VIPLAV TRADING LTD, MUMBAI V. ACIT CIR 8(3), MUMBAI

ITA 91/MUM/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92451 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 26-02-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 06-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Assessee Lawyers: G P MEHTA
• Keywords: Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , , BEFORE SHRI G. S. PANNU , A M AND SHRI AMIT SHUKLA , J M ./ I.T.A. NO. 91/MUM/2009 ( / ASSESSMENT YEAR: 2003 - 04 ) VIPLAV TRADING LTD. C/O. G. P. MEHTA & CO. CHARTERED ACCOUNTANTS 807, TULSIANI CHAMBERS, NARIMAN POINT, MUMBAI - 400 021 / VS. ASST. CIT, CIRCLE, AAYAKAR BHAVAN, IIND FLOOR , M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACV 1487 B ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI G. P. MEHTA / RESPONDENT BY : SHRI PAWAN KUMAR BEERLA / DATE OF HEARING : 16.04.2015 / DATE OF PRONOUNCEMENT : 24 .04.2015 / O R D E R PER G. S. PANNU , A. M.: THIS IS AN APPEA L BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - XXIX , MUM BAI (CIT(A) FOR SHORT) DATED 08.10.2008 , WHICH IN TURN , HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER (A.O.) U/S . 271 B OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DATED 23.04.2007 PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2003 - 04. 2. IN THIS APPEAL, THE SOLITARY GRIEVANCE OF THE ASSESSEE IS AGAINST THE PENALTY IMPOSED U/S.271B OF THE ACT AMOUNTING TO RS. 1 LAC. 2 ITA NO. 91/MUM/2009 (A.Y. 2003 - 04) VIPLAV TRADING LTD. VS. ASST. CIT 3. BRIEFLY PUT THE RELEVANT FACTS ARE THAT TH E APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT , 1956 AND IT IS INTER ALIA ENGAGED IN THE BUSINESS OF EXPORT OF INDUSTRIAL RAW MATERIALS. FOR THE A.Y. 2003 - 04, IT FILED A RETURN OF INCOME ON 01.12.2003 , DECLARING A LOSS OF RS.15,25,28,260/ - . IT WAS FOUND THAT THE RETURN OF INCOME FILED BY THE ASSESSEE WAS NOT ACCOMPANIED BY THE TAX AUDIT REPORT PRESCRIBED U/S.44AB OF THE ACT. ON BEING SHOW CAUSED, THE ASSESSEE EXPLAINED THAT THE RETURN OF INCOME WAS ALSO FILED WITHOUT THE AUDITED ACCOUNTS BECAUSE THE STATUTORY AUDIT AS REQUIRED BY THE COMPANIES ACT, 195 6 WAS NOT COMPLETED BY ITS AUDITORS M/S. D. K. JHANWAR & CO., CHARTERED ACCOUNTANTS, MUMBAI, ON ACCOUNT OF CERTAIN DISPUTES/DIFFERENCE WITH THE MANAGEMENT OF THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT FOR WANT OF THE COMPLETION OF THE STATUTORY AUDIT, EVE N THE TAX AUDIT PRESCRIBED IN TERMS OF SECTION 44AB OF THE ACT ALSO COULD NOT BE COMPLETED. SUBSEQUENTLY, ASSESSEE RESOLVED THE DIFFERENCE S /DISPUTE WITH THE ERSTWHILE AUDITORS AFTER OBTAINING THE I R RESIGNATION, AND NEW AUDITORS NAMELY M/S. J. J. JOSHI & CO ., CAS, MUMBA I WERE APPOINTED AS A STATUTORY AUDITORS TO CARRY OUT THE AUDIT OF THE ASSESSEE COMPANY FOR THE PERIOD STARTING FROM THE FINANCIAL YEAR S (FY) 2001 - 02 TO 2004 - 05. THE ASSESSEE POINTED OUT THAT SUCH APPOINTMENT COULD TAKE PLACE ONLY IN THE A NNUA L G ENERAL M EETING OF THE COMPANY HELD ON 30.09.2005 AND THEREAFTER THE AUDIT OF ACCOUNTS WAS COMPLETED. IT WAS CONTENDED THAT ON 17.03.2006, ASSESSEE OBTAINED THE STATUTORY AUDIT FOR THE INSTANT YEAR WHICH WAS COMPLETED BY THE NEW AUDITORS , M/S. J. J. JOSH I & CO., CAS, MUMBAI. ON THE BASIS OF THE AFORE - SAID FACTUAL MATRIX, ASSESSEE POINTED OUT THAT THERE WAS A REASONABLE CAUSE FOR NOT COMPLYING WITH THE REQUIREMENT OF SECTION 44AB OF THE ACT , IN FURNISHING THE REQUISITE TAX AUDIT REPORT ALONG WITH THE RETUR N OF INCOME FILED. 4. THE A.O. AS WELL AS THE CIT(A) HAVE NOT ACCEPTED THE PLEA OF THE ASSESSEE AND INSTEAD PENALTY AMOUNTING TO RS.1 LAC HAS BEEN LEVIED BY INVOKING SECTION 271B OF THE ACT FOR NON - OBTAINING/FURNISHING OF AUDIT REPORT U/S.44AB OF THE ACT AS PRESCRIBED. 5. BEFORE US, THE LD. REPRESENTATIVE POINTED OUT THAT SIMILAR FACTUAL MATRIX PREVAILED IN THE CASE OF A SISTER CONCERN SARABA IMPEX LIMITED VS. ASST. CIT (IN ITA NO. 3 ITA NO. 91/MUM/2009 (A.Y. 2003 - 04) VIPLAV TRADING LTD. VS. ASST. CIT 541/MUM/2008 DATED 29.10.2010 FOR A.Y. 2002 - 03 ), WHEREIN ALSO THE A.O. HA D LEVIED PENALTY U/S.271B OF THE ACT. IN THE CASE OF SARABA IMPEX LIMITED (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL HELD THAT THE PENALTY U/S.271B WAS NOT LEV I ABLE. FOLLOWING THE AFORESAID PRECEDENT, IT WAS CONTENDED THAT THE PENALTY U/S.271B OF THE ACT IS NOT JUSTIFIED. 6. ON THE OTHER HAND, THE LD. D EPARTMENTAL REPRESENTATIVE (D R ) APPEARING FOR THE REVENUE CONTENDED THAT THE ASSESSEE OUGHT TO HAVE APPOINTED THE STATUTORY AUDITORS IN TIME SO AS TO COMPLY WITH THE REQUIREMENT OF OBTAINING THE AUDIT REPORT WITHIN THE PERMISSIBLE TIME LIMIT. THEREFORE, INACTIO N ON THE PART OF THE ASSESSEE WOULD NOT BE A REASONABLE CAUSE FOR NON - IMPOSITION OF PENALTY U/S.271B OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SECTION 273B OF THE ACT PROVIDES THAT NO PENALTY SHALL BE IMPOSABLE ON THE ASSESSEE IF THERE EXIST S A REASONABLE CAUSE FOR FAILURE IN COMPLYING WITH THE PROVISIONS PRESCRIBED THEREIN , WHICH ALSO INCLUDE THE PRO VISIONS OF SECTION 271B OF THE A CT , THAT HAS BEEN INVOKED IN THE PRESENT CASE. SECTION 271B HAS BEEN INVOKED AS THE ASSESSEE WAS FOUND TO HAVE FAILED TO GET HIS AC COUNT S AUDITED AND FURNISH THE PRESCRIBED AUDIT REPORT IN THE MANNER REQUIRED BY SECTION 44AB OF THE ACT. THE FAILURE TO COMPLY WITH THE REQUIREMENT S OF SECTION 44AB OF TH E ACT HAS BEEN EXPLAINED TO BE NON - OBTAINING OF THE STATUTORY AUDIT REPORT FROM THE AUDITORS ON ACCOUNT OF DIFFERENCES / DISPUTE BETWEEN THE AUDITORS AND THE MANAGEMENT OF THE ASSESSEE - COMPANY. THE AFORE - SAID REASON HAS BEEN CANVASSED BY THE ASSESSEE BEFORE T HE LOWER AUTHORITIES ALSO , BUT IT DID NOT FIND FAVOUR WITH THE INCOME - TAX A UTHORITIES. NEVERTHELESS, WE FIND THAT THE BONAFIDES OF THE REASONS CANVASSED BY THE ASSESSEE FOR THE FAILURE HAVE NOT BEEN DOUBTED BY THE I NCOME TAX AUTHORITIES. INSTEAD, THE POINT MADE OUT BY THE I NCOME - TAX AUTHORITIES IS THAT THE ASSESSEE OUGHT TO HAVE BEEN VIGILANT AND APPOINTED THE NEW AUDITOR IN TIME, RATHER THAN APPOINTING THE NEW AUDITOR IN THE ANNUAL GENERAL MEETING HELD ON 30.09.2005. INSOFAR AS THE COMPLETION OF THE AUDIT FOR THE FINANCIAL YEAR UNDER CONSIDERATION IS CONCERNED, THE SAME WAS COMPLETED AND FURNISHED BEFORE THE A.O. ON 17.03.2006, AFTER IT WAS CONDUCTED BY THE NEW AUDITORS. IT IS QUITE CLEAR THAT THE AUDIT REPORT THAT WAS REQUIRED TO BE FURNISHED IN TERMS OF S ECTION 44AB OF THE ACT , COULD HAVE 4 ITA NO. 91/MUM/2009 (A.Y. 2003 - 04) VIPLAV TRADING LTD. VS. ASST. CIT BEEN COMPLIED AND FURNISHED ONLY AFTER THE STATUTORY AUDIT UNDER THE COMPANIES ACT, 1956 WAS COMPLETED. THE STATUTORY AUDIT REQUIRED BY THE COMPANIES ACT, 1956 ITSELF WAS DELAYED IN THE PRESENT CASE FOR THE REASONS EXPLAI NED BY THE ASSESSEE, I.E., ON ACCOUNT OF DISPUTE BETWEEN THE MANAGEMENT AND THE AUDITORS. THE SAID EXPLANATION HAS NOT BEEN FOUND TO BE FALSE AND , IN ANY CASE, THE SAME IS ALSO AMENABLE FOR ACCEPTANCE , AS THE SUBSEQUENT EVENTS SHOW THAT THE AUDITORS WERE I NDEED CHANGED BY THE ASSESSEE - COMPANY IN ITS ANNUAL GENERAL MEETING HELD ON 30.09.2005. IN FACT, IN THE SAID ANNUAL GENERAL M EETING, THE NEW STATUTORY AUDITORS WERE APPOINTED WITH THE MANDATE OF COMPLETING THE AUDIT FOR THE FINANCIAL YEAR S 2001 - 02 TO 2004 - 05. THE DELAY IN APPOINTMENT OF THE NEW AUDITOR AND THE RESIGNATION OF THE PREVIOUS AUDITOR ITSELF SHOWS THAT THERE EXISTED REASONS BEYOND THE CONTROL OF THE ASSESSEE DUE TO WHICH THE AUDIT PRESCRIBED U/S.44AB OF THE ACT WAS NOT CARRIED OUT . IN SIMILAR CIR CUMSTANCES, THE T RIBUNAL IN THE CASE OF SARABA IMPEX LIMITED (SUPRA), FOUND IT EXPEDIENT TO DELETE THE PENALTY LEVIED U/S.271B OF THE ACT. AS PER THE T RIBUNAL, THE DELAY IN COMPLETING THE STATUTORY AUDIT PRESCRIBED UNDER THE COMPANIES ACT, 1956 , WAS A REAS ONABLE CAUSE FOR THE FAILURE OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENT S OF SECTION 44AB OF THE ACT. 8. IN VIEW OF THE AFORE - SAID DISCUSSION, WE HEREBY SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO DELETE THE PENALTY OF RS.1 LAC IMPOSED U/ S.271B OF THE ACT. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 24 TH , 201 5 SD/ - SD/ - ( AMIT SHUKLA ) ( G. S. PANNU ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 24 . 0 4 .201 5 . . ./ ROSHANI , SR. PS 5 ITA NO. 91/MUM/2009 (A.Y. 2003 - 04) VIPLAV TRADING LTD. VS. ASST. CIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI