M/s. BSI Group India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5949/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7123 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 28-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SREENIVASA RAO
• Keywords: Wholly owned subsidiary; Reasonable cause
• Section: 273B; 92E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SM C - 1 , NEW DELHI BEFORE SH. N. K. SAINI, A CCOUNTANT M EMBER ITA NO. 5949 /DEL/2014 : ASSTT. YEAR : 2009 - 10 M/S BSI GROUP INDIA PVT. LTD., THE MIRA, A - 2, PLOT NO . 1 & 2, ISHWAR NAGAR, MATHURA ROAD, NEW DELHI - 110065 VS DCIT, CIRCLE - 3(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A BCB3790L ASSESSEE BY : SH. SHAILESH GUPTA , ADV. REVENUE BY : SH. A. SREENIVASA RAO , SR. DR DATE OF HEARING : 28 .06 .201 6 DATE OF PRONOUNCEMENT : 05 .07 .201 6 ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 29 .08 .2014 OF LD. CIT(A) - V I , NEW DELHI . 2 . FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING PENALTY UNDER SECTION 271B OF THE ACT AMOUNTING TO RS. 1,00,000/ - . 1.2 THAT IN DOING SO, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIAT E THE BASIC FACT THAT APPELLANT HAD DULY EXPLAINED THE REASONS FOR DELAY IN FILING OF TAX AUDIT REPORT, WHICH EXPLANATION AND DOCUMENTARY EVIDENCES WERE ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 2 ARBITRARILY BRUSHED ASIDE BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AND THEREFORE, THE PENAL TY SO SUSTAINED SHOULD BE DELETED AS SUCH. 1.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER GROSSLY ERRED IN RELYING ON THE JUDGMENTS TOTALLY INAPPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT COMPANY AND FURTHER, PLACING HER JUDG MENT ON WHOLLY EXTRANEOUS AND IRRELEVANT CONSIDERATIONS. 3 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A 100% SUBSIDIARY OF BSI STANDARDS INSTITUTIONS UK (BSI GROUP) AND WAS ENGAGED IN ASSESSMENT, REASSESSMENT OF MANAGEMENT SYSTEMS TRAINING AND ISO CERTIFICATION. THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.01.2010 DECLARING GROSS TOTAL INCOME OF RS.1,02,89,523/ - BEFORE SET OFF OF BROUGHT FORWARD LOSS ES . THE AO ISSUED THE NOTICE DATED 30.03.2013 U/S 271B OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) TO SHOW CAUSE AS TO WHY THE PENALTY U/S 271B OF THE ACT BE NOT LEVIED AS THE ASSESSEE HAD GOT ITS ACCOUNTS AUDITED U/S 44AB ON 27.11.2009, WHEREAS THE SPECIFIED DATED TO GET ITS ACCOUNTS AUDITED WAS 30.09.2009. SINCE, THERE WAS NO C OMPLIANCE TO THE NOTICE U/S 271B OF THE ACT. THE AO LEVIED THE PENALTY OF RS.1,00,000/ - U/S 271B OF THE ACT. 4 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO SUSTAINED THE PENALTY LEVIED BY THE AO BY OBSERVING IN PARAS 5.1 TO 5.5 OF THE IMPUGNED ORDER AS UNDER: ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 3 5.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT VIS - A - VIS THE PENALTY ORDER PASSED IN THIS CASE, AS UNDER CHALLENGE. SECTION 271B PROVIDES FOR IMPOSITION OF PENALTY FOR ASSESSEE 'IF ANY PERSON FAILS TO GET HIS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR OR YEARS RELEVANT TO AN ASSESSMENT YEAR [FURNISH A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTIO N 44AB], THE [ASSESSING] OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY, BY WAY OF PENALTY, A SUM EQUAL TO ONE - HALF PERCENT OF TOTAL SALES, TURNOVER OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS, OR OF THE GROSS RECEIPTS IN PROFESSION, IN SUCH PREVIOUS YEAR OR YEARS OR A SUM OF [ONE HUNDRED FIFTY THOUSAND RUPEES], WHICHEVER IS LESS]. [BUT THE WORD ONE HUND RED FIFTY THOUSAND RUPEES WAS SUBSTITUTED FOR ONE HUNDRED THOUSAND RUPEES BY THE FINANCE ACT, 2010, W.E.F. 01.04.2011]. 5.2. IN THE INSTANT CASE, THE AO OBSERVED THAT APPELLANT COMPANY HAS GOT ITS ACCOUNTS AUDITED U/S 44AB ON 27.11.2009 WHEREAS FOR THE AS SESSMENT YEAR UNDER CONSIDERATION I.E. A. Y. 2009 - 10 THE SPECIFIED DATE, IN IT. ACT, 1961, BY WHICH THE APPELLANT COMPANY HAS TO GET ITS ACCOUNTS AUDIT ED WAS 30.09.2009. ACCORDINGLY, PENALTY U/S 271B OF THE I .T. ACT, 1961 AMOUNTING TO RS.1,00,000/ - WAS LEVI ED BY THE AO. 5 . 3 . BEFORE INITIATING THE PENALTY PROCEEDINGS, THE AO ISSU ED A SHOW CAUSE NOTICE DATED 30. 03.2013 TO THE APPELLANT TO SHOW CAUSE AS TO WHY PENALTY U/S 271B OF THE I.T. ACT BE NOT LEVIED AND APPELLANT WAS REQUIRED TO FILE ITS REPLY BY 08.04. 2013. AS PER APPELLANT SUBMISSION, THE SAID NOTICE WAS DULY RECEIVED BY THEM ON 04.04.2013. ON THE DATE OF HEARING I.E. 08.04.2013, THE APPELLANT DID NOT FILE ITS REPLY DUE TO THE FOLLOWING REASON AS MENTIONED IN ITS LETTER DATED 08.04.2013 FILED BEFORE TH E DCI T, CIRCLE - 3(1), NEW DELHI: ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 4 'THE ABOVE CASE HAS BEEN FIXED FOR HEARING ON TODAY I.E. 08 TH APRIL, 2013. THIS IS TO INFORM YOU THAT OUR MANAGEMENT/FINANCE PEOPLE ARE TRAVELLING ON OFFICIAL WORK AND WILL BE AVAILABLE IN COMING WEEK ONLY THEREFORE WE REQU EST YOU TO KINDLY BE ADJOUR NED THE CASE TO SOME OTHER DATE AFTER 15 TH APRIL, 2013.' 5.4. IN THIS REGARD, IT IS AMPLE CLEAR THAT APPELLANT WAS GIVEN AN OPPORTUNITY TO FILE ITS REPLY. IT IS THE APPELLANT WHO COULD NOT AVAIL THE OPPORTUNITY AS GIVEN BY THE A O BEFORE INITIATING THE PENALTY PROCEEDINGS U/S 271B OF I . T. ACT, 1961 AND DID NOT BOTHER TO FILE ITS REPLY BY 20.06.2013. 5.5. THE CASE LAWS CITED BY THE APPELLANT DO NOT COME TO ITS RESCUE. IN THIS CONTEXT, RELIANCE IS PLACED ON THE JUDGEMENT - ACIT VS. GAYATHRI TRADERS (ITAT, SB - HYD) 58 I TD 121 WHEREIN IT HAS BEEN STIPULATED THAT ACCOUNTS GOT AUDITED BELATEDLY AFTER THE SPECIFIED DATE U/S 44AB - PENALTY LEVIABLE SINCE SUFFICIENT CAUSE/REASON NOT FURNISHED. 5 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COU NSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER OF THE ITAT MUMBAI BENCH IN THE CASE OF APL INDIA PVT. LTD. VS JCIT (OSD) REPORTED AT (2014) 41 TAXMAN 85 (COPY OF THE SAID ORDER WAS F URNISHED WHICH IS PLACED ON RECORD). IT WAS SUBMITTED THAT DELAY IN GETTING THE TAX AUDIT U/S 44AB OF THE ACT WAS D UE TO THE REASON S THAT THE STATUTORY AUDIT GOT DELAYED AND WAS NOT COMPLETED WHICH WAS BEYOND THE CONTROL OF THE ASSESSEE. THE LD. COUNSEL FO R THE ASSESSEE REITERATED THE REASONS AND CIRCUMSTANCES AS STATED BEFORE THE LD. CIT(A ) WHICH READ AS UNDER: ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 5 (I) THAT MR. JAGJIT DEWAN, HEAD OF FINANCE, RESIGNED FROM THE COMPANY DURING THE IMPUGNED FINANCIAL YEAR I.E. ON 4.9.2008. (II) THAT MR. ARUN, AS STT. MANAGER FINANCE ALSO RE SIGNED FROM THE COMPANY ON 4.12. 2008. (III) THAT DURING THE IMPUGNED FINANCIAL YEAR THE COMPANY FULLY MIGRATED FROM OLD ACCOUNTING SOFTWARE TO A NEW ERP SYSTEM (SAP). THAT CALENDAR YEAR WAS THE REPORTING PERIOD BASE D ON THE BOO KS OF ACCOUNT OF BSI , UK (HOLDING COMPANY) AND IN RESPECT OF MODULE FOR BOOK KEEPING ON FINANCIAL YEAR BASIS, IT WAS STILL UNDER STABILIZATION. (IV) THAT THE COMPANY OUTSOURCED THE SERVICES OF KPMG, FOR INTERNAL CONTROL FROM SEPT 2008 TO MAY 2009. (V) TH AT MR. MUKESH ARORA, JOINED THE COMPANY AS DIRECTOR FINANCE ON 7.4.2009. (VI) THAT MR. SINGLA, INTERNAL AUDITOR AND TAX CONSULTANT OF THE COMPANY EXPIRED ON 27.4.2009, AND AS A CONSEQUENCE, THE BRIEFS OF THE APPELLANT COMPANY COULD NOT BE PROCURED FOR A LONG TIME TO HAND OVER THE SAME TO ANOTHER INTERNAL AUDITOR AND TAX CONSULTANT TO TAKE UP THE JOB. (VII) THAT THE STATUTORY AUDITORS STARTED THE AUDIT PROCESS W.E.F. 22.7.2009 AND DURING THE COURSE OF AUDIT, IT WAS FOUND THAT THERE WERE SOME TECHNICAL SNA GS IN THE NEW SAP SYSTEM AND ALSO THERE WERE PROBLEMS IN UNDERSTANDING OF SAP. SINCE THE SENIOR FINANCE AND ACCOUNTS STAFF HAD ALREADY LEFT THE COMPANY, IT TOOK CONSIDERABLE TIME TO RECONCILE CLOSING BALANCES WITH PHYSICAL RECORDS WITH THE RESULT THE FINAN CIAL ACCOUNTS COULD NOT BE FINALIZED IN TIME. ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 6 (VIII) THAT DURING THE INTERVENING PERIOD THE COMPANY DID NOT HAVE COMPETENT AND TRAINED ACCOUNTS STAFF WH O COULD WORK ON SAP SYSTEM (MR. JAGJIT DEWAN AND MR. ARUN LEFT THE COMPANY AS STATED ABOVE) AND SINCE T HE FINALIZATION OF ACCOUNTS WAS GETTING LATE, THE COMPANY AGAIN ENGAGED THE SERVICES OF MR. ARUN, EX - ASSISTANT MANAGER FINANCE, WHO WAS TRAINED AND CONVERSANT WITH ERP (SAP) ON CONTRACT BASIS W.E.F. 20.10.2009. (IX) THAT DUE TO THE AFORESAID REASONS, THE STATUTORY AUDIT GOT COMPLETED ON 27.11.2009 AND ON THE SAME DATE THE STATUTORY AUDIT REPORT AND TAX AUDIT REPORT WAS SIGNED I.E. ON 27.11.2009. (X) THAT REPORT U/S 92E ON (FORM 3CEB) WAS SIGNED BY THE AUDITORS ON JANUARY 28, 2010 AND IMMEDIATELY ON OBTAIN ING THE SAME, THE COMPANY FILED ITS RETURN OF INCOME ON THE SAME DAY I.E. ON JANUARY 28, 2010 (ON LINE) AND ALSO FILED COPY OF REPORT U/S 92E WITH THE DEPARTMENT ON JANUARY 28, 2010. 6. IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED THE ORDERS OF THE AUTH ORITIES BELOW AND REITERATED THE OBSERVATIONS MADE BY THE LD. CIT(A) IN PARA 5.5 OF THE IMPUGNED ORDER WHICH WE HAVE ALREADY REPRODUCED IN THE FORMER PART OF THIS ORDER. 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH T HE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT APPEARS THAT STATUTORY AUDIT OF THE ASSESSEE GOT COMPLETED ON 27.11.2009 AND ON THE SAME DATE TAX AUDIT REPORT WAS SIGNED. THE ASSESSEE FILED THE RETURN OF INCOME ON 28.01.2010 AND THE DELAY IN G ETTING THE TAX AUDIT ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 7 REPORT WAS DUE TO THE DELAY IN COMPLETING THE STATUTORY AUDIT. A SIMILAR ISSUE HAS BEEN ADJUDICATED BY THE CO - ORDINATE BENCH I.E. ITAT MUMBAI BENCH A , MUMBAI IN THE CASE OF APL INDIA PVT. LTD. VS JCIT (SUPRA) WHEREIN BY FOLLOWING THE JUDGMENT OF THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS PUNJAB STATE LEATHER DEVELOPMENT CORPORATION LTD. (2001) 119 TAXMAN 258. THE PENALTY LEVIED U/S 271B WAS DELETED BY HOLDING AS UNDER: ACCORDING TO SECTION 273B, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE FOR ANY FAILURE WHICH INTER ALIA INCLUDE THE DEFAULTS MENTIONED IN SECTION 271B, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. A PLAIN READING OF SECTION 273B MAKES IT CLEAR THAT THE SAME IS A PROCEDURAL LAW WITH REGARD TO THE QUESTION OF IMPOSITION OF PENALTY UNDER DIFFERENT SECTIONS WHICH INCLUDE SECTION 271B. SECTION 271B MAINTAINS IMPOSITION OF PENALTY ON THE FAILURE BUT, BY REASON OF RULE OF EVIDENCE PROVIDED UNDER SECTIO N 273B, SUCH IMPOSITION OF PENALTY IS DEPENDENT ON THE PROOF THAT THERE WAS NO REASONABLE CAUSE FOR THE FAILURE. UNLESS IT IS PROVED THAT THERE WAS REASONABLE CAUSE FOR THE FAILURE THERE IS NO ESCAPE FROM THE IMPOSITION OF PENALTY. SECTION 271B DOES NOT L EAVE ANY DISCRETION AT THE HANDS OF THE AUTHORITY EXCEPT AS PROVIDED IN SECTION 273B. THERE CANNOT BE ANY PROPOSITION CONCEIVED OF TO THE EXTENT THAT IF THERE WAS A SUBSTANTIVE COMPLIANCE OR IF THERE WAS NO ABSOLUTE DEFAULT THEN PENALTY CANNOT BE IMPOSED. BUT THE STATUTE HAS USED THE EXPRESSION 'MAY' EMPLOYED IN SECTION 271B WHICH CANNOT BE TREATED TO BE MANDATORY. IT HAS LEFT A DISCRETION THAT THE TAXING AUTHORITY IN GIVEN FACTS AND ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 8 CIRCUMSTANCES MAY NOT IMPOSE PENALTY IF THEY ARE SATISFIED THAT THERE WAS SUFFICIENT GROUND FOR NOT IMPOSING PENALTY. BUT IT DEPENDS ON THE FACTS OF EACH CASE AND HAVING REGARD TO THE MATERIALS PLACED BEFORE IT OR WHERE THE FINDING IS SUCH THAT IT CAN CONCEIVE OF TWO ALTERNATE MEANING, THEN THE MEANING BENEFICIAL TO THE ASSESSEE HAS TO BE ACCEPTED. THERE WAS MATERIAL ON RECORD ACCORDING TO WHICH IT COULD BE SAID THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR NON - COMPLIANCE WITH THE PROVISIONS OF SECTION 44AB. THE REASON GIVEN IN THE PRESENT CASE FOR NON - COMPLIANCE WITH THE STATUTORY PROVISIONS OF SECTION 44AB WAS LATE COMPLETION OF STATUTORY AUDIT BY THE AUDITORS WHICH WAS COMPLETED ON 21.04.2009. AFTER COMPLETION OF THE SAID STATUTORY AUDIT, WITHIN A REASONABLE TIME I.E. WITHIN A PERIOD OF LITTLE MORE THAN 2 MONTHS, TH E ASSESSEE OBTAINED TAX AUDIT REPORT ON 25.06.2009 AND RETURN WAS E - FILED ON 03.09.2009. WITHOUT COMPLETING STATUTORY AUDIT, THE ASSESSEE COULD NOT HAVE OBTAINED TAX AUDIT REPORT, WHICH CONSTITUTED REASONABLE CAUSE. THIS PLEA WAS RAISED BY THE ASSESSEE EVE N BEFORE THE ASSESSING OFFICER AND ASSESSING OFFICER HAD NOT DOUBTED SUCH CONTENTION OF THE ASSESSEE. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. PUNJAB STATE LEATHER DEVELOPMENT CORPN. LTD. [2001] 119 TAXMAN 258 HAS HELD THAT DELAY IN COMPLETION OF STATUTORY AUDIT WAS REASONABLE CAUSE FOR NON - COMPLIANCE WITH SECTION 44AB AND IT WAS HELD THAT THE TRIBUNAL WAS RIGHT IN CANCELLING PENALTY LEVIED UNDE R SEC TION 271B. THUS COMMISSIONER (APPEALS) WAS NOT RIGHT IN UPHOLDING THE LEVY OF PENALTY UNDER SECTION 271B PENALTY WAS DIRECTED TO BE DELETED. ITA NO . 5949 /DEL /201 4 BSI GROUP INDIA PVT. LTD. 9 8. SINCE, THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE AFORESAID REFE RRED TO CASE AN D NO CONTRARY DECISIO N WAS CITED BEFORE ME . I, THEREFORE, BY RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DELETE THE PENALTY LEVIED BY THE AO AND SUSTAINED BY THE LD. CIT(A). 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . (O RDE R PRON OUNCED IN THE COURT ON 05 /07 /2016 ) SD/ - (N. K. SAINI) ACCOUNTANT MEMBER DAT ED: 05 /07 /2016 *SUBODH* C OPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR