PRAKASH H MUTHA, THANE V. DCIT CEN CIR 1, THANE

ITA 6803/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8252 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJAT MITTAL
• Keywords: Search and seizure; Document seized; Reasonable cause; Documents seized
• Section: 132

Judgement Text

1 ITA NO.6803 /MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.6803/MUM/2014 (ASSESSMENT YEAR: 2007-08) SHRI PRAKASH HIRACHAND MUTHA, PROP M/S MUTHA JEWELLERS, 3 RD FLOOR, MUTHA HOUSE, OPP WELCOME HOTEL, SHIVAJI CHOWK, KALYAN (W), DIST. THANE PAN : ADRPS9728F VS DY.CIT, CENT.CIR.1, THANE APPELLANT RESPONDEDNT APPELLANT BY SHRI PIYUSH CHHAJED RESPONDENT BY SHRI POOJAT MITTAL DATE OF HEARING 09-11-2017 DATE OF PRONOUNCEMENT 22-11-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT(A)-2, THANE DATED 06-08-2014 AND IT PERTAINS TO AY 2007-08. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PROPRIETOR OF M/S MUTHA JEWELLERS. THE ASSESSEES BUSINESS PREMISES AS WELL AS RESIDENTIAL PREMISES WERE RAIDED U/S 132 OF THE ACT ON 07-02-20 06 ALONG WITH OTHER GROUP CASES. DURING THE COURSE OF SEARCH VARIOUS INCRIMI NATING MATERIALS WERE FOUND 2 ITA NO.6803 /MUM/2014 AND SEIZED. THE ASSESSEE HAS FILED RETURN OF INCOM E FOR THE ASSESSMENT YEAR 2007-08 ON 30-12-2008 DECLARING TOTAL INCOME AT RS. 46,31,570. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED T HAT DUE DATE FOR FURNISHING RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 WAS ON 31-10- 2007 WHEREAS THE ASSESSEE HAS FILED RETURN OF INCOM E ON 31-12-2008. THE AO FURTHER OBSERVED THAT THE GROSS SALES / TURNOVER OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR WAS RS.2,36,55,192 AND ACC ORDINGLY HE WAS REQUIRED TO OBTAIN AND FURNISH TAX AUDIT REPORT U/S 44AB OF THE INCOME-TAX ACT, 1961 ALONGWITH THE RETURN OF INCOME ON OR BEFORE DUE DA TE FOR FILING THE RETURN. SINCE THE ASSESSEE HAS FILED RETURN OF INCOME ON 30 -12-2008, THE AO ISSUED SHOW CAUSE NOTICE AND ASKED AS TO WHY PENALTY U/S 2 71B OF THE ACT SHOULD NOT BE LEVIED FOR FAILURE TO FILE AUDIT REPORT U/S 44AB WITHIN THE DUE DATE OF FILING THE RETURN OF INCOME. IN RESPONSE TO SHOW CAUSE NO TICE, THE ASSESSEE SUBMITTED THAT DUE TO SEIZURE OF VOLUMINOUS INFORMA TION, THE ASSESSEE WAS TO GET COPIES OF THE DOCUMENTS SEIZED FROM THE DEPARTM ENT SO AS TO PRODUCE THEM BEFORE AUDITOR FOR COMPILATION AND VERIFICATIO N. THE ASSESSEE FURTHER SUBMITTED THAT HE COULD GET THE COPIES OF THE SEIZE D DOCUMENTS AND CD SEIZED DURING THE COURSE OF SEARCH ONLY ON 24-06-2008 WHIC H IS EVIDENT FROM THE FACT THAT THE DEPARTMENT HAS DRAWN LAST PANCHANAMA AFTER ANALYSIS OF CD ON 24- 06-2008. HE HAS COLLECTED ALL THE DOCUMENTS AND FU RNISHED THEM TO THE 3 ITA NO.6803 /MUM/2014 AUDITOR, WHO HAD ISSUED AUDIT REPORT ON 14-07-2008. THE ASSESSEE FURTHER SUBMITTED THAT HE GOT TAX AUDIT REPORT ON 14-07-200 8 BECAUSE OF ILL HEALTH OF HIS TAX CONSULTANT, WHO IS DIFFERENT FROM THE AUDIT OR, WHO CARRIED OUT THE AUDIT WORK, COULD FILE RETURN OF INCOME ONLY ON 30-12-200 8 ALONGWITH TAX AUDIT REPORT. THEREFORE, THERE IS A REASONABLE CAUSE FOR NOT FILING THE AUDIT REPORT WITHIN THE TIME ALLOWED UNDER THE ACT AND HENCE, PE NALTY U/S 271B CANNOT BE LEVIED. THE AO DID NOT CONVINCE WITH THE EXPLANATI ON OF THE ASSESSEE AND LEVIED PENALTY OF RS.1 LAKH U/S 271B FOR FAILURE TO FILE TAX AUDIT REPORT WITHIN THE TIME ALLOWED UNDER THE ACT. 3. AGGRIEVED BY THE PENALTY ORDER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A), ASSESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE AO. ASSESSEE FURTHER SUBMITTED THAT FAILURE TO OBTAIN T AX AUDIT REPORT AND FURNISH THE SAME WITHIN DUE DATE ALLOWED UNDER THE ACT WAS UNINTENTIONAL AND BEYOND HIS CONTROL BECAUSE OF SEIZURE OF VARIOUS INCRIMINA TING MATERIALS AT THE TIME OF SEARCH PERTAINING TO AY 2007-08, WHICH HE COULD BE ABLE TO GET ONLY IN MAY, 2007. THEREAFTER, HE HAS FURNISHED COPIES OF SEIZE D MATERIALS TO BE AUDITOR. THEREFORE, THERE IS A REASONABLE CAUSE FOR NOT FILI NG THE TAX AUDIT REPORT WITHIN THE TIME ALLOWED UNDER THE ACT AND, THEREFORE, THE AO WAS INCORRECT IN LEVYING PENALTY U/S 271B. THE CIT(A), AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS NOT BEEN AB LE TO EXPLAIN WITH 4 ITA NO.6803 /MUM/2014 NECESSARY EVIDENCES THE DELAY IN OBTAINING THE TAX AUDIT REPORT U/S 44AB FROM 1-10-2007 TO 14-10-2008. THEREFORE, HE OPINED THAT THERE WAS NO REASONABLE CAUSE FOR NOT OBTAINING THE TAX AUDIT REPORT ON OR BEFORE 31-10-2007. WITH THESE OBSERVATIONS, THE CIT(A) UPHELD PENALTY LEVIE D BY THE AO U/S 271B OF THE ACT. AGGRIEVED BY THE ORDER OF C IT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 4. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THERE IS A REASONABLE CAUSE FOR NOT FURNISHING TAX AUDIT REPORT ON OR BEFORE 31-10- 2007, WHICH IS EVIDENT FROM THE FACT THAT THE DEPARTMENT HAS GIVEN COPIES OF SE IZED MATERIALS IN MAY, 2007 AND ALSO CONTENTS OF CD ON 24-06-2008. THE TAX AUD ITOR REFUSED TO ISSUE TAX AUDIT REPORT IN THE ABSENCE OF SEIZED MATERIALS AS, ACCORDING TO HIM, IT IS NECESSARY TO CO-RELATE HIS BOOKS OF ACCOUNT WITH SE IZED DOCUMENTS AND CD. THE TAX AUDITOR, AFTER CONSIDERING THE CONTENTS OF SEIZED MATERIAL AND CD HAS ISSUED TAX AUDIT REPORT ON 14-07-2008 AND THEREAFTE R HE HAD FURNISHED RETURN OF INCOME ON 3-12-2008. THOUGH THERE IS A GAP OF A LMOST 4 TO 5 MONTHS FROM THE DATE OF TAX AUDIT REPORT TO FURNISHING OF RETUR N OF INCOME, THE TAX CONSULTANT, WHO HAD TAKEN UP THE WORK OF FILING RET URN OF INCOME WAS ILL DURING THE PERIOD BECAUSE OF WHICH HE COULD NOT FILE THE R ETURN OF INCOME IMMEDIATELY, AFTER OBTAINING TAX AUDIT REPORT. THE LD.AR REFERRING TO THE PAPER BOOK SUBMITTED ALL CORRESPONDENCE BETWEEN THE DEPAR TMENT AND OTHER EVIDENCES TO JUSTIFY HIS ARGUMENTS. ON THE OTHER H AND, THE LD.DR STRONGLY 5 ITA NO.6803 /MUM/2014 SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT T HE ASSESSEE FAILED TO EXPLAIN REASONS FOR NOT OBTAINING TAX AUDIT REPORT WITHIN T HE TIME WITH COGENT REASONS. THEREFORE, THE AO WAS RIGHT IN LEVYING PENALTY U/S 271B AND HIS ORDER SHOULD BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE FACT WITH REGARD TO THE SEIZURE OF VOLUMINOUS I NFORMATION PERTAINING TO AY 2007-08 IS NOT DISPUTED BY THE LOWER AUTHORITIES. THE ASSESSEE HAS COLLECTED COPIES OF SEIZED MATERIALS ONLY IN THE MONTH OF MAY , 2007. IT IS ALSO AN ADMITTED FACT THAT THE CONTENTS OF CD SEIZED DURIN G THE COURSE OF SEARCH WAS EXTRACTED AND PANCHANAMA WAS DRAWN ON 24-06-2008, A COPY OF WHICH IS ENCLOSED IN THE PAPER BOOK AT PAGE 51. THE DUE DAT E OF FILING TAX AUDIT REPORT FOR THE ASSESSMENT YEAR 2007-08 WAS ON 31-10-2007. THE ASSESSEE HAS OBTAINED TAX AUDIT REPORT ON 14-07-2008. THE ASSES SEE HAS EXPLAINED THE REASONS FOR NOT OBTAINING TAX AUDIT REPORT WITHIN T HE TIME ALLOWED UNDER THE ACT. ACCORDING TO THE ASSESSEE, THE TAX AUDIT AUDI TOR REFUSED TO ISSUE TAX AUDIT REPORT UNLESS SEIZED DOCUMENTS PERTAINING TO AY 200 7-08 CONTAINED IN CD WAS NOT FURNISHED FOR VERIFICATION. THE COPIES OF SEIZ ED DOCUMENTS AND CONTENTS OF CD WAS HANDED OVER TO THE ASSESSEE ON 24-06-2008. THE ASSESSEE HAS OBTAINED TAX AUDIT REPORT IMMEDIATELY AFTER GETTING COPIES OF SEIZED PAPERS AND CONTENTS OF CD. THEREFORE, WE ARE OF THE VIEW THAT THERE IS A REASONABLE CAUSE 6 ITA NO.6803 /MUM/2014 FOR NOT OBTAINING TAX AUDIT REPORT WITHIN THE TIME ALLOWED UNDER THE ACT. THE EXPLANATIONS OFFERED BY THE ASSESSEE APPEARS TO BE BONA FIDE AND THERE IS NO MALA FIDE INTENTION FOR NOT OBTAINING THE AUDIT REP ORT WITHIN THE TIME ALLOWED UNDER THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS ERRED IN LEVYING PENALTY U/S 271B OF THE INCOME-TAX ACT, 1961. THE CIT(A) WITHOUT APPRECIATING THE FACTS HAS CONFIRMED PENALTY LEVIED BY THE AO. HENCE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) CONFIRMING LEVY OF PENAL TY AND DIRECT AO TO DELETE PENALTY LEVIED U/S 271B OF THE ACT, 1961. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2017. SD/- SD/- (SAKTIJIT DEY) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 22 ND NOVEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. 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