ORIENTAL DECORATORS, MUMBAI V. ACIT RG 18(1), MUMBAI

ITA 7610/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2110 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMNATH UKKALDR
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Reasonable cause; Retraction
• Section: 133A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.7610/MUM/2013 ASSESSMENT YEAR: 2008-09 M/S. ORIENTAL DECORATORS, 4 NSE, BLDG. WORLI VILLAGE, WORLI MUMBAI -400025 / VS. ACIT - 18(1) 1 ST FLOOR, PIRAMAL CHAMBERS PAREL, MUMBAI -400012 (ASSESSEE) (REVENUE ) P.A. NO. AAAFO6914H !' / ASSESSEE BY SHRI H ARI S. RAHEJA (AR) / REVENUE BY SHRI SOMNATH UKKAL (DR) # $ % & / DATE OF HEARING : 4/11/2015 % & / DATE OF ORDER: 30/11/2015 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2 9, MUMBAI {(IN SHORT LD. CIT(A)} DATED 14.10.2013 FOR THE ORIENTAL DECORATORS 2 ASSESSMENT YEAR 2008-09, DECIDED AGAINST THE PENALT Y ORDER PASSED BY THE ASSESSING OFFICER (IN SHORT AO) U/S 271B OF THE ACT, ON THE FOLLOWING GROUNDS: 1.ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE L EVY OF PENALTY OF RS.1,00,000/- U/S.271B OF THE INCOME TAX ACT, 1961 ON THE GROUND OR GROUNDS AS CONTAINED IN THE APPELLANT ORDER OR OTHERWISE. 2. THE APPELLANT CRAVE LEAVES TO ADD, AMEND, ALTER, MODIFY AND OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2 . DURING THE COURSE OF HEARING SHRI HARI S. RAHEJA AUTHORISED REPRESENTATIVE (LD. COUNSEL) ON BEHALF O F THE ASSESSEE AND SHRI SOMNATH UKKAL, DEPARTMENTAL REPRESENTATIVE (LD DR) ON BEHALF OF THE REVENUE, AR GUED THE CASE. 3. THE ONLY ISSUE IN THIS APPEAL IS WITH REGARD TO LEV Y OF PENALTY U/S 271B. DURING THE COURSE OF HEARING, IT HAS BEEN ARGUED BY LD. COUNSEL OF THE ASSESSEE THAT THE ASSE SSEE HAS PASSED THROUGH HIGHLY ADVERSE AND TOUGH CIRCUMSTANC ES WHICH HAD LED TO DELAY IN TAX AUDIT AND FILING OF R ETURN. HE HAS FILED A FACT SHEET SHOWING CHRONOLOGY OF ALL THE EV IDENCES WHEREIN IT HAS BEEN MENTIONED THAT IN THIS CASE SUR VEY WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 19.09. 2008, WHEREAS DUE DATE OF RETURN WAS 30.09.2008 I.E. JUST 11 DAYS BEFORE DUE DATE OF FILING OF RETURN. VARIOUS COMPLI CATIONS TOOK ORIENTAL DECORATORS 3 PLACE AFTER THE DATE OF SURVEY AND ASSESSEE CAME IN TO PROBLEM AND THAT IS HOW DEFAULT TOOK PLACE. IT HAS BEEN SUB MITTED THAT THE REASONS WERE BEYOND THE CONTROL OF ASSESSEE. TH E ASSESSEE HAS OTHERWISE ALWAYS MADE COMPLIANCES IN TIME AS PE R LAW. THUS, THERE WAS REASONABLE CAUSE FOR THE DEFAULT, A ND THEREFORE, IN THESE CIRCUMSTANCES PENALTY SHOULD NO T HAVE BEEN LEVIED, AND THUS WRONGLY CONFIRMED BY THE LD. CIT(A). 3.1. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE ORDE RS OF THE LOWER AUTHORITIES. 3.2. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND SUBMISSIONS MADE BY BOTH THE SIDES BEFORE US, A S WELL AS MATERIAL PLACED BEFORE US FOR OUR CONSIDERATION. 3.3. BRIEF FACTS LEADING TO THE IMPOSITION OF PENALTY U NDER SECTION 271B ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING AN INCOM E OF RS.1,15,86,940/- AND THE ASSESSMENT IN THIS CASE WA S COMPLETED AT AN INCOME OF RS.1,41,00,120/-. THE AO NOTED THAT ASSESSEE HAD CARRIED OUT THE BUSINESS OF INTER IOR DECORATION AND IN THE PROFIT AND LOSS ACCOUNT FOR T HE YEAR UNDER CONSIDERATION HAD SHOWN TOTAL TURNOVER AT RS.6,70,71,450/- WHICH WAS MUCH ABOVE RS.40,00,000/ -. THEREFORE THE ASSESSEE WAS UNDER OBLIGATION TO GET HIS BOOKS OF ACCOUNTS AUDITED BY AN ACCOUNTANT AS PER PROVISI ONS OF SECTION 44AB BEFORE THE SPECIFIED DATED, WHICH IN T HIS CASE WAS 30.09.2008. ORIENTAL DECORATORS 4 3.4. FROM THE RETURN OF INCOME FILED, IT WAS OBSERVED B Y THE AO THAT ASSESSEE HAS NOT GOT HIS BOOKS OF ACCOUNTS AUDITED AS PER THE PROVISIONS OF SECTION 44AB BEFORE THE SPECI FIED DATE OF FILING OF THE RETURN OF INCOME I.E. 30.09.2008. ACC ORDINGLY THE AO ASKED THE ASSESSEE TO EXPLAIN THE REASONS FOR NO T GETTING THE BOOKS OF ACCOUNTS AUDITED. IN RESPONSE TO THE A BOVE, IT WAS STATED BY THE ASSESSEE THAT A SURVEY ACTION U/S 133A WAS CARRIED OUT AT THEIR BUSINESS PREMISES ON 19.09.200 8 AND AFTER THE SURVEY THE PART TIME ACCOUNTANT LEFT THE JOB LEAVING BEHIND THE ACCOUNTS TO BE FINALIZED. DUE TO THESE R EASONS, THERE WAS DELAY IN GETTING THE BOOKS OF ACCOUNTS AU DITED AND THIS WAS A REASONABLE CAUSE IN TERMS OF SECTION 273 B R.W.S. 271B. 3.5. THE AO DID NOT ACCEPT THE ABOVE ARGUMENTS OF THE ASSESSEE AND CONTENDED THAT THE SURVEY ACTION HAD T AKEN PLACE AT THE PREMISES OF THE ASSESSEE ON 19.09.2008 AND BEFORE THAT PERIOD THE ASSESSEE HAD SUFFICIENT TIME TO GET HIS ACCOUNTS AUDITED U/S. 44AB AND SUBMIT THE SAME IN T IME, WHICH THE ASSESSEE FAILED TO DO AND THEREFORE THE A SSESSEE COMMITTED THE DEFAULT WITHIN THE MEANING OF SECTION 44AB AND LIABLE FOR PENALTY U/S 271B OF THE I.T. ACT 1961. O N THE BASIS OF THE ABOVE ARGUMENTS, THE AO IMPOSED A PENALTY OF RS.1,00,000/- ON THE ASSESSEE U/S 271B FOR THE YEAR UNDER CONSIDERATION. 3.6. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), BUT NO RELIEF WAS GIVEN AND PENALTY IMPOSED BY THE AO WAS CONFIRMED ORIENTAL DECORATORS 5 ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO SH OW REASONABLE CAUSE FOR THE DEFAULT. 3.7. BEFORE US, LD. COUNSEL HAS SUBMITTED A FACT SHEET WHICH CLARIFIES THE SITUATION OF THE ASSESSEE. FOR THE SA KE OF READY REFERENCE, WE FIND IT APPROPRIATE TO REPRODUCE THES E FACTS, CONTAINING CHRONOLOGY OF EVIDENCE AND ADVERSE CIRCU MSTANCES FACED BY THE ASSESSEE: 1. RETURN DUE ON 30/09/2008 2. RETURN FILED ON 30/09/2009 3. SURVEY CONDUCTED ON 19/09/2008 4. PENALTY U/S 271B LEVIED FOR NOT CARRYING AUDIT IN T IME. 5. BUSINESS OF ASSESSEE IS INTERIOR DECORATION 6. INCOME AS PER PROFIT AND LOSS ACCOUNT RS. 5,837/- 7. DISALLOWANCE MADE SUO MOTO FOR RS. 1,42,93,783/- 8. MAJOR DISALLOWANCE MADE U/S 40(A)(IA) RS.1,26,03,91 4/- 9. STATEMENT RECORDED IN SURVEY MAKING A DECLARATION O F RS. 1,20,00,000/- 10. COMPLAINT FILED WITH CHIEF COMMISSIONER ON 29/09/2008 FOR HARASSMENT AND UNDUE PRESSUR E WHILE RECORDING THE STATEMENT. 11. POST DATED CHEQUES OBTAINED FORCIBLY FOR PAYMENT OF TAX ON INCOME DISCLOSED IN THE STATEMENT. 12. RETRACTION FILED ON 16/10/2008 13. WRIT PETITION FILED IN HIGH COURT 14. REPLY RECEIVED FROM CBDT ON 03/11/2008 15. WRIT WITHDRAWN IN VIEW OF ASSURANCE FROM CBDT 16. FOLLOW UP WITH COT 10/01/2009 AND 14/01/2009 . 17. PART TIME ACCOUNTANT RESIGNS AFTER SURVEY 18. TAX CONSULTANT CHANGED AFTER SURVEY 19. NEW AUDITOR APPOINTED IN DECEMBER 2008 ORIENTAL DECORATORS 6 20. ACCOUNTS COMPLETED AFTER SUOMOTO DISALLOWING U/ S 40(A)(IA) RS. 1,26,03,914/- AS TDS WAS NOT PAID. 21. MISTAKE OF ACCOUNTANT FOR NOT HAVING DEDUCTED T AX AND PAID HENCE HE RESIGNED. 22. JUSTIFIED AND REASONABLE CAUSE FOR NOT GETTING THE ACCOUNTS AUDITED IN TIME. 23. ADDITION MADE IN ASSESSMENT RELATE TO FURTHER DISALLOWANCE U/S 40(A)(IA)AND DISALLOWANCE OUT OF E XPENSES. 24. PRAY THERE WAS JUSTIFIED, SUFFICIENT AND REASON ABLE CAUSE SINCE THE MENTAL STATE OF THE PARTNER AFTER THE SUR VEY WAS DISTURBED FOR A FEW MONTHS AND THE RESIGNATION OF T HE ACCOUNTANT COUPLED WITH CHANGE OF AUDITOR AND HEAVY INCOME TAX LIABILITY FOR NON DEDUCTION OF TAX AT SOURCE LE ADING TO DISALLOWANCE OF RS.1,26,03,914/- U/S 40(A)(I) . 3.8. IN ADDITION TO ABOVE, OUR ATTENTION HAS BEEN DRAWN TO THE CIRCULAR ISSUED BY THE CBDT DATED 03.11.2008 WHEREI N DIRECTION WAS GIVEN TO CONCERNED CIT TO TAKE APPROP RIATE ACTION TO RESOLVE THE COMPLAINT FILED BY THE ASSESS EE. WE HAVE CONSIDERED ALL THE FACTS AND CIRCUMSTANCES OF THE C ASE AND WE ARE OF THE VIEW THAT THE ASSESSEE PASSED THROUGH VA RIOUS ADVERSE CIRCUMSTANCES DUE TO WHICH UNINTENTIONAL LA PSE TOOK PLACE ON THE PART OF THE ASSESSEE IN GETTING THE BO OKS OF ACCOUNTS AUDITED AS PER THE PROVISIONS OF SECTION 4 4AB WITHIN THE SPECIFIED TIME LIMIT. IT IS FURTHER NOTED THAT NOTHING HAS BEEN BROUGHT BEFORE US BY THE LD. DR, INDICATING IF ANY SUCH DEFAULT HAS BEEN DONE BY THE ASSESSEE IN PAST YEARS . WE FIND THAT THE DELAY ON THE PART OF THE ASSESSEE IN THIS YEAR WAS BECAUSE OF THE VARIOUS ADVERSE CIRCUMSTANCES AS HAV E BEEN NARRATED ABOVE. WE FIND THAT THESE REASONS CONSTITU TE A ORIENTAL DECORATORS 7 REASONABLE CAUSE AS ENVISAGED U/S 273B, AND THERE FORE, ASSESSEE SHOULD NOT BE MADE LIABLE FOR LEVY OF PENA LTY U/S 271B. THE PENALTY OF RS. 1,00,000/- IMPOSED BY THE AO IS HEREBY DELETED. 4 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2015. SD/- (JOGINDER SINGH) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER # $ MUMBAI; ( DATED ; 30/11/2015 CTX? P.S/. .. %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0 ( * ) / THE CIT, MUMBAI. 4. / / # 0 / CIT(A)- , MUMBAI 5. 34 - , / *& 5 , # $ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. / BY ORDER, .3* - //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI