M/s. Sony Jewellers, Kolkata V. ITO, Wd.39(3), Kolkata, Kolkata

ITA 690/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9382 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-04-2014
• Court: TRIBUNAL
• Department Lawyers: SATYAJIT MONDAL JCIT SRDR
• Assessee Lawyers: DILIP KUMAR SHAH
• Keywords: Bonafide belief; Reasonable cause; Ignorance of law
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.690/KOL/2014 ( / ASSESSMENT YEAR:2006-07) M/S SONY JEWELLERS, 169A, B.B.GANGULY STREET, KOLKATA-700012 VS. ITO-39(3), KOLKATA PDDON COURT, 8 TH FLOOR, 18 RABINDRA SURANI, KOLKATA- 700001 ./ ./PAN/GIR NO.: AASFS 4447 H ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI DILIP KUMAR SHAH, FCA REVENUE BY : SHRI SATYAJIT MONDAL, JCIT, SR-DR / DATE OF HEARING : 09/01/2017 /DATE OF PRONOUNCEMENT 22/02/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINI NG TO ASSESSMENT YEAR 2006-07, IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-IV, KOLKATA IN APPEAL NO.05/CIT(A)-IV/2010-11, DATED 17 .12.2013, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER (AO) UNDER SECTION 271FB OF THE INCOME TAX ACT 1961, (HEREINAF TER REFERRED TO AS THE ACT), DATED 18.03.2010. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT A.Y.2006-07 O N 18-10-2006 DECLARING TOTAL INCOME OF RS.77,315/-. THE CASE OF THE ASSESS EE WAS SELECTED FOR SCRUTINY BY CASS AND THE AO FRAMED THE ASSESSMENT U /S.143(3) ON DATED 08/12/2008. HOWEVER, THE ASSESSEE DID NOT FILE FBT RETURN U/S.115WD FOR THE ASSESSMENT YEAR 2006-07 THEREFORE, THE ASSESSIN G OFFICER, ISSUED NOTICE U/S.115WH TO THE ASSESSEE. THEREAFTER, THE A SSESSEE FIRM HAS FILED ITA NO.690/14 M/S SONY JEWELLERS 2 FBT RETURN FOR THE ASSESSMENT YEAR 2006-07 ON 03.09 .2009 SHOWING THE TOTAL VALUE OF FRINGE BENEFIT AT RS. 0/- (ZERO). THE AO DID NOT CONVINCE WITH THE REPLY SUBMITTED BY THE ASSESSEE AND THEREFORE, COMPLETED THE ASSESSMENT U/S.115WE(3) AT A TOTAL VALUE OF FRINGE BENEFIT AT RS.13,584/-. CONSEQUENT UPON, PEN ALTY PROCEEDINGS WAS INITIATED U/S.271FB FOR BELATED FILING OF FBT RETUR N. 3. AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS CONFIRMED THE ORDER PASSED BY THE AO OBSERVING THE FOLLOWINGS :- 5.2 I HAVE EXAMINED THE SUBMISSION OF THE A.R OF T HE APPELLANT. I AM OF THE VIEW THAT THE APPELLANT CANNOT TAKE THE P LEA OF IGNORANCE OF LAW. THE ACCOUNTS OF THE APPELLANT ARE DULY AUDI TED U/S.44AB IN FORM NO.3CD AND AUDITOR IS ALSO THE AUTHORISED REPR ESENTATIVE OF THE APPELLANT. I AM NOT PREPARED TO BELIEVE THAT A QUALIFIED CHARTERED ACCOUNTANT WHO IS ALSO THE AUDITOR AND AR OF THE APPELLANT CAN BE EXCUSED FOR CLAIMING IGNORANCE OF LAW. I AM ALSO OF THE VIEW THAT TELEPHONE AND TRAVELLING & CONVEYANCE EXPENSES PAID TO THE EMPLOYEES WILL ATTRACT FBT. I AM, THERE FORE, OF THE VIEW THAT THE ACTION OF THE AO TO LEVY PENALTY U/S.271FB FOR RS.1,03,600/- SHOULD BE UPHELD. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWIN G GROUNDS OF APPEAL :- FOR THAT THE AUTHORITIES BELOW HAVE NOT PROPERLY AP PRECIATED THE FACT:- 1)THAT FBT WAS INTRODUCED FOR THE A.Y 2006-2007 FOR THE FIRST TIME. AS A RESULT, THE ASSESSEE FIRM WAS NOT FULLY AWARE THE PROVISIONS SECTION 115WB FOR PAYMENT OF FBT ON DEEMED EXPENDIT URE. 2) THE ASSESSEE FIRM HAD NO INTENTION OF EVADING FB T. IT HAS BEEN PROVED BY SMART PAYMENT OF FBT AS ASSESSED BY THE L .D A.O. 3)THAT THE ASSESSEE FIRM DID NOT FILE THE FBT RETUR N DUE TO IGNORANCE OF THE PROVISIONS OF FBT ON DEEMED EXPEND ITURE. ITA NO.690/14 M/S SONY JEWELLERS 3 4) THAT THE L.D. A.O. DID NOT POINT OUT THE FACT OF NON-FILING OF FBT RETURN AT THE TIME OF SCRUTINY ASSESSMENT THOUGH IT WAS BROUGHT TO HIS NOTICE, VIDE ANNEXURE- II OF FORM 3CD SUBMITTED ON 18/10/2006. 5)THAT THE ASSESSEE FIRM STILL UNDER HONEST BELIEF THAT THE FIRM DID NOT PAY ANY EXPENDITURE ON ACCOUNT OF TRAVELLING & TELEPHONE TO THE EMPLOYEES. 6) THAT THE ASSESSEE FIRM SHOULD NOT SUFFER FOR THE FAULT OF THE ACCOUNTANT OR AUTHORISED REPRESENTATIVE. 7) NORMALLY UNDER INCOME TAX ACT, PENALTY SHOULD NO T EXCEED THE AMOUNT OR TAX SOUGHT TO BE EVADED. 8) THAT THE APPELLANT MAY BE ALLOWED TO URGE ANY OT HER GROUND / GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 4.1. LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE U S THAT THE ASSESSEE FIRM HAD NO MALAFIDE INTENTION OF EVADING FBT AS TH E ASSESSEE FIRM PAID THE TAX IMMEDIATELY AS LEVIED BY LD. ASSESSING OFFI CER. THE ASSESSEE FIRM WAS UNDER A BONAFIDE BELIEF THAT THE PROVISIONS OF FBT WERE NOT APPLICABLE TO THE DEEMED EXPENDITURE ON TELEPHONE, TRAVELLING AND CONVEYANCE ETC. THE AR FOR THE ASSESSEE HAS FURTHER SUBMITTED THAT SECTION 273B OF THE ACT SAYS THAT INSPITE OF PROVISIONS CONTAINED IN SE CTION 271FB, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OF THE ASSESSEE FO R ANY FAILURE, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR SUCH FAI LURE. HENCE THE ASSESSEE FIRM WAS UNDER THE BONAFIDE BELIEF THAT TH E PROVISIONS OF FBT WERE NOT APPLICABLE ON DEEMED EXPENDITURE. THE ASSE SSEE UNDER CONSIDERATION WAS NOT AWARE OF THE INTRICATE PROVIS IONS OF SECTION 115 WB ON DEEMED EXPENDITURE, THEREFORE, HE HAS COMMITTED THE DELAY IN FILING THE FBT RETURN, AS IT WAS THE FIRST YEAR OF ASSESSM ENT OF FBT IN FILING FBT RETURN. THE AR FOR THE ASSESSEE ALSO RELIED ON THE FOLLOWING JUDGMENTS: (1). ITA NO. 141/KOL/2013 ITAT KOLKATA A.Y. 2006-07 ITA NO.690/14 M/S SONY JEWELLERS 4 (2). ITA NO. 172 (ASR)/2014 ITAT AMRITSAR A.Y. 2006 -07 (3) ITA NO. 158 TO ITA NO. 163/IND/2011 A.Y. 2006-0 7 THE SUM AND SUBSTANCE OF THESE JUDGMENTS ARE THAT T HE PROVISIONS OF SECTION 273B OF THE ACT HAS BEEN INCORPORATED WHICH SAYS THAT INSPITE OF PROVISIONS CONTAINED IN SECTION 271FB, NO PENALTY S HALL BE IMPOSABLE ON THE ASSESSEE FOR ANY FAILURE IF HE PROVES THAT THE RE WAS A REASONABLE CAUSE FOR SUCH FAILURE. ASSESSMENT YEAR 2006-07 WAS THE FIRST YEAR WHERE THE FBT PROVISIONS ARE APPLICABLE. THE FBT AMOUNT P AID BY THE ASSESSEE IS TOO SMALL TO INVITE THE PENALTY. THE FRINGE BENE FIT TAX PROVISIONS WAS INTRODUCED FOR THE FIRST TIME WITH EFFECT FROM THE ASSESSMENT YEAR 2006-07 THEREFORE THERE MAY BE SOME IGNORANCE OF LAW BY THE ASSESSEE, THAT IS THE ASSESSEE WAS NOT FULLY ACQUAINT WITH THE PROVISIONS OF THE ACT AND IN ADDITION TO THIS THE TAX PAYABLE BY THE ASSESSEE IS VERY SMALL AND NOT A MATERIAL ITEM TO ATTRACT THE HUGE PENALTY. RATIO OF THESE JUDGMENTS ARE SQUARELY APPLICABLE TO THE ASSESSEE UNDER CONSIDERATION. THE TOTAL TAX PAYABLE BY THE ASSESSE E ON ACCOUNT OF FBT PROVISIONS COMES AT RS.6432/- WHEREAS THE PENALTY I MPOSED ON THIS AMOUNT IS AT RS. 1,03,600/- WHICH IS HIGHLY DISPROP ORTIONATE. 4.2. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS ALSO PRIMARILY RELIED ON THE FINDINGS OF THE AO WHICH WE HAVE ALREADY NOT ED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 4.3. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF THE ASSESSEE, AS THE PROPOSITION CANVASSED BY LD. AR FOR THE ASSE SSEE ARE SUPPORTED BY ITA NO.690/14 M/S SONY JEWELLERS 5 THE JUDGMENTS CITED ABOVE. AS LD. AR FOR THE ASSESS EE HAS POINTED OUT THAT THE TOTAL TAX PAYABLE BY THE ASSESSEE ON ACCOU NT OF FBT PROVISIONS COMES AT RS.6432/- WHEREAS THE PENALTY IMPOSED ON T HIS AMOUNT IS AT RS. 1,03,600/- WHICH IS HIGHLY DISPROPORTIONATE, AND EV EN APPLYING A COMMON SENSE IT IS NOT ACCEPTABLE, AS THIS WAS THE FIRST Y EAR WHERE THE FBT PROVISIONS WERE APPLICABLE TO THE ASSESSEE THEREFOR E NATURALLY THERE WAS SOME SMALL IGNORANCE OF LAW ON THE PART OF THE ASSE SSEE. HOWEVER, IGNORANCE OF LAW IS NOT AN EXCUSE, BUT IN THIS CA SE VERY SMALL TAX AMOUNT IS INVOLVED ON WHICH THE ASSESSING OFFICER IMPOSED PENALTY AT RS.1,03,600/-. WE ARE OF THE VIEW THAT TAX PAYABLE UNDER CONSIDERATION BY THE ASSESSEE COMES AT RS.6432/- ON THE VALUE OF FRI NGE BENEFIT AT RS.13,584/- THEREFORE, CONSIDERING THE INSIGNIFICAN T AMOUNT THE HEAVY PENALTY SHOULD NOT BE IMPOSED. ACCORDINGLY WE DELET E THE PENALTY. 4.4. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22/0 2/2017. S D/ - (S.S.VISWANETHRA RAVI) S D/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 22/02/2017 ' $%& /PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-M/S SONY JEWELLERS 2. / THE RESPONDENT.- ITO WD. 39(3), KOLKATA 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//