M/S. BEAUTIFUL SECURITIES LTD., MUMBAI V. ACIT CENTRAL CIRCLE-17 &28, MUMBAI

ITA 5830/MUM/2008

• Counselvise Citation: 583019914 RSA 2008
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: JITENDRA JAIN
• Keywords: Reasonable cause
• Section: 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B : MUMBAI BEFORE SHRI D.K. AGARWAL, (JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.5830/MUM/2008 ASSESSMENT YEAR : 200304 M/S. BEAUTIFUL SECURITIES LTD. 9, DIAMOND HOUSE, VATCHHA GANDHI ROAD, GAMDEVI, MUMBAI-400 007. ..( APPELLANT ) P.A. NO. (AAACB 9147 N) VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-17 & 28, MUMBAI ..( RESPONDENT ) APPELLANT BY : SHRI JITENDRA JAIN RESPONDENT BY : SHRI D. S. SUNDER SINGH DATE OF HEARING : 11.08.2011 DATE OF PRONOUNCEMENT : 17 TH AUGUST, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 8.7.2008 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2003 -04. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING LEVY OF PENALTY UNDER SECTION 271B. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE A O NOTED THAT FOR ASSESSMENT YEAR 2003-04, THE ASSESSEE WAS REQUIRED TO FILE RETURN OF INCOME ON 31.10.2003 WHICH WAS NOT FILED. THE AO THEREFOR E, ISSUED NOTICE UNDER SECTION 148 ON 13.3.2006 IN RESPONSE TO WHICH THE ASSESSEE FILED RETURN ON 21.12.2006 DECLARING LOSS OF RS.1,27,81,441/-. THE RETURN SHOWED THAT THE TURNOVER/GROSS RECEIPTS OF THE BUSINESS WAS MORE TH AN RS .40.00 LACS AND ITA NO.5830/M/08 A.Y:03-04 2 THEREFORE, THE ASSESSEE WAS REQUIRED TO GET ITS ACC OUNTS AUDITED AND FILE AUDIT REPORT UNDER SECTION 44AB WHICH WAS NOT DONE. THE AO THEREFORE INITIATED PENALTY PROCEEDINGS UNDER SECTION 271B FO R FAILURE TO GET ACCOUNTS AUDITED AND FURNISH THE AUDIT REPORT. THE ASSESSEE EXPLAINED THAT THE STATUTORY AUDIT COULD NOT BE COMPLETED BECAUSE THE AUDIT FOR THE ASSESSMENT YEAR 2001-02 WAS STILL PENDING. IT WAS THEREFORE, REQUESTED TO NOT LEVY THE PENALTY. THE AO HOWEVER DID NOT ACCEPT THE EXPLANA TION GIVEN BY THE ASSESSEE AS A REASONABLE CAUSE FOR NOT GETTING AUDI T DONE. HE ACCORDINGLY LEVIED PENALTY OF RS.1.00 LACS WHICH WAS DISPUTED B Y THE ASSESSEE. IN APPEAL THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT IT HA D SUFFERED HEAVY FINANCIAL LOSSES RESULTING INTO DISRUPTING OF BUSINESS ACTIVI TIES AND THEREFORE, ACCOUNTS WERE NOT FINALIZED. THERE WAS THEREFORE A REASONAB LE CAUSE FOR NOT GETTING THE ACCOUNTS AUDITED. THE CIT(A) HOWEVER DID NOT A CCEPT THE EXPLANATION AND CONFIRMED THE PENALTY LEVIED BY THE AO AGGRIEVE D BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) THAT DUE TO HEAVY LOSSES THE BUSINESS WAS TOTALLY DISRUPTED AND WHICH WAS THE RE ASON FOR NOT GETTING THE ACCOUNTS AUDITED. IT WAS ALSO SUBMITTED THAT BUSIN ESS WAS ULTIMATELY CLOSED. IT WAS ALSO POINTED OUT THAT ULTIMATELY THERE WAS N O TAX LIABILITY ON THE ASSESSEE AS THE AO IN THE ASSESSMENT MADE HAD DETER MINED THE TAX LIABILITY AT NIL. IT WAS ACCORDINGLY URGED THAT PENALTY SHOU LD BE DELETED. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND PLACE D RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALT Y UNDER SECTION 271B. UNDER SECTION 44AB, THE ASSESSEES HAVING GROSS RECEIPTS/T URNOVER OF MORE THAN RS.40.00 LACS, ARE REQUIRED TO GET THE ACCOUNTS AUD ITED AND FURNISH AUDIT REPORT TO BE FILED BEFORE AO WITHIN SPECIFIED DATE. IN THIS CASE THE ACCOUNTS WERE NOT AUDITED ABOUT WHICH THERE IS NO DISPUTE. THE EXPLANATION GIVEN BY ITA NO.5830/M/08 A.Y:03-04 3 THE ASSESSEE IS THAT THE ACCOUNTS COULD NOT BE AUDI TED AS AUDIT FOR THE EARLIER YEARS WAS STILL INCOMPLETE DUE TO HEAVY LOSS INCURR ED. IT HAS ALSO BEEN SUBMITTED THAT THE BUSINESS OF THE ASSESSEE HAD BEE N TOTALLY DISRUPTED BECAUSE OF THE LOSSES. THE CLAIM OF THE ASSESSEE I S SUPPORTED BY LOSS OF RS.1.27 CRORES DECLARED BY THE ASSESSEE FOR THE ASS ESSMENT YEAR 2003-04. THE ASSESSEE HAS NO ADVANTAGE IN NOT GETTING THE AC COUNTS AUDITED AND IN NOT GETTING THE INCOME TAX RETURN FILED IN TIME BEC AUSE IN CASE THE RETURN IS NOT FILED IN TIME, THE ASSESSEE WILL NOT BE ABLE TO CARRYFORWARD THE LOSS. THERE IS ALSO NO TAX AVOIDANCE INVOLVED AS EVEN THE AO IN THE ASSESSMENT UNDER SECTION 143(3) HAS DETERMINED NIL TAX LIABILI TY. THE BUSINESS OF THE ASSESSEE IS ALSO STATED TO BE CLOSED. UNDER THESE CIRCUMSTANCES, THE EXPLANATION OF THE ASSESSEE THAT IT COULD NOT GET T HE ACCOUNTS AUDITED AND NOT FILED THE AUDIT REPORT DUE TO BUSINESS BEING DI SRUPTED ON ACCOUNT OF HEAVY LOSSES HAS TO BE CONSIDERED AS BONAFIDE AND, IN OUR VIEW, IT IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271B. WE AC CORDINGLY SET ASIDE THE ORDER OF CIT(A) AND DELETE THE PENALTY LEVIED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 17.8.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17.8.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.