SHRI MAHESH BHAWSAR, Shajapur V. The ITO, Shajapur

ITA 642/IND/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91835 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 16-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K AGRAWAL
• Keywords: Reasonable cause

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO. 642/IND/2014 A.Y. 2006-07 SHRI MAHESH BHAVSAR SHAJAPUR PAN ADIPB 8628C ::: APPELLANT VS INCOME TAX OFFICER SHAJAPUR ::: RESPONDENT APPELLANT BY SHRI S.K. AGRAWAL RESPONDENT BY SHRI RAHUL RAMAN DATE OF HEARING 25.6.2015 DATE OF PRONOUNCEMENT 6 . 7 .2015 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LEARNED CIT(A), UJJAIN, DATED 23.7.20 14. IN 2 THIS CASE THE ONLY ISSUE INVOLVED IS SUSTAINING THE P ENALTY OF RS. 58,230/- LEVIED U/S 271B OF THE ACT FOR FAILU RE TO GET THE ACCOUNTS AUDITED. 2. THE ASSESSEE HAS SUBMITTED RETURN OF INCOME ON 27.7.2007 FOR THE ASSESSMENT YEAR 2006-07 DECLARING TAXABLE INCOME AT RS. 1,91,175/-. THE ASSESSING OFFI CER FOUND THAT THE ASSESSEE HAS NOT GOT ITS ACCOUNTED AUDITE D AS PER THE PROVISIONS OF SECTION 44AB OF THE ACT AND AS SUCH THE ASSESSEE IS LIABLE TO PENALTY U/S 271B OF THE ACT. WHILE THE ASSESSEE CLAIMS THAT THE ASSESSEE WAS PREVENTE D BY A REASONABLE CAUSE FROM GETTING THE ACCOUNTS AUDITED. THE ASSESSEE SUBMITTED THAT THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE. THE ASSESSEE IS GETTING ITS ACCOUNTS AUDITED IN ALL THE SUBSEQUENT YEARS IN TIME. THE DETAILS ARE AS UNDER :- 3 A.Y. DATE OF AUDIT REPORT 2007 - 08 26.10.2007 2008 - 09 SEPT. 2008 2009 - 10 08.09.2009 2010 - 11 15.09.2010 2011 - 12 30.09.2011 2012 - 13 28.9.20112 2013 - 14 26.09.2013 HE SUBMITTED THAT THE NORMAL AUDIT WAS CARRIED OUT BY T HE CA. HOWEVER, HE HAS NOT ADVISED THE ASSESSEE TO GET T HE ACCOUNTS AUDITED U/S 44AB OF THE ACT. THIS BEING TH E FIRST YEAR, THE ASSESSEE WAS NOT VERY WELL CONVERSANT WITH TH E COMPLIANCE OF CERTAIN IT PROVISIONS, THEREFORE, THIS BONAFIDE UNINTENDED SLIP. AS SOON AS THE ASSESSEE CAME TO KNOW THESE PROVISIONS, THE ASSESSEE IS EVERY YEAR GETTING ITS 4 ACCOUNTS AUDITED IN TIME AND SUBMITTING THE SAME BEFOR E THE INCOME TAX AUTHORITIES. HE SUBMITTED THAT IN THE CASE OF BANGALORE STEEL DISTRIBUTORS VS. ITO; 49 ITD 668 IT W AS HELD THAT THE WORK OF FILING AND COMPLYING WITH OTHER STATUTORY REQUIREMENTS ENTRUSTED TO AUDITORS THEN THE FAILURE ON THE PART OF THE AUDITOR TO ACTUALLY COMPLY WI TH THE SAID REQUIREMENTS, PARTNERS OF THE ASSESSEE FIRM NO T SUPPOSED TO BE ACQUAINTED WITH INTRICATE PROVISION OF T HE INCOME TAX ACT, HAS BEEN HELD TO BE REASONABLE CAUSE FO R DELAY. MISTAKE OF THE ASSESSEES COUNSEL WAS HELD REASONABLE CAUSE IN THE CASE OF ITO VS. GULABDAS STORES; 69 TTJ 472. THE ASSESSEE CANNOT BE PENALIZED FOR ADVOCATES LAPSES. 3. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER S OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH THE SIDES. THIS WAS THE FIRST Y EAR OF BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS COMPLIED 5 WITH THE PROVISIONS OF SECTION 44AB OF THE ACT IN AL L THE SUBSEQUENT YEARS. AFTER CONSIDERING VARIOUS PLEADINGS O F THE ASSESSEE, WE ARE OF THE VIEW THAT THERE WAS NO WILL FUL DEFAULT ON THE PART OF THE ASSESSE. THE AUDITORS HAVE NO T POINTED OUT THE COMPLIANCE OF LAW WITH REGARD TO SECT ION 44AB OF THE ACT IN VIEW OF TURNOVER OF THE ASSESSE. THE ASSESSEE IS COMPLYING WITH THE PROVISIONS RELIGIOUSL Y IN THE SUBSEQUENT YEARS. CONSIDERING THESE ASPECTS, WE ARE OF THE VIEW THAT THERE WAS A REASONABLE CAUSE FOR NOT GETTING T HE ACCOUNTS AUDITED IN THE FIRST YEAR WHEN THE TAX AUDITOR S HAVE NOT ADVISED THE ASSESSEE TO DO SO. WE GET SUPPOR T FROM THE FOLLOWING JUDGMENTS FOR HOLDING SO :- ( 1989) 29 ITD 537 (MAD) IN THE ITAT MADRAS BENCH B K. RAVI KUMAR & CO. VS. ITO SECTION 271B OF THE INCOME TAX ACT, 1961 PENALTY FAILURE TO GET ACCOUNTS AUDITED ASSESSMENT YEAR 1985-86 FOR RELEVANT ASSESSMENT YEAR ACCOUNTS OF ASSESSEE FIRM SHOULD HAVE BEEN AUDITED BY 31.7.1985 BUT WERE AUDITED ONLY ON 27.8.1986. OWING TO REASONS (I) THAT ONE OF PARTNERS IN CHARGE WAS ILL FOR A CONSIDERABLE PERIOD OF TIME IN 1985 A ND 6 HAD UNDERGONE SURGERY ON 21.9.1985 AND EVEN THEREAFTER THERE WERE COMPLICATIONS (II) THAT BEING FIRST YEAR OF TAX AUDIT, FINALIZATION OF ACCOUNTS A ND TRACING TRIAL BALANCE DIFFERENCES TOOK MORE TIME TH AN EXPECTED, AND (III) THAT IT HAD REQUESTED VIDE LETT ER DATED 30.9.1985 FOR TIME IN FORM NO. 6 EXPLAINING CIRCUMSTANCES IN DETAIL WHETHER ON FACTS AND HAVING REGARD TO PERIOD OF DELAY AND CONDUCT OF ASSESSEE IN KEEPING DEPARTMENT INFORMED FOR DELAY AND AUDIT OF ACCOUNTS, IT COULD BE SAID THAT THERE WAS A REASONABLE CAUSE FOR DELAY IN AUDIT OF ACCOUNTS AND THUS NO PENALTY WAS LEVIABLE UNDER SECTION 271B HELD, YES. THE JUDGEMENT OF MP HIGH COURT IN ITO VS. NANAK SINGH GULIANI (2002) (2002) 257 ITR 677 WOULD ALSO SAY THAT IF SUFFICIEN T CAUSE IS SHOWN NO PENALTY COULD BE LEVIED. (2006) 9 SOT 60 (COCHIN) (URO) ITAT COCHIN BENCH ORIENTAL MEDICINES (P) LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-I, ALLEPPEY SECTION 271B OF THE INCOME-TAX ACT, 1961 PENALTY FOR FAILURE TO GET ACCOUNTS AUDITED. THE TRIBUNAL FOLLOWING SUPREME COURTS DECISION IN HINDUSTAN STEEL LTD. VS. STATE OF ORISSA 83 ITR 26(SC) HELD THAT PENALTY UNDER SECTION 271B (FOR NO T GETTING ACCOUNTS AUDITED AND FILING TAX AUDIT REPOR T) CANNOT BE IMPOSED UNLESS THERE WAS A DELIBERATE DEFIANCE OF LAW OR THE ASSESSEE IS GUILTY OF CONTUMACIOUS OR DISHONEST CONDUCT OR THE ASSESSEE ACTED IN CONSCIOUS DISREGARD OF OBLIGATIONS. IF IN THE 7 PENALTY ORDER THERE IS NOTHING TO INDICATE THAT THE RE WAS A DELIBERATE DEFIANCE OF LAW ETC. AS AFORESAID, THE PENALTY IMPOSED IS LIABLE TO BE CANCELLED. THUS , THE ASSESSEE CAN PLEAD THAT THERE WAS NO DELIBERATE DEFIANCE OF LAW ETC ON HIS PART AND THEREFORE HE IS NOT LIABLE FOR PENALTY. THE ASSESSEE CAN ALSO PLEAD THA T THE ORDER DOES NOT BRING ANY FACTS ON RECORD WHICH GO TO INDICATE THAT THERE WAS DELIBERATE DEFIANCE OF L AW ETC. ON IS PART AND THEREFORE LIABLE TO BE SET ASID E (2004) 3 SOT (DELHI) IN THE ITAT DELHI BENCH DEVENDRA KUMAR ASHOK KUMAR VS. INCOME TAX OFFICER SECTION 271B OF THE INCOMETAX ACT, 1961 PENALTY FOR FAILURE TO GET ACCOUNTS AUDITED ASSESSMENT YEAR 1996-97 RELYING ON AFFIDAVIT OF ITS ADVOCATE , WHO FOR GOT TO FILE RETURN IN SPITE OF HAVING RECEI VED AUDIT REPORT UNDER SECTION 44AB IN TIME, ASSESSEE DISPUTED LEVY OF PENALTY UNDER SECTION 271B FOR INADVERTENT DELAY BUT ASSESSEES EXPLANATION WAS REJECTED WHETHER SINCE NEITHER ASSESSING OFFICER NOR COMMISSIONER (APPEALS) EXAMINED ADVOCATE WHO HAD FILED AFFIDAVIT ON OATH AND ASSESSEES EXPLANATION HAD BEEN REJECTED MAINLY BY DISBELIEVING, IT COULD BE SAID ON FACTS THAT DEFAUL T OCCURRED ON ACCOUNT OF NO FAULT ON PART OF ASSESSEE AND THUS PENALTY LEVIED HAD TO BE CANCELLED HELD, YES. (2004) 4 SOT 887 (KOL) IN THE ITAT KOLKATA BENCH C' GEM MOTORS VS. ITO SECTION 271B, OF IT ACT, 1961 PENALTY FOR FAILURE T O GET ACCOUNTS AUDITED A.Y. 1995-96 TO 1999-2000. ASSESSEE FIRM WAS LIABLE TO TAX AUDIT SINCE TO 8 INCEPTION. DUE TO INADVERTENT MISTAKE COMMITTED BY ITS ADVOCATE, RETURN COULD NOT IN FILED ALONG WITTE N TAX AUDIT REPORT AS REQUIRED U/S 44AB THOUGH IT WAS FILED ALONG WITHIN DUE DATE & WAS ACCORDINGLY PROCESSED U/S 143(1)(A) ASSESSEE FURNISHED ADVOCATES AFFIDAVIT SUPPORTED BY OTHER EVIDENCE IN THAT REGARD. A.O. REVISED PENALTY WHICH WAS UPHELD BY COMMISSIONER (APPEALS) WHETHER CIRCUMSTANCES IF CASE CLEARLY INDICATED THAT THERE WAS NO REASON BEFORE ASSESSEE TO HOLD BACK AUDIT FEES & THUS IT WAS NOT A WILLFUL NEGLECT ACT ON PART OF ASSESSE. H ELD YES WHETHER THEREFORE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR SUCH FAILURE & PENALTY SO CARR IED U/S 271B WAS TO BE CANCELLED HELD YES. (1999) 235 ITR 481 (KER.) HIGH COURT OF KERALA JAI TRADING CO. VS. COMMISSIONER OF INCOME-TAX SECTION 271B, READ WITH SECTION 44AB, OF THE INCOME TAX ACT, 1961 PENALTY FOR FAILURE TO GET ACCOUN TS AUDITED ASSESSMENT YEAR 1985-86 PENALTY IMPOSED ON ASSESSEE FIRM FOR FAILURE TO GET ITS ACCOUNTS AUDITED, IN TERMS OF PROVISION OF SECTION 44AB ASSESSEE SUBMITTED THAT THERE WAS NO OBLIGATION ON IT TO GET ITS ACCOUNT AUDITED IN RELEVANT PREVIOUS YEAR AS SECTION 44AB AND SECTION 271B WERE NOT THERE IN STATUTE DURING RELEVANT PREVIOUS YEAR AND THAT, DESPITE ITS BEST EFFORTS, IT COULD NOT MAKE ARRANGEMENTS TO GET ACCOUNTS AUDITED AS PRESCRIBED UNDER SAID PROVISIONS - WHETHER ON FACTS, IT COULD NOT BE SAID THAT THERE WAS TOTAL DEFIANCE OF LAW BY ASSESSEE IN SUBMITTING AUDITED ACCOUNTS HELD, YES WHETHER ASSESSING OFFICER SHOULD CONSIDER AND DECIDE MATTER AFRESH AFTER CONSIDERING WHETHER EXPLANATION OF ASSESSEE WOULD CONSTITUTE REASONABLE 9 CAUSE FOR ITS FAILURE TO SUBMIT AUDITED ACCOUNTS, H ELD YES. IN VIEW OF THE CIRCUMSTANCES OF THE CASE AND ALSO TAKING INTO CONSIDERATION THE FACT THE THESE WERE T HE INITIAL YEARS OF OPERATION OF THE SAID SECTION 44AB ON THE ASSESSE. IT HAS GOT TO BE CONSIDERED THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE FROM GETTING THE SAID AUDIT WORK DONE IN TIME. THEREFORE YOUR HONOUR IS REQUESTED TO DROP THE PENALTY PROCEEDINGS AGAINST THE ASSESSE. 5. CONSIDERING THE VARIOUS JUDGMENTS, WE DIRECT TO D ELETE THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . . PRONOUNCED IN OPEN COURT ON 6 TH JULY, 2015 SD SD (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED - 6 TH JULY, 2015