Himachal Futuristic Communications Ltd., New Delhi V. JCIT, New Delhi

ITSSA 8/DEL/2012

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1085 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-09-2015
• Assessment Year: misc
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 131; 27

Judgement Text

IT(SS)A NO. 08/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.(SS)A.NO.08/DEL/2012 ASSESSMENT YEAR : 2002-03 HIMACHAL FUTURISTIC COMMUNICATIONS LTD., VS JOINT DIRECTOR INCOME TAX 8, COMMERCIAL COMPLEX, (INV.), UNIT-V, ARA CENTRE, MASJID MOTH, GREATER KAILASH-II, JHANDEWALAN EXTN ., NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT B Y: SHRI VARUN MEHLAWAL, ADV. RESPONDENT BY : SHRI T. V ASANTHAN, SR. DR DATE OF HEARING: 22.09.2015 DATE OF PRONOUNCEMENT: 4.11.2015 O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-XXXIII, NEW DELHI DATED 30.11.2011 PASSED IN APPEAL NO. 491/07- 08/05 FOR ASSESSMENT YEAR 2002-03 TO 2007-08 PAS SED U/S 272A(1)( C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) HAS BEEN U PHELD CONFIRMING THE PENALTY OF RS.10,000/-. 2. THE GROUNDS RAISED BY THE ASSESSEE/APPELLANT REA D AS UNDER:- 1. THE ORDER PASSED BY CIT (A) -XXXIII IS BAD IN LAW AND VOID AB-INITIO. IT(SS)A NO. 08/DEL/2012 2 2. THE CIT (A) -XXXIII HAS ERRED IN CONFIRMING THE PENALTY OF RS. 10,000/- ON THE APPELLANT BY THE RESPONDENT UNDER SECTION 272 A (1) (C) OF THE INCOM E TAX ACT, 1961, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE CIT (A)-XXXIII HAS ERRED IN CONFIRMING THE PENALTY OF RS. 10,000/- ON THE APPELLANT BY THE RESPONDENT UNDER SECTION 272 A (1) (C) OF THE INCOM E TAX ACT, 1961, ON THE APPELLANT FOR REASONS ATTRIBUTABLE TO THE APPELLANT AS THE APPELLANT WAS DISABLED BY THE I.T. TEAM TO ACCESS THE HARD DISC CONTAINING THE ACCOUNTING DATA BY NOT FOLLOWING THE PROPER PROCEDURE FOR THE SHUT DOWN OF THE SAME AND IN THE PROCESS IT WAS CORRUPTED. 3. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD, INTER ALIA PENA LTY ORDER OF THE ASSESSING OFFICER, IMPUGNED ORDER, PAPER BOOK FILED BY THE AS SESSEE, SPREAD OVER 12 PAGES AND RELEVANT PART OF THE ASSESSMENT ORDER DATED 29. 12.2009. 4. AT THE VERY OUTSET, FROM OPERATIVE PART OF THE P ENALTY ORDER, WE NOTE THAT THE PENALTY HAS BEEN IMPOSED BY OBSERVING AS UNDER: - FROM THE ABOVE DISCUSSION, IT IS EVIDENT THAT ALL THE PRECONDITIONS FOR APPLICATION AND IMPOSITION OF PEN ALTY HAVE BEEN SQUARELY MET AND IT CAN BE REASONABLY CONCLUDE D THAT THERE IS ANIMUS I.E. CONSCIOUS AVOIDANCE ON THE PART OF T HE ASSESSEE COMPANY TO NOT PRODUCE THE BOOKS OF ACCOUNTS IN RES PONSE TO THE SUMMONS U/S 131 OF THE INCOME TAX ACT, 1961 ISSUED BY DDIT(INV), UNIT V(2), DELHI. THEREFORE, IT IS PROVE D THAT M/S HFCL HAS VESTED INTEREST IN NON RESPONDING TO THE S UMMON U/ S 131 OF THE IT ACT 1961. THE CRITERION FOR AVOIDANCE OF THE PENALTY IS THAT THE EXPLANATION OF THE PERSON FOR THE PURPOSE OF AVOIDA NCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANATION. REBUTTAL FOR AVO IDANCE OF THE PENALTY MUST BE ON RELEVANT AND COGENT MATERIALS. H OWEVER, FROM IT(SS)A NO. 08/DEL/2012 3 THE FACTS OF THE CASE AND THE REPLY OF THE ASSESSEE COMPANY IN RESPONSE TO THE SHOW CAUSE NOTICE U/S 274 R.W.S. 27 2A (1) (C) OF THE IT ACT 1961, THE ASSESSEE COMPANY HAS MERELY RE -ITERATED ITS EARLIER SUBMISSIONS. IN ANY CASE, THE FACT OF THE MATTER IS THAT THE ASSESSEE COMPANY WAS TO PRODUCE THE BOOKS OF AC COUNTS BEFORE THE INVESTIGATION WING OF THE DEPARTMENT FOR VERIFICATION IN ITS CASE, WHICH IT FAILED TO DO SO PURPOSELY AND CONSCIOUSLY, AND DESPITE BEING IN POSSESSION OF THE BOOKS OF ACCOUNTS . I, THEREFORE, HOLD THAT M/ S HFCL HAS INTENTIONALLY AND WILLFULLY FAILED TO RESPOND TO THE SUMMON U/ S 131 OF THE I T ACT 1961 AND IT IS A FIT CASE FOR LEVY OF PENALTY U/ S 272 A (1) (C) READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961. THERE FORE, A PENALTY OF RS.L0,000/-( RS. TEN THOUSAND RUPEES ONL Y ) IS LEVIED AS BELOW:- PENALTY ( AS DISCUSSED ABOVE) = RS.10,000/- FROM FIRST APPELLATE ORDER OF THE CIT(A), WE NOTE T HAT THE PENALTY WAS UPHELD AS CONFIRMED BY OBSERVING AND CONCLUDING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED THE VIEWS OF THE JD IT (INV.), UNIT-V, NEW DELHI AND THE APPELLANT ON THE ISSUE. T HE APPELLANT HAS NOT CO-OPERATED WITH THE INVESTIGATION WING AND HAS NOT FURNISHED THE BOOKS OF ACCOUNTS ASKED FOR. THE APPE LLANT'S SUBMISSION THAT THE ACCOUNT BOOKS WERE IN THE SERVE R SEIZED BY THE INCOME-TAX DEPARTMENT IS ALSO NOT A VERIFIABLE FACT AS THE ACCOUNT BOOKS WERE NEVER ACCESSED IN INVESTIGATION WING EVEN WITH THE HELP OF EMPLOYEES OF THE APPELLANT COMPANY . IN HIS STATEMENT, SH. MAHENDRA NAHATA, CHAIRMAN OF THE APP ELLANT COMPANY HAD CLEARLY STATED THAT 'THE COMPANY KEEPS BACK UP DATA, WHICH WILL BE COMPILED TO PREPARE THE ACCOUNT S FOR THE YEARS FOR WHICH THE DEPARTMENT IS UNABLE TO ACCESS THE ACCOUNTS IN THE SERVER. ' DESPITE REPEATED OPPORTUNITIES, TH E APPELLANT COMPANY DID NOT PRODUCE BOOKS OF ACCOUNTS BEFORE TH E INVESTIGATION WING. I FIND THAT THE APPELLANT COMPA NY HAS INTENTIONALLY AND WILL FULLY FAILED TO PRODUCE ACCO UNT BOOKS BEFORE THE INVESTIGATION WING IN RESPONSE TO THEIR REPEATED SUMMONS. I THEREFORE HOLD THAT THE PENALTY U/S 272A (1)(C) WAS RIGHTLY LEVIED BY THE JDIT (LNV.), UNIT-V, NEW DELH I. ALL THE THREE GROUNDS OF APPEAL ARE THEREFORE DISMISSED. IT(SS)A NO. 08/DEL/2012 4 5. THE CRUX OF THE ALLEGATIONS LEVELLED BY THE AS SESSING OFFICER IS THAT THERE WAS A CONSCIOUS AVOIDANCE BY THE ASSESSEE TO NOT PR ODUCE BOOKS OF ACCOUNTS IN RESPONSE TO SUMMONS U/S 131 OF THE ACT ISSUED BY TH E DDIT(INV.) UNIT V(2), DELHI. THE CIT(A) UPHELD THE PENALTY BY OBSERVING THAT THE SUBMISSION AND EXPLANATION OF THE ASSESSEE IS NOT VERIFIABLE THAT THE ACCOUNT BOOKS WERE IN THE SERVER SEIZED BY THE DEPARTMENT IS NOT VERIFIABLE A S THE ACCOUNT BOOKS WERE NEVER ACCESSED IN INVESTIGATION WING EVEN WITH THE HELP OF EMPLOYEES OF THE APPELLANT COMPANY. 6. THE MAIN CONTENTION OF THE APPELLANT IS THAT THE ASSESSEE DID COOPERATE WITH THE REVENUE DURING ASSESSMENT PROCEEDINGS AND THE A SSESSEE PRODUCED BOOKS OF ACCOUNTS BEFORE DCIT WHICH IS APPARENT FROM THE OBS ERVATION IN PARA 3.13 AND 3.14 OF THE ASSESSMENT ORDER. IT WAS ALSO CONTENDE D BY THE ASSESSEE THAT ON THE ONE HAND, THE DEPARTMENT IS IMPOSING PENALTY FOR NO N-PRODUCTION OF ACCOUNT BOOKS AND ON THE OTHER HAND, THE REVENUE IS NOT CON SIDERING THE ACCOUNT BOOKS ON THE VAGUE ALLEGATION THAT SINCE THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS AT THE TIME OF SEARCH, DURING POST SEARCH INQUIRIES AND DURING ASSESSMENT PROCEEDINGS, HENCE LETTER GIVEN BY THE A SSESSEE IS NOT TREATED AS VALID PROOF OF PRODUCING OF BOOKS OF ACCOUNTS. LD. AR PL ACING RELIANCE ON THE ORDER OF THE ITAT, AHMEDABAD A BENCH DATED 31.10.2011 IN THE C ASE OF TARACHAND S. KASAT HUF VS DCIT IN IT(SS)A NO.196/AH D/2011 AND OTHER RELATED APPEALS, SUBMITTED THAT WHEN ASSESSEE HAS S UBMITTED ACCOUNT BOOKS IT(SS)A NO. 08/DEL/2012 5 DURING ASSESSMENT PROCEEDINGS, THEN NON-COMPLIANCE OF THE NOTICE CANNOT BE ATTRIBUTED TO THE ASSESSEE AND PENALTY U/S 272A(1)( C) CANNOT BE IMPOSED IN THE SITUATION OF BONAFIDE COMPLIANCE ON THE PART OF THE ASSESSEE SPECIALLY WHEN NO PREJUDICE HAS BEEN CAUSED TO THE REVENUE AND THE DE LAY IN SUBMITTING ACCOUNT BOOKS DID NOT BRING ANY BENEFIT OR WRONGFUL GAIN TO THE ASSESSEE. 7. REPLYING TO THE ABOVE, LD. DR SUPPORTED THE ACTI ON OF THE ASSESSING OFFICER AND IMPUGNED ORDER AND SUBMITTED THAT THERE WAS A CONSCIOUS NON- COMPLIANCE BY THE ASSESSEE TO THE NOTICES OF THE DC IT AND HENCE PENALTY U/S 272A(1)(C) OF THE ACT WAS CORRECTLY LEVIED WHICH WA S UPHELD BY THE CIT(A) ON WELL-FOUNDED REASONING. 8. ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, W E OBSERVE THAT FROM PARAS 3.13 OF THE ASSESSMENT ORDER, IT IS APPARENT THAT T HE ASSESSEE SUBMITTED ACCOUNT BOOKS DURING ASSESSMENT PROCEEDINGS AND FROM PARA 3 .14 IT IS APPARENT THAT THE ASSESSING OFFICER DID NOT CONSIDER THIS COMPLIANCE ON HIS OWN WHIMS BY OBSERVING THAT THE SAME WERE NOT PRODUCED AT THE TI ME OF SEARCH DURING POST SEARCH INQUIRIES AND DURING ASSESSMENT PROCEEDINGS AND THESE OBSERVATIONS ARE CONTRARY TO THE FACTS NOTED BY HIM IN PARA 3.13 THA T THE ASSESSEE SUBMITTED ACCOUNT BOOKS, HENCE, BASIS OF THE ALLEGATION THAT THE ASSESSEE DID NOT COMPLY WITH THE NOTICES OF THE DCIT IS NOT FOUND TO BE SUS TAINABLE. HOWEVER, WE OBSERVE THAT THERE WAS A DELAY IN COMPLYING WITH TH E DIRECTIONS/NOTICES OF THE DCIT/ASSESSING OFFICER BUT THIS APPEARS TO BE DUE T O REASONS BEYOND CONTROL OF IT(SS)A NO. 08/DEL/2012 6 THE ASSESSEE. IN THE CASE OF M/S HINDUSTAN STEELS LTD. VS THE STATE OF ORISSA AIR 1970 HON'BLE SUPREME COURT 253 , AS RELIED BY THE LD. AR, IT WAS HELD THAT EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE A UTHORITY COMPETENT TO IMPOSE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PEN ALTY WHERE THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE TAXING ST ATUTE. IN THE PRESENT CASE, WHEN THE ASSESSEE IS ABLE TO ESTABLISH THAT THE ACC OUNT BOOKS WERE PRODUCED DURING ASSESSMENT PROCEEDINGS, HOWEVER WITH SOME DE LAY, THEN IT IS A TECHNICAL/VENIAL BREACH OF THE PROVISIONS OF THE AC T AND PENALTY CANNOT BE HELD AS CORRECT AND JUSTIFIED. 9. IT IS ALSO RELEVANT TO NOTE THAT UNDISPUTEDLY SH RI MAHENDRA NAHATA, CHAIRMAN OF THE APPELLANT COMPANY IN HIS STATEMENT RECORDED ON 13.12.2007 STATED THAT THE COMPANY KEEPS BACK UP DATA, WHICH WILL BE COMPILED TO PREPARE THE ACCOUNTS FOR THE YEARS FOR WHICH THE DE PARTMENT IS UNABLE TO A ACCESS THE ACCOUNTS IN THE SERVER. THIS ALSO SHOWS COOPER ATION AND OBEDIENCE ON THE PART OF THE ASSESSEE COMPANY. HENCE, PENALTY CAN B E IMPOSED UPON THE ASSESSEE ON THE ALLEGATION OF NON-COMPLIANCE OF THE NOTICE U /S 131 OF THE ACT AND THE ASSESSING OFFICER WAS NOT CORRECT IN PASSING PENALT Y ORDER IMPOSING PENALTY OF RS.10,000 U/S 272A(1)(C) OF THE ACT. IN THIS SITUA TION, WE ARE INCLINED TO HOLD THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY AND HENCE IMPUGNED FIRST APPELLATE ORDER CANNOT BE HELD AS SUSTAINABLE AND THUS WE DEMOLISH THE IT(SS)A NO. 08/DEL/2012 7 SAME. ACCORDINGLY, GROUND NO. 1 TO 3 OF THE ASSESS EE/APPELLANT ARE ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PEN ALTY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 4.11.2015. SD/- SD/- (S.V. MEHROTRA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 4.11. 2015 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR