Attinkara Electronics, Alappuzha V. The ITO,Wd-1, Thiruvalla

ITA 601/COCH/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6892 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-02-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 31-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: VENKITACHALAM
• Keywords: Business income; Reasonable cause
• Section: 273B; 201

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO . 601 / COCH/ 20 1 8 ASSESSMENT YEAR : 2 01 2 - 13 ATTINKARA ELECTRONICS, M C ROAD, CHENGANNUR, ALAPPUZHA - 689 121. [PAN: AAIFA 1283D] VS. THE INCOME TAX OFFICER, WARD - 1, THIRUVALLA. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI M .S. VENKITACHALAM, CA REVENUE BY SMT. A.S. BINDHU, SR. DR D ATE OF HEARING 25 / 0 2/ 201 9 DATE OF PRONOUNCEMENT 01/03 /201 9 O R D E R PER CHANDRA POOJARI, AM: THI S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) , KOTTAYAM DATED 29/10/2018 A ND PERTAINS TO ASSESSMENT YEAR 2012 - 13. 2. THE ONLY ISSUE IN THIS APPEAL IS WITH REGARD TO LEVY OF PENALTY U/S. 271B OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2012 - 13 ON 27/03/2014 DECLARING TOTAL INCOME OF RS.7,09,690/ - . AS PER THE I.T.A. NO . 601 /COCH/ 201 8 2 PROFIT AND LOSS ACCOUNT FURNISHED ALONG WITH THE RETURN, THE ASSESSEE HAD TURNOVER OF RS.22,07,67,094/ - DURING THE A Y 2012 - 13. AS THE TOTAL TURNOVER OF THE BUSINESS EXCEEDED RS.40 LAKHS IN THE PREVIOUS YEAR, THE ASSESSEE WAS LIABLE TO GET HIS ACCOUNTS AUDITED BEFORE THE SPECIFIED DATE. AS THE ASSESSEE HAD FAILED TO GET THE ACCOUNTS AUDITED U/S. 44AB OF THE ACT, THE AS SESSING OFFICER AFTER REJECTING THE EXPLANATION OF THE ASSESSEE LEVIED PENALTY U/S. 271B OF THE ACT AMOUNTING TO RS.1,50,000/ - BY OBSERVING AS UNDER: ' AS THE ASSESSEE FAILED TO GET HIS ACCOUNTS AUDITED AND TO FURNISH THE REPORT OF SUCH AUDIT BEFORE THE S PECIFIED DATE AS REQUIRED UNDER SECTION 44AB OF THE INCOME TAX ACT, 1961, A NOTICE WAS ISSUED ON 26/03/2015 REQUIRING THE ASSESSEE TO SHOW CAUSE TO WHY PENALTY UNDER SECTION 271 B OF THE ACT SHOULD NOT BE IMPOSED ON THE ASSESSEE. IN RESPONSE TO THE ABOVE, THE ASSESSEE FILED AN EXPLANATION STATING THAT THE MANAGING PARTNER WAS UNDERGOING MEDICAL TREATMENT FOR LUMBAGO SCIATICA (LOW BACK PAIN) DURING THE PERIOD FROM 20/09/2012 FOR 30 DAYS AND COULD NOT FINALIZE THE BOOKS OF ACCOUNTS TO SUBMIT FOR AUDIT BY THE ACCOUNTANT. ON VERIFICATION OF THE COPY OF MEDICAL CERTIFICATE FILED ALONG WITH THE LETTER, IT WAS OBSERVED THAT THE CERTIFICATION DATED 19/10/2012 WAS TO THE EFFECT THAT MR. S NAUSHAD WAS UNDER TREATMENT FOR LUMBAGO SCIATICA (LOW BACK PAIN) FROM 20/09/20 12 TO 18/10/2012. HOWEVER HE COULD FINALIZE THE AUDIT AFTER 14 MONTHS OF COMPLETION OF HIS TREATMENT ONLY. THE ASSESSEE OR THE AUTHORIZED REPRESENTATIVE HAD NOT FURNISHED ANY EXPLANATION FOR THE DELAY OCCURRED AFTER 19/10/2012 TILL THE DATE OF FILING THE R EPORT. NO CAUSE OR MATERIAL EVIDENCE WAS BROUGHT ON RECORD TO EXPLAIN THAT THE DELAY WAS DUE TO REASONS BEYOND THE CONTROL OF THE ASSESSEE. UNDER THE ABOVE CIRCUMSTANCES, I AM COMPLETELY SATISFIED THAT THE ASSESSEE HAD FAILED TO GET HIS ACCOUNTS AUDITED A ND TO FURNISH THE REPORT OF SUCH AUDIT BEFORE THE SPECIFIED DATE AS REQUIRED UNDER SECTION 44AB OF THE INCOME TAX ACT, 1961 WITHOUT REASONABLE CAUSE FOR THE SAID FAILURE AND AS SUCH THE PROVISIONS OF SECTION 271 B OF THE INCOME TAX ACT, 1961 ARE CLEARLY AT TRACTED THE CASE. I THEREFORE HEREBY DIRECT THAT THE ASSESSEE SHALL PAY, BY WAY OF PENALTY, A SUM OF RS.1,50,000/ - WHICH BEING LESS THAN THE SUM EQUAL TO ONE HALF PERCENT OF THE TOTAL SALES OF RS.22,07,67,094/ - IN THE PREVIOUS YEAR I.T.A. NO . 601 /COCH/ 201 8 3 RELEVANT TO ASSESSMENT Y EAR 2012 - 13, ACCORDINGLY I, THE UNDERSIGNED, DO HEREBY IMPOSE A PENALTY OF RS.1,50,000/ - AS PER SEC.271B OF THE ACT. THIS SHOULD BE PAID AS PER THE DEMAND NOTICE AND CHALLAN ENCLOSED HEREWITH . ' 4. BEFORE THE CIT(A), THE FILED A LETTER 10.04.2015, EX PLAINING THE REASON S FOR THE DELAY IN GETTING THE ACCOUNTS AUDITED AS FOLLOWS: A) ILL HEALTH OF THE PARTNER MR. NAUSHAD S FROM 20.09.2012 TO 19.10.2012 SUPPORTED BY MEDICAL CERTIFICATE DATED 19.10.2012 B) AT THE TIME OF FINALIZATION ON 25.10.2012 THERE W AS A HARDWARE DAMAGE AND THE ENTIRE DATA WAS LOST. THE ASSESSEE HAD TO RE - ENTER ALL THE LOST DATA IN THE SYSTEM AND THIS TOOK MORE TIME CONSIDERING THE VOLUME OF SALES AND NUMBER OF BRANCHES OF THE ASSESSEE. THE LEARNED ASSESSING OFFICER FAILED TO CONSID ER THE GENUINE REASON OF HARDWARE DAMAGE. 4.1 A CERTIFICATE OF THE SYSTEM MAINTENANCE FIRM M/S. AMPADI SYSTEMS, CHENGANNUR WAS FILED BEFORE THE CIT(A) WHICH READS AS FOLLOWS: TO WHOMSOEVER IT M A Y CONCERN WE HEREBY CERTIFY THAT WE ARE DOING THE MAINTENANCE OF THE COMPUTERS OF M/S. ATTINKARA ELECTRONICS, CHENGANNUR. WE WERE INTIMATED ON 25.10.2012 THAT ONE OF THEIR DESKTOP COMPUTER WAS NOT WORKING. OUR SYSTEM MAINTENANCE STAFF ATTENDED THE COMPLAINT ON THAT DA T E AND FOUND THAT TH E ENTIRE DATA WAS LOST DUE TO HARDWARE DAMAGE. WE COULD NOT RECOVER ANY DATA ENTERED /SAVED IN THE SYSTEM. SD/ - MANAGER SYSTEMS MAIN TENANCE FOR AMP A DI SYSTEMS 10/04/2015 I.T.A. NO . 601 /COCH/ 201 8 4 4. 2 THUS, IT WAS SUBMITTED THAT THERE WERE GENUINE REASONS FOR THE DELAY. ACCORDING TO THE LD. AR, PROVISIONS OF SECTION 273B PROVIDE THAT NO PENALTY SHALL BE IMPOSABLE ON THE ASSESSEE IF HE PROVES TH AT THERE IS A REASONABLE CAUSE FOR THE SAID FAILURE. 5. THE CIT(A) CONFIRMED PENALTY LEVIED BY THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSEE WAS LIABLE TO GET HIS ACCOUNTS AUDITED AS PER THE PROVISIONS OF THE SECTION 44AB OF THE ACT AND F AILURE T O COMPLY WITH THE PROVISIONS OF SECTION 44AB OF THE ACT WOULD ATTRACT PENALTY UNDER SECTION 271 B OF THE ACT. HOWEVER, ACCORDING TO THE CIT(A), LEVY OF SUCH PENALTY IS SUBJECT TO PROVISIONS OF SECTION 273B OF INCOME TAX ACT, 1961. AS PER THE PROVISIONS OF SECTION 273B, IT IS FOR THE ASSESSEE TO PROVE THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO GET THE ACCOUNT S AUDITED AS REQUIRED UNDER SECTION 44A8. THE CIT(A) OBSERVED THAT THE CLAIM OF ILL HEALTH OF THE PARTNER AS A REASONABLE CAUSE WAS NOT VALID FOR THE DELAY IN GETTING THE ACCOUNTS AUDITED SINCE THE DELAY WAS ON ACCOUNT OF LOSS OF DATA DUE TO HARDWARE DAMAGE OF THE C OMPUTER. 5. 1 ON PERUSAL OF THE CERTIFICATE ISSUED AS ABOVE, THE CIT(A) FOUND THAT THE CONTENTS OF THE LETTER DID NOT INDICATE THAT TH E ONE DESKTOP COMPUTER WHICH GOT DAMAGED WAS CONTAINING ACCOUNTS DATA OF THE ASSESSEE. FURTHER, ACCORDING TO THE CIT(A), THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE THAT IT DID NOT HAVE ACCOUNTS ON ANY OTHER COMPUTER OR THE ACCOUNTS WERE ACTUA LLY I.T.A. NO . 601 /COCH/ 201 8 5 RECONSTRUCTED. THUS, THE CIT(A) HELD THAT THE ASSESSEE HAD N OT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT THERE WAS REASONABLE CAUSE FOR NOT GETTING THE ACCOUNTS AUDITED WITHIN THE PRESCRIBED TIME UNDER THE SECTION 44AB OF THE ACT AND TH EREFORE, CONF IRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER U NDER SECTION 271B OF THE ACT . 6 . AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7 THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE RECORD. THE ASSESSEE WAS REQUIRED TO GET HIS BOOKS OF ACCOUNT AUDITED AS PER THE PROVISIONS OF SECTION 44AB OF THE AC T B E FORE 30/09/2012 FOR THE A.Y. 2012 - 13. THE ASSESSEE GOT THE BOOKS AUDITED ON 24/03/2014 AND THE SAME WAS FURNISHED BEFORE THE AS SESSING OFFICER ON 27/03/2014. THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER ON 26/03/2015. HOWEVER, THERE WAS DELAY IN FURNISHING THE AUDIT REPORT IN COMPLIANCE WITH SECTION 44AB OF THE ACT. THE CONTENTION OF THE LD. AR IS THAT THE REASON FO R DELAY IN FURNISHING THE AUDIT REPORT BELATEDLY WAS DUE TO THE ILL HEALTH OF THE PARTNER SHRI NAUSHAD S. FROM 20.09.2012 TO 19.10.2012 COUPLED WITH MALFUNCTIONING OF THE COMPUTER AND LOSS OF ENTIRE DATA DUE TO HARDWARE DAMAGE. FOR THIS PURPOSE, THE LD. AR RELIED ON THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF STAR AGENCIES VS. ITO (23 CCH 646) WHEREIN I.T.A. NO . 601 /COCH/ 201 8 6 IT WAS HELD THAT EVEN THOUGH ASSESSEE COULD NOT GET THE ACCOUNTS AUDITED WITHIN TIME BUT HAVING FILED THE AUDIT REPORT ALONG WITH THE RETURN, NO PENALTY U/S. 271B WAS ATTRACTED. FURTHER, ILLNESS OF ONE OF THE PARTNERS CONSTITUTED REASONABLE CAUSE FOR THE DELAY. HE ALSO RELIED ON THE RECENT DECISION OF THIS TRIBUNAL IN THE CASE OF JOHNS BIWHEELERS VS. ACIT IN ITA NO.411/COCH/2018 DA TED 05/02/2019 WHEREIN IT WAS HELD AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THIS CASE, THE ASSESSEE WAS REQUIRED TO GET HIS BOOKS OF ACCOUNT AUDITED AND FILED ALONG WITH THE RETURN OF INCOME U/S. 44AB WITHIN THE D UE DATE OF 30/09/201 2 FOR THE ASSESSMENT YEAR 201 2 - 13. . HOWEVER, THE AUDIT REPORT WAS FURNISHED ONLY ON 28/03/2014. THE CONTENTION OF THE LD. AR WAS THAT THE DELAY IN FILING THE RETURN OF INCOME WAS DUE TO DAMAGE TO COMPUTER SYSTEM DUE TO VIRUS INFECTIO N WHICH IS A REASONABLE CAUSE AS PRESCRIBED U/S. 273B OF THE I.T. ACT. THE LD. AR RELIED ON THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS CONTENTIONS: I) CIT VS. MALAYALAM PLANTATIONS LTD. (1976) (103 ITR 835) (KER.) II) ACIT VS. AMAR CHAND RAJ KUMAR (2004) (89 ITD 96)(ITAT, CHANDIGARH) III) PREM PRAKASH SENAPATI VS. ITO (ITA NO.459&185/CTK/2017 DATED 17/04/2018) )(ITAT, CUTTACK). 7.1 FROM THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEE GOT HIS BOOKS OF ACCOUNTS AUDITED ON 28/03/2 014 WHICH WAS MADE AVAILABLE TO THE ASSESSING OFFICER AND NO PREJUDICE HAS BEEN CAUSED TO THE REVENUE. NOW THE SHORT QUESTION THAT ARISES IS WHETHER IN THIS SCENARIO, PENALTY U/S. 271B OF THE ACT CAN BE LEVIED OR NOT. IN OUR CONSIDERED OPINION, THE ASSE SSEE HAD ONLY COMMITTED TECHNICAL VENIAL BREACH WHICH DOES NOT CREATE ANY LOSS TO THE EXCHEQUER AS THE AUDIT REPORT WAS AVAILABLE TO THE ASSESSING OFFICER BEFORE THE COMPLETION OF THE ASSESSMENT PROCEEDINGS. THE MADRAS HIGH COURT IN THE CASE OF CIT VS. A. N. ARUNACHALAM (208 ITR 481) IN THE CONTEXT OF FILING OF AUDIT REPORT FOR CLAIMING DEDUCTION U/S. 80J OF THE ACT, OBSERVED THAT ONCE AUDIT REPORT HAS BEEN MADE AVAILABLE BEFORE THE LD. ASSESSING OFFICER BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SHOULD BE GRANTED DEDUCTION U/S. 80J OF THE ACT. WE OBSERVE THAT THIS JUDGMENT WAS RENDERED IN THE CONTEXT OF ADJUDICATION OF QUANTUM OF DEDUCTION CLAIMED BY THE ASSESSEE. HENCE, THE SAID ANALOGY CAN VERY WELL BE DRAWN AND USED IN THE PENALTY PROC EEDINGS LIKE THAT OF THE ASSESSEE. TO SUM UP, WE HOLD THAT THE ASSESSEE HAD COMMITTED ONLY TECHNICAL VENIAL BREACH FOR I.T.A. NO . 601 /COCH/ 201 8 7 WHICH HE CANNOT BE PENALIZED. IN VIEW OF THE ABOVE, WE ARE INCLINED TO DELETE THE PENALTY MADE BY THE ASSESSEE U/S. 271B OF THE ACT. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8.1 IN OUR OPINION, THE CASE OF THE ASSESSEE WILL SQUARELY FIT INTO THE RATIO LAID DOWN IN THE ABOVE CASES CITED SUPRA. THE ASSESSEE HAS C OMITTED ONLY TECHNICAL VENIAL BREACH WHICH DOES NOT CR EATE ANY LOSS TO THE EXCHEQUER. T HE AUDIT REPORT WAS FILED BEFORE THE ASSESSING OFFICER BEFORE THE COMPLETION OF THE ASSESSMENT . THE ILL HEALTH OF THE PARTNER SHRI NAUSHAD S AND THE MALFUNCTIONING OF THE COMPUTER DUE TO HARDWARE DAMAGE ARE REASONABLE CAU SES FOR NOT FURNISHING THE AUDIT REPORT BEFORE THE ASSESSING OFFICER WITHIN THE STIPULATED TIME. HENCE, WE ARE INCLINED TO HOLD THAT THIS IS NOT A FIT CASE FOR LEVYING PENALTY U/S. 271B. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 MARCH , 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 01 MARCH , 2019 GJ COPY TO: 1 . ATTINKARA ELECTRONICS, M C ROAD, CHENGANNUR, ALAPPUZHA - 689 121. 2. THE INCOME TAX OFFICER, WARD - 1, THIRUVALLA. I.T.A. NO . 601 /COCH/ 201 8 8 3 . THE COMMISSIONER O F INCOME - TAX (AP P EALS) , KOTTAYAM. 4 . THE PR. COMMISSIONER OF INCOME - TAX, KOTTAYAM. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN