Dinesh Sharma, Gurdaspur V. The Income Tax Officer, Gurdaspur

ITA 73/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5733 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-02-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: J P BHATIA LD
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUN AL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.73(ASR)/2017 ASSESSMENT YEAR:2007- 08 DINESH SHARMA HOUSE NO.256/6 IMPROVEMENT TRUST COLONY JAIL ROAD, GURDASPUR PAN:ADQPS2692P VS. INCOME TAX OFFICER GURDASPUR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.P.BHATIA (LD. ADV.) RESPONDENT BY: SH. RAHUL DHAWAN (LD. DR) DATE OF HEARING: 07.02.2018 DATE OF PRONOUNCEMENT: 26.02.2018 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE/APPELLANT, ON FEELING AGGRIEVED AGAINST THE ORD ER DATED 29 TH DECEMBER, 2016 PASSED BY THE LD. CIT(A)-2, AMRITSAR, IN APPEAL NO.252/2013-14, BY WHICH THE LD. CIT(A) CONFIR MED THE PENALTY ORDER PASSED U/S 271A OF THE I.T. ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I I, AMRITSAR HAS GROSSLY ERRED IN UPHOLDING PENALTY OF RS.25,000 /- IMPOSED BY THE AO U/S.271A ON THE BASIS OF ALLEGED DEFAULT U/S.44AA. ITA NO.73/ASR/2017 (A.Y.2007-08) DINESH SHA RMA VS. ITO 2 THE PENALTY IMPOSED AND UPHELD IS UNJUST, UNLAWFUL, ILLEGAL AND HIGHLY EXCESSIVE. 2. THAT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE HA VE NOT BEEN PROPERLY CONSIDERED AND THE PENALTY U/S.271A WAS WR ONGLY IMPOSED AND THE SAME HAS BEEN WRONGLY UPHELD. 3. THAT THE OBSERVATIONS MADE ARE AGAINST FACTS AND AR E BASED ON SURMISES & CONJECTURES AND DO NOT AFFORD LEGAL JUST IFICATION TO THE IMPOSITION OF PENALTY. IN ANY CASE, THE ALLEGED VIOLATION OF SECTION 44AA IS BASED ON SURMISES & CONJECTURES AND THE PENALTY HAS BEEN WRONGLY IMPOSED. 4. THAT THE APPELLANT WAS NOT CARRYING ON ANY BUSINESS OR PROFESSION AND, THEREFORE, THE PROVISIONS OF SECTIO N 44AA WERE NOT APPLICABLE TO HIM. IN ANY CASE, THE INCOME DECL ARED WAS LESS THAN RS.1,20,000/- AND THE GROSS RECEIPTS WERE NOT FROM ANY BUSINESS AND THE APPELLANT WAS NOT LEGALLY REQUIRED TO MAINTAIN THE BOOKS OF ACCOUNT. 5. THAT IN ANY CASE, THE TOTAL INCOME DECLARED WAS MO RE THAN 5% OF THE GROSS RECEIPTS AND, THEREFORE, THE APPELLANT WAS NOT UNDER ANY LEGAL OBLIGATION TO MAINTAIN THE BOOKS OF ACCOU NT. THAT IN ANY CASE, THE APPELLANT WAS UNDER THE BONAFIDE IMPR ESSION THAT THE DECLARED INCOME BEING MORE THAN 5% OF THE GROSS RECEIPTS, THE PROVISIONS OF SECTION 44AA WERE NOT APPLICABLE IN HIS CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CARRIED ON BUSINESS OF SHAWLS EMBROIDERED BELONGING TO M/ S AGRAWAL TEXTILES, GURDASPUR AND RECEIVED PAYMENT OF RS.11,46,805/- FROM THE SAID FIRM, THEREFORE, GROSS RECE IPTS OF THE ASSESSEE DURING THE FINANCIAL YEAR (F.Y.) 2006-07 RE LEVANT TO THE AST.YEAR:2007-08 EXCEEDED RS.10 LACS, AS PER SEC.44AA OF THE I.T. ACT, THE ASSESSEE WAS REQUIRED TO KEEP AND MAINT AIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE THE ASSESSING OFFICER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WI TH THE PROVISION OF THE I.T. ACT. BUT DURING THE COURSE O F ITA NO.73/ASR/2017 (A.Y.2007-08) DINESH SHA RMA VS. ITO 3 ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE HAS NOT KEPT AND MAINTAINED ANY BOOKS OF ACCOUNT AND OTHER DO CUMENTS IN RESPECT OF HIS AFORESAID BUSINESS, THEREFORE, THE ASSE SSED INCOME OF THE ASSESSEE WAS FRAMED AT RS.4,27,080/-, HOWEVE R, THE SAME WAS RESTRICTED TO RS.3 LACS BY THE LD. CIT(A), AM RITSAR ON APPEAL, AND SUBSEQUENTLY THE PENALTY PROCEEDINGS HA VE ALSO BEEN INITIATED. IN THE PENALTY PROCEEDINGS, IT WAS SUBM ITTED BY THE ASSESSEE THAT ADDITION HAS BEEN CONFIRMED ON THE ESTI MATE BASIS AND THE ASSESSEE WAS NOT CARRYING ON ANY BUSINESS AND IT WAS MERELY DOING JOB WORK OF EMBROIDERY OF SHAWLS, BY COLLECTING SHAWLS FROM LUDHIANA AND GAVE THE SAME TO P OOR LADIES OF VARIOUS VILLAGES NEAR GURDASPUR AND EARNED IN COME THROUGH EMBROIDERY CHARGES FROM SUCH JOB WORK AND HIS INCOME WAS VERY SMALL, THEREFORE, IT WAS NOT POSSIBLE FOR HIM TO KEEP BOOKS OF ACCOUNT. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IMPOSED A PENALTY OF RS.25,000/- U/S 271A OF THE I.T. ACT WHICH WAS CHALLENGED BY THE ASSE SSEE BY FILING APPEAL BEFORE THE LD. CIT(A). THE LD. CIT (A) CONFIRMED THE IMPOSITION OF PENALTY OF RS.25,000/- U/S.271A OF THE ACT. 4. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE LD . CIT(A), THE ASSESSEE PREFERRED THE INSTANT APPEAL AND IN SUPPORT OF ITS CASE SUBMITTED THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS BUT IN FACT HIS WORK WAS TO COLLECT SHAWLS FROM LUDH IANA AND TO GIVE THE SAME TO THE POOR LADIES OF VILLAGES N EAR GURDASPUR AND EARNED INCOME THROUGH EMBROIDERY CHARGES FROM ITA NO.73/ASR/2017 (A.Y.2007-08) DINESH SHA RMA VS. ITO 4 SUCH JOB WORK, THEREFORE, THE ASSESSEE CANNOT BE HELD AS DO ING PROFESSION OR BUSINESS, BUT HE WAS SIMPLY A CARRIER/MIDDLE MAN BETWEEN THE OWNER OF THE SHAWLS AND THE LADIES OF VILL AGES INVOLVED IN THE EMBROIDERY. IT WAS FURTHER SUBMITTED THAT NO SALE OR PURCHASE WAS INVOLVED, THEREFORE, ALSO THE ASSESSEE WAS N OT CARRYING ANY BUSINESS THERETO. THE ASSESSEE HAS ALSO RELIED ON JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. SAINI MEDICAL STORE, REPORTED AT 267 ITR 79 ( P&H). 5. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDE R PASSED BY THE AUTHORITIES BELOW. 6. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS RIVAL SUBMISSIONS OF THE PARTIES. FRO M THE SIMPLE READING OF SEC.44AA (2) THE RELEVANT PROVISION IS APPLICABLE TO THE PERSON CARRYING ON BUSINESS OR PROFESSION AND MANDATES TO MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE TO ASSESSING OFFICER IN ORDER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT. IN THE INSTANT CASE, THE LD. AR SUBMITTED THAT THE ASSE SSEE WAS UNDER BONAFIDE BELIEF THAT HE HAS NOT CARRYING ANY BUSINESS, THEREFORE, NOT MAINTAINED ANY BOOKS OF ACCOUNT OR OTHE R DOCUMENTS AS HE IS SIMPLICITOR AN AGENT AND/OR CARRIER B ETWEEN THE SHAWLS OWNER AND WORKERS INVOLVED IN THE EMBROIDE RY, THEREFORE, WAS NOT CARRYING ON ANY BUSINESS, AND HENCE, NOT COVERED BY SEC.44AA BECAUSE THE APPELLANT WAS DOING ONLY JOB ITA NO.73/ASR/2017 (A.Y.2007-08) DINESH SHA RMA VS. ITO 5 WORK, AS HE USED TO BRING PLAIN SHAWLS FROM SHAWL MERCHAN TS FOR JOB WORK OF EMBROIDERY AND RETURNED THE SHAWLS TO TH EM WHILE RECEIVING HIS LABOUR CHARGES. THERE WAS NEITHER ANY PURCH ASE NOR ANY SALE, THEREFORE, THE SAME CANNOT BE TERMED AS BUSIN ESS. ALTERNATIVELY, IT WAS ALSO CLAIMED BY THE APPELLANT TH AT HE WAS UNDER BONAFIDE IMPRESSION THAT HE WAS NOT DOING ANY BU SINESS, THEREFORE, SEC.44AA WAS NOT APPLICABLE. IT WAS ALSO EARN ESTLY SUBMITTED THAT THERE WAS NO INTENTION TO AVOID OR EVA DE THE TAX. WE MUST REMIND OURSELVES WHILE DEALING WITH THE ISSUE O F BONAFIDE BELIEF, THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA, REPORTED A T 1970 AIR 253(SC) OBSERVED THAT, IT IS CLEAR THAT AN ORDER IMPOSING PENA LTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF QUASI CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION AND THE PENALT Y WILL NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. FURTHER THE APEX COURT OBSERVED THAT EVEN IF PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUS TIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIAB LE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. EVEN OTHERWISE THE JU DGMENT OF HONBLE HIGH COURT IN THE CASE OF CIT VS. SAINI MEDICAL STORE ITA NO.73/ASR/2017 (A.Y.2007-08) DINESH SHA RMA VS. ITO 6 (SUPRA) WHILE DEALING WITH ISSUE QUA BONAFIDE BELIEF H ELD AS UNDER A COMBINED READING OF THE PROVISIONS OF SECTIONS 2 71D AND 273B OF THE INCOME-TAX ACT, 1961, MAKES IT CLEAR TH AT IF THE ASSESSEE SHOWS REASONABLE CAUSE FOR THE FAILURE TO COMPLY WITH ANY PROVISION REFERRED TO THEREIN, THE PENALTY FOR ITS VIOLATION SHALL NOT BE IMPOSABLE ON THE ASSESSEE. HELD , THAT' IN PRESENT CASE THE COMMISSIONER (APPEALS) IN HIS ORDER DATED JUNUARY 18, 1999, WHEREBY THE PE NALTY U/S.271D OF THE ACT WAS DELETED, HAD ACCEPTED THE VERSION GIVEN BY THE ASSESSEE THAT VIOLATION OF THE PROVISI ONS OF THE ACT WAS UNDER A BONAFIDE BELIEF OF THE ASSESSEE AND THE SAME WAS NOT WITH ANY INTENTION TO AVOID OR EVADE THE TAX. T HE FINDINGS OF THE COMMISSIONER (APPEALS) HAD BEEN CONFIRMED IN AP PEAL BY THE TRIBUNAL. THE CANCELLATION OF THE PENALTY WAS V ALID. WHILE COMING TO THE INSTANT CASE AS THE ASSESSEE IS ILLITERATE PERSON HAVING SMALL WORK TO DO SEEMS TO BE U NDER BONAFIDE BELIEF FOR NOT MAINTAINING THE BOOKS OF ACCOU NT AS THE ASSESSEE HAS ENCOUNTERED THE SAID SITUATION FIRST TIME, THE REFORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES AND ALSO CONSIDERING THE JUDGMENTS (SUPRA) PASSED BY THE HONBLE APEX COURT AND THE HONBLE PUNJAB & HARYANA HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT IN THE INSTANT CASE THE VIOLATI ON OF THE PROVISIONS OF THE ACT WAS NEITHER DISHONEST NOR INTENTIO NAL TO AVOID OR TO EVADE THE TAX BUT BECAUSE OF THE BONAFIDE BELIEF THAT HE IS NOT CARRYING ANY BUSINESS, AND HENCE, WE ARE SATISFI ED THAT BONAFIDE BELIEF OF THE ASSESSEE WAS QUITE REASONABLE WHICH ABSOLVED HIM FROM THE LIABILITY OF THE PENALTY. HENCE , THE APPEAL OF THE ASSESSEE STANDS ALLOWED AND THE PENALTY IMPOSED U/S ITA NO.73/ASR/2017 (A.Y.2007-08) DINESH SHA RMA VS. ITO 7 271A OF THE ACT BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A)-2 AMRITSAR STANDS DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.02.2018. SD/- SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED:26.02.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) DINESH SHARMA, GURDASPUR (2) THE INCOME TAX OFFICER, GURDASPUR (3) THE CIT(A)-2, AMRITSAR (4) THE CIT CONCERNED. (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER