDE BELIEF THAT THERE IS NO OBLIGATION TO FILE TAX AUDIT REPOR T U/S 44AB OF THE ACT., IS BONA-FIDE ONE AND THE RATIOS LAID DOWN IN THE CASE LAWS RELIED ITA NO. 5589/MUM/2010 SAKARWADI TRADING CO. PVT. LTD. 4 UPON BY THE ASSESSEE (SUPRA) SUPPORTS THE CASE OF T HE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEES C ASE IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271B OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND CANCEL THE PENALTY OF RS. 1 ,00,000/- IMPOSED BY THE AO U/S 271B. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2011. SD/- (R.K. PANDA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 30 TH SEPTEMBER, 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.