A.S. MOLOOBHOY & SONS, MUMBAI v. ACIT 17(1), MUMBAI

ITA 1041/MUM/2010 | 2002-2003
Pronouncement Date: 23-12-2010 | Result: Allowed

Appeal Details

RSA Number 104119914 RSA 2010
Assessee PAN AAAFA2693P
Bench Mumbai
Appeal Number ITA 1041/MUM/2010
Duration Of Justice 10 month(s) 13 day(s)
Appellant A.S. MOLOOBHOY & SONS, MUMBAI
Respondent ACIT 17(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 23-12-2010
Date Of Final Hearing 21-12-2010
Next Hearing Date 21-12-2010
Assessment Year 2002-2003
Appeal Filed On 09-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI BEFORE SHRI J SUDHAKAR REDDY ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 1041/MUM/2010 (ASSESSMENT YEARS: 2002-03) M/S A S MOLOOBHOY AND SONS ANCHOR HOUSE 1 ST MAGAZINE ST. DARUKHANA MUMBAI-400010 PAN:AAAFA2693P .. APPELLANT VS ACIT 17(1) R NO..113 1 ST FL PIRAMAL CHAMBERS LALBAUG PAREL MUMBAI-400012 RESPONDENT APPELLANT BY : SHRI S C TIWARI RESPONDENT BY : SHRI VIJAY SHANKAR O R D E R PER VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.12.2009 OF THE LEARNED CIT(A)-XXIX MUMBAI ARISING FROM THE PENALTY ORDER PASSED U/S 271B FOR THE ASSESSMENT YEAR 2002-03. 2. ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)S ERRED IN FACTS AND IN LAW IN ITA NO. 2820/MUM/2009 (ASSESSMENT YEARS: 2006-07) 2 CONFIRMING THE LEVY OF PENALTY U/S 271B ALTHOUGH T HE DELAYED FILING OF RETURN AND NON COMPLIANCE OF PROVISIONS OF SECTION 44AB ON THE PART OF THE ASSESSEE FIRM WAS ON ACCOUNT OF REASONS ENTIRELY BEYOND ITS CONTROL AND NOT DELIBERATE AND WILLFUL A ND NOT RESULTING IN ANY LOSS OF REVENUE TO THE GOVERNMENT. 3. FACTS LEADING TO THE PENALTY ARE THAT THE ASSESS EE FILED RETURN OF INCOME ON 1.11.2004 AS AGAINST THE DUE DA TE OF FILING RETURN 31.10.2002 ALONG WITH THE TAX AUDIT REPORT. SINCE TAX AUDIT REPORT FILED BELATEDLY THE AO HAS INITIATED PENALTY PROCEEDINGS U/S 271B R.W.S 274B AND IMPOSED THE PEN ALTY OF RS.1 LAKH VIDE ORDER DATED 24.1.2007. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY U/S 271B BEFORE THE CIT(A) WHO CONFIRMED THE ACTION OF THE AO. 4. BEFORE US THE LEARNED AR HAS SUBMITTED THAT DUE TO THE DIFFERENCES AND DISPUTES AMONGST THE PARTNERS OF TH E ASSESSEE-FIRM THERE WAS A DELAY IN FINALIZATION O F THE ACCOUNT FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENTS Y EAR UNDER CONSIDERATION. THESE DIFFERENCES AND DISPUTES LATE R ON WERE SETTLED BY WAY OF ARBITRATION AND CONSEQUENCE TO TH E DEED OF RETIREMENT AND RE-CONSTITUTION OF THE FIRM IN THE M ONTH OF MAY 2004. THEREAFTER THE ANNUAL ACCOUNTS FOR THE PRE VIOUS YEAR ENDING ON 31.3.2003 WAS FINALIZED IN THE MONTH OF M ARCH 2004 AND TAX AUDIT REPORT WAS OBTAINED ON 14.10.2004 WHI CH WAS ITA NO. 2820/MUM/2009 (ASSESSMENT YEARS: 2006-07) 3 FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INC OME FILED ON 1.11.2004. THE LEARNED AR HAS FURTHER CONTENDED THAT THE DELAY IN TAX AUDIT REPORT IS RESULT OF DELAY IN F INALIZATION OF ACCOUNT DUE TO THE REASONS EXPLAINED BY THE ASSESSE E WHICH WERE BEYOND THE CONTROL OF HUMAN BEING. THEREFORE THERE WAS DELAY IN OBTAINING THE TAX AUDIT REPORT U/S 44AB. HE HAS FURTHER SUBMITTED THAT THE DELAY WAS NOT DELIBERATE OR WILLFUL BUT DUE TO THE FACTS AND CIRCUMSTANCES AS EXPLAINED BY THE ASSESSEE. HE HAS FURTHER POINTED OUT THAT THERE N O LOSS TO THE REVENUE DUE TO THIS NON-FILING OF THE TAX AUDIT REP ORT WITHIN THE DUE DATE BECAUSE THE ASSESSEE FILED RETURN FOR CLAI MING REFUND. THE LEARNED AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE HAS DULY EXPLAINED THE REASONS FOR DEL AY IN OBTAINING THE TAX AUDIT REPORT AND THE REASONS EXP LAINED BY THE ASSESSEE ARE SUFFICIENT . HE HAS RELIED UPON TH E DECISION OF HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF VAMANA APPANNA & SONS V. ASSTT. CIT (1997) 58 TTJ (HYD-TRIB) 696 ; 5. ON THE OTHER HAND THE LEARNED DR HAS SUBMITTED THAT FILING OF THE RETURN ALONG WITH THE TAX AUDIT REPOR T BEFORE THE DUE DATE IS MANDATORY AND THE ASSESSEE HAS VIOLATED THE MANDATORY PROVISIONS OF STATUTE AND THEREFORE THE INTENT OF THE LEGISLATION HAS TO BE SEEN. HE HAS FURTHER SUBMIT TED THAT THE DISPUTES BETWEEN THE PARTNERS LEAD TO NON-FINALIZA TION OF THE ITA NO. 2820/MUM/2009 (ASSESSMENT YEARS: 2006-07) 4 ACCOUNTS IS NOT A PLAUSIBLE EXPLANATION FOR CONDON ATION OF DELAY. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE LEARNED AR AS WELL AS THE LEAR NED DR AND CONSIDERED THE RELEVANT RECORD. UNDISPUTEDLY T HERE WAS A DELAY IN FILING THE RETURN OF INCOME AND CONSEQUENT LY THE DELAY IN FILING THE TAX AUDIT REPORT. THE ASSESSEE HAS E XPLAINED THE REASONS FOR THE DELAY BEFORE THE AO DURING THE PEN ALTY PROCEEDINGS U/S 271B WHICH ARE RECORDED BY THE AO AS UNDER: ON ACCOUNT OF DIFFERENCE AND DISPUTES AMONG THE PARTNERS THERE WAS A DELAY IN FINALIZING THE ACCOUN TS OF THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR. THESE DIFFERENCES AND DISPUTES WERE LATER O N SETTLED BY AND WAY OF ARBITRATION AND CONSEQUENT T O THAT THE DEED OF RETIREMENT AND RECONSTITUTION OF THE FIRM WAS MADE IN THE MONTH OF MAY 2004. THE ANNUAL ACCOUNTS FOR THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR ENDING ON 31.3.2002 WERE THEREAFTER FINALIZED IN THE MONTH OF OCTOBER 2004 AND TAX AU DIT REPORT THEREON WAS OBTAINED ON 14.10.2004 WHICH WAS FILED BY OUR CLIENT ALONG WITH THE REUR5N OF INCOME FILED BY THEM ON 1.11.2004. IT IS SUBMITTED BY OUR CLIENT THAT THE DELAY IN FINALIZATION OF ANNUAL ACCOUNTS AND CONSEQUENT DEL AY IN OBTAINING TAX AUDIT REPORT U/S 44AB WAS ON ACCO UNT OF THESE REASONS BEYOND THEIR CONTROL AND WAS NOT DELIBERATE AND WILLFUL. HOWEVER AS IT WILL BE OBSE RVED FROM THE F RECORDS THERE HAS BEEN SUBSTANTIAL COMPLIANCE ON THE PART OF OUR CLIENT WITH THE PROVISIONS OF SECTION 44AB AND NO LOSS OF REVENUE H AS BEEN CAUSED TO THE GOVERNMENT ON ACCOUNT OF DELAY I N FINALIZATION OF TAX AUDIT REPORT FOR THIS ASSESSMEN T YEARS. CONSIDERATION THESE FACTS OUR CLIENTS REQUE ST YOUR HONOUR TO KINDLY CONDONE THE SAID DELAY AND DR OP ITA NO. 2820/MUM/2009 (ASSESSMENT YEARS: 2006-07) 5 THE PENALTY PROCEEDINGS INITIATE AGAINST OUR CLIENT U/S 271B OF IT ACT 1961 FOR THIS ASSESSMENT YEAR. WE HOPE YOUR HONOUR WILL FIND THE ABOVE SUBMISSIONS OF OUR CLIENT IN ORDER AND WILL KINDLY ACCEDE TO TH EIR REQUEST AND DROP THE PENALTY PROCEEDINGS INITIATED AGAINST THEM; WE REQUEST YOUR HONOUR KINDLY GRANT TO OUR CLIENT A N OPPORTUNITY FOR A DISCUSSION IN THE MATTER BEFORE Y OU FINALIZE YOUR DECISION IN THIS PENALTY PROCEEDINGS 7. AFTER CONSIDERING THE REPLY AND EXPLANATION AS REPRODUCED ABOVE. HE WAS OF THE VIEW: A) THAT THE REPLY IS NOT TENABLE FOR THE REASONS TH AT THE AUDIT REPORT U/S 44AB FILED AFTER A GAP OF TWO YEAR S FROM THE DUE DATE OF FILING ; B) IT WAS OBLIGATORY ON THE PART OF THE ASSESSEE TO OFFER THE TAX AND GET TAX AUDIT REPORT BEFORE THE DUE DATE AN D FILE THE AUDIT REPORT BY DUE DATE; C) THE DELAY OF THE PERIOD OF TWO YEARS IS NOT CONV INCING ; 8. IT IS CLEAR FROM THE ABOVE REASONING GIVEN BY T HE AO FOR NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE THAT THE CORRECTNESS OF THE EXPLANATION AND THE REASONS WER E NOT DISPUTED BY THE AO. THE EXPLANATION WAS TURNED DOW N BY THE AO BECAUSE IN VIEW OF THE AO IT WAS NOT TENABLE. AS PER THE PROVISIONS OF SECTION 273B NO PENALTY SHALL BE IMP OSED ON THE PERSON OR THE ASSESSEE FOR ANY FAILURE REFERRED TO IN THE ITA NO. 2820/MUM/2009 (ASSESSMENT YEARS: 2006-07) 6 VARIOUS PROVISIONS AS MENTIONED IN THE SAID SECTIO N INCLUDING SECTION 271B IF HE PROVES THAT THERE WAS A REASONA BLE CAUSE FOR THE SAID FAILURE. THE ASSESSING OFFICER HAS NO T DISPUTED THAT THERE WAS A DELAY IN FINALIZATION OF THE ACCOU NTS DUE TO THE DIFFERENCES AND DISPUTES BETWEEN PARTNERS OF TH E ASSESSEE-FIRM AND FINALLY THE FIRM WAS RECONSTITUTE D IN THE MONTH OF MAY 2004 AFTER THE SETTLEMENT BETWEEN THE PARTNERS THROUGH ARBITRATION. THUS UNLESS AND UNTIL THE A CCOUNTS ARE FINALIZED THERE CANNOT BE AUDIT REPORT U/S 44AB. W HEN THE EXPLANATION AND REASONS FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 271B ARE NOT FOUND AS UNTRUE THEN WHILE CONSTRUING THE REASONABLE CAUSE FOR THE SAID FAILUR E THE PERIOD OF DELAY SHALL NOT BE SOLE BASIS. IT IS REASON AND CAUSE WHICH IS MATERIAL FOR DECIDING THE REASONABLENESS OF TH E CAUSE. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF THE CA SE WE ARE OF THE VIEW THAT THE ASSESSEE HAS EXPLAINED A REAS ONABLE CAUSE FOR NOT FILING THE TAX AUDIT REPORT WITHIN A PERIOD OF TIME AS PRESCRIBED UNDER THE PROVISIONS OF ACT AND THER EFORE IN VIEW OF THE PROVISIONS OF SECTION 273B NO PENALTY CAN BE IMPOSED WHEN THE EXPLANATION AND REASONS ARE FOUND AS REASONABLE. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE PENALTY. ITA NO. 2820/MUM/2009 (ASSESSMENT YEARS: 2006-07) 7 9. IN THE RESULT THE APPEAL BY THE ASSESSEE IS ALL OWED ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2010 SD SD (J.SUDHAKAR REDDY) (V IJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M E MBER MUMBAI ON THIS 23 RD DAY OF DEC 2010 SRL:221210 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER ASSTT. REGISTRAR ITAT MUMBAI