Natarajan Ramesh Rajan, Kolkata V. DCIT, Circle -54, Kolkata, Kolkata

ITA 872/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83214 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 31-05-2012
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY ACIT
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Salary income; Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HON BLE SRI SHAMIM YAHYA , A M & HON BLE SRI GEORGE MATHAN, J M] ITA NO. 872 /KOL/2012 ASSESSMENT YEAR : 2006 - 07 ( APPELLANT ) (RESPONDENT) NATARAJ AN RAMESH R AJAN .. - VS - D.C. I.T., CIRCLE - 54 , KOLKATA KOLKATA (PAN: ACSPN 8579 K) FOR THE APPELLANT SHRI SOUMITRA CHOWDHURY, ADVOCATE FOR THE RESPONDENT SHRI P.K.CHAKRABORTY, ACIT DATE OF HEARING : 01.12 .2014 DATE O F PRONOUNCEMENT : 01.12 .2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF L D. C.I.T.(A ) - XXXVI, KOLKATA DT. 09.04.2012 AND PERTAI NS TO ASSESSMENT YEAR 2006 - 07. 2 . THE ISSUE RAISED IN THIS APPEAL IS THA T THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY U/S 271B OF THE ACT AMOUNTING TO RS.29,340/ - . 3. IN THIS CASE THE AO NOTED THAT IT WAS SEEN THAT THE ASSESSEE S INCOME DURING THE PREVIOUS YEAR INCLUDE INCOME FROM SALARY FROM THE FIRM M/S. LOVELOCK & LEWE S OF WHICH HE WAS A PARTNER. AO OPINED THAT S INCE INCOME BY WAY OF SALARY OR REMUNERATION FROM A FIRM WAS TO BE TREATED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION AS THE CASE MAY BE IN TERMS OF SECTION 28(V) OF ACT AND SINCE THE RECEIPTS FROM THE PROFESSION IN THE CASE OF THE ASSESSEE WAS RS.58,68,000/ - I.E. EXCEEDING RS.10 LAC, THE ASSESSEE WAS REQUIRED TO GET HIS ACCOUNTS AUDITED WITHIN THE SPECIFIED TIME AND TO FURNISH THE AUDIT REPORT BEFORE THE SPECIFIED DATE UNDER THE ITA.NO. 872 /K /2012 NATARAJ A N RAMESH RAJAN A.YR. 2006 - 07 2 PROVISION OF S E 44AB OF THE ACT. HENCE HE HE LD THAT F AILURE ON THE PART OF THE ASSESSEE TO HAVE DONE SO MADE HIM LIABLE TO PENALTY U/S 271B OF THE ACT. 4. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). THE ASSESSEE REITERATED THAT HE WAS NOT ENGAGE D IN PROFESSION IN HIS INDIVIDUAL CAPACITY DURING THE A.YR. 2006 - 07 AND HE DID NOT HAVE ANY CLIENTS OF HIS OWN TO SERVE AS AN INDIVIDUAL PRACTICING CHARTERED ACCOUNTANT AS SUCH HAD NO TURN OVER AND OR COLLECTION FROM CLIENTS AS PROFESSIONAL FEES WITHIN THE MEANING OF SECTION 44AB OF THE ACT. ACCORDINGLY HE DID NOT INCUR ANY EXPENDITURE IN THIS REGARD. THAT THE ASSESSEE PROVIDED SERVICES RENDERED ON BEHALF OF THE FIRM FROM WHERE HE RECEIVED PARTNERS SALARY AND SHARE OF PROFIT. THE ASSESSEE FURTHER SUBMITTED THAT THE PARTNERSHIP FIRM FROM WHERE HE HAS RECEIVED HIS SALARY AND SHARE OF PROFIT HAD ALREADY BEEN AUDITED U/S 44AB OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE S PROFESSION WAS WITHIN THE PURVIEW OF SERVICE TAX. IT WAS SUBMITTED THAT IN ALL C ASES THE REGISTRATION WAS GRANTED TO THE FIRMS AND NOT THE PARTNERS. HENCE IT WAS CLAIMED IT IS EVIDENCE FROM THE SERVICE TAX RULES THAT EARNING BY THE PARTNERS ARE NOT OF PROFESSIONAL NATURE. HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED. HE HELD THAT IT IS CLEAR FROM THE LANGUAGE OF SECTION 28(V) OF THE ACT THAT THE RECEIPTS OF THE ASSESSEE IS COVERED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION. HENCE HE HELD THE ASSESSEE WAS REQUIRED TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT. HENCE HE UPHELD THE LEVY OF PENALTY. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS AS REFERRED TO HEREIN ABOVE AS MADE BEFORE THE LD. CIT(A). THE LD. COUNSEL OF THE ASSESSE CLAIMED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEE WAS IN THE BONA FIDE BELIEF THAT HE HAS RECEIVED SALARY AND SHARE OF PROFIT FROM CHARTERED ACCOUNTANT PARTNERSHIP FIRM AND HIS INCOME WAS NO T LIABLE TO BE AUDITED U/S 44AB OF THE ACT. HENCE THE LD. COUNSEL OF THE ASSESSEE PLEADED THAT THERE WAS A REASONABLE CAUSE FOR THE FAILURE ON THE PART OF THE ASSESSEE TO COMPLY WITH ITA.NO. 872 /K /2012 NATARAJ A N RAMESH RAJAN A.YR. 2006 - 07 3 THE PROVISIONS OF THE ACT AND HENCE HE CLAIMED THAT SECTION 273B OF THE ACT SHOULD COME TO THE RESCUE TO THE ASSESSEE AND ASSESSEE SHOULD NOT BE VISITED WITH THE RIGOUR OF PENALTY U/S 271B OF THE ACT. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5.1. UPON CAREFUL CONSIDERATION WE NOTE THAT T HE ASSESSEE IS A PROFESSIONAL CHARTERED ACCOUNTANT. HE IS NOT PRACTICING IN HIS INDIVIDUAL CAPACITY. THE RECEIPTS ARE FROM THE PARTNERSHIP FIRM IN THE SHAPE OF SALARY AND SHARE OF PROFIT. THE ASSESEE WAS IN T HE BONA FIDE BELIEF THAT IN THESE CIRCUMSTANCE H IS RECEIPT BY WAY OF SALARY AND SHARE OF PROFIT DID NOT QUALIFY AS TURN OVER FOR THE PURPOSE OF SECTION 44AB OF THE ACT. HENCE WE AGREE WITH THE LD.COUNSEL OF THE ASSESSEE THAT ASSESSEE S CASE DOES FALL U/S 273B OF THE ACT. THE SAID SECTION PROVIDES THAT NO PENALTY SHALL BE IMPOSABLE ON THE PERSON FOR ANY FAILURE INCLUDING THAT UNDER WHICH PENALTY U/S 271B OF THE ACT IS LEVIABLE IF THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE IT CAN BE S AID THAT ASSESSEE WAS IN THE BONA FIDE BELIEF THAT HIS INDIVIDUAL CASE DOES NOT FALL FOR AUDIT U/S 44AB OF THE ACT. WE FURTHER NOTE THAT THE ASSESSEE S CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS TO WARRANT LEVY OF PENALTY . IN THIS REGARD W E DRAW SUPPORT FR OM THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF HINDUSTAN STEEL LTD VS STATE OF ORISSA 83 ITR 26 (SC) WHICH HELD AS UNDER : AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI - CRIMINAL PROCEEDING, AN D 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. PENALTY WILL NOT ALSO BE IMPOSED MERELY BE CAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM P ENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 5.2. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND IN OUR CONSIDERED OPINION THE ASSESSEE IS NOT LIABLE FOR LEVY OF PENALTY U/S 271B OF THE ACT. HENCE WE SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND DELETE THE LEVY OF PENALTY OF RS.29,340/ - . ITA.NO. 872 /K /2012 NATARAJ A N RAMESH RAJAN A.YR. 2006 - 07 4 6. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 01.12 .2014. SD/ - SD/ - [ GEORGE MATHAN ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 01.12 .2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . NATARAJAN RAMESH RAJAN, C/O LOVELOCK & LEWS, PLOT.Y/14, BLOCK - EP, SECTOR - V, SALT LAKE CITY, KOLKATA - 700091. 2 D.C.I.T., CIRCLE - 54 , KOLKATA. 3 . CIT(A) - XXXVI, KOLKATA. 4. CIT KOLKATA 5 . CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES