K Ramaswamy , Mysore V. The Assistant Commissioner of Income TAx Circle-1(1), Mysore

ITA 956/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6193 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-02-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Initiation of penalty proceedings; Reasonable cause; Procedural lapse; TDS
• Section: 273B; 271E; 64; 271B; 44AB; 48; 13; 22; 153C; 27; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH ES : A , BANGALORE BEFORE SHRI N.V.VASUDEVAN, VICE PRESIDENT AND S HRI A.K.GARODIA, A CCOUNTANT MEMBER SL. NO ITA NOS. ASST.YEA R APPELLANT RESPONDENT 1 956 TO 958(B)/2018 2007 - 08 , 2008 - 09 & & 2009 - 10 K.RAMASWAMY, NO.567, ASHWINI, 1 ST CROSS, MARUTHI TEMPLE ROAD, KUVEMPUNAGARA, MYSORE - 570 023. PAN NO.ADGPR5117A THE ACIT, CIRCLE - (1), MYSORE - 570 008 2 9 6 1 , 9 64 & 965 (B)/2018 2010 - 11 , 2011 - 12 & 2012 - 13 K.RAMASWAMY, NO.5 6 7, ASHWINI,1 ST CROSS, MARUTHI TEMPLE ROAD, KUVEMPUNAGARA, MYSORE - 570 023 PAN NO.ADGPR5117A THE ACIT, CIRCLE - (1), MYSORE - 570 008 3 967(B)/2018 2010 - 11 R.AJITH, NO.567, ASHWINI,1 ST CROSS, MARUTHI TEMPLE ROAD, KUVEMPUNAGARA, MYSORE - 570 023 PAN NO. AGPPR0788R THE ACIT, CIRCLE - (1), MYSORE - 570 008 APPELLANT BY : SHRI TATA KRISHNA, A DVOCATE REVENUE BY : SHRI MANJEET SINGH , ADDL.C IT DATE OF HEARING : 06 - 02 - 2020 DAT E OF PRONOUNCEMENT : 12 - 02 - 2020 O R D E R PER BENCH : THESE ARE APPEALS BY THE A SSESSEE S AGAINST SIX DIFFERENT ORDER S OF CIT(A) , MYSORE , AS PER THE FOLLOWING DETAILS; ITA NOS. 956 - 958,961,964&965 & 967(B)/2018 2 2. I. ITA NOS.956,957 & 958(B)/2018 & 964 & 965(B)/2018 ARE APPEALS BY THE A SSESSEE AGAINST THE ORDERS OF CIT(A) , MYSORE DATED 28 - 09 - 2017 FOR ASSESSMENT YEARS: 2007 - 08,2008 - 09 & 2009 - 10 AND 2011 - 12 & 2012 - 13. 3. II. ITA NO.961(B)/2018 IS AN APPEAL OF THE AS SESSEE AGAINST THE ORDER OF CIT(A) , MYSORE DATED 31 - 03 - 2017 FOR ASSESSMENT YEAR 2010 - 11. 4. IN ALL THESE APPEALS , THE A SSESSEE HAS CHALLENGED THE ORDER OF CIT(A) , WHEREBY THE CIT(A HAD CONFIRMED THE ORD E R OF A O IMPOSING PENALTY ON THE A SSESS E E U/S 271B OF THE IT ACT, 1961 (ACT). THE A SSESSEE IN ALL THESE APPEALS IS ONE SHRI K.RAMASWAMY. 5. ITA NO.967(B)/2018 IS AN APPEAL BY THE A SSESSEE BY N A ME SHRI R. AJITH AGAINST THE ORDER DATED 28 - 09 - 2017 OF CIT(A), MYSORE RELATING TO ASSESSMENT YEAR 2010 - 1 1. IN THIS APPEAL, THE A SSESSEE CHALLENGED THE ORDER OF CIT( A) WHEREBY THE CIT(A) CONFIRMED THE ORDER OF AO IMPOSING PENALTY ON THE A SSESSEE U/S 271B OF THE ACT. 6. THE A SSESSE E BY NAME SHRI K.RAMASWAMY, IS AN INDIVIDUAL ENGAGED IN REAL ESTATE BUSINESS. IN THE COURSE OF HIS BUSINESS HE ACQUIRED AGRICULTURAL LAND M EASURING APPROXIMATELY 16 ACRES AT MARASE VILLAGE, MYSORE TALUK. THE A SSESSEE CONVERTED THE SAID LAND INTO NON - AGRICULTURAL LAND AND FORMED HOUSING LAYOUT AND SOLD SITES AFTER SUCH CONVERSION. THESE LANDS WERE SUBSEQUENTLY, ACQUIRED BY THE KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD ( KIADB ) UNDER THE KIADB ACT, 1966. AFTER SUCH ACQUISITION , POSSESSION OF THE LAND S W ERE FORCIBLY TAKEN FROM THE A SS ESSEE AND IN THE BUILDINGS OWNED BY THE A SSESSEE IN WHICH THE BOOKS OF ACCOUNTS WERE ALLEGEDLY KEPT HAD BE EN DESTROYED IN THE PROCESS OF DEMOLITION WHILE TAKING FORCEFUL POSSESSION FROM TH E A SSESSEE. THE POSSESSION OF THE LAND WAS TAKEN SOMETIME IN THE MONTH OF JULY, 2007. ITA NOS. 956 - 958,961,964&965 & 967(B)/2018 3 7. A SURVEY U/S 133 A OF THE ACT WAS CONDUCTED ON 22 - 07 - 2013. IT IS CONSEQUENT THAT THE SURVEY PROCEEDINGS U/S 1 48 OF THE ACT WERE INITIATED IN THE C A SE OF THE A SSESSEE. IN THE PROCEEDINGS U/S 148 OF THE ACT , THE A SSESSEE FILED RETURN OF INCOME ON THE FOLLOWING DATES: ASSESSMENT YEAR S DATE OF FILING THE RETURN OF INC O ME 2007 - 08 28 - 08 - 2013 2008 - 09 13 - 09 - 2013 2009 - 10 07 - 11 - 2013 2010 - 11 31 - 12 - 2013 2011 - 12 19 - 03 - 2014 2012 - 13 12 - 06 - 2014 IT IS NOT IN DISPUTE THAT ALONGWITH THE RETURN OF INCOME A SSESSEE FILED AUDIT REPORT U/S 44 A B OF THE ACT. IT IS NOT DISPUTED THAT THE PROVISIONS OF SEC.44AB OF THE ACT WERE APPLICABLE IN THE C A SE OF THE A SSESSEE IN ALL THE ASSESSMENT YEARS REFERRED TO ABOVE. THE A SSESSEE WAS REQUIRED TO GET THE BOOKS OF ACCOUNTS AUDITED AND FILE SUCH REP ORT BEFORE THE SPECIF IED DATE. ADMITTEDLY, THE AUDIT REPORT W AS NOT OBTAINED AND FILED BEFORE THE SPECIFIED DATE AND THEREFORE, THERE WAS A DEFAULT ON THE PART OF THE A SSESSEE U/S 44AB OF THE ACT. AS PER 271B OF THE ACT , IF ANY PERSON WHO FAILS TO FURNISH A REPORT OF AUDIT AS IS REQUIRED BY SEC.44AB OF THE ACT WITHIN THE SPECIFIED DATE, IS LIABLE FOR PENALTY . AS PER SECTION 273B OF THE ACT NO PENALTY CAN BE IMPOSED , IF THERE WAS REASONABLE CAUSE FOR FAILURE TO GET THE REPORT OF AUDIT ON OR BEFORE THE SPECIFIED DATE AND FURNISH THE SAME ON OR BEFORE THE SPECIFIED DATE. 7. THE FACTS IN THE CASE OF SHRI R. AJITH ARE IDENTICAL. I N ITA NO.967(B)/2018 . H E FILED RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 OF THE ACT FOR THE ASSESSMENT YEAR 2010 - 11 ON 30 - 12 - 2014 ALONGWITH THE RETURN HE ALSO FILED REPORT OF AUDIT BUT THAT REPORT WAS NOT OBTAINED AND FILED BEFORE THE SPECIFIED DATE AS REQUIRED U/S 44AB OF THE ACT. HENCE, PENALTY U/S 271B OF THE ACT, W AS INITIATED ON THE A SSESSEE BY THE AO WHICH WAS CONFIRMED BY THE CIT(A). ITA NOS. 956 - 958,961,964&965 & 967(B)/2018 4 8. AGGRIEVED BY TH E ORDER OF CIT(A) , A SSESSEES HAVE FILED THESE APPEALS BEFORE THE TRIBUNAL. 9. BEFORE US , SEVERAL CONTENTIONS WERE PUT FORTH BY THE LD.COUNSEL FOR THE A SSESSEE ON THE VALIDITY OF THE IMPOSITION OF PENALTY U/S 271B OF THE ACT. WE SHALL FIRST TAKE UP THE GROUND WITH REGARD TO ABSENCE OF PRIOR APPROVAL HAVING BEEN TAKEN BY THE A O WHO WAS OF THE RANK OF ACIT, A S CONTEMPLATED BY THE PRO V ISIONS OF SEC.274(2) OF THE ACT . THIS G ROUND W OULD BE RELEVANT FOR APPEALS IN THE CASE OF SHRI K .RAMASWAMY FOR ASSESSMENT YEAR S 2009 - 10 TO 2012 - 13. I.E ITA NO S .958(B)/2018, 964, 965(B)/2018 AND THE APPEAL OF SHRI R.AJITH IN ITA N O .967(B)/20 18 FOR ASSESSMENT YEAR 2010 - 11. AS FAR AS THE AFORESAID ISSUE IS C ONCERNED SEC.274(2) OF THE ACT, PROVIDES THA T NO ORDER IMPOSING PENALTY UNDER CHAPTER XXI WHICH ALSO INCLUDES SEC.271B SHALL BE MADE BY ACIT OR DCIT WH ERE THE PENALTY EXCEEDS RS.20,000/ - WITHOUT THE PRIOR APPROVAL OF THE JOINT CIT . IT IS N OT IN DISPUTE BEFORE US THAT THE PENALTY IMPOSED FOR AFORESAID ASSESSMENT YEARS EXCEEDS RS.20,000/ - AND THEREFORE, THE PRIOR APPROVAL OF THE JCIT WAS REQUIRED TO BE OBTAINED. THE ORDER IMPOSING PENALTY WAS PASSED BY THE ACIT IN THE CAS E OF SHRI R AJITH, WAS PASSED ON 23 - 09 - 2015 AND IN THE CASE OF SHRI K.RAMA SWAMY, WAS PASS E D ON 2 3 - 09 - 2015 IN ALL THESE ASSESSMENT YEARS . 10. THE LD. COUNSEL FOR THE A SSES S EE FILED BEFORE US COPIES OF APPROVAL GIVEN BY THE JCIT AND THE APPROVAL IN THE CASE OF SHRI R.AJITH , IS DATED 28 - 09 - 2015 AND IN THE CASE OF SHRI K . RAMASWAM Y DATED 24 - 09 - 2015. IT IS THUS CLEAR THAT THERE HAS BE E N VIOLATION OF THE PROVISIONS OF SEC.274(2) OF THE ACT IN AS MUCH AS THE PRIOR APPROVAL OF THE JCIT HAS NOT BEEN OBTAINED BEFORE IMPOSING PENALTY U/S 271B OF THE ACT. THE CONSEQUENCE OF NOT GETTING PRIOR APPROVAL IS THAT THE ORDER IMPOSING PENALTY HAS TO BE HELD AS INVALID. IN THIS REGARD THE LD.COUNSEL FOR THE A SSESSEE HAS PLACED RELIANCE O N THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C A SE OF PR.CIT VS SUNRI SE FINLEASE (P) LTD., (2018) 89 TAXMANN.COM 1( G UJ.) IN THE A FORESAID CASE, THERE WA S A RE Q U I REMENT THAT AN ORDER U/S 153C CAN BE PASSED ONLY AFTER OBTAINING PRIOR APPROVAL U/S 153D OF THE ACT , BY JCIT. ITA NOS. 956 - 958,961,964&965 & 967(B)/2018 5 THE QUESTION BEFORE THE COURT WAS THAT ABSENCE OF SUCH PRIOR APPROVAL WOULD RENDER THE ORDER OF ASSESSMENT AND THE PROCEEDINGS WOULD STAND INVALIDATED. THE HONBLE GUJARAT HIGH COURT HELD THAT ABSENCE OF PRIOR APPROVAL RENDERS THE PROCEEDINGS INVALID. THE LD. COUNSEL ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE ITAT, DELHI C BENCH IN THE CASE OF M .P.JAIN VS ITO WHEREIN , IT WAS HELD THAT THE PENALTY IMPOSED BY THE ITO WITHOUT PRI OR APPROVAL OF IAC WAS INVALID AND IT HAD TO BE CANCELLED. THE IMPOSITION OF PENALTY IN THAT CASE WAS U/S 273A OF THE ACT WHICH REQUIRED THE ITO TO OBTAIN THE APPROVAL OF IAC. 12. THE LD.DR SUBMITTED THAT IT WAS ONLY A PROCEDURAL IRREGULARITY W H ICH WILL NOT INVALIDATE THE ORDER IMPOSING PENALTY U/S 273B OF THE ACT. 13. WE HAVE GIVEN A CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT IN THE LIGHT OF THE ADMITTED FACTUAL POSITION THE ORDER IMPOSING PENALTY U/S 273B OF THE ACT , WAS PASSED WITHOUT OBTAINING PRIOR APPROVAL OF THE JCIT , AS REQUIRED BY THE PROVISION S OF SEC.274(2) OF THE ACT. THE ORDER IMPOSING PENALTY FOR THE AFORESAID ASSESSMENT YEARS ARE INVALID AND LIABLE TO BE CANCELLED ON THIS GROUND. THUS, THE APPEALS OF SHRI K.RAMASWAMY, FOR ASSESSMENT YEARS 2009 - 10 TO 2012 - 13 I.E. IN ITA NO S .958.961,964 & 96 5(B)/2018 AND THE APPEAL OF SHRI R AJITH BEING ITA NO.967(B)/2018 FOR ASSESSMENT YEAR 2010 - 11 ARE ALLOWED . 