DIGHI PORT LTD, MUMBAI V. ITO 2(1)(2), MUMBAI

ITA 576/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62287 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 22-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: PARAS S SAVLA
• Keywords: Reasonable cause; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI RAJENDRA ( A.M.) ITA NO. 576/MUM/2010 ASSESSMENT YEAR : 2005-06 M/S DIGHI PORT LTD., NEW EXCELSIOR, 6 TH FLOOR, A.K. NAYAK MARG, FORT, MUMBAI 400001. PAN : AABCD 2607 A VS. INCOME TAX OFFICER 2(1)(2), AAYAKAR BHAWAN, M.K. ROAD, MUMBAI- 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARAS S. SAVLA RESPONDENT BY : SHRI C.G.K. NAIR DATE OF HEARING 12.4.2012 DATE OF PRONOUNCEMENT 25.4.2012 O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.11.2009 PASSED BY THE LD. CIT (A) FOR THE A.Y. 2005-06 CONFIRMING THE PENALTY OF RS. 86,174/- IMPOSED BY T HE A.O. U/S 271B OF THE INCOME TAX ACT, 1961 (THE ACT). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY FILED RETURN OF INCOME ON 4.09.2006 DECLARED AN INCOME OF RS. 9,95,440/-. THE A.O. FROM THE P&L ACCOUNT NOTED THAT A GROSS RECEIP TS OF RS. 1.72 CRORES WERE CREDITED TO P&L ACCOUNT AND THE RETURN OF INCO ME WAS NOT ACCOMPANIED WITH THE TAX AUDIT REPORT AS REQUIRED U /S 44AB OF THE ACT. ITA NO. 576/MUM/2010 M/S DIG HI PORT LTD. 2 HE FURTHER NOTED THE RETURN OF INCOME WAS ALSO NOT FILED IN TIME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. VIDE POINT NO. 9 OF HIS LETTER DTD. 3.2.2007 ASKED THE ASSESSEE AS UNDER:- POINT NO. 9: SHOW CAUSE WHY PENALTY U/S 271B SHOUL D NOT BE INITIATED FOR NO AUDITING THE ACCOUNTS AS REQUIRED U/S 44AB OF IT ACT, WHEN THE GROSS RECEIPT FOR THE RELEVANT FIN ANCIAL YEAR EXCEEDED RS. 40 LAKHS. (EMPHASIS SUPPLIED) IN RESPONSE, THE ASSESSEE HAS FURNISHED TAX AUDIT R EPORT DURING THE PENALTY PROCEEDING ON 6.3.2007 STATING THAT TAX AUDIT REPORT OF THE COMPANY COULD NOT BE CARRIED OUT AS ONE OF THE ACCO UNTANTS HAS RESIGNED FROM THE COMPANY. THE COMPANY FURTHER APPOINTED NE W PERSON IN HIS PLACE. HENCE, THERE WAS DELAY IN PREPARING THE TAX AUDIT REPORT. HOWEVER, THE TAX AUDIT REPORT WAS PREPARED AND DULY AUDITED BY THE AUDITOR. WE ARE HEREWITH SUBMITTING THE TAX AUDIT REPORT OF THE COMPANY DATED 14.10.2006 AS REQUIRED U/S 44AB OF THE IT ACT, 1961 FOR YOUR PERUSAL. HOWEVER, THE A.O. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE DID NOT ACCEPT THE SAME FOR THE FOLLOWING REASONS PAGE 2 OF THE PENALTY ORDER): 1. THE DUE DATE FOR FILING THE RETURN OF INCOME FO R AY 2005-06 IS 31.10.05, WHEREAS RETURN OF INCOME IS FILED ON 4.9. 06. THUS, THERE WAS DELAY OF 11 MONTHS FOR FILING THE RETURN. 2. THE ASSESSEE IS REQUIRED TO FURNISH TAX AUDIT RE PORT BY 31.10.05, DULY AUDITED BY AN ACCOUNTANT. HOWEVER, THE ASSESS EE HAS FURNISHED THE SAME DURING THE SCRUTINY PROCEEDINGS. 3. THOUGH, THE TAX AUDIT REPORT U/S 44AB WAS DATED 14/10/06, IT WAS, FILED DURING THE SCRUTINY PROCEEDINGS I.E. ON 6/3/07. 4. THE TAX AUDIT REPORT WAS NOT FILED VOLUNTARILY O N THE SPECIFIED DATE. THE SAME WAS FILED IN RESPONSE TO THE SHOW CAUSE LE TTER DATED 3/2/07. ITA NO. 576/MUM/2010 M/S DIG HI PORT LTD. 3 AS PER SEC. 44AB OF THE I.T. ACT CERTAIN PERSONS ( COVERED UNDER THE PROVISIONS OF SEC. 44AB) ARE BOUND TO GET THEIR ACC OUNTS AUDITED BY AN ACCOUNTANT BEFORE THE SPECIFIED DATE AND HAVE TO FU RNISH THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND V ERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS PR ESCRIBED BY DUE DATE FOR FILING THE RETURN. THEREFORE, THE ASSESSEE COM PANY WAS REQUIRED TO OBTAIN TAX AUDIT REPORT BY 31/10/05. AS THE ASSESS EE COMPANY HAS FILED THE TAX AUDIT REPORT DURING THE SCRUTINY PROCEEDING S I.E. 6/3/07 AND NO EVIDENCES COULD BE FILED THAT THE SAME REPORT WERE OBTAINED BY ASSESSEE IN TIME. IT IS CLEAR THAT ASSESSEE HAS FAILED TO C OMPLY WITH THE PROVISIONS OF SECTION 44AB OF IT ACT. ACCORDINGLY, HE IMPOSED THE PENALTY OF RS. 86,174/- @ 0.5% OF THE GROSS RECEIPTS VIDE ORDER DTD. 20.09.2007 PASSED U/S 271B OF THE INCOME TAX ACT, 1961. 3. ON APPEAL, THE LD. CIT(A) WHILE AGREEING WITH TH E VIEWS OF THE A.O., CONFIRMED THE PENALTY IMPOSED BY THE A.O. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL AND ADDITIONAL GROUND:- 1. THE CIT(A)-4 ERRED IN CONFIRMING THE ORDER OF ASSES SING OFFICER WITH REGARD TO PENALTY U/S 271B, EVEN THOUG H IT IS AN ADMITTED POSITION THAT THE AUDIT REPORT U/S 44AB DA TED 4/10/2006 WAS FILED DURING SCRUTINY PROCEEDINGS. 2. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW PENALTY U/S 271B WOULD NOT HAVE BEEN LEVIED IF THE TAX AUDIT REPORT WAS FILED AT THE TIME OF SCRUTINY ASSE SSMENT. 3. THE CIT(A) DISREGARDED VARIOUS CASES AND CAME TO ERRONEOUS CONCLUSION THAT TAX AUDIT REPORT U/S 44AB IS REQUIRED TO BE FILED PRIOR TO THE FILING OF RETURN OF INCOME . ADDITIONAL GROUNDS OF APPEAL:- ITA NO. 576/MUM/2010 M/S DIG HI PORT LTD. 4 THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER HAS PASSED THE ORDER U/S 271B ON 20.09.2007 , WHICH IS BEYOND SIX MONTHS FROM THE MONTH OF THE ISSUE OF TH E NOTICE DT. 03-02-2007 RECEIVED ON 05.02.2007, AND HENCE THE PE NALTY ORDER IS BARED BY LIMITATION. 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ADDITIONAL GROUND GOES TO THE ROOT OF THE MATTER, THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE APEX COURT IN T HE CASE OF NATIONAL THERMAL POWER CORPORATION LTD. VS. CIT REPORTED IN (1998) 229 ITR 383 (SC), THE ADDITIONAL GROUND MAY BE ADMITTED. 6. THE LD. COUNSEL FOR THE ASSESSEE WHILE ARGUING T HE CASE ON THE ADDITIONAL GROUND SUBMITS THAT THE ORDER U/S 271B D TD. 20.09.2007 PASSED BY THE A.O. IS BEYOND 6 MONTHS FROM THE MONT H OF THE ISSUE OF NOTICE DTD. 3.2.2007 RECEIVED ON 5.2.2007. HE FURTH ER SUBMITS THAT THE LIMITATION FOR IMPOSING THE PENALTY HAS BEEN PROVID ED U/S 275(1)(C) WHEREIN IT HAS BEEN MENTIONED THAT NO ORDER IMPOSIN G THE PENALTY SHALL BE PASSED AFTER EXPIRY OF FINANCIAL YEAR IN WHICH T HE PROCEEDINGS IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALT Y HAS BEEN INITIATED, ARE COMPLETED OR 6 MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIO D EXPIRES LATER. HE FURTHER SUBMITS THAT IN VIEW OF THE SAID PROVISION, THE PROCEEDINGS IN THIS CASE WERE INITIATED ON 3.2.2007, THEREFORE, THE LAS T DATE OF PASSING THE ORDER WAS 31-8-2007 WHEREAS THE SAID ORDER WAS PAS SED ON 20-9-2007 AND HENCE THE SAME IS BARRED BY LIMITATION AND, THE REFORE, THE ORDER PASSED BY THE A.O. BE QUASHED. ON MERIT, HE SUBMITS THAT IN VIEW OF THE ASSESSEES EXPLANATION FILED BEFORE THE A.O. AND TH E LD. CIT(A), THE ITA NO. 576/MUM/2010 M/S DIG HI PORT LTD. 5 ASSESSEE WAS PREVENTED BY REASONABLE CAUSE, THEREFO RE, THE PENALTY ON THE SAID GROUND ALSO LIABLE TO BE CANCELLED. 7. ON THE OTHER HAND, THE LD. D.R. SUBMITS THAT VID E LETTER DTD. 3.2.2007, THE A.O. HAS MERELY ASKED THE ASSESSEE AS TO WHY PENALTY PROCEEDINGS SHOULD NOT BE INITIATED. SINCE THE A.O. WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, HE ISSUED SHOW CAU SE NOTICE DTD. 21.3.2007 AS TO WHY PENALTY SHOULD NOT BE IMPOSED U /S 271B OF THE ACT. THE A.O. AFTER CONSIDERING THE ASSESSEES EXPLANATI ON, IMPOSED THE IMPUGNED PENALTY WHICH HAS BEEN CONFIRMED BY THE LD . CIT(A), THEREFORE, THE PENALTY ORDER PASSED BY THE A.O. IS WITHIN 6 MO NTHS FROM THE DATE OF SHOW CAUSE NOTICE DTD. 21.3.2007 PROVIDED U/S 275(1 )(C) OF THE ACT. HE FURTHER SUBMITS THAT FOR THE REASONS MENTIONED IN T HE ORDER OF THE A.O. AND THE LD. CIT(A), THE PENALTY LEVIED BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) SHOULD BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IS A LEGAL GROUND AND THE SAME GOES TO THE ROOT OF THE MATTER, THEREFORE, FOLLOWING THE RATIO OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. WE FURTHER FIND THERE IS NO DISPUTE THAT IN THIS CASE THE RETURN WAS DUE TO BE FILED ON OR BEFORE 31.10.2005 WHICH WAS FILED ON 4. 9.2006. IT IS ALSO NOT ITA NO. 576/MUM/2010 M/S DIG HI PORT LTD. 6 IN DISPUTE THAT TAX AUDIT REPORT U/S 44 AB DTD.14.1 0.2006 WAS FILED ON 6.3.2007 IN RESPONSE TO THE SHOW CAUSE LETTER DTD. 3.2.2007 (SUPRA). THUS IT IS CLEAR THAT AT THE TIME OF ISSUANCE OF LE TTER DTD. 3.2.2007 WHEREIN THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY PENALTY U/S 271B OF THE ACT SHOULD NOT BE INITIATED FOR NON-AUD ITING OF THE ACCOUNTS AS REQUIRED U/S 44AB OF THE ACT, NO SUCH AUDIT REPO RT WAS FILED BY THE ASSESSEE BEFORE THE A.O. AND THE SAME WAS FILED SUB SEQUENTLY ON 6.3.2007. IN THE ABSENCE OF AUDIT REPORT THE A.O. H AS MERELY ASKED THE ASSEESSEE AS TO WHY PENALTY SHOULD NOT BE INITIATED U/S 271B OF THE ACT. IT DOES NOT MEAN THAT THE A.O. HAS ISSUED SHOW CAUS E NOTICE AS TO WHY THE PENALTY SHOULD NOT BE IMPOSED. THE SHOW CAUSE NOTICE WAS ISSUED ON 21.3.2007 AND THE A.O. AS PER THE LIMITATION PRO VIDED U/S 275(1)(C) OF THE ACT HAS PASSED ORDER WITHIN 6 MONTHS FROM THE E ND OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY WAS INITIATE D. THUS THE PENALTY ORDER PASSED BY THE A.O. IS WITHIN THE PERIOD PROVI DED U/S 275(1)(C) OF THE ACT AND THE SAME IS NOT BARRED BY LIMITATION. T HIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF THE SPECIAL BENCH OF T HE ITAT IN THE CASE OF DEWAN CHAND AMRIT LAL V. DCIT, [2006] 98 ITD 200 (C HD) [SB] WHEREIN IT HAS BEEN HELD THAT (PAGE 226 OF THE REPORT) . . THE LIMITATION FOR COMPLETION OF PENALTY PROCEEDINGS AS PROVIDED UNDER SECTION 275(1)(C) HAS GOT TO BE COMPUTED FROM THE DATE OF ISSUE OF SHOW-C AUSE NOTICE BY THE COMPETENT AUTHORITY, WHICH IN THE PRESENT CASE, IS THE DCIT (NOW JCIT). SINCE THE RESPECTIVE ORDERS UNDER SECTION 271D HAVE BEEN PASSED WITHIN A ITA NO. 576/MUM/2010 M/S DIG HI PORT LTD. 7 PERIOD OF SIX MONTHS FROM THE DATE OF INITIATION BY THE COMPETENT AUTHORITY, THE PENALTY ORDERS PASSED IN THE CASES OF THE APPEL LANTS HEREIN ARE NOT BARRED BY LIMITATION. 9. AS REGARDS THE REASONABLE CAUSE SHOWN BY THE ASS ESSEE THAT ONE OF THE ACCOUNTANTS HAS RESIGNED FROM THE COMPANY AND T HE COMPANY FURTHER APPOINTED A NEW PERSON IN HIS PLACE IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE, THEREFORE, THE SAME IS DEVOID OF ANY MERIT AND THE SAME IS REJECTED. 10. FOR THE REASONS DISCUSSED ABOVE, WE CONFIRM THE PENALTY IMPOSED BY THE A.O. AND SUSTAINED BY THE LD. CIT(A). THE G ROUNDS TAKEN BY THE ASSESSEE INCLUDING THE ADDITIONAL GROUND ARE, THERE FORE, REJECTED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF APRIL, 2012. SD/ - (RAJENDRA) ACCOUNTANT MEMBER SD/ - (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 25 TH APRIL , 2012. ITA NO. 576/MUM/2010 M/S DIG HI PORT LTD. 8 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 4, MUMBAI 4. COMMISSIONER OF INCOME TAX 2, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. 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