ACE DERIVATIVES & COMMODITY EXCHANGE LTD., MUMBAI V. DIT (I & CI), MUMBAI

ITA 6513/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88696 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 06-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: PRASAD LANKE
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.6513/MUM/2013, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2010-11 ACE DERIVATIES & COMMODITY EXCHANGE LTD., 401, INFINITY PARK, BUILDING NO.4 GEN A.K.VAIDYA MARG, DINDOSHI MALAD EAST, MUMBAI-400097 PAN:AAACT7281P VS DIRECTOR OF INCOME-TAX (I&CI), AAYAKAR BHAVAN, MUMBAI-20 ( #$ / ASSESSEE) ( %&#$ / RESPONDENT) !'( !'( !'( !'( ) ) ) ) /ASSESSEE BY :SHRI PRASAD LANKE * ) / REVENUE BY :SHRI NEIL PHILIP ! ! ! ! * ** * (+ (+ (+ (+ / DATE OF HEARING :30 - 03 -2015 ,-' * (+ / DATE OF PRONOUNCEMENT :30 -03-2015 ! ! ! ! , 1961 1961 1961 1961 * * * * 254 254 254 254( (( (1 11 1) )) ) (6( 7 (6( 7 (6( 7 (6( 7 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) ! ! ! ! PER RAJENDRA, AM - CHALLENGING THE ORDER DT.30.09.2013 OF THE DIT(I&CI ),MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE DIRECTOR OF INCOME TAX (I&CI),MUMBAL (HEREINA FTER REFERRED TO AS 'THE DIT') ERRED IN IMPOSING PENALTY OF RS.71,500/- U/S.271FA FOR DELAY IN FILING ANNUAL INFORMATION REPORT (AIR) U/S. 285BA OF THE I.T.ACT,1961 FOR 715 DAYS W ITHOUT APPRECIATING THE FACT THAT TILL 16.8.2013, THE APPELLANT WAS UNDER BONA FIDE BELIE F THAT IT WAS NOT REQUIRED TO FILE SUCH AIR. 2.HE FURTHER ERRED IN LEVYING PENALTY ON CONJECTURE AND SURMISE AND WITHOUT APPRECIATING FACTS OF THE APPELLANT'S CASE. 3.HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD TH AT: A.THE APPELLANT WAS A COMPANY LIMITED BY GUARANTEE TILL AY 2009-10 AND IT CONVERTED INTO A COMPANY LIMITED BY SHARES IN AY 2010-11 AND IT CAME OUT WITH RIGHTS ISSUE FOR THE FIRST TIME. B.THE APPELLANT WAS UNDER A BONA FIDE BELIEF THAT O NLY COMPANIES COMING OUT WITH PUBLIC ISSUE OR PUBLIC RIGHTS ISSUE ONLY ARE REQUIRED TO FILE AI R. C.THE APPELLANT HAS SUO MOTO FILED AIR THE MOMENT I T BECAME AWARE THAT EVEN AN UNLISTED COMPANY COMING OUT WITH A RIGHTS ISSUE IS REQUIRED TO FILE AIR. D.THE APPELLANT FILED THE AIR EVEN BEFORE ANY NOTIC E WAS RECEIVED FROM THE DEPARTMENT REGARDING THE FILING OF AIR U/S 285BA. E.THE DEFAULT IS NOT DELIBERATE OR INTENTIONAL THER E IS NO MA/A FIDE INTENTION TO TAINT IN IT. THERE I S NO ELEMENT OF FRAUD OR WILLFUL NEGLECT. F.THE ASSESSEE DID NOT DERIVE ANY BENEFIT WHATSOEVE R BY NOT FILING THE AIR IN TIME. THE APPELLANT NEITHER ACTED DELIBERATELY IN DEFIANC E OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF IT S OBLIGATION 4.THE APPELLANT PRAYS THAT BASED ON THE FACTS AND THE CIRCUMSTANCES OF ITS CASE, IT BE HELD THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE TO COMPLY WITH THE PROVISIONS OF SECTION 285 BA OF THE I.T. ACT, 1961 AND HENCE THE PROVISIONS OF SECTION 271FA ARE NOT ATTRACTED AND D1T BE FURTHER DIRECTED TO DELETE THE PENALTY OF RS.71,500/-. YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER THE ABOVE GROUNDS OF APPEAL. FACTS OF THE CASE: 2. THE ASSESSEE WAS REQUIRED TO FILE AN AIR UNDER THE PROVISIONS OF SECTION 285BA AND RULE ITA/6513/MUM/2013,AY.2010-11-ADCEL 2 114E OF THE RULES,FOR THE F.Y. 2009-10 BY 30.08.201 0.BUT,SAME WAS FILED ON 16.08.2012. ACCORDINGLY A NOTICE,DATED 29 MARCH, 2013, WAS ISSU ED REQUIRING IT TO EXPLAIN WHY A PENALTY SHOULD NOT BE LEVIED UNDER SECTION 271FA OF THE ACT .THE NOTICE WAS RETURNED BY POSTAL DEPARTMENT WITH REMARKS UNCLAIMED.AGAIN A SHOW-CAUS E NOTICE DATED 20.08.2013 WAS ISSUED BY THE DIT FIXING UP THE DATE FOR HEARING ON 03.09. 2013.IN ITS REPLY,THE ASSESSEE STATED THAT IT WAS UNDER BONAFIDE BELIEF THAT IT WAS NOT REQUIRED TO FILE AIR,THAT IT HAD FILED AIR BEFORE ANY NOTICE FOR FILING AIR WAS ISSUED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE FAA HELD THAT THERE WAS CONSIDERABLE DELAY IN FILING TH E AIR,THAT AS PER RULE 114E ANY COMPANY ISSUING SHARES WAS LIABLE TO FILE AN AIR,THAT THE P ROVISIONS OF SECTION 271FA PROVIDED THAT FOR FAILURE IN FILING AIR HAD TO PAY PENALTY OF RS. 100/- FOR EVERY DAY OF DEFAULT,THAT THE ASSESSEE HAD NOT FILED ANY EVIDENCE THAT IT HAD GEN UINELY A WRONG BELIEF ABOUT REQUIREMENT OF FILING OF THE AIR,THAT IT SHOULD HAVE CONSULTED SOM E TAX EXPERT,THAT A MISTAKEN BELIEF ABOUT THE PROVISIONS OF LAW COULD NOT BE TAKEN A GOOD EXC USE,THAT THE ASSESSEE HAD FAILED TO ESTABLISH ANY REASONABLE CAUSE FOR NOT FILING THE RETURN WITHIN TIME,THAT IT WAS A FIT CASE FOR LEVY OF PENALTY.ACCORDINGLY,FOR THE DELAY OF 715 DA YS IN FILING THE REPORT,HE LEVIED PENALTY OF RS.71,500/-. 3. BEFORE US,AUTHORISED REPRESENTATIVE(AR)STATED THAT THE ASSESSEE WAS INCORPORATED IN 1956, THAT IT WAS A PRIVATE LIMITED COMPANY,THAT IN THE YEAR I T WAS CONVERTED TO COMPANY LIMITED BY SHARES FROM COMPANY LIMITED BY GUARANTEE,THAT IT HAD ISSUE D SHARED ON RIGHT BASIS,THAT IT DID NOT FILE AIR AS IT WAS UNDER THE IMPRESSION THAT AIR WAS REQUIRE D TO BE FILED WHEN PUBLIC RIGHT ISSUE WAS MADE,THAT IT REALIZED THAT STAND TAKEN BY IT WAS NO T CORRECT,THAT IT IMMEDIATELY FILED THE AIR, THAT DEFAULT WAS COMMITTED DUE TO BONAFIDE BELIEF,THAT P ENALTY NOTICE WAS ISSUED ONLY AFTER THE ASSESSEE FILED AIR,THAT DELAY IN FILING AIR WAS NOT MALAFIDE.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE DIT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE COMPANY WAS INCORPORATED IN 1956 AND TILL THE YEAR 2009 IT REMAINED PRIVATE LIMITED COMPANY, THAT ON 27.07.2009 IT WAS REGISTERED AS COMPANY LIM ITED BY SHARES U/S.32(1)(B)OF THE COMPANIES ACT,THAT AS PER THE PROVISIONS OF RULE 114E OF THE INCOME TAX RULES,1962 FILING OF AIR WAS MADE COMPULSORY IN THE YEAR 2005,THAT THE ASSESSEE HAD N OT FILED THE REPORT INITIALLY BUT LATER ON IT FILED THE AIR ON ITS OWN,THE DIT HAD ISSUE THE NOTICE FOR LEVYING OF PENALTY AFTER FILING OF AIR BY THE ASSESSEE. HERE,WE WOULD LIKE TO REFER TO THE JUDGMENT OF THE HONBLE APEX COURT,DELIVERED IN THE CASE OF HINDUSTAN STEEL LTD.(83ITR26),WHEREIN IT WAS HELD T HAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED, EIT HER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST,OR ACTE D IN CONSCIOUS DISREGARD TO ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO.WE WOULD ALSO LIKE TO REFER TO THE PROVISIONS OF SECTION 273B OF THE ACT. SECTI ON 273B OF THE ACT ENVISAGES A NON OBSTANTE CLAUSE AS AGAINST CERTAIN SECTIONS INCLUDING SECTIO N 271 FA OF THE ACT.IT PROVIDES THAT NO PENALTY SHALL BE IMPOSABLE ON A PERSON OR AN ASSESSEE,AS TH E CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISION IF THE ASSESSEE PROVES THAT THERE WA S REASONABLE CAUSE FOR SUCH FAILURE. THUS, PENALTY IS NOT AUTOMATIC UNDER SECTION 271FA OF THE ACT ON MERE VIOLATION OF THE PROVISIONS OF ITA/6513/MUM/2013,AY.2010-11-ADCEL 3 ACT.IN OTHER WORDS,IN THE EXCEPTIONAL SITUATION ENV ISAGED IN SECTION 273B OF THE ACT, IT IS PERMISSIBLE FOR AN ASSESSEE TO SUBSTANTIATE REASON ABLE CAUSE FOR HIS FAILURE TO COMPLY WITH THE PROVISIONS ON THE BASIS WHEREOF PENALTY IS SOUGHT T O BE IMPOSED UPON HIM.THUS,IF AN ASSESSEE SUCCESSFULLY DISCHARGES THIS OBLIGATION, IT IS OPEN TO HIM TO RAISE A CLAIM THAT HE SHOULD BE EXCUSED FROM THE CONSEQUENTIAL PENAL EFFECT.COURTS ARE OF T HE VIEW THAT REASONABLE CAUSE IN SECTION 273B OF THE ACT WOULD MEAN CAUSE WHICH HAS NEXUS TO THE FAILURE OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENT OF LAW. THE QUESTION OF VENIAL OR TECHN ICAL NATURE OF BREACH WOULD ARISE IN THOSE CASES WHERE THE ASSESSEE UNDER A BONA FIDE BELIEF MAY CON SIDER THAT A PARTICULAR ACT IS NOT REQUIRED TO BE DONE OR THE ACT REQUIRED TO BE DONE HAS IN FACT BEE N DONE, BUT WHILE DOING SO THE DEFECT OF VENIAL OR TECHNICAL NATURE HAS OCCURRED. SECTION 273B OF THE ACT ENVISAGES A NON OBSTANTE CL AUSE AS AGAINST CERTAIN SECTIONS,INCLUDING SECTION 271 FA.IT PROVIDES THAT NO PENALTY SHALL BE IMPOSABLE ON A PERSON OR AN ASSESSEE,AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAI D PROVISION IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR SUCH FAILURE.THUS,PENALTY IS N OT AUTOMATIC UNDER SECTION 271FA OF THE ACT ON MERE VIOLATION OF THE PROVISIONS OF ACT.IN OTHER WO RDS,IN THE EXCEPTIONAL SITUATIONS AS ENVISAGED IN SECTION 273B OF THE ACT,IT IS PERMISSIBLE FOR AN ASSESSEE TO SUBSTANTIATE REASONABLE CAUSE FOR HIS FAILURE TO COMPLY WITH THE PROVISIONS ON THE BA SIS WHEREOF PENALTY IS SOUGHT TO BE IMPOSED UPON HIM.THUS,IF AN ASSESSEE SUCCESSFULLY DISCHARGE S THIS OBLIGATION, IT IS OPEN TO HIM TO RAISE A CLAIM THAT HE SHOULD BE EXCUSED FROM THE CONSEQUENT IAL PENAL EFFECT.COURTS ARE OF THE VIEW THAT REASONABLE CAUSE IN SECTION 273B OF THE ACT WOULD M EAN CAUSE WHICH HAS NEXUS TO THE FAILURE OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENT OF LAW. THE QUESTION OF VENIAL OR TECHNICAL NATURE OF BREACH WOULD ARISE IN THOSE CASES WHERE THE ASSESSE E UNDER A BONA FIDE BELIEF MAY CONSIDER THAT A PARTICULAR ACT IS NOT REQUIRED TO BE DONE OR THE AC T REQUIRED TO BE DONE HAS IN FACT BEEN DONE, BUT WHILE DOING SO THE DEFECT OF VENIAL OR TECHNICAL NA TURE HAS OCCURRED. IF WE CONSIDER THE FACTS OF THE CASE IT BECOMES CLE AR THAT THE ASSESSEE WAS A COMPANY LIMITED BY GUARANTEE FOR A VERY LONG PERIOD I.E. FROM 1956 TO 2009,THAT SHARES WERE ISSUED ON RIGHT BASIS BY IT,BUT IT FAILED TO FURNISH AIR AS REQUIRED BY THE RULES.IT WAS CLAIMED THAT UNDER A BONAFIDE BELIEF IT HAD NOT FILED AIR INITIALLY,BUT LATER ON IT FILE D THE REPORT VOLUNTARILY.IN OUR OPINION,CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE IT COULD CONSTITUTE A REASONABLE CAUSE FOR NOT FILING THE REPORT.THEREFORE,WE ACCEPT THE EXPLANATI ON FILED BY THE ASSESSEE CAN BE ACCEPTED A REASONABLE CAUSE,AS ENVISAGED BY SECTION 273B OF TH E ACT.FOLLOWING THE ABOVE MENTIONED DECISION OF HONBLE APEX COURT AND CONSIDERING THE PROVISIONS OF SECTION 273B OF THE ACT,WE REVERSE THE ORDER OF THE DIT.EFFECTIVE GROUND OF AP PEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY TH E ASSESSEE STANDS ALLOWED. 9(: !'( ; < * 6 = * ( > ?. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH ,MARCH,2015. 7 * ,-' A B! 30 C,2015 - * 6 F SD/- SD/- ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ITA/6513/MUM/2013,AY.2010-11-ADCEL 4 / MUMBAI, B! /DATE: 30.03.2015 SK 7 7 7 7 * ** * % %% %(G (G (G (G HG'( HG'( HG'( HG'( / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ I J , 4. THE CONCERNED CIT / I J 5. DR A BENCH, ITAT, MUMBAI / GK6 %(! , , . . . 6. GUARD FILE/ 6 9 &G( %( //TRUE COPY// 7! / BY ORDER, L / > DY./ASST. REGISTRAR , /ITAT, MUMBAI.