SORABH MURARILAL GUPTA, MUMBAI V. ITO (IT) 3(1), MUMBAI

ITA 8/MUM/2013

• Counselvise Citation: 819914 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 22-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 01-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: VIMAL PUNMIYA
• Keywords: Reasonable cause; Competent authority
• Section: 273B; 143(3)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.08 /MUM/2013 (A.Y. 2008-09) SHRI SORABH MURARILAL GUPTA, 702, RUSTOMJEE, O-ZONE, TOWER-6, LAXMI SINGH COMPLEX, GOREGAON MULUND LINK ROAD, GOREGAON (WEST), MUMBAI 400 062 PAN: AABPG 4966C THE ITO (INTERNATIONAL TAXATION) 3(1), MUMBAI. ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY :SHRI VIMAL PUNMIYA ()$% * + * + * + * + /RESPONDENT BY : SHRI NEIL PHILIP ' * ,-' / / / / DATE OF HEARING : 22.09.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 22.09.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST ORDER PASSED BY LD. CIT(A)-10, MUMBAI DATED 30/10/2012 FOR ASSES SMENT YEAR 2008-09. GROUNDS OF APPEAL READ AS UNDER: 1. THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING THE PENALTY OF RS.67,200/- LEVIED UNDER SECTION 271B OF THE INCOM E TAX ACT, 1961. 2. THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING THE FACTS AND DISREGARDING THE AUDIT REPORT U/S. 44AB OF THE ACT AND ALSO THE AFFIDAVIT FILED WITH HIM. 2. THE ASSESSEE IS AN INDIVIDUAL AND HAS BEEN ASSES SED AS NON RESIDENT INDIAN VIDE ASSESSMENT ORDER DATED 13/12/2010 PASSE D UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961(THE ACT), WHEREIN RETURN ED INCOME OF RS.4,60,480/- HAS BEEN ASSESSED AT A SUM OF RS.5,50,666/- BY MAKI NG AN ADDITION OF RS.90,186/- ON ACCOUNT OF DIFFERENCE IN INTEREST. THE ASSESSEE HAD PAID INTEREST TO M/S.MUKHTA STEEL & FAB. PVT. LTD. @ 15% AND AO R ESTRICTED THE SAME TO 12%. ITA NO.08 /MUM/2013 (A.Y. 2008-09) 2 IT IS THEREFORE, AN ADDITION OF RS.90,186/- WAS MAD E ON ACCOUNT OF DIFFERENCE IN THE RATE OF INTEREST. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE TRANSACTION OF THE ASSESSEE OF SALE AND PURCHASE O F SHARES EXCEEDED RS.40.00 LACS, THEREFORE, THE ASSESSEE WAS UNDER AN OBLIGAT ION TO GET HIS ACCOUNTS AUDITED AND SINCE NO AUDIT REPORT WAS FILED EITHER ALONG WITH THE RETURN OF INCOME OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS, PROCE EDINGS UNDER SECTION 271B OF THE ACT WERE INITIATED FOR THE DEFAULT DESCRIBED I N SECTION 44AB ACCORDING TO WHICH IN CASE THE TURNOVER EXCEED RS.40.00 LACS, TH EN THE ASSESSEE WOULD BE UNDER AN OBLIGATION TO OBTAIN AUDIT REPORT AND FILE THE SAME ALONGWITH RETURN OF INCOME. 3.1 IN RESPONSE TO NOTICE ISSUED FOR SHOW CAUSE AGA INST LEVY OF PENALTY THE ASSESSEE HAD SUBMITTED A LETTER DATED 15/1/2011 WHI CH HAS BEEN REPRODUCED IN THE IMPUGNED PENALTY ORDER PASSED BY THE AO. IT W AS SUBMITTED THAT ASSESSEE IS NON-RESIDENT AND REMAINS OUTSIDE INDIA MOST OF THE TIME. HE HAS EXECUTED A POWER OF ATTORNEY IN FAVOUR OF HIS FATHER, WHO RES IDES IN MUMBAI. HOWEVER, AS THE ASSESSEE WAS CONTACTABLE AT THE TIME OF HEARING , THE A.R OF THE ASSESSEE REQUIRED THE ASSESSEE TO STATE THAT WHETHER AUDIT OF THE ACCOUNTS WAS DONE AND WHETHER THE REPORT IS AVAILABLE. THE ASSESSEE BEIN G UNAWARE OF THE FACTUAL POSITION TOLD A.R THAT THE SAME IS NOT AVAILABLE. LATER ON IT WAS NOTICED THAT THE FATHER OF THE ASSESSEE HAD OBTAINED THE AUDIT REPOR T UNDER SECTION 44AB FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS NOT AWA RE OF THIS FACT AND AS A RESULT HE COMMUNICATED TO THE A.R THAT AUDIT REPORT IS N OT AVAILABLE AND BASED UPON THAT FACT A.R DURING THE COURSE OF ASSESSMENT PROCE EDINGS SUBMITTED THAT THE AUDIT REPORT IS NOT AVAILABLE. UPON RECEIVING THE NOTICE FOR LEVY OF PENALTY THE FATHER OF THE ASSESSEE REVERTED WITH REGARD TO AVAI LABILITY OF AUDIT REPORT TO THE A.R AND TOLD HIM THAT AUDIT REPORT WAS OBTAINED ON TIME . THUS, IT WAS SUBMITTED THAT FATHER OF THE ASSESSEE WHO IS POWER OF ATTORNEY HO LDER HAD OBTAINED THE REPORT IN TIME, COPY OF WHICH IS ATTACHED AND IT IS ONLY DUE TO MISCOMMUNICATION ON THE PART OF THE ASSESSEE, IT WAS COMMUNICATED TO THE A .O THAT AUDIT REPORT IS NOT AVAILABLE WHICH IS CONTRARY TO THE FACTUAL POSITION . THUS, IT WAS PLEADED IN THE LATTER THAT NO PENALTY SHOULD BE IMPOSED. THE AO R EJECTED SUCH SUBMISSION OF THE ASSESSEE FOR THE REASONS THAT THE ASSESSEE IS REPR ESENTED AND GUIDED IN HIS TAX ITA NO.08 /MUM/2013 (A.Y. 2008-09) 3 MATTER BY QUALIFIED CHARTERED ACCOUNTANTS; WHEN TH E SHARES WERE CONVERTED INTO STOCK-IN-TRADE FROM APRIL 2007 AND THE TRADING RESU LT EXCEEDED THE LIMITS AS PRESCRIBED UNDER SECTION 44AB, THE REPRESENTATIVE OUGHT TO HAVE INSISTED UPON THE TAX AUDIT REPORT EVEN AT THE TIME OF PREPARATIO N OF THE RETURN IN THE ASSESSEES CASE, IT IS ONLY WHEN THE A.O POINTED OUT THAT THE SHARES WERE CONVERTED INTO STOCK-IN-TRADE BY THE ASSESSEE AND THE TURN OVER EX CEEDED THE PRESCRIBED LIMIT AT THAT TIME ASSESSEE BECOME AWARE OF THE REQUIREMENT OF TAX AUDIT REPORT. THUS, THE AO OBSERVED THAT THE CONTENTION OF THE REPRESENTATI VE CANNOT BE ACCEPTED THAT HE HAS ALREADY GOT HIS TAX AUDIT REPORT BY 30/7/200 8 AS THE AO HAD ALREADY CALLED FOR SUCH REPORT DURING THE ASSESSMENT PROCEEDINGS WHICH WERE NOT FURNISHED AND THE EXPLANATION OFFERED NOW IS ONLY AN AFTER THOU GHT. THE A.O OBSERVED THAT THE EXPLANATION OF THE ASSESSEE AND SUBMISSION GIVEN IN RESPONSE TO NOTICE ARE TOTALLY DIFFERENT AND CONTRADICTORY TO THE ACTUAL F ACTS OF THE CASE AND IT IS MANDATORY ON THE PART OF THE ASSESSEE TO FILE SUCH AUDIT REPORT AS THE TURNOVER OF THE ASSESSEE EXCEEDED RS.40.00 LACS WHICH WAS A S UM OF RS.1,34,39,633/-. CALCULATING HALF PERCENT OF THE SAID TURNOVER, THE AO IMPOSED PENALTY OF RS.67,198/- AND ROUNDED UP THE SAME TO RS.67,200/- . 4. AN APPEAL WAS FILED BEFORE LD. CIT(A). THE SUBM ISSION MADE BEFORE A.O. WERE REITERATED. HOWEVER, LD. CIT(A) UPHELD THE A CTION OF A.O BY HOLDING THAT HE HAS NOT BEEN CONVINCED WITH THE ASSESSEES REASON FOR NOT FURNISHING THE TAX AUDIT REPORT AT THE TIME OF ORIGINAL PROCEEDINGS. THE ADMISSION BY THE ASSESSEE BEFORE THE AO IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THAT THE TAX AUDIT REPORT WAS NOT OBTAINED APPEARS TO BE CORRECT. T HE TAX AUDIT REPORT FURNISHED IN THE PENALTY PROCEEDINGS DOES NOT APPEAR TO BE CORRE CT AND IS HENCE REJECTED. THEREFORE, LD. CIT(A) HAS HELD THAT HE IS CONVINCE D THAT THERE WAS NO REASONABLE CAUSE WITH THE ASSESSEE TO FURNISH TAX AUDIT REPOR T AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. BY NOT FILING THE SAME DUR ING THE ASSESSMENT PROCEEDINGS AND LATER SUBMISSION OF THE AUDIT REPOR T DURING THE PENALTY PROCEEDINGS, THE ASSESSEE HAS DEFEATED THE ENTIRE P URPOSE OF SECTION 44AB OF THE ACT. IN THIS MANNER, LD. CIT(A) HAS UPHELD THE LEV Y OF PENALTY. THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 5. LD. AR OF THE ASSESSEE REITERATED THE SUBMISSIO NS MADE BEFORE A.O AND LD. CIT(A), WHICH HAVE BEEN DISCUSSED IN DETAILS IN THE ABOVE PART OF THIS ORDER. HE ITA NO.08 /MUM/2013 (A.Y. 2008-09) 4 SUBMITTED THAT ALONGWITH SUBMISSIONS MADE BEFORE AO AN AFFIDAVIT WAS ALSO FILED BY THE ASSESSEE, COPY OF WHICH IS PLACED AT PAGES 1 6 TO 17 OF THE PAPER BOOK. HE SUBMITTED THAT COPY OF AUDIT REPORT WHICH WAS OBTA INED ON 30/7/2008 IS ALSO FILED AT PAGES 4 TO 15 OF THE PAPER BOOK. HE FUR THER SUBMITTED THAT AO WAS WRONG IN HOLDING THAT THE SUBMISSION OF AUDIT REPOR T DURING THE COURSE OF PENALTY PROCEEDINGS WAS AN AFTER THOUGHT. HE SUBMITTED THA T LD. CIT(A) IS ALSO WRONG IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THAT T HE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE FOR NOT FURNISHING THE AUDIT REPOR T ALONGWITH THE RETURN OF INCOME AS WELL AS DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. HE SUBMITTED THAT ALL THE FACTS AND CIRCUMSTANCES WERE NOT ONLY EXPLAINED IN THE REPLY BUT THE SAME WERE ALSO SUPPORTED BY AN AFFIDAVIT FILED BY T HE ASSESSEE. IN ABSENCE OF ANY CONTRARY FACTS HAVING BEEN BROUGHT ON RECORD, IT WI LL BE INCORRECT ON THE PART OF THE REVENUE TO ASSUME THAT THE FACTS SUBMITTED BY THE ASSESSEE ALONGWITH COPY OF AUDIT REPORT WERE AN AFTER THOUGHT. LD. AR ALSO RELIED UPON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ASHOKA DAIRY (2005) 149 TAXMAN 732 (PUNJ. & HAR), WHEREIN AUDIT REPORT WAS FILED WITH A DELAY OF ONE MONTH AND TWENTY EIGHT DAYS FROM THE SPECIFIED DATE AND EXPLAINING THE DELAY IT WAS SUBMITTED THAT THE DELAY WAS ON ACCOUNT OF PAR TNERS BEING NOT WELL EDUCATED AND ACCOUNTANT HAD LEFT THE JOB AND CHARTERED ACCOU NTANT DELAYED PREPARATION OF AUDIT REPORT AND THIS WAS ACCEPTED AS REASONABLE A ND SUFFICIENT CAUSE FOR NON- LEVY OF PENALTY. LD. AR ALSO RELIED UPON THE DECIS ION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. TEA KING (2002) 123 TA XMAN 162 (GUJ), WHEREIN IT WAS HELD THAT ACCORDING TO SECTION 273B NO PENALTY SHAL L BE IMPOSED ON THE PERSON OR THE ASSESSEE FOR ANY FAILURE AS REFERRED TO IN THE SAID SECTION IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. L D. AR ALSO RELIED UPON THE DECISION IN THE CASE OF MOHAN TRADING CO. VS. UOI (1985) 156 ITR 134 AND CIT VS. RAMAKRISHNA STORES (2002) 253 ITR 175 (CAL) TO CONT END THAT IMPOSITION OF PENALTY UNDER SECTION 271B OF THE ACT IS NOT AUTOMA TIC AND IN AN APPROPRIATE CASE, THE COMPETENT AUTHORITY, ON BEING SATISFIED W ITH THE EXPLANATION GIVEN BY THE ASSESSEE, IS FREE NOT TO IMPOSE PENALTY. 5.1 LD. AR ALSO RELIED UPON THE FOLLOWING DECISIONS TO CONTEND THAT IF THE ASSESSEE HAS SUBMITTED REASONABLE CAUSE THEN NO PE NALTY SHOULD BE IMPOSED. (I) ADDL. CIT VS. I.M.PATEL & CO. (1977) 107 ITR 2 14 (GUJ)(FB) ITA NO.08 /MUM/2013 (A.Y. 2008-09) 5 (II) ITO V. KAYSONS INDIA (200) 246 ITR 489 (PUJ & HAR) (III)ITO V. NANAK SINGH GULANI (2002) 257 ITR 677 (IV) CITVS. CAPITAL ELECTRONICS (2003) 261 ITR 4 (C AL) 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY THE A.O AND LD. CIT(A). HE SUBMITTED THAT THE SUBMISSION OF AUDIT REPORT DURING THE COURSE OF PENALTY PROCEEDINGS WAS AN AFTER THOUGHT. THE S UBMISSION OF THE AUDIT REPORT DURING THE COURSE OF PENALTY PROCEEDINGS CANNOT ABS OLVE THE ASSESSEE FROM LEVY OF PENALTY AS ASSESSEE HAD FAILED TO SUBMIT THE SAID AUDIT REPORT FIRSTLY ALONGWITH THE RETURN AND THEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE TURNOVER OF THE ASSESSEE EXCEEDED THE PRESCRIBED LIMIT. THE REFORE, THERE WAS A DEFAULT COMMITTED UNDER SECTION 44AB FOR WHICH THE PENALTY IS PRESCRIBED UNDER SECTION 271B OF THE ACT. THEREFORE, LD. DR PLEADED THAT PE NALTY HAS RIGHTLY BEEN CONFIRMED BY LD. CIT(A) AND HIS ORDER SHOULD BE UPH ELD. 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. ACCORDING TO EXPLANATION SUBMITTED IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE BEING A NON-RESIDENT HAD ENTRUSTED THE TASK OF LOOKING AFTER HIS TAX MATTERS TO HIS FATHER TO WHOM POWER O F ATTORNEY WAS GIVEN. IT IS FURTHER EXPLAINED THAT ASSESSEE BEING NON-RESIDEN T MOSTLY REMAINS OUTSIDE INDIA AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS HE WAS AVAILABLE FOR COMMUNICATION WITH HIS A.R, WHO DURING THE COURSE O F ASSESSMENT PROCEEDINGS ASKED HIM TO TELL THAT WHETHER OR NOT AUDIT REPO RT HAS BEEN OBTAINED. THE ASSESSEE, IN ABSENCE OF KNOWLEDGE REPLIED TO THE A.R THAT IT WAS NOT AVAILABLE. BASED ON THAT, A.R SUBMITTED BEFORE THE AO THAT THE AUDIT REPORT WAS NOT AVAILABLE. IN THESE CIRCUMSTANCES THE ASSESSMENT W AS COMPLETED IN ABSENCE OF AUDIT REPORT. IT HAS ALREADY BEEN MENTIONED THAT N ON-SUBMISSION OF THE AUDIT REPORT HAS NOT CONTRIBUTED TO ANY ADDITION WHICH I S MADE IN THE ASSESSMENT ORDER. DURING THE COURSE OF PENALTY PROCEEDINGS C OPY OF AUDIT REPORT WAS SUBMITTED ALONG WITH EXPLANATION WHICH HAS BEEN DIS CUSSED IN DETAILS IN THE ABOVE PART OF THIS ORDER. ACCORDING TO WELL ESTAB LISHED LAW PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROC EEDINGS AND IT IS WITHIN THE RIGHT OF THE ASSESSEE TO TAKE FRESH PLEA TO SUBSTA NTIATE THE SAME IN THE PENALTY PROCEEDINGS. THE ASSESSEE SUBMITTED AN EXPLANATIO N AND ALSO SUBMITTED AN AFFIDAVIT SUPPORTING THE CONTENTIONS ALONGWITH COPY OF AUDIT REPORT. IN SUCH A ITA NO.08 /MUM/2013 (A.Y. 2008-09) 6 CIRCUMSTANCES, THE EXPLANATION OF THE ASSESSEE WAS EITHER REQUIRED TO BE VERIFIED OR TO BE ADMITTED AND IN THE ABSENCE OF ANY CONTRA RY MATERIAL THE EXPLANATION OF THE ASSESSEE COULD NOT BE DISBELIEVED MERELY BY SAY ING THAT THE SAME IS AN AFTER THOUGHT. THEREFORE, IN OUR OPINION, IN ABSENCE AN Y MATERIAL BEING BROUGHT ON RECORD TO CONTROVERT THE SUBMISSIONS OR EXPLANATION , IT WILL BE INAPPROPRIATE TO HOLD THAT THE EXPLANATION OF THE ASSESSEE IS EITHE R UNSUBSTANTIATED OR IS AN AFTER THOUGHT. ACCORDING TO THE EXPLANATION OF THE ASSES SEE, IT CAN BE SAID THAT ASSESSEE WAS PREVENTED BY REASONABLE CAUSE FOR NON- SUBMISSION OF THE AUDIT REPORT WHICH WAS AVAILABLE AT THE TIME OF FILING T HE RETURN AS DATE OF AUDIT REPORT IS 30/07/2008 AND THE RETURN WAS FILED ON 22/9/2008 . IN THESE CIRCUMSTANCES, IT CAN BE SAID THAT THE LEVY OF PENALTY UNDER SECTI ON 271B WAS SAVED BY THE PROVISIONS OF SECTION 273B OF THE ACT, ACCORDING T O WHICH FOR THE FAILURE WHICH INTER-ALIA INCLUDE SECTION 271B NO PENALTY SHALL B E IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, IF HE PROVES THA T THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. IN VIEW OF THE FACT THAT THE ASSESSEE HAS MADE AVAILABLE THE AUDIT REPORT WHICH WAS PRIOR TO THE DATE OF FILING THE RETURN AND HAVING FILED THE SAME ALONG WITH THE AFFIDAVIT OF THE ASSESSEE WHICH HAS NOT BEEN CONTROVERTED BY THE AO BY BRINGING ANY ADVERSE MATERIAL ON RECORD, IT CAN BE SAID THAT THE LEVY OF PENALTY IS SAVED BY THE PROVISIONS OF SECTION 273B OF THE ACT. ACCORDINGLY, WE DELETE THE PENALTY AND ALLOW THE APPEAL. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22.09. 2 014. 1 * ./0 2'3 22.09.2014 / * 9 SD/- SD/- ( ! /RAJENDRA) ( .. / I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 22 ND SEPT. 2014. VM. ITA NO.08 /MUM/2013 (A.Y. 2008-09) 7 1 * (,: ; :0, 1 * (,: ; :0, 1 * (,: ; :0, 1 * (,: ; :0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. <() / THE CIT, MUMBAI. 4. < / CIT(A)-13, MUMBAI 5. :?9 (,' , , / DR, ITAT, MUMBAI 6. 9@ A / GUARD FILE. 1' 1' 1' 1' / BY ORDER, ):, (, //TRUE COPY// B BB B/ // /C C C C (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI