Shri Inderjeet Singh Damania, Noida V. ACIT, New Delhi

ITA 5742/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3747 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 14-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Onus to prove
• Section: 273B; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5742/DEL /2015 ASSESSMENT YEAR: 2008-09 ITA NO. 5743/DEL /2015 ASSESSMENT YEAR: 2008-09 INDERJEET SINGH DAMANIA, H-174, SECTOR 41, NOIDA. (PAN: AELPD5066N) VS ACIT, CIRCLE-33(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH AGGARWAL, CA RESPONDENT BY: SHRI ATIQ AHMAD, SR. DR DATE OF HEARING : 14.09.2017 DATE OF PRONOUNCEMENT: 31.10.2017 ORDER PER BENCH: BOTH THESE APPEALS HAVE BEEN PREFERRED BY THE ASSES SEE. ITA NO. 5742 HAS BEEN FILED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 17, NEW DELH I, WHEREIN VIDE ORDER DATED 11/08/2015, THE LD. FIRST APPELLAT E AUTHORITY HAS CONFIRMED THE IMPOSITION OF PENALTY OF RS. 2,60 ,420/- ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 2 IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT, 1961. ITA NO. 5743 HAS BEEN PREFERRED AGAINST THE ORDER PASSE D BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 17, NEW DELH I WHEREIN, VIDE ORDER DATED THE 11/08/2015, THE LD. FIRST APPE LLATE AUTHORITY HAS CONFIRMED THE IMPOSITION OF PENALTY OF RS. 40,0 00/- IMPOSED UNDER SECTION 271 (1) (B) OF THE INCOME TAX ACT, 19 61. BOTH THE APPEALS PERTAIN TO ASSESSMENT YEAR 2008 09. BOTH THE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE THEY ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, DURING THE YEAR UNDER APPEAL, HAD FILED HIS RETURN OF INCOME D ECLARING INCOME AT RS. 9,38,237/-. THE ASSESSMENT WAS COMPLE TED UNDER SECTION 144 OF THE INCOME TAX ACT, 1961 AT AN INCOM E OF RS. 12,616,510/-. THE AO, WHILE MAKING THE ASSESSMENT, HAD MADE ADDITION OF THE TOTAL AMOUNT DUE TO THE SUNDRY CRED ITORS AND EXPENSES PAYABLE AS ON 31/03/2008 BY HOLDING THAT T HE SAME WERE NOT ALLOWABLE UNDER THE CASH SYSTEM OF ACCOUNT ING. THE TAX AUDITOR, IN THE TAX AUDIT REPORT, DUE TO AN INADVER TENT ERROR, HAD ERRONEOUSLY STATED THAT THE METHOD OF ACCOUNTING FO LLOWED BY THE ASSESSEE WAS CASH INSTEAD OF MERCANTILE WHICH W AS THE METHOD OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE . ON APPEAL, ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 3 THE LD. CIT (APPEALS) DELETED THE ADDITIONS OF RS. 69,71,507/- AND RS. 39,40,594/- OUT OF TOTAL ADDITION OF RS. 74 ,31,007/- AND RS. 41,58,026/- MADE ON ACCOUNT OF CREDITORS AND CO MMISSION EXPENSES RESPECTIVELY. THE LD. CIT (APPEALS), HOWEV ER, SUSTAINED ADDITION OF RS. 5,11,590/- TOWARDS THE CLOSING BALA NCES OF TWO CREDITORS ON THE GROUND THAT THEIR PAN NUMBERS WERE NOT FURNISHED. THE OTHER ADDITIONS SUSTAINED BY THE LD. CIT (APPEALS) WERE DISALLOWANCE OF COMMISSION PAID TO SMALL AND P ETTY COMMISSION AGENTS TOTALLING TO RS. 2,17,433/- AND A LSO AMOUNT OF DONATIONS AMOUNTING TO RS. 37,150/- NOT ADDED BA CK BY THE ASSESSEE IN THE COMPUTATION OF INCOME. THE LD. CIT (APPEALS) ALSO CONFIRMED ADDITION OF RS. 28,090/- BEING INCLU SION OF AUDIT FEE TWICE IN THE FINAL ACCOUNTS. 2.1 SUBSEQUENTLY THE AO LEVIED PENALTY OF RS. 60,4 22/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ON ADDITIONS/ DISALLOWANCES WHICH WAS ON FURTHER APPEAL CONFIRMED BY THE LD. CI T (APPEALS) AND NOW THE ASSESSEE HAS APPROACHED THE ITAT CHALLE NGING THE CONFIRMATION OF SUCH PENALTY AND HAS RAISED THE FOL LOWING GROUNDS OF APPEAL ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 4 ITA NO. 5742/DEL /2015 1. THAT THE ORDER OF THE LEARNED CIT (APPEALS)-17 NEW DELHI IS ARBITRARY, BIASED AND BAD IN LAW AND IN FACTS AN D CIRCUMSTANCES OF THE CASE IN SO FAR AS IT CONFIRMS PENALTY ORDER PASSED UNDER SECTION 271(L)(C ) BY THE ASSESSING OF FICER. 2) THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERRE D IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271 (1 ) (C) AMOUNTING TO RS. 2,60,420/- WITHOUT APPRECIATING TH E FACT THAT THE ASSESSEE HAD NEITHER FURNISHED INACCURATE PARTI CULARS OF HIS INCOME NOR CONCEALED HIS INCOME. 3) THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERRE D IN CONFIRMING THE PENALTY LEVIED UNDER SECTION 271(L)( C) OF THE ACT BY THE ASSESSING OFFICER ON DEEMING ADDITION OF RS. 7,66,163/- MADE UNDER SECTION 68 OF THE ACT. 4) THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERRE D IN QUOTING OUT OF CONTEXT THE OBSERVATIONS MADE IN JUDICIAL PR ECEDENTS QUOTED BY HIM TO CONFIRM THE LEVY OF PENALTY. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DE LETE THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2.2 FURTHER, THE AO HAS ALSO PROCEEDED TO IMPOSE PE NALTY OF RS. 40,000 UNDER SECTION 271 (1) (B) OF THE INCOME TAX ACT VIDE ORDER DATED 30/03/2014 FOR NON-COMPLIANCE OF NOTICE UNDER SECTION 143 (2) DATED 29/09/2010, NON-COMPLIANCE OF NOTICE UNDER SECTION 142 (1) DATED 29/09/2010, NON-COMPLIANCE OF NOTICE ISSUED UNDER SECTION 142 (1) DATED 15/11/2010 AND N ON- COMPLIANCE OF NOTICE UNDER SECTION 143 (1) DATED 10 /12/2010. WHILE IMPOSING THE PENALTY, THE AO HAS NOTED THAT T HE SHOW ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 5 CAUSE NOTICES WERE ISSUED TO THE ASSESSEE AND DULY SERVED UPON THE ASSESSEE BEFORE THE IMPOSITION OF THE PENALTY B UT THE ASSESSEE HAD NOT FILED ANY REPLY IN THIS REGARD. 2.3 ON APPEAL, THE PENALTY UNDER SECTION 271 (1) (B ) WAS ALSO CONFIRMED BY THE LD. CIT (APPEALS) AND NOW THE ASSE SSEE HAS APPROACHED THE ITAT AND HAS CHALLENGED THE CONFIRMA TION BY TAKING THE FOLLOWING GROUNDS OF APPEAL ITA NO. 5743/DEL/2015 :- 1. THAT THE ORDER OF THE LEARNED CIT (APPEALS)-17 NEW DELHI IS ARBITRARY, BIASED AND BAD IN LAW AND IN FACTS AN D CIRCUMSTANCES OF THE CASE IN SO FAR AS IT CONFIRMS LEVY OF PENALTY UNDER SECTION 271(L)(B ) BY THE ASSESSING O FFICER. 2) THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERRE D IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271 (1 ) (B) AMOUNTING TO RS. 40,000/- WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAD A REASONABLE CAUSE. 3) THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERRE D IN CONFIRMING THE LEVY OF PENALTY WITHOUT THE ASSESSIN G OFFICER HAVING ISSUED PRECISE AND SPECIFIC NOTICE FOR EACH DEFAULT U/S 271(1)(B) AS ENVISAGED IN THE PROVISIONS OF THE ACT . THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DE LETE THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING. ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 6 3. AT THE OUTSET, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT AS FAR AS THE PENALTY UNDER SECTION 271 (1) (C ) WAS CONCERNED, PENALTY WAS LEVIED ON ACCOUNT OF ADDITION/DISALLOWANCES SUSTAINED BY THE LD. CIT (AP PEALS) WITH RESPECT TO SUNDRY CREDITORS ON THE GROUND THAT PAN DETAILS OF TWO OF THE CREDITORS WERE NOT FURNISHED. IT WAS ALSO SU BMITTED THAT EXPENSES PERTAINING TO DONATION AND DOUBLE DEBIT OF AUDIT FEES IN THE FINAL ACCOUNTS WERE CONFIRMED BY THE LD. CIT (A PPEALS) AND PENALTY WAS LEVIED ON THESE TWO AMOUNTS ALSO. THE L D. AUTHORISED REPRESENTATIVE SUBMITTED THAT PENALTY WAS NOT LEVIA BLE ON AMOUNTS ADDED BACK FROM SUNDRY CREDITORS AS THE ASS ESSEE HAD NOT FURNISHED INACCURATE PARTICULARS OF INCOME AND THE ONLY FAILURE ON HIS PART WAS THE INABILITY TO FURNISH PA N NUMBERS OF THE TWO CREDITORS. IT WAS SUBMITTED THAT THE SAME W AS NOT A MANDATORY REQUIREMENT AS PER THE STATUTE. WITH RESP ECT TO THE EXPENSES ON DONATION AND AUDIT FEES, IT WAS SUBMITT ED THAT THE SAME WAS, AT BEST, AN INADVERTENT ERROR AND THE PEN ALTY WAS NOT LEVIABLE ON THESE ADDITIONS ALSO. 3.1 ON THE ISSUE OF PENALTY IMPOSED UNDER SECTION 2 71 (1) (B), IT WAS SUBMITTED THAT DIFFERENCES HAD DEVELOPED BETWEE N THE ASSESSEE AND THE TAX AUDITOR, WHO WAS ALSO THE COUN SEL OF THE ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 7 ASSESSEE, DUE TO INCORRECT MENTION OF METHOD OF ACC OUNTING IN THE TAX AUDIT REPORT BY THE AUDITOR AND THAT THE ASSESS EE WAS UNAWARE OF THE FACT THAT THE COUNSEL HAD STOPPED AT TENDING PROCEEDINGS BEFORE THE ASSESSING OFFICER TILL THE R ECEIPT OF SHOW CAUSE NOTICE PROPOSING TO MAKE THE ASSESSMENT AND F IXING THE DATE OF HEARING FOR 20/12/2010. IT WAS ALSO SUBMITT ED THAT THE ASSESSEE HIMSELF ATTENDED THE HEARING BEFORE THE AS SESSING OFFICER ON 20/12/2010. IT WAS SUBMITTED THAT THERE WAS A VA LID AND REASONABLE CAUSE FOR THE ASSESSEE FAILING TO ATTEND THE PROCEEDINGS WHICH WAS BONA FIDE AND, THEREFORE, THE PENALTY DESERVED TO BE DELETED. OUR ATTENTION WAS ALSO DRAW N TO AFFIDAVIT DATED 07/08/2015, SUBMITTED BY THE ASSESSEE, IN WHI CH THE FACTS AS SUBMITTED BEFORE US HAVE BEEN INCORPORATED. IT W AS SUBMITTED THAT THE PENALTY IMPOSED UNDER SECTION 271 (1) (B) BE DELETED. 4. IN RESPONSE, THE LD. SENIOR DEPARTMENTAL REPRESE NTATIVE VEHEMENTLY ARGUED THAT BOTH THE PENALTIES HAD RIGHT LY BEEN IMPOSED AND PRAYED THAT THE SAME SHOULD BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE MATERIAL ON RECORD. AS FAR AS THE PENALTY UNDER SEC TION 271 (1) (C) IS CONCERNED, THE HONBLE SUPREME COURT, IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA 83 ITR 26, HAD LAID DOWN ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 8 THE POSITION OF LAW BY HOLDING THAT THE ASSESSING O FFICER IS NOT BOUND TO LEVY PENALTY AUTOMATICALLY SIMPLY BECAUSE THE QUANTUM ADDITION HAS BEEN SUSTAINED. ALSO IN CASE OF CIT V. KHODAY ESWARA (83 ITR 369) (SC), IT HAS BEEN HELD THAT PEN ALTY CANNOT BE LEVIED SOLELY ON BASIS OF REASONS GIVEN IN THE ORIG INAL ORDER OF ASSESSMENT. 5.1 THE HONBLE SUPREME COURT HAS REITERATED THE L AW IN CASE OF DILIP N. SHROFF V. JT. CIT 291 ITR 519 BY HOLDI NG IN PARA 62 THAT FINDING IN ASSESSMENT PROCEEDINGS CANNOT AUTOM ATICALLY BE ADOPTED IN PENALTY PROCEEDINGS AND THE AUTHORITIES HAVE TO CONSIDER THE MATTER AFRESH FROM DIFFERENT ANGLE. 5.2 THUS, T HE STATUTE REQUIRES A SATISFACTION ON THE PART OF T HE ASSESSING OFFICER. HE IS REQUIRED TO ARRIVE AT A SA TISFACTION SO AS TO SHOW THAT THE ASSESSEE HAS CONCEALED THE AMOUNT OR HAS FURNISHED INACCURATE PARTICULARS AND THIS ONUS IS T O BE DISCHARGED BY THE DEPARTMENT. WHILE CONSIDERING WH ETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS BURDEN THE ASSESSING OFFICER SHOULD NOT BEGIN WITH THE PRESUMPTION THAT HE IS GUILTY. SINCE THE BURDEN OF PROOF IN PENALTY PROCEEDINGS VA RIES FROM THAT IN THE ASSESSMENT PROCEEDINGS, A FINDING IN THE ASS ESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CAN NOT ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 9 AUTOMATICALLY BE ADOPTED THOUGH A FINDING IN THE AS SESSMENT PROCEEDINGS CONSTITUTES GOOD EVIDENCE IN THE PENALT Y PROCEEDINGS. IN THE PENALTY PROCEEDINGS THE AUTHORI TIES MUST CONSIDER THE MATTER AFRESH AS THE QUESTION HAS TO B E CONSIDERED FROM A DIFFERENT ANGLE. THE FUNDAMENTAL LEGAL PROPO SITION THAT ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE CANNOT BE LOST SIGHT OF. 5.3 IT IS WELL SETTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT. THE HONBLE BOMBAY HIGH COURT HAS LAID DOWN IN CIT VS. DHARAMCHAND L. SHAH 204 ITR 462 (BOM) THAT FINDINGS IN ASSESSMENT PROCEEDINGS D ONT OPERATE AS RES JUDICATA IN PENALTY PROCEEDINGS. IN VIJAY POWER GENERATORS LTD VS. ITO 6 DTR 64 (DEL) IT WAS HELD T HAT IT IS WELL SETTLED THAT THOUGH THEY CONSTITUTE GOOD EVIDENCE D O NOT CONSTITUTE CONCLUSIVE EVIDENCE IN PENALTY PROCEEDINGS. 5.4 IT IS AGAIN WELL-SETTLED THAT DURING PENALTY PR OCEEDINGS, THERE HAS TO BE REAPPRAISAL OF THE VERY SAME MATERI AL ON THE BASIS OF WHICH THE ADDITION WAS MADE AND IF FURTHER MATERIAL IS ADDUCED BY THE ASSESSEE IN THE COURSE OF THE PENALT Y PROCEEDINGS, IT IS ALL THE MORE NECESSARY THAT SUCH FURTHER MATERIAL SHOULD ALSO BE EXAMINED IN AN ATTEMPT TO A SCERTAIN ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 10 WHETHER THE ASSESSEE CONCEALED HIS INCOME OR FURNIS HED INACCURATE PARTICULARS. THUS, UNDER PENALTY PROCEED INGS ASSESSEE CAN DISCHARGE HIS BURDEN BY RELYING ON THE SAME MATERIAL ON THE BASIS OF WHICH ASSESSMENT IS MADE B Y CONTENDING THAT ALL NECESSARY DISCLOSURES WERE MADE AND THAT ON THE BASIS OF MATERIAL DISCLOSED THERE CANNOT BE A C ASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. FURTHER, IF THERE IS ANY MATERIAL OR ADDITI ONAL EVIDENCE WHICH WAS NOT PRODUCED DURING ASSESSMENT PROCEEDING S SAME CAN BE PRODUCED IN PENALTY PROCEEDINGS AS BOTH ASSE SSMENT AND PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE. 5.5 IN CIT VS. M/S SIDHARTHA ENTERPRISES 184 TAXMAN 460 (P & H), IT WAS HELD BY THE HONBLE PUNJAB & HARYANA HIG H COURT THAT THE JUDGMENT IN DHARMENDRA TEXTILE CANNOT BE READ A S LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. EVEN SO, THE CONCE PT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF THE SAID JUDG MENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT. 5.6 ON THE SPECIFIC FACTS OF THE PRESENT CASE, IT IS SEEN THAT THE PENALTY ORDER IS WOEFULLY SILENT ON THE ISSUE AS TO HOW THIS ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 11 SATISFACTION OF FURNISHING OF INACCURATE WAS ARRIVE D AT. THE QUANTUM ADDITION ON WHICH THE PENALTY HAS BEEN IMPO SED PERTAINS TO DISALLOWANCE OUT OF SUNDRY CREDITORS, D ONATIONS NOT WRITTEN BACK AND AUDIT FEE EXPENSES DEBITED TWICE. THE LD. CIT (APPEALS) HAS NOT EXAMINED THE ISSUE IN DETAIL BUT HAS SIMPLY CONFIRMED THE PENALTY BY RELYING ON THE FINDINGS OF THE AO AND THAT OF THE LD. CIT (APPEALS) IN THE QUANTUM PROCEE DINGS. HOWEVER, THERE IS NO FINDING BY THE AUTHORITIES BEL OW ON THE ISSUE AS TO HOW THE FURNISHING OF INACCURATE PARTICULARS HAS COME TO BE ESTABLISHED SO AS TO WARRANT IMPOSITION OF PENAL TY. THUS, IT IS APPARENT THAT THE PENALTY HAS BEEN IMPOSED AS AN AU TOMATIC OUTCOME OF THE CONFIRMATION OF THE QUANTUM ADDITION . CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES, IN O UR VIEW, THE IMPUGNED DISALLOWANCE DOES NOT INVITE THE PROVISION S OF SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE SET ASIDE T HE ORDER OF THE LD. CIT (APPEALS) AND DIRECT THE AO TO DELETE THE P ENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 5.7 AS FAR AS THE ISSUE OF PENALTY U/S 271(1)(B) IS CONCERNED, FROM A PERUSAL OF THE SECTION 273B, WE UNDERSTAND T HAT, NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISION S OF CLAUSE (B) OF SUB-SECTION (1) OF SECTION 271, NO PENALTY S HALL BE IMPOSED ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 12 ON THE PERSON OR THE ASSESSEE AS THE CASE MAY BE, F OR ANY FAILURE REFERRED TO IN THE SAID PROVISION, IF HE PROVES THA T THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. SO IT CAN BE UNDERSTOOD THAT PENALTY CANNOT BE IMPOSED, IF THE ASSESSEE IS ABLE TO PROVE THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILUR E OF NOT COMPLYING WITH THE NOTICE SERVED ON THEM. 5.8 THE MEANING OF REASONABLE CAUSE HAS BEEN DISCU SSED IN THE CASE OF WODWARD GOVERNOR INDIA P. LTD. VS. CIT AND ORS. 253 ITR 745 (DELHI). THE RELEVANT PORTION, AS CONTAINED IN PARA 5 AND 6, IS REPRODUCED BELOW:- 'WHAT WOULD CONSTITUTE REASONABLE CAUSE CANNOT BE L AID DOWN WITH PRECISION. IT WOULD DEPEND UPON FACTUAL BACKGROUND AND THE SCOPE IS EXTREMELY LIMITED AND U NLESS THE CONCLUSIONS ARE PERVERSE BASED ON CONJECTURES O R SURMISES AND/ OR HAVE BEEN ARRIVED AT WITHOUT CONSI DERATION OF RELEVANT MATERIAL AND/ OR HAVE BEEN ARRIVED AT W ITHOUT CONSIDERATION LEAVE NO SCOPE FOR INTERFERENCE. REAS ONABLE CAUSE, AS APPLIED TO HUMAN ACTION IS THAT WHICH WOU LD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDI NARY PRUDENCE. THE EXPRESSION 'REASONABLE' IS NOT SUSCEP TIBLE OF A CLEAR AND PRECISE DEFINITION; FOR AN ATTEMPT TO GIV E A SPECIFIC MEANING TO THE WORD NOT SPACE. IT CAN BE DESCRIBED AS RATIONAL ACCORDING TO THE DICTATES OF REASON AND IS NOT EXCESSIVE OR IMMODERATE. THE WORD 'REASONABLE' HAS IN LAW THE PRIMA FACIE MEANING OF REASONABLE WITH REGARD T O THOSE CIRCUMSTANCES OF WHICH THE ACTOR, CALLED ON TO ACT REASONABLY, KNOWS OR OUGH6T O KNOW (SEE IN RE, A SOLICITOR (194 5) KB 368 (CA).REASONABLE CAUSE CAN BE REASONABLY SAID TO BE A CAUSE WHICH PREVENTS A MAN OF AVERAGE INTELLIGENCE AND OR DINARY ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 13 PRODUCE, ACTING UNDER NORMAL CIRCUMSTANCES, WITHOUT NEGLIGENCE OR INACTION OR WANT OF BONA FIDES.' 5.9 IN THE CASE OF AZADI BACHAO ANDOLAN V. UNION O F INDIA 252 ITR 471 (DELHI), THE HON'BLE HIGH COURT HELD AS UND ER:- 'SECTION 273B STARTS WITH A NON OBSTANTE CLAUSE AND PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN SEVERAL PROVISIONS ENUMERATED THEREIN INCLUDING SECTION 271 C, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASS ESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE A CLAUSE BEGINNING WITH 'NOTWITHST ANDING ANYTHING' IS SOMETIMES APPENDED TO A SECTION IN THE BEGINNING WITH A VIEW TO GIVE THE ENACTING PART OF THE SECTION IN CASE OF CONFLICT AN OVERRIDING EFFECT OVER THE P ROVISION OF ACT MENTIONED IN THE NON OBSTANTE CLAUSE (SEE ORIENT PA PER AND INDUSTRIES LTD V STATE OF ORISSA, AIR 1991 SC 672) A NON OBSTANTE CLAUSE MAY BE USED AS A LEGISLATIVE DEVICE , TO MODIFY THE AMBIT OF THE PROVISION OF LAW MENTIONED IN THE NON OBSTANTE CLAUSE, OR TO OVERRIDE IT IN SPECIFIED CIR CUMSTANCES (SEE T R THANDUR V UNION OF INDIA, AIR 1996 SC 1643 ) THE TRUE EFFECT OF THE NON OBSTANTE CLAUSE IS THAT IN S PITE OF THE PROVISION OR ACT MENTIONED IN THE NON OBSTANTE CLAU SE, THE ENACTMENT FOLLOWING IT WILL HAVE ITS FULL OPERATION OR THAT THE PROVISIONS EMBRACED IN THE NON OBSTANTE CLAUSE WILL NOT BE AN IMPEDIMENT FOR THE OPERATION OF THE ENACTMENT (SEE SMT PARAYANKANDIYAL ERAVATH KANAPRAVAN KALLIANI AMMA V K DEVI, AIR 1996 SC 1963) THEREFORE, IN ORDER TO BRIN G IN APPLICATION OF SECTION 271C IN THE BACKDROP OF SECT ION 273B, ABSENCE OF REASONABLE CAUSE, EXISTENCE OF WHICH HAS TO BE ESTABLISHED BY THE ASSESSEE, IS THE SINE QUA NON LE VY OF PENALTY UNDER SECTION 271C IS NOT AUTOMATIC BEFORE LEVYING PENALTY, THE CONCERNED OFFICER IS REQUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAILURE REFERRED TO IN THE CONCERN ED PROVISION THE SAME WAS WITHOUT A REASONABLE CAUSE THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT THERE EXISTED REASO NABLE CAUSE WHICH WAG THE REASON FOR THE FAILURE REFERRED TO IN THE CONCERNED PROVISION THEREAFTER THE OFFICER DEALING WITH THE MATTER HAS TO CONSIDER WHETHER THE EXPLANATION OFFE RED BY THE ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 14 ASSESSEE OR THE PERSON, AS THE CASE MAY BE, AS REGA RDS THE REASON FOR FAILURE, WAS ON ACCOUNT OF REASONABLE CA USE 'REASONABLE CAUSE' AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AN D ORDINARY PRUDENCE IT CAN BE DESCRIBED AS PROBABLE C AUSE IT MEANS AN HONEST BELIEF FOUNDED UPON REASONABLE GROU NDS, OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES, WHICH AS SUMING THEM TO BE TRUE, WOULD REASONABLY LEAD ANY ORDINARI LY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT TH E SAME WAS THE RIGHT THING TO DO THE CAUSE SHOWN HAS TO BE CONSIDERED AND ONLY IF IT IS FOUND TO BE FRIVOLOUS, WITHOUT SUBSTANCE OR FOUNDATION, THE PRESCRIBED CONSEQUENCE S FOLLOW THE ABOVE BEING THE POSITION, THE COMMISSIONER'S NO N- CONSIDERATION OF THE PLEA RAISED BY THE ASSESSEE AB OUT THE EXISTENCE OF REASONABLE CAUSE VITIATED THE ORDER ON THAT SCORE, WE FIND THE ORDER PASSED BY THE COMMISSIONER TO BE NON- MAINTAINABLE.' 5.10 REVERTING TO THE FACTS PRESENT CASE, IT HAS B EEN SUBMITTED THAT ASSESSMENT PROCEEDINGS BEFORE THE AO WERE EARL IER BEING TAKEN CARE OF BY THE TAX COUNSEL, WHO, HOWEVER, STO PPED ATTENDING THE PROCEEDINGS WITHOUT INTIMATING THE AS SESSEE AS DIFFERENCES HAD DEVELOPED BETWEEN THE ASSESSEE AND THE COUNSEL. AN AFFIDAVIT TO THIS EFFECT HAS ALSO BEEN PLACED ON RECORD WHICH HAS NOT BEEN CONTESTED BY THE LD. SENIOR DEPARTMENT AL REPRESENTATIVE. IT IS OUR CONSIDERED OPINION THAT T HE FAILURE OF THE ASSESSEES COUNSEL TO ATTEND THE ASSESSMENT PROCEED INGS WITHOUT INFORMING THE ASSESSEE WAS A REASONABLE CAUSE WHICH WOULD FALL WITHIN THE EXCEPTION AS PROVIDED IN SECTION 273B AN D, THEREFORE, ITA NO. 5742 & 5743/DEL/2015 ASSESSMENT YEAR 2008-09 15 UNDER THE CIRCUMSTANCES THE PENALTY IMPOSED UNDER S ECTION 271 (1) (B) DESERVES TO BE DELETED. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND DIRECT THE AO TO DELET E THE PENALTY IMPOSED UNDER SECTION 271(1)(B) OF THE INCOME TAX A CT, 1961. 6. IN THE FINAL RESULT BOTH THE APPEALS OF THE ASSE SSEE STAND ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31ST O CTOBER, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 31ST OCTOBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR