MAFATLAL SETH (HUF), MUMBAI V. ASST CEN CIR 14, MUMBAI

ITA 620/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71844 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 26-11-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Keywords: Reasonable cause
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 618 TO 621 /M/2011 & 623 TO 624/M2011 ASSESSMENT YEAR: 2003 - 04 TO 2008 - 09 M/S. MAFATLAL SETH (HU F) , SHOP NO.9, 13 TH KHETWADI RD., MUMBAI 400004 PAN: AACHM9991E VS. ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1 4 , INCOME TAX OFFICE, AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) ASSES SEE BY : NONE REVENUE BY : SHRI R.K. SAHU, D.R. DATE OF HEARING : 26 .11.13 DATE OF PRONOUNCEMENT : 06.12.13 O R D E R PER BENCH : ALL THE ABOVE NOTED SIX APPEALS FILED BY THE ASSESSEE ARE D IRECTED AGAINST THE CONSOLIDATED ORDER PASSED BY L D. CIT(A) DATED 11. 11 . 2010 FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09. THE GROUNDS OF APPEAL IN ALL THESE APPEALS ARE COMMON AND READ AS UNDER: 1. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ORDER OF THE LEARNED ASSESSING OFFICER LEVYING PENALTY OF RS. 10,000/ - U/S 271(1)(B) OF INCOME TAX ACT, 1961. SUCH ORDER I S PASSED WITHOUT CONSIDERING THE SUBMISSION MADE BEFORE HIM AS WELL AS WITHOUT CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, PENALTY LEV IE D U/S 271 (1) (B) OF INCOME TAX ACT, 1961 OF RS. 10,000/ - SHOULD BE CANCELLED. 2. YOUR APPELLANT CRAVES TO ADD, ALTER, OR AMEND ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF APPEAL. ITA NO . 619 TO 621 /M/11 & 623 - 624 /M/11 M/S. MAFATLAL SETH (HUF) 2 2. THE FACTS IN ALL THESE APPEALS ARE SAME AND THE SE APPEALS ALSO HAVE BEEN DECIDED BY L D. CIT(A) WITH A CONSOLIDATED ORDER, THEREFORE, FOR THE SAKE OF CONVENIENCE WE PROCEED TO DECIDE ALL THE APPEALS BY THIS CONSOLIDATED ORDER. 3. NOTICE OF HEARING WAS SENT TO ASSESSEE THROUGH RPAD. HOWEVER, ON THE F IXED DATE OF HEARING NONE HAS COME ON BEHALF OF THE ASSESSEE. HOWEVER, A LETTER DATED 22.11.13 HAS BEEN RECEIVED FROM THE ASSESSEE VIDE WHICH IT HAS BEEN REQUESTED THAT THE ASSESSEE HAS ALREADY PLACED ON FILE TWO PAPER BOOKS AND THE ASSESSEE DOES NOT WANT TO APPOINT ANY COUNSEL FOR THE MATTERS. IT HAS BEEN PRAYED THAT THE ABOVE CASES BE DECIDED ON MERITS AFTER GOING THROUGH THE DOCUMENTS. IN VIEW OF THE REQUEST OF THE ASSESSEE , WE PROCEED TO DECIDE THE APPEALS ON MERITS AFTER HEARING THE LD. D.R. AND ON THE BASIS OF MATERIAL ON RECORD. 4. THE LD. CIT(A) HAS SUMMARIZED THE DETAILS OF NOTICES SENT TO THE ASSESSEE AND THE CONCLUSION OF THE AO REGARDING F AILURE OF THE ASSESSEE TO COM PLY THE NOTICES IN A CHART WHICH FOR THE SAKE OF CONVENIENCE IS RE PRODUCED AS UNDER: SL. NO. NOTICE UNDER WHICH SECTION AND DATED DATE OF HEARING REMARKS 1. 143(2) AND 142(1) DATED 3 / 2 /20 1 0 ISSUED AND DULY SERVED UPON THE APPELLANT. 15/2 /20 1 0 REQUISITE DETAILS NOT FILED. NOBODY ATTENDED AND ADJOURNMENT LETTER FILED B Y M/S. MALPANI & ASSOCIATES WITHOUT ENCLOSING ANY LETTER OF AUTHORITY. 2 . NOTICE U/S. 274 RWS 271(1)(B) DATED 25/3/2010 ISSUED AND DULY SERVED UPON THE APPELLANT. 5/4/2010 - DO - ITA NO . 619 TO 621 /M/11 & 623 - 624 /M/11 M/S. MAFATLAL SETH (HUF) 3 5. THE LD. CIT(A) HAS OBSERVED THAT THE ALLEGED REPRESENTATIVE OF ASSES SEE M/S. MALPANI & ASSOCIATES, HAD NEVER FILED BEFORE THE AO ANY LETTER OF A UTHORITY EXECUTED BY THE ASSESSEE IN THEIR FAVOUR. THUS THE SAID FIRM HAD NO AUTHORITY TO FILE ANY REPLY. HENCE THE AO RIGHTLY DID NOT CONSIDER SUCH UNAUTHORIZED AND IRREGULAR REPLY . IT WAS THE OBLIGATION OF THE ASSESSEE TO SHOW REASONABLE CAUSE AND AO WAS NOT REQUIRED TO ESTABLISH CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE AND DELIBERATE DEFIANCE OF LAW. IN ABSENCE OF ANY EVIDENCE OR MATERIAL TO SHOW THAT WHY T HE ASSESSEE DID NOT MAKE COMPLIANCE OF THE NOTICES, THE PENALTY WAS LEVIABLE. LD. CIT(A) HAS FURTHER RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF K.P. MADHUSUDANAN VS. CIT, 251 ITR 99(SC), WHEREIN IT HAS BEEN HELD THAT MENS - REA IS NOT REQUIRED TO BE PROVED IN THE CASE OF PENALTY LEVIABLE UNDER SECTION 271(1)(C). LD. CIT(A) HAS ALSO REFERRED TO VARIOUS DECISIONS INTER - ALIA INCLUDING DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILES PROCESSO RS, 306 ITR 277 (SC) TO COME TO A CONCLUSION THAT MENS - REA IS NOT AN ESSENTIAL ELEMENT TO IMPOSE PENALTY. LD. CIT(A) HAS ALSO LINKED THE FAILURE OF THE ASSESSEE WITH THE MATERIAL FOUND AND SEIZED BY THE DEPARTMENT AS A RESULT OF SEARCH AND THE ACTION OF TH E ASSESSEE IN AVOIDING THE PROCEEDINGS AND ITS FAILURE TO FURNISH THE DETAILS. FINALLY, L D. CIT(A) HAS COME TO A CONCLUSION THAT AO WAS JUSTIFIED IN IMPOSING THE PENALTY AND IN THIS MANNER LEVY OF PENALTY HAS BEEN SUSTAINED. BEING AGGRIEVED FROM THE ORDER OF THE LD. CIT(A), THE ASSESSEE THUS HAS PREFERRED THE PRESENT APPEAL. 6. BEFORE US L D. D.R , WHILE RELYING UPON THE ORDERS PASSED BY AO AND L D. CIT(A) , HAS PLEADED T HAT ASSESSEE DID NOT ATTEND ON THE VARIOUS DAT ES AND DID NOT FILE THE DETAIL AND AS SUCH THE P ENALTY HAS RIGHTLY BEEN SUSTAINED BY L D. CIT(A) AND HIS ORDER SHOULD BE UPHELD. THE LD. D.R. HAS FURTHER RELIED UPON AN AUTHORITY OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF REPAKA ITA NO . 619 TO 621 /M/11 & 623 - 624 /M/11 M/S. MAFATLAL SETH (HUF) 4 SEETHARAMSWAMY VS. CIT STYLED AS [1961] 42 ITR 829 (AP) WHEREIN THE HONBLE ANDHRA PRADESH HIGH COURT UPHELD THE ACTION OF THE AO IMPOSING PENALTY FOR FAILURE OF THE ASSESSEE TO COMPLY WITH THE NOTICES CONCERNED. THE LD. D.R. HAS FURTHER RELIED UPON AN ANOTHER AUTHORITY OF THE HONBLE PATNA HIGH COURT IN THE CASE OF CIT VS. STANDARD MERCANTILE CO. STYLED AS [1986] 160 ITR 613 (PAT) WHEREIN THE HONBLE PATNA HIGH COURT HAS HELD THAT THE ONUS IS ON THE ASSESSEE TO ANSWER THE CHARGE OF HAVING FAILED TO COMPLY WITH NOTICE UNDER SECTION 142. IT HAS BEEN HELD THAT WHERE THE AO HAD REJECTED ASSESSEES PLEA RELATING TO THE REASONS PUT FORTH BY HIM PREVENTING HIM TO PRODUCE THE BOOKS BEFORE THE AO ON THE STIPULATED DATE, THE LEVY OF PENALTY BY THE AO UNDER SECTION 271(B) OF THE ACT WAS JUSTIFIED. 7. WE HAVE CONSIDE RED THE SUBMISSIONS OF THE L D. D.R. WE HAVE ALSO CAREFULLY GONE THROUGH THE PENALTY ORDER AS WELL AS ORDER PASSED BY L D. CIT(A). A PERUSAL OF THE PENALTY ORDER PASSED BY THE AO REVEALS THAT THE CIT(A) HAS NOT CORRECTLY NARRATED THE FACTS OF THE CASE. AS PE R THE PENALTY ORDER, I N RESPONSE TO NOTICE ISSUED UNDER SECTION 271(1)(B) OF INCOME TAX ACT, 1961(THE ACT), THE REPLY OF THE ASSESSEE WAS THAT NOTICE UNDER SECTION 143(2), 142(1) ASKING TO ATTEND ON 15. 2 .20 1 0 WAS NOT RECEIVED BY IT . THE NOTICE WHICH WAS R ECEIVED ON 9.2.2010 WAS IN THE CASE O F MAFATLAL (INDIVIDUAL) AND ON THE DATE FIXED REPLY WAS FILED IN THE SAID CASE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS STILL READY TO PROVIDE THE REQUIRED DETAILS. THUS IT WAS SUBMITTED THAT THERE WAS NO NON - COM PLIANCE OF THE STATUTORY NOTICE AND PROCEEDINGS UNDER SECTION 271(1)(B) SHOULD BE DROPPED. HOWEVER, A.O REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE . AO FURTHER OBSERVED THAT ASSESSEE BELONGED TO M/S. PRAKASH STEELAGE GROUP, WHICH WAS A CONTINUOUS DEFAUL TER OF NON - COMPLIANCE OF NOTICES. THE ASSESSEE HAD FAILED TO GIVE SATISFACTORY EXPLANATION ON THE SHOW CAUSE NOTICE AND, THEREFORE, HE IMPOSED PENALTY UNDER SECTION 271(1)(B) OF THE ITA NO . 619 TO 621 /M/11 & 623 - 624 /M/11 M/S. MAFATLAL SETH (HUF) 5 ACT. SIMILAR ORDER HAD ALSO BEEN PASSED IN RESPECT OF ALL OTHER ASSESSMENT YEARS. 8 . FROM THE ABOVE FACTS, IT IS CLEAR THAT THE AO HAD REJECTED THE CONTENTION OF THE ASSESSEE THAT NO NOTICE UNDER SECTIONS 143(2) AND 143(1) WAS SERVED UPON IT WHEREAS THE CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT SINCE THE M/S . MALPANI & ASSOCIATES HAD NOT FILED ANY AUTHORITY LETTER FROM THE ASSESSEE HENCE THE REPLY/ADJOURNMENT LETTER WAS NOT CONSIDERED. IT SEEMS THAT THE CIT(A) WITHOUT GOING THROUGH THE FACTS OF THE CASE HAS DISMISSED THE APPEAL OF THE ASSESSEE IN A MECHANIC AL MANNER. THE ACTUAL FACTS OF THE CASE ARE ENTIRELY DIFFERENT FROM THOSE NARRATED BY THE CIT(A) IN HIS ORDER. 9. NOW COMING TO THE MERITS OF THE CASE, THE ASSESSEE BEFORE THE AO HAD SUBMITTED THAT THE ALLEGED NOTICE WAS IN FACT IN THE NAME OF MAFATLAT I NDIVIDUAL NOT MAFATLAL HUF (ASSESSEE) AND ON THE DA TE FIXED REPLY WAS FILED IN THAT CASE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS STILL READY TO PROVIDE THE REQUIRED DETAILS. IN OUR VIEW, IT IS NOT A CASE WHERE THE ASSESSEE WITHOUT ANY REASONABLE C AUSE HAD FAILED TO COMPLY WITH THE NOTICES ISSUED UNDER SECTION 143(2) AND 142(1) OF THE INCOME TAX ACT. THE REVENUE HAS NOT PLACED ANY COPY OF THE ALLEGED NOTICE WHICH WAS ISSUED AND SERVED IN THE NAME OF THE ASSESSEE . THE ASSESSEE HAD GIVEN THE REPLY TH AT THOUGH NO NOTICE UNDER SECTIONS 143(2) AND 142(1) OF THE INCOME TAX ACT WAS SERVED UPON IT , YET IT WAS READY TO SUBMIT THE REQUIRED DETAILS. BUT IN THIS CASE, THE AO SIMPLY REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE WI THOUT REBUTTING THE SAME. THE LD. CIT (A) ALSO UPHELD THE LEVY OF PENALTY IN A MECHANICAL MANNER WITHOUT CORRECTLY APPRECIATING THE FACTS . THE SUBSEQUENT CONDUCT OF THE ASSESSEE IN THIS CASE IS ALSO RELEVANT. THE ASSESSEE IN THE SUBSEQUENT PROCEEDINGS PRODUCED THE RELEVANT MATERIAL IN RESPONSE TO THE FRESH NOTICES ISSUED BY THE AO UNDER SECTION 143(2) AND 142(1) ITA NO . 619 TO 621 /M/11 & 623 - 624 /M/11 M/S. MAFATLAL SETH (HUF) 6 AND THE ASSESSMENT PROCEEDINGS WERE COMPLETED. IT IS NOT THE CASE WHERE THE ASSESSMENT PROCEEDINGS WERE COMPLETED EX - PARTE OR WHERE THE ASSESSEE HAD NOT PRODUCED THE RELEVANT M ATERIAL/EVIDENCES DURING THE ASSESSMENT PROCEEDINGS. 9. WE HAVE ALSO GONE THROUGH THE CASE LAWS CITED BY THE LD. D.R. IN THE CASE OF REPAKA SEETHARAMSWAMY (SUPRA) THE CASE WAS FIXED BY THE AO FOR FINAL HEARING AND THE ASSESSEES REQUEST FOR ADJOURNMENT ON THE GROUND THAT ITS HEAD CLERK WAS SICK WAS REJECTED BY THE AO. HE DID NOT ADJOURN THE CASE AND COMPLETED THE ASSESSMENT TO BEST OF HIS JUDGMENT AND THE ORDER OF THE AO WAS UPHELD UP TO THE HIGH COURT. IN THE CASE OF STANDARD MERCANTILE CO. (SUPRA) THE ASSESSEES SUBMISSION THAT THE BOOKS OF ACCOUNTS WERE LOST IN A TAXI WAS REJECTED BY THE AO IN THE ASSESSMENT PROCEEDINGS AS WELL IN THE REGISTRATION PROCEEDINGS. UNDER SUCH CIRCUMSTANCES THE ACTION OF THE AO IN IMPOSING PENALTY FOR NON PRODUCTION OF BOOKS OF ACCOUNT BY THE AO UNDER SECTION 271(1)(B) WAS UPHELD BY THE HONBLE HIGH COURT. HOWEVER THE FACTS OF THE CASE ARE ENTI RELY DIFFERENT. IN VIEW OF OUR A BOVE OBSERVATIONS, I T CANNOT BE HELD IN THE CASE IN HAND THAT THE ASSESSEE HAD FAILED TO COMPLY WITH THE NOTICES . T HE LEVY OF PENALTY IN RESPECT OF ALL THE ABOVE NOTED APPEALS IS HEREBY ORDERED TO BE DELETED. 10 . IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.12 . 2013. SD/ - SD/ - ( D. KARUNAKARA RAO ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 06.12. 2013. * KISHORE ITA NO . 619 TO 621 /M/11 & 623 - 624 /M/11 M/S. MAFATLAL SETH (HUF) 7 COPY TO: THE APPELLANT TH E RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.