Shri Lalsingh Bhanwarsingh Jadon,, Indore v. The ITO, Indore

ITA 533/IND/2009 | 2005-2006
Pronouncement Date: 17-02-2010 | Result: Allowed

Appeal Details

RSA Number 53322714 RSA 2009
Bench Indore
Appeal Number ITA 533/IND/2009
Duration Of Justice 2 month(s) 24 day(s)
Appellant Shri Lalsingh Bhanwarsingh Jadon,, Indore
Respondent The ITO, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 17-02-2010
Date Of Final Hearing 16-02-2010
Next Hearing Date 16-02-2010
Assessment Year 2005-2006
Appeal Filed On 23-11-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER ITA NOS.532 AND 533/IND/2009 A.Y. 2005-06 LAL SINGH BHANWAR SINGH JADON INDORE (PAN AJLPJ-3049-E) .APPELLANT VS INCOME TAX OFFICER 3(3) INDORE .RESPONDENT APPELLANT BY : SHRI C.P. RAWKA FCA RESPONDENT BY : SMT. APARNA KARAN SR. DR O R D E R BOTH THESE APPEALS ARE BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED FIRST APPELLATE AUTHORITY DATED 18.9.2009 A ND 16.9.2009 RESPECTIVELY CHALLENGING THE IMPOSITION OF PENALTY OF RS. 41 200/- U/S 271B AND RS.31 035/- U/S 271(1) RESPECTIVELY. DU RING HEARING OF THESE APPEALS I HAVE HEARD SHRI C.P. RAWKA LEARNE D COUNSEL FOR THE ASSESSEE AND SMT. APARNA KARAN LEARNED SR. DR. 2 2. FIRST WE SHALL TAKE UP THE APPEAL IN ITA NO. 532 /IND/2009 WHEREIN THE IMPOSITION OF PENALTY U/S 271-B HAS BEEN CHALLE NGED. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASS ESSEE IS A LIQUOR CONTRACTOR AND PRIOR TO ASSESSMENT YEAR 2005-06 WAS NOT ASSESSED TO TAX AS THERE WAS NO BUSINESS ACTIVITY BY THE ASSESS EE THE ASSESSEE WAS STAYING IN A VILLAGE AND LATER ON SHIFTED TO A NEARBY TOWN PARTICIPATED IN A LIQUOR AUCTION AND A LIQUOR SHOP WAS ALLOTTED TO HIM IN VILLAGE TODI. IT WAS EXPLAINED THAT THE ASSESSEE IS LIABLE TO PAY TAX AT ORIGIN OF PURCHASE OF COUNTRY LIQUOR EVEN IF THERE IS NO EARNING TO THE ASSESSEE. IT WAS POINTED OUT THAT AFTER COMPLETION OF ASSESSMENT THE ASSESSEE WAS FOUND ELIGIBLE FOR REFUND OF RS.7 240/ -. IT WAS CLAIMED THAT THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT SINC E FULL AMOUNT OF TAX HAS BEEN PAID BY HIM THEREFORE HE DID NOT GET HIS ACCOUNTS AUDITED. IT WAS FAIRLY ADMITTED THAT AFTER RECEIPT OF NOTICE FR OM THE DEPARTMENT THE ASSESSEE GOT HIS ACCOUNTS AUDITED AND SUBMITTED BEF ORE THE AO AND GOT IT ASSESSED WHICH FINALLY RESULTED INTO REFUND OF R S.7 240/-. THE CRUX OF ARGUMENTS IS THAT SINCE TAX WAS PAID PRIOR TO INCOM E THEREFORE THE IMPOSITION OF PENALTY U/S 271B IS NOT JUSTIFIED FOR WHICH RELIANCE WAS PLACED ON THE DECISIONS IN CIT VS. IQBALPUR COOPERA TIVE CANE DEVELOPMENT UNION LTD. (179 TAXMAN 27) (UTTARAKHAND ) ITO VS. NANAK SINGH GULIANI (257 ITR 677) (MP) AND M/S. SHAPE-N-S IZE CASTING PVT. 3 LTD. VS. ACIT (ITA NO. 281/IND/2005). ON THE OTHER HAND THE LEARNED SR. DR STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDI NG THAT FIRSTLY THE CASES RELIED UPON BY THE LEARNED COUNSEL FOR THE AS SESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT APPEAL AND S ECONDLY THE ASSESSEE DID NOT GET HIS ACCOUNTS AUDITED BEFORE ISSUANCE OF NOTICE BY THE DEPARTMENT. THE IMPUGNED ORDER WAS STRONGLY DEFENDE D. 3. I HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED RESPECTIVE COUNSELS AND PERUSED THE MATERIAL AVAILA BLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL ORIGI NALLY RESIDING IN A VILLAGE AND LATER ON SHIFTED TO A TOWN IN DISTRICT UJJAIN. THE ASSESSEE GOT LICENCE FOR THE SALE OF LIQUOR IN VILLAGE TODI TEH. SANWER AND THE TOTAL SALES WERE TO THE TUNE OF RS. 82 32 797/-. SINCE THE TURNOVER OF THE ASSESSEE WAS MORE THAN RS. 40 LACS HE WAS REQUIRED TO GET HIS A CCOUNTS AUDITED U/S 44AB OF THE ACT BEFORE THE SPECIFIED DATE I.E. 31.1 0.2005. THE AO INITIATED PENALTY PROCEEDINGS U/S 271B. AS PER THE REVENUE SINCE THE ASSESSEE DID NOT ATTEND THE PROCEEDINGS IN RESPONSE TO NOTICES THEREFORE HE WAS HELD TO BE ASSESSEE IN DEFAULT FO R NOT GETTING HIS ACCOUNTS AUDITED AS REQUIRED U/S 44AB OF THE ACT T HEREFORE THE PENALTY OF RS. 41 200/- WAS IMPOSED. THE PENALTY ORDER WAS AFFIRMED IN APPEAL BY THE LEARNED CIT(A) WHICH IS UNDER CHALLENGED BE FORE THIS TRIBUNAL. ADMITTEDLY THIS IS THE FIRST YEAR OF BUSINESS OF T HE ASSESSEE. THE CRUX OF 4 ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASS ESSEE WAS UNDER A REASONABLE BELIEF THAT SINCE TAX HAS ALREADY BEEN D EPOSITED AND REFUND WAS ALLOWED THEREFORE THE ASSESSEE IS NOT OBLIGED TO FILE THE RETURN OR TO GET THE ACCOUNTS AUDITED. BEFORE COMING TO ANY CONC LUSION I AM REPRODUCING HEREUNDER THE RELEVANT PROVISION AS CON TAINED IN SECTION 271B OF THE ACT:- [ FAILURE TO GET ACCOUNTS AUDITED. 271B. IF ANY PERSON FAILS 66 [***] TO GET HIS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR OR YEARS RE LEVANT TO AN ASSESSMENT YEAR OR 67 [FURNISH A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB ] THE 68 [ASSESSING] OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PE NALTY A SUM EQUAL TO ONE-HALF PER CENT OF THE TOTAL SALES TURNOVER OR GROSS RECEIPTS AS THE CASE MAY BE IN BUSINESS OR OF THE GROSS RECEIPTS IN PROFESSION IN SUCH PREVIOUS YEAR OR YEARS OR A SUM OF ONE HUNDRED THOUSAND RUPEES WHICHEVER IS LESS.] THE AFORESAID PROVISION WAS INSERTED BY THE FINANCE ACT 1984 W.E.F. 1.4.1985 WHEREAS THE PRESENT ASSESSMENT YEAR IS 200 2-03 THEREFORE THE AFORESAID PROVISION IS DULY APPLICABLE TO THE C ASE OF THE ASSESSEE. AS PER THE PROVISION OF SECTION 271B THE ASSESSEE IS S UPPOSED TO GET ITS ACCOUNTS AUDITED IN RESPECT OF ANY PREVIOUS YEAR AN D TO FURNISH THE AUDITED REPORT AS REQUIRED UNDER SECTION 44AB OF TH E ACT FAILING WHICH THE PENALTY IS LIABLE TO BE IMPOSED AS PROVIDED IN THE SECTION . ADMITTEDLY EVEN AFTER AUDITED ACCOUNTS FINALLY THE ASSESSMENT RESULTED 5 INTO REFUND OF RS. 7240/- BUT THE FACT REMAINS THAT THE PROVISIONS OF SECTION 44AB WERE NOT COMPLIED WITH BY THE ASSESSEE WHICH RESULTED INTO IMPOSITION OF PENALTY U/S 271B. THIS IS ALSO A FACT THAT IT IS NOT THE CASE THAT THE ASSESSEE SUO MOTO GOT HIS ACCOUNTS AU DITED RATHER THE AUDIT WAS GOT DONE AFTER RECEIPT OF NOTICE ISSUED T O THE ASSESSEE ON 23.8.2008 TO WHICH THERE WAS NO RESPONSE BY THE ASS ESSEE. ANOTHER NOTICE DATED 16.9.2008 WAS ISSUED WHICH WAS ALSO NO T COMPLIED WITH AND THEREAFTER THE ASSESSEE WAS HELD TO BE IN DEFAU LT FOR NOT GETTING THE TAX AUDIT REPORT AS REQUIRED U/S 44AB OF THE ACT. H OWEVER THE FACT REMAINS THAT IN SECTION 44A FOR IMPOSING PENALTY TH ERE IS DISCRETION WITH THE AO AND IT IS NOT MANDATORY IN NATURE. THE REASO NABLENESS HAS TO BE CONSIDERED FOR THE ALLEGED NON-COMPLIANCE. EVEN IN THE ASSESSMENT FRAMED U/S 143(3) READ WITH SECTION 148 OF THE ACT VIDE ORDER DATED 23.8.2008 I HAVE FOUND THAT IN ITNS-150 (INCOME TAX COMPUTATION FORM) THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS.5 90 5 00/- WHEREIN REFUND OF RS. 7 239/- WAS GRANTED TO THE ASSESSEE. THEREFO RE IT CAN BE SAID THAT THERE IS NO LOSS TO THE REVENUE. IN SUCH A SIT UATION IT CAN BE SAID THAT THE ASSESSEE WAS UNDER A REASONABLE BELIEF THA T SINCE THE TAX HAS ALREADY BEEN PAID BY THE ASSESSEE THEREFORE THE A SSESSEE HAS COMPLIED WITH THE PROVISIONS OF THE ACT. EVEN OTHER WISE THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE. AS PER PROVISIONS OF SECTION 271B A 6 DISCRETION HAS BEEN GIVEN TO THE LEARNED AO TO LEVY PENALTY BY USING THE WORD MAY. IT IS NOT MANDATORY IN NATURE BUT DISC RETIONARY. VIDE FINANCE ACT 1988 (CIRCULAR NO. 525 DATED 24 TH NOVEMBER 1998) SECTION 206C WAS INTRODUCED IN THE ACT WHICH PROVIDES FOR COLLE CTION OF TAX AT SOURCE. THE OBJECT OF INTRODUCTION OF THE NEW PROVISION FO R WORKING OUT THE PROFIT ON PRESUMPTIVE BASIS AND TO GET OVER THE PROBLEM FA CED IN ASSESSING THE INCOME AND RECOVERY OF TAXES IN THE CASE OF PERSONS TRADING IN COUNTRY LIQUOR TIMBER AND FOREST PRODUCE WHEREIN LARGE NU MBER OF SUCH PERSONS EITHER DO NOT MAINTAIN ANY BOOKS OF ACCOUNTS OR THE BOOKS ARE MAINTAINED AS IRREGULAR OR INCOMPLETE. AFTER A CER TAIN PERIOD IT IS VERY DIFFICULT TO LOCATE SUCH PERSONS AFTER THE AGREEMEN T IS OVER. EVEN THE DEPARTMENT SOMETIMES FINDS IT DIFFICULT TO COLLECT THE TAXES FROM THEM. IN VIEW OF THESE FACTS THE PRESUMPTIVE RATE OF PROFIT IS APPLIED IN CASES EXCEPT PUBLIC SECTOR COMPANY WHICH PURCHASES THE SP ECIFIED GOODS AND TRADES IN THE SAME. SECTION 44AC OF THE ACT APPLIE S ONLY IN CASE OF PERSONS ENGAGED IN THE TRADING OF GOODS REFERRED TO THEREIN. IN THE PRESENT APPEAL SINCE THE PRESUMPTIVE TAX HAS ALREA DY BEEN DEPOSITED BY THE ASSESSEE AND ESPECIALLY A REFUND WAS ALLOWED BY THE DEPARTMENT THAT TOO U/S 143(3)/148 OF THE ACT THEREFORE IT C AN BE SAID THAT THE ASSESSEE WAS UNDER A REASONABLE BELIEF THAT HE HAS PAID THE REQUIRED TAXES. SINCE THERE IS NO LOSS TO THE REVENUE THER EFORE I AM OF THE 7 CONSIDERED OPINION THAT NO PENALTY IS EXIGIBLE. TH E RATIO LAID DOWN BY THE HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V . IQBALPUR COOPERATIVE CANE DEVELOPMENT UNIONS LIMITED (2009) 179 TAXMAN 27 WHEREIN THE ASSESSEE COULD NOT GET ITS ACCOUNTS AUD ITED AS REQUIRED U/S 44AB OF THE ACT WITHIN THE PRESCRIBED TIME. THE AO IMPOSED PENALTY U/S 271B. SINCE NO TAX WAS PAYABLE BY THE ASSESSEE THE TRIBUNAL WAS HELD TO BE JUSTIFIED IN DELETING THE PENALTY. LIKEWISE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NANAKCHAND GULYANI (257 I TR 677) (M.P.) HELD THAT FOR NON-COMPLIANCE OF COMPULSORY AUDIT THERE IS A DISCRETIONARY POWER WITH THE AO IN IMPOSING PENALTY AND THE SAME WAS HELD TO BE NOT MANDATORY. SINCE THERE WAS REASONABLE CAUSE FOR NO N-COMPLIANCE PENALTY WAS HELD TO BE NOT IMPOSABLE U/S 44AB READ WITH SECTION 271B AND 273B OF THE ACT. THE INDORE BENCH OF THE TRIBUN AL IN THE CASE OF SHAPE-N-SIZE CASTING PVT. LTD. (SUPRA) PLACED RELIA NCE UPON THE DECISION FROM THE HONBLE JURISDICTIONAL HIGH COURT IN NANAK CHAND GULIANI (SUPRA) AND ALSO THE DECISION FROM THE HON BLE RAJASTHAN HIGH COURT IN BAJRANG OIL MILLS (207 CTR 1) AND ULTIMATE LY DELETED THE PENALTY IMPOSED U/S 271B. THIS DECISION OF THE TRIB UNAL HAS ATTAINED FINALITY AS NO CONTRARY DECISION WAS BROUGHT TO MY NOTICE. IN THE LIGHT OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS THE PENALT Y IMPOSED U/S 271B IS DELETED CONSEQUENTLY THIS APPEAL OF THE ASSESS EE IS ALLOWED. 8 4. NOW I SHALL TAKE APPEAL IN ITA NO. 533/IND/2009 WHEREIN THE CONFIRMATION OF PENALTY U/S 271(1) AMOUNTING TO RS .31 035/- HAS BEEN CHALLENGED BY THE ASSESSEE. IN VIEW OF THE ABOVE S INCE A REFUND OF RS. 7240/- WAS GRANTED TO THE ASSESSEE THEREFORE IT C AN BE SAID THAT THERE IS NO LOSS TO THE REVENUE. THE RATIO LAID DOWN BY THE HONBLE KERALA HIGH COURT IN CIT V. N. KRISHNAN (240 TAXMAN 47) SU PPORTS THE CASE OF THE ASSESSEE. ON PERUSAL OF SECTION 271(1) IT IS AMPLY CLEAR THAT PENALTY COULD BE DETERMINED WITH REFERENCE TO THE A MOUNT OF TAX AND UNLESS TAX IS DETERMINED PENALTY COULD NOT BE QUAN TIFIED. SINCE THERE IS NO LOSS TO THE REVENUE THEREFORE I AM OF THE VIEW THAT NO PENALTY CAN BE IMPOSED. THE RATIO LAID DOWN BY THE HONBLE APEX CO URT IN CIT V. PRIOTHIPAL SINGH & COMPANY; 249 ITR 670 FURTHER SUP PORTS THE CASE OF THE ASSESSEE. IN THE PRESENT APPEAL NEITHER THE AS SESSEE CONCEALED ITS INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCO ME THEREFORE NO PENALTY IS IMPOSABLE U/S 271(1) AS THE AFORESAID T WIN CONDITIONS ARE NECESSARILY HAVE TO BE COMPLIED WITH BEFORE IMPOSIN G PENALTY WHICH THE DEPARTMENT HAS FAILED TO DO SO. THE HONBLE MP HIGH COURT IN THE CASE OF CIT V. SKYLINE AUTO PRODUCTS PVT. LTD.(271 ITR 3 35) EVEN WENT TO THE EXTENT THAT WHEN MISTAKE IS BONAFIDE NO PENALTY IS LEVIABLE U/S 271(1). THE STAND OF THE ASSESSEE IS FURTHER FORTIFIED BY T HE FACT THAT EVEN IN THE ASSESSMENT ORDER THE INCOME DECLARED BY THE ASSESSE E WAS ACCEPTED 9 AND WHICH EVEN RESULTED INTO REFUND OF RS. 7240/-. IN VIEW OF THESE FACTS THIS APPEAL OF THE ASSESSEE IS ALLOWED. FINALLY BOTH THE APPEALS OF THE ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY 2010. (JOGINDER SINGH) JUDICIAL MEMBER FEBRUARY 17 2010 COPY TO APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE *DBN/