SHRI PARTHSARTHI NAIDU, Indore V. THE ITO 2(1), Indore

ITA 84/IND/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5704 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Reasonable cause; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER SHRI PARTHSARTHI NAIDU, PROP.KAMAKSHI TRANSPORT CO., PIGDAMABER, A.B.ROAD, RAU, INDORE. PAN: AAOPN 4584 B VS. ITO, WARD 2(1), INDORE. APPELLANT RESPONDENT APPELLANTS BY SHRI ATIK BANSAL, CA RESPONDENT BY SHRI MOHD.JAVED, SR. DR DATE OF HEARING 26.07.2016 DATE OF PRONOUNCEMENT 26.07.2016 O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-III, INDORE [H EREINAFTER REFERRED TO AS THE CIT(A)] DATED 20.11.2015 AND PER TAINS TO ASSESSMENT YEAR 2010-11 AS AGAINST APPEAL DECIDED I N ASSESSMENT ORDER DATED 16.08.2013 OF ITO WARD 2(1), INDORE [HEREINAFTER REFERRED TO AS THE AO]. 2. THE ASSESSEE HAS TAKEN THREE GROUNDS OF APPEAL. HOWEVER, THE EFFECTIVE GROUND IS REGARDING IMPOSITI ON OF PENALTY U/S 271B OF RS.1 LAKH, WHICH IS UPHELD BY THE LD. CIT(A). I.T.A. NO. 84/IND/2016 ASSESSMENT YEAR: 2010-11 SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 2 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 15.11.2010 DECLAR ING TOTAL INCOME AT RS. 4,98,491/-. THE SAME WAS ASSESSED VID E ORDER U/S 143(3) DATED 30.01.2013 AND TOTAL INCOME WAS DETERM INED AT RS. 7,45,690/-. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE AO NOTICED THAT THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS, THOUGH THE GROSS TURNOVER OF THE ASSESSEE WAS NOTICED AT RS. 2,39,52,974/-, WHEREAS THE ASSESSEE HAS SHOW N THE GROSS RECEIPT AT RS. 5,90,400/- IN THE RETURN OF INCOME F ILED BY HIM. SINCE THE GROSS RECEIPTS OF THE ASSESSEE WERE EXCEE DED TO RS. 40 LACS, THEREFORE, THE ASSESSEE WAS REQUIRED TO GET H IS BOOKS OF ACCOUNTS AUDITED AS PER THE PROVISIONS OF SECTION 4 4AB OF THE INCOME-TAX ACT, 1961. IN VIEW OF THESE FACTS, THE A O ISSUED SHOW CAUSE NOTICE U/S 271B ASKING THE ASSESSEE AS TO WHY THE PENALTY U/S 271B SHOULD NOT BE LEVIED. IN RESPONSE TO THIS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE NON-COMPLIANCE O F SECTION 44AB OF THE ACT, WAS NOT INTENTIONAL, BUT DUE TO TH E REASON THAT HEALTH CONDITION OF THE ASSESSEE GOT CRITICAL DURIN G THE YEAR AND HE HAD TO GET URGENTLY ADMITTED IN THE HOSPITAL FOR MEDICAL TREATMENT. HOWEVER, THE AO DID NOT SATISFY WITH TH E EXPLANATION AND OBSERVED THAT THE MEDICAL REPORT FOR THE TREATM ENT IN THE CHL APOLLO HOSPITAL AS FILED BY THE ASSESSEE ARE DA TED 28.02.2009 TO 06.03.2009, WHICH WAS NOT RELEVANT FO R THE SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 3 3 ASSESSMENT YEAR 2010-11. FURTHER, THE ASSESSMENT PR OCEEDINGS FOR THE ASSESSMENT YEAR 2007-08 WERE ALSO IN PROGRE SS, WHEREIN THE ASSESSEE HAD PERSONALLY ATTENDED BEFORE THE AO ON 11.06.2010 AND 22.06.2010, THE PERIOD FOR WHICH FRO M 01.04.2010 TO 30.09.2010 WERE DUE FOR AUDIT FOR THE YEAR UNDER REFERENCE. ACCORDINGLY, THE AO LEVIED PENALTY OF RS . 1 LAC U/S 271B OF THE INCOME-TAX ACT, 1961. 4. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), BU T COULD NOT GET ANY RELIEF. 5. THE LD. CIT(A) HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW A REASONABLE CAUSE FOR FAILURE TO GET THE B OOKS OF ACCOUNTS AUDITED U/S 44AB, WHEREAS THE AO HAS CLEAR LY BROUGHT OUT THAT THE ASSESSEE PERSONALLY APPEARED IN THE IN COME TAX OFFICE IN THE PERIOD DURING WHICH THE BOOKS OF ACCO UNTS HAD TO BE AUDITED FOR ASSESSMENT YEAR 2010-11. ACCORDINGLY, P ENALTY LEVIED BY THE AO WAS CONFIRMED BY OBSERVING THAT THE CASE LAWS CITED BY THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE CASE. 6. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTED TH AT THE ASSESSEE HAD VOLUNTARILY FILED THE RETURN OF IN COME SHOWING TOTAL INCOME OF RS. 4,98,491/-, WHICH WAS ASSESSED AT RS. 7,45,690/- BY APPLYING NET PROFIT RATE @ 3.5 %. IT WAS DUE TO THE REASON THAT THE ASSESSEES HEALTH CONDITION WAS CRI TICAL DURING THE YEAR AND HE WAS ADMITTED TO THE HOSPITAL FOR TH E MEDICAL SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 4 4 TREATMENT. THEREFORE, HE WAS NOT ABLE TO DO HIS ROU TINE WORK PROPERLY AND COULD NOT MAINTAIN THE BOOKS OF ACCOUN TS AS ESSENTIAL FOR THE PURPOSE OF AUDIT. THE LD. AUTHORI ZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE A SSESSEE HAS GOT HIS BOOKS OF ACCOUNTS DULY AUDITED IN THE PREVI OUS YEAR, WHICH PROVES THAT HE WAS NOT NEGLIGENT AND WAS CONS CIOUS TO ABIDE BY THE RULES. THE AO AND LD. CIT(A) HAS MISU NDERSTOOD THE FACTS. THE CONTENTION OF THE AO THAT THE ASSESS EE HAS PERSONALLY ATTENDED THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2007-08 ON 11.06.2010 AND 22.06.2010 AND, THER EFORE, HE WAS WELL ENOUGH TO GET HIS BOOKS OF ACCOUNTS AUDITE D IS NOT SHOWING CORRECT VIEW AS THE BOOKS OF ACCOUNTS FOR T HE ASSESSMENT YEAR 2010-11 WERE FROM 01.04.2009 TO 31. 03.2010 AND ALMOST DURING THE WHOLE YEAR, THE ASSESSEE COUL D NOT MAINTAIN PROPER BOOKS OF ACCOUNTS AND, THEREFORE, C OULD NOT GET THEM DULY AUDITED. THE LD. AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE HAS ALSO FILED SOME SUPPORTING EVIDENCE OF MEDICAL TREATMENT, WHICH ARE PLACED AT PAPER BOOK PAGE NOS. 22 TO 37. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE F URTHER SUBMITTED THAT THE ASSESSEE WAS NOT IN A CONDITION TO MAINTAIN PROPER BOOKS OF ACCOUNTS AND, THEREFORE, THE AO APP LIED NET PROFIT RATE AFTER REJECTING THE BOOKS OF ACCOUNTS. THEREFORE, THE ASSESSEE ONCE HAS ALREADY BEEN PENALIZED DUE TO ADD ITION TO THE SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 5 5 BOOK RESULT FOR NON-MAINTENANCE OF BOOKS, HENCE CON SEQUENTIAL FAILURE FOR NOT GETTING THE BOOKS OF ACCOUNTS AUDIT ED, IF PENALIZED, WOULD TANTAMOUNT TO PENALIZE TWICE FOR A SINGLE FAI LURE DUE TO CIRCUMSTANCES BEYOND HIS CONTROL. THE LD. AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE PLACED RELIANCE ON T HE FOLLOWING DECISIONS :- (I) STAR AGENCIES VS. ITO, I.T.A.T., COCHIN BENCH, (200 4) 23 CCH 0646 (COCH TRIB.),(2006) 5 SOT 0336. (II) SHRI AZAD KUMAR JAIN VS. ITO, AGRA BENCH I.T.A.NO. 43/AGR/2010. (III) SIBONARAYAN PATRO & BROS. VS. ITO, I.T.A.T., CUTTAC K BENCH, (1996) 54 TTJ 0644: (1998) 67 ITD 0001. (IV) ITO VS. GAYATRI COAL SUPPLY CO., I.T.A.T. PATNA BEN CH (THIRD MEMBER), (1997) 63 ITD 0237. (V) CIT VS. ASHOKA DAIRY, (2006) 200 CTR 0211 ( P&H ) (VI) CIT VS. ANAND KUMAR & CO., (2005) 196 CTR 0225, (2006) ITR 0111. (ALL) (VII) SURAJMAL PARSURAM TODI VS. CIT, (1996) 222 ITR 0691 (GAU) (VIII) CIT VS. E.C.C.PROJECT PVT.LTD., (2015 374 ITR 0044 (ALL). 7. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT IN THE DECISION OF ITO VS. GAYATRI C OAL SUPPLY COMPANY (SUPRA), IT WAS HELD THAT EVEN ILLNESS OF CHARTERED SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 6 6 ACCOUNTANT CONSTITUTES A REASONABLE CAUSE, HENCE, P ENALTY U/S 271B COULD NOT BE LEVIED. 8. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS NOR ANY AUDIT FOR THE YEAR WAS GOT DONE. THE LD. SR. DEPARTMENTAL REPRESENTATIVE FURT HER SUBMITTED THAT AS PER CASE LAW RELIED BY LD. AUTHOR IZED REPRESENTATIVE OF THE ASSESSEE THE ILLNESS OF CHART ERED ACCOUNTANT COULD BE CONSIDERED AS REASONABLE CAUSE FOR NOT GETTING THE BOOKS OF ACCOUNTS AUDITED, WHEREAS IN T HE INSTANT CASE, THE ASSESSEE WAS ILL, HENCE, REVISION IS NOT APPLICABLE. THEREFORE, THE SAME CANNOT CONSTITUTE REASONABLE CA USE. FURTHER, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT THE ASSESSEE HAS APPEARED BEFORE THE AO AND, THEREFORE , THE RELIANCE ON MEDICAL REPORT IS NOT RELEVANT. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT REPORTS AVAILABLE WITH US. WE ARE OF THE C ONSIDERED OPINION THAT THE AO AND LD. CIT(A) HAVE NOT DIS-APP ROVED THE VERSION OF THE ASSESSEE, WHICH HE HAS TAKEN BEFORE THE AUTHORITIES BELOW. THE ASSESSEE HAS FILED MEDICAL R EPORTS, WHICH ARE PLACED AT PAPER BOOK PAGE NOS. 22 TO 37, WHICH SHOWS THAT THE ASSESSEE WAS UNDER MEDICAL TREATMENT FOR THE PE RIOD FROM 28.02.2009 TO 14.03.2010. THUS, THE HEALTH OF THE A SSESSEE FOR SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 7 7 THE PERIOD FROM FEBRUARY, 2009, TO MARCH, 2010, REL EVANT TO ASSESSMENT YEAR UNDER REFERENCE WAS NOT WELL AND HE WAS REGULARLY UNDER MEDICATION AND HOSPITALIZED AT REGU LAR INTERVALS. IT IS ALSO NOTICED FROM THE PAPER BOOK PAGES 19 & 2 0 THAT THIS FACT OF THE ILLNESS OF THE ASSESSEE WAS ALSO COMMUN ICATED IN A LETTER DATED 04.04.2009 ADDRESSED TO CHIEF COMMISSI ONER OF INCOME TAX CITING REASONS OF HIS ILLNESS REGARDING GETTING THE REFUND PROCESSED SPEEDILY. SIMILAR COMMUNICATION WA S ALSO MADE TO ITO WARD 2(1), INDORE (WHICH IS PLACED AT P APER BOOK PAGE 21) FOR GIVING THE EFFECT OF THE APPELLATE ORD ER IN WHICH THE ASSESSEE HAS CITED THAT HE WAS SUFFERING FROM CHRON IC DISEASE (C- 2) AND FACING FINANCIAL HARDSHIPS AND ALSO IS LEGAL LY ENTITLED TO HIS DUE REFUND. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT DUE TO THE ILLNESS OF THE ASSESSEE, HE COULD NOT MA INTAIN PROPER BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2009-10 RE LEVANT TO ASSESSMENT YEAR 2010-11, WHICH ARE ESSENTIAL FOR AU DIT U/S 44AB OF THE ACT. THEREFORE, THE QUESTION THAT THE B OOKS OF ACCOUNTS COULD BE AUDITED DURING THE PERIOD IN WHIC H THE ASSESSEE ATTENDED PERSONALLY BEFORE HIM CANNOT BE S AID AS IRRELEVANT. BECAUSE THE ESSENTIAL BOOKS OF ACCOUNT S REQUIRED FOR AUDIT COULD NOT BE MAINTAINED DUE TO ILLNESS OF THE ASSESSEE, HENCE THERE WAS NO BOOKS OF ACCOUNTS, WHICH COULD B E PRODUCED BEFORE CHARTERED ACCOUNTANTS FOR GETTING THEM AUDIT ED. SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 8 8 THEREFORE, THE CONTENTION OF THE AO IS MISPLACED. F URTHER, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS RELIE D IN THE CASE OF ITO VS. GAYATRI COAL SUPPLY COMPANY (SUPRA), WHE REIN IT WAS HELD THAT THE ILLNESS OF CHARTERED ACCOUNTANT CONST ITUTED A REASONABLE CAUSE AND HENCE PENALTY U/S 271B COULD N OT BE LEVIED, WHEREAS IN THE INSTANT CASE, THE ASSESSEE WAS HIMSELF ILL DUE TO WHICH HE COULD NOT MAINTAIN ESSENTIAL BOOKS, HENCE SAME CONSTITUTES A REASONABLE CAUSE. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS ALSO PLACED RELI ANCE IN THE CASE OF STAR AGENCIES VS. ITO, (2006) 5 SOT 336 (CO CHIN TRIB), WHEREIN IT WAS HELD THAT THE ILLNESS OF ONE OF THE PARTNERS CONSTITUTED REASONABLE CAUSE FOR THE DELAY. SIMILAR LY, THE CASE LAW RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIV E OF THE ASSESSEE IN THE CASE OF CIT VS. ANAND KUMAR & CO., (2006) 281 ITR 0111. (ALL), SURAJMAL PARSURAM TODI VS. CIT, ( 1996) 222 ITR 0691 (GAU) AND OTHERS ALSO SUPPORT HIS CASE THAT NO PENALTY IS LEVIABLE, AS THERE IS REASONABLE CAUSE, AND THERE I S NO DELIBERATE OR INTENTIONAL INACTION ON THE PART OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENT OF SECTION 44AB BEFORE THE SPECIFIE D DATE. THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE HAVE NO T BEEN NEGATED BY THE REVENUE AUTHORITIES BY PRODUCING AN Y CONTRARY EVIDENCE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE AS SESSEE HAS SHRI PARTHSARTHI NAIDU, RAU VS. ITO, 2(1), INDORE I.T.A.NO. 84/IND/2016 A.Y.2010-11. 9 9 ESTABLISHED REASONABLE CAUSE FOR NON-GETTING THE AU DIT REPORT U/S 44AB DUE TO HIS BAD HEALTH, WHICH HE HAS PROVED WITH SUPPORT OF DOCUMENTARY EVIDENCES. THEREFORE, THE PE NALTY IN DISPUTE AMOUNTING TO RS. 1 LAC DESERVES TO BE CANCE LLED. WE, ACCORDINGLY, CANCEL THE IMPUGNED PENALTY LEVIED U/S 271B OF THE ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 26TH JULY, 2016. SD/- (D.T.GARASIA) JUDICIAL MEMBER SD/- (O.P.MEENA) ACCOUNTANT MEMBER DATED :26TH JULY, 2016. CPU* COPY TO: 1. THE ASSESSEE. 2. THE A.O. CONCERNED. 3. THE LD. PCIT CONCERNED 4. THE LD. CIT(A) 5. THE D.R., INDORE 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., INDORE