14. WHAT REMAINS FOR CONSIDERATION IS ITA NO.956 & 958 OF SHRI K.RAMASWAMY FOR ASSESSMENT YEARS 2007 - 08 & 2008 - 09. AS FA R AS THESE TWO APPEALS ARE CONCERNED , WE DEEM IT APPROPRIATE TO DEAL WITH THE ARGUMENTS OF THE LD. COUNSEL FOR THE A SSESSEE THAT T HE PENALTY IMPOSED IN THESE TWO APPEAL S ALSO DESERVES TO BE CANCELLED FOR THE REASONS THAT IN THE QUANTUM ORDER I.E. THE ORDER OF ASSESSMENT THE AO HAS NOT RECORDED ANY SATISFACTION REGARDING LEVY OF PENALTY U /S 27 1 B OF THE ACT . IN THIS REGARD, THE LD.COUNSEL FOR THE A SSESSEE DREW OUR ATTENTION TO THE ORDER S OF ASSESSMENT DATED 08 - 05 - 2014 FOR ASSESSMENT YEAR S 2007 - 08 AND 2008 - 09 . COPIES OF WHICH ARE PLACED AT PAGE - 81 - 86 OF THE A SSESSEES PAPER BOOK. ITA NOS. 956 - 958,961,964&965 & 967(B)/2018 6 15. IN THE AFORESAID ORDER S OF ASSESSMENT , THE AO HA S NOT RECORDED ANY SATISFACTION REGARDING THE VIOLATION OF A SSESSEE U/S 44AB OF THE ACT AND INITIATION OF PENALTY PROCEEDINGS FO R SUCH VIOLATION. THE LD. COUNSEL FOR THE A SSESSEE DREW OUR ATTENTION TO THE DECISION OF THE H O NBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V S E.C.C.PROJECT (P) LTD., (2014) 49 TAXMANN.COM 17 (ALLAHABAD) WHEREIN IT WAS HELD THAT IF THE AO HAS NOT RECORDED SATISFACTION IN THE ASSESSMENT ORDER REGARDING VIOLATION OF SEC.44 A B OF THE ACT AND INITIATED PROCEEDINGS U/S 271B OF THE ACT , THEN THE ORDER IMPOSING PENALTY U/S 271B OF THE ACT IS LIABLE TO BE CANCELLED ON THAT GROUND. OUR ATTENTION WAS ALSO DR AWN TO A DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS JAI LAXMI RICE MILL, AMABALA CITY (379 ITR 521(SC) WHEREIN, IN THE CONTEXT OF IMPOSI TION OF PENALTY U/S 271E OF THE ACT (WHICH IS AKIN TO SEC.271D) THE HONBLE SUP R EME COURT HELD THAT RECORDING OF SATISFA CTION AND INITIATION OF PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER IS REQUIRED AND IN THE A BSENCE OF THE SAME THE PENALTY PROCEEDINGS U/S 27E OF THE ACT ARE LIABLE TO BE CANCELLED. 16. THE LD. D R SUBMITTED THAT FOR INITIATING PROCEED INGS U/S 271B OF THE ACT NO SUCH SATISFACTION HAS TO BE RECORDED IN THE ORDER OF ASSESSMENT AS IT IS A DISTINCT DEFAULT, DIV ERSE FROM THE ASSESSMENT PROCEEDINGS. 17. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT T HERE HAS BEEN NO RECORDING OF SATISFACTION IN THE O RDER OF ASSESSMENT PROCEEDINGS. THEREFORE, AS PER THE LAW LAID DOWN I N THE DECISION S CITED BY THE LD. COUNSEL FOR THE ASSESSEE , IMPOSITION OF PENALTY U/S 271B O F THE ACT CANNOT BE SUSTAINED. THEREFORE, THE ORDERS IMPOSING PENALTY FOR THESE TWO ASSESSMENT YEARS ARE ALSO LIABLE TO BE CANCELLED. ITA NOS. 956 - 958,961,964&965 & 967(B)/2018 7 18. IN THE RESULT, ALL THESE APPEALS FILED BY THE ASSESSE E S ARE ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEB.2020. SD/ - SD/ - ( A.K.GARODIA ) ( N.V.VASUDEVAN ) ACCOUNTANT MEMBER VIC E PRESIDENT DATED : 12 - 02 - 2020. *AM COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST. REGISTRAR