Smt. Shalu Jain, Kanpur V. Dy. Commissioner of Income Tax-2, Kanpur

ITA 649/LKW/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1777 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 22-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINKI MAHAWAR
• Keywords: Period of limitation; Time period of passing order

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 649/LKW/2017 ASSESSMENT YEAR: 2006 - 07 SMT. SHALU JAIN 125/44, O BLOCK GOVIND NAGAR, KANPUR V. DY. CIT - 2 KANPUR T AN /PAN : AAOPL6246P (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI SWARAN SINGH, C.A. RESPONDENT BY: SMT. PINKI MAHAWAR, D.R. DATE OF HEARING: 23 08 201 8 DATE OF PRONOUNCEMENT: 31 08 201 8 O R D E R PER P ARTHA SARATHI CHA UDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - I, KANPUR DATED 28/8/2017 AS PER FOLLOWING GROUNDS OF APPEAL: - 1) THAT THE LD. C.I.T. (APPEALS) - 1, KANPUR HAS ERRED IN LAW AND ON FACTS BY SUSTAINING THE PENALTY OF RS. 81,161 / - IMPOSED BY THE LD. A.O. UNDER SECTION 271B OF THE INCOME TAX ACT,1961. 2) THAT THE LD. C.I.T. (APPEALS) - 1, KANPUR HAS ERRED IN LAW AND ON FACTS BY RELYING ON THE REMAND REPORT OF JT. CIT STATING THAT THE PENALTY ORDER DATED 27.03.2014 IS WI THIN THE LIMITATION AS PER SECTION 275(1 )(A) OF THE INCOME TAX ACT, 1961. 3) THAT THE LD. C.I.T. (APPEALS) - I, KANPUR HAS FAILED TO APPRECIATE THE FACT THAT NO PENALTY COULD HAVE BEEN LEGALLY IMPOSED U/S 27IB OF THE INCOME TAX ACT, 1961, SINCE THE PENALTY ORDER DATED ITA NO.649/LKW/2017 PAGE 2 OF 7 27.03.2014 IS BARRED BY LIMITATION AS PER SECTION 275(1 )(C) OF THE INCOME TAX ACT,1961. 4) THAT THE PENALTY ORDER OF THE LD. CIT(APPEALS) - ! U/S 271B OF THE INCOME TAX ACT, 1961, IS ILLEGAL, WHOLLY UNJUSTIFIED, UNSUSTAINABLE IN LAW AND DESERVES TO BE DELETED. 5) THAT ANY OTHER RELIEF OR RELIEFS AS MAY BE DEEMED FIT IN THE CASE & CIRCUMSTANCES OF THE CASE BE GRANTED. 2 . THE MAIN GRIEVANCE OF THE ASSESSEE IS AGAINST IMPOSITION OF PENALTY UNDER SECTION 271B OF THE ACT AND CONFIRMED BY THE LD. CIT(A). ASSESSEE HAS TAKEN A LEGAL GROUND THAT PENALTY IMPOSED UNDER SECTION 271B OF THE ACT IS BARRED BY LIMITATION AS PER PROVISIONS OF SECTION 275(1)(C) AND ALSO CONTESTED THE CASE ON MERITS. 3 . THE FACTS IN THIS CASE ARE THAT ASSESSEE IS AN INDIVIDUAL TRADING OF SHARES (DERIVATIVES, FUTURE & OPTION). THE LD. ASSESSING OFFICER HAS IMPOSED A PENALTY OF RS.81,161/ - UNDER SECTION 271B OF THE ACT FOR ALLEGED FAILURE TO GET THE BOOKS OF ACCOUNT AUDITED AS PER PROVISIONS OF SECTION 44AB OF THE ACT. THE LD. ASSESSING OF FICER HAS WORKED OUT THE TURNOVER OF THE ASSESSEE AT RS. 1,62,32,157/ - . IN THE COURSE OF PROCEEDINGS UNDER SECTION 27IB OF THE ACT, IT WAS EXPLAINED THAT AUDIT AS PER PROVISIONS OF SECTION 44AB OF THE ACT, WAS NOT REQUIRED AS THE TURNOVER DID NOT EXCEED THE LIMIT OF RS.1 CRORE IN THE CASE OF THE ASSESSEE . IT WAS ALSO EXPLAINED VIDE REPLY DATED 12 . 03.2014 THAT AS PER GUIDANCE NOTE ON SECTION 44AB OF THE ACT, REVISED IN 2005 E DITION ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, NEW DELHI DEFINED T HE TURNOVER UNDER SECTION 44AB OF THE ACT AS UNDE R: - ' CLAUSE(B) DERIVATIVES, FUTURES AND OPTIONS: SUCH TRANSACTIONS ARE COMPLETED WITHOUT THE DELIVERY OF SHARES OF SECURITIES. THESE ARE ALSO SQUARED UP BY PAYMENT OF DIFFERENCES. THE CONTRACT NOTES ITA NO.649/LKW/2017 PAGE 3 OF 7 ARE ISS UED FOR THE FULL VALUE OF THE ASSET PURCHASED OR SOLD BUT ENTRIES IN THE BOOKS OF ACCOUNT ARE MADE ONLY FOR THE DIFFERENCES. THE TRANSACTIONS MAY BE SQUARED UP ANY TIME ON OR BEFORE THE STRIKING DATE. THE BUYER OF THE OPTION PAYS THE PREMIA. THE TURNOVER I N SUCH TYPES OF TRANSACTIONS IS TO BE DETERMINED AS FOLLOWS: - (I)THE TOTAL OF FAVOURABLE AND UNFAVOURABLE DIFFERENCES SHALL BE TAKEN AS TURNOVER. (II)PREMIUM RECEIVED ON SALE OF OPTIONS IS ALSO TO BE INCLUDED IN TURNOVER. (III)IN REAPED OF ANY REVERSE TRAD ES ENTERED, THE DIFFERENCE THEREON, SHOULD ALSO FORM PART OF THE TURNOVER. ' 4 . IN THE LIGHT OF THE ABOVE DEFINITION, THE TURNOVER WOULD MEAN TOTAL OF FAVOURABLE AND UNFAVOURABLE DIFFERENCES AS TURNOVER. THE ASSESSING OFFICER DID NOT FIND FAVOUR WITH THE ARGU MENTS PUT FORTH BY THE ASSESSEE AND IM POSED PENALTY OF RS.81,161/ - UNDER SECTION 271B OF THE ACT FOR FAILURE TO GET THE BOOKS OF ACCOUNT AUDITED AS PER PROVISIONS OF SECTION 44AB OF THE ACT. 5 . BEFORE THE LD. CIT(A), THE PLEA OF THE ASSESSEE WAS THAT FIRST SH OW CAUSE NOTICE UNDER SECTION 271B OF THE ACT WAS ISSUED ON 24/11/2008 AND AS PROVIDED UNDER SECTION 275(1)(C) OF THE ACT , PENALTY IS BARRED BY LIMITATION SINCE IT HAS CROSSED THE PERIOD OF SIX MONTHS PROVIDED FOR THE PURPOSE OF LIMITATION IN SECTION 271(1 )(C) ; MEANING THEREBY DATE OF FIRST SHOW CAUSE NOTICE UNDER SECTION 271B WAS DATED 24/11/2008 AND SIX MONTHS THERE FROM ENDS ON 31/5/2009. IN THE CASE OF THE ASSESSEE, PENALTY ORDER WAS ISSUED ON 27/3/2014 WHICH IS WELL BEYOND THE PERIOD OF LIMITATION OF S IX MONTHS ENDING ON 31/5/2009 AND, THEREFORE, PENALTY UNDER SECTION 271B GETS ATTRACTED BY LIMITATION UNDER SECTION 275(1)(C) OF THE ACT. THE LD. CIT(A) ISSUED A LETTER DATED 8/3/2017 TO ACIT - 2, ITA NO.649/LKW/2017 PAGE 4 OF 7 KANPUR TO PROVIDE FACTUAL REPORT ON THE MATTER WHETHER THE PENALTY IS LEVIED IN TIME OR HAS BEEN BARRED BY LIMITATION. IN RESPONSE TO THE LETTER DATED 8/3/2017, REMAND REPORT WAS SUBMITTED ON 25/4/2017 AND THE ASSESSEE WAS CONFRONTED WITH THE REMAND REPORT. ASSESSEE ACCORDINGLY MADE HIS SUBMISSIONS BEFORE THE LD . CIT(A) . THE CRUX OF THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT ASSESSING OFFICER HAS CONTENDED THAT LIMITATION FOR IMPOSING PENALTY UNDER SECTION 271B IS COVERED UNDER SECTION 275(1)( A ) AND, THEREFORE, IMPUGNED PENALTY ORDER DATED 27 /3/2014 IS WITHIN LIMITATION. PER CONTRA, ASSESSEES CASE IS THAT FOR THE PURPOSE OF SECTION 271B PROVISIONS OF SECTION 275(1)(C) IS APPLICABLE. ASSESSEE ALSO PLACED RELIANCE ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF SUBODH KUMAR BHARGAV A VS. CIT [2009] 309 ITR 31 (DELHI). 6 . THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE, PENALTY ORDER, REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE, SIMPLY MADE REFERENCE TO SECTION 275(1)(A) AND REITERATED THE FINDINGS OF THE ASSESSING OFFICER AND UPHELD THE ADDITION. THE LD. CIT(A), AS APPEARS FROM HIS ORDER, HAS NOT AT ALL ADJUDICATED SPECIFICALLY HOW THE CASE OF THE ASSESSEE IS COVERED UNDER SECTION 275(1)(A) OF THE ACT AND NOT UNDER SECTION 275(1)(C) OF THE ACT. 7 . AT THE TIME OF HEARING BEFO RE US, LD. A.R. OF THE ASSESSEE FILED A PAPER BOOK AND SUBMITTED CHRONOLOGY OF EVENTS DEMONSTRATING THAT PENALTY ORDER UNDER SECTION 271B IS BARRED BY LIMITATION AS PER SECTION 275(1)(C) OF THE ACT. THE LD. A.R. OF THE ASSESSEE PLACED RELIANCE UPON THE DE CISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SUBODH KUMAR BHARGAVA VS. CIT (SUPRA) AND THE DECISION OF ITAT LUCKNOW BENCH IN THE CASE OF ACIT VS. VAISH BOROTHERS & CO. LTD. IN ITA NO 116 & 117/LKW/2003. ITA NO.649/LKW/2017 PAGE 5 OF 7 8 . THE LD. D.R., ON THE OTHER HAND, RELIED ON T HE ORDERS OF THE AUTHORITIES BELOW. 9 . WE HAVE PERUSED THE CASE RECORD AND HEARD THE RIVAL CONTENTIONS. IN THIS CASE PENALTY HAS BEEN IMPOSED UNDER SECTION 271B FOR FAILURE TO GET THE ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT. IT IS THE CASE OF THE REV ENUE THAT IMPOSITION OF PENALTY IS WELL WITHIN TIME AND IS COVERED UNDER SECTION 275(1)(A) OF THE ACT. PER CONTRA ASSESSEES CONTENTION IS THAT IN REGARD TO PENALTY IMPOSED UNDER SECTION 271B, IT IS COVERED AS PER SECTION 275(1)(C) OF THE ACT AND IS BARRE D BY LIMITATION, SINCE AS PER SECTION 275(1)(C) PENALTY ORDER HAS TO BE PASSED WITHIN SIX MONTHS FROM THE DATE OF ISSUANCE OF NOTICE. IN OTHER WORDS, THE ORDER IMPOSING PENALTY UNDER SECTION 271B SHOULD BE PASSED WITHIN SIX MONTHS FROM THE DATE WHEN THE P ROCEEDINGS FOR PENALTY ARE INITIATED . ON TH IS ISSUE WE TAKE GUIDANCE FROM THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SUBODH KUMAR BHARGAVA VS. CIT (SUPRA) WHEREIN THE HON'BLE HIGH COURT HAS CATEGORIZED TWO SITUATIONS FALLING UNDER SECTION 275(1) ( C). IN FIRST CATEGORY OF CASES, ACTION FOR IMPOSITION OF PENALTY IS INITIATED IN THE COURSE OF SAME PROCEEDINGS, WHILE IN OTHER CATEGORY OF CASES, ACTION FOR IMPOSITION OF PENALTY IS INITIATED BUT IN THE COURSE OF SOME OTHER PROCEEDINGS. IN THE F ORMER CATEGORY OF CASES, TWO PERIOD S OF LIMITATION MAY BE APPLICABLE, ONE IS TO BE RECKONED FROM THE DATE ON WHICH OTHER PROCEEDINGS HAVE BEEN COMPLETED UPTO AND INCLUDING THE END OF THE FINANCIAL YEAR IN WHICH THAT DATE OCCURS AND OTHER PERIOD OF LIMITAT ION IN SUCH A CASE WOULD BE SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ACTION FOR IMP OSITION OF PENALTY IS INITIATED; WHEREAS IN THE LATTER CATEGORY ONLY SECOND PERIOD OF LIMITATION OF SIX MONTHS FROM THE END OF THE MONTH FOR ACTION OF IMPOSITION OF PENALTY HAS BEEN INITIATED WOULD APPLY; MEANING THEREBY PENALTY UNDER SECTION 271B IS IMPOSED FOR FAILURE TO GET THE ACCOUNTS AUDITED AS PER ITA NO.649/LKW/2017 PAGE 6 OF 7 REQUIREMENT OF SECTION 44AB WHICH IS OTHER PROCEEDINGS AND NOT ASSESSMENT PROCEEDINGS. ONCE IT IS OTHER PROCEEDIN GS, THEN LIMITATION OF SIX MONTHS FROM THE END OF THE MONTH , ONLY ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED HAS TO BE TAKEN INTO ACCOUNT. FOLLOWING THE RATIO OF THIS DECISION, IN THE INSTANT CASE OF ASSESSEE IS COVERED UNDER SECTION 275(1)(C). SIMILARLY, THE CO - ORDINATE BENCH OF ITAT LUCKNOW IN THE CASE OF ACIT VS. VAISH BOROTHERS & CO. LTD. (SUPRA) ON THE SIMILAR FACTS AND CIRCUMSTANCES OBSERVED AND HELD AS FOLLOWS: - THE SHOW - CAUSE NOTICE FOR ASST. YRS. 1987 - 88 AND 1989 - 90 WAS FIRST ISSUED ON 14TH FEB., 1992. AS THE PENALTY PROCEEDINGS IN BOTH THE YEARS WERE INITIATED AFTER 31ST MARCH, 1989, THE PROVISIONS OF S. 275 AS AMENDED BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987, SHALL APPLY FOR THE PURPOSES OF CALCULATING LIMITATION PERIOD. ADMITTEDLY, TH E PENALTY UNDER S. 271B WAS NOT RELATABLE TO THE INCOME COMPUTED. THEREFORE, UNDER THE PROVISIONS OF S. 275( 1 )(C), THE PENALTY ORDER SHOULD HAVE BEEN PASSED WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ACTION FOR IMPOSITION OF PENALTY IS INITIA TED. IN THE INSTANT CASE, THE ACTION FOR IMPOSITION OF PENALTY WAS INITIATED IN FEBRUARY, 1992. THUS, THE PENALTY ORDER SHOULD HAVE BEEN PASSED WITHIN SIX MONTHS FROM 29TH FEB., 1992. AS THE PENALTY HAS BEEN IMPOSED IN 2001, THE SAME WAS BEYO ND THE LIMITAT ION PERIOD. THE CI T(A) APPRECIATED THESE FACTS AND CANCELLED THE PENALTY. THERE IS NO INFIRMITY IN HIS ORDER AND THE SAME IS UPHELD. 10 . IN THE INSTANT CASE OF THE ASSESSEE ALSO , IT IS A PENALTY UNDER SECTION 271B WHICH IS NOT RELATABLE TO THE INCOME COMPUTED . THEREFORE, IN THIS CASE ALSO AS PER PROVISIONS OF SECTION 275(1)(C) , PENALTY ORDER SHOULD HAVE BEEN PASSED WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED OR FIRST NOTICE OF PENALTY IS ISSUED. WE FIND FIRST SHOW CAUSE NOTICE UNDER SECTION 271B WAS ISSUED ON 24/11/2008 AND SIX MONTHS THEREFROM I.E. ORDER IMPOSING PENALTY SHOULD HAVE BEEN PASSED WITHIN 31/5/2009. HOWEVER, IN THIS ITA NO.649/LKW/2017 PAGE 7 OF 7 CASE OF THE ASSESSEE , ORDER IMPOSING PENALTY UNDER SECTION 271B IS PASSED O N 27/3/2014 AND IS BARRED BY LIMITATION. IN VIEW OF THE MATTER, WE ANSWER THE LEGAL QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. SINCE THE LEGAL QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE, THE ISSUES ON MERIT IN THIS APPEAL BECOMES INF RUCTUOUS. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 / 0 8 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST AUGUST , 201 8 JJ: 2308 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR