SHREE SIDDHIVINAYAK AGENCY, MUMBAI v. DCIT CEN CIR-32, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO. 242/M/2009 ASSESSMENT YEAR : 2005-06 ITA NO.243/M/2009 ASSESSMENT YEAR : 2006-07 SHREE LAXMI ENTERPRISES SHOP NO.13 TRIVEDI TOWER J.N. ROAD MULUND(W) MUMBAI-80. ..( APPELLANT ) P.A. NO. (AASFS 5223 P) VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-32 MUMBAI. ..( RESPONDENT ) ITA NO.244/M/2009 ASSESSMENT YEAR : 2006-07 SHREE SIDDHIVINAYAK AGENCY 306 DEVJI KANJI BUILDING PRINCESS STREET MUMBAI-02. ..( APPELLANT ) P.A. NO. (ABCFS 0617 E) VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-32 MUMBAI. ..( RESPONDENT ) ITA NO.245/M/2009 ASSESSMENT YEAR : 2005-06 ITA NO.246/M/2009 ASSESSMENT YEAR : 2006-07 SHREE JALARAM ONLINE INFOTECH SHOP NO.3 BABU NIWAS S.V.P. ROAD MULUND(W) MUMBAI-80. ..( APPELLANT ) P.A. NO. (AAWFS 5986 R) VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-32 MUMBAI. ..( RESPONDENT ) ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 2 ITA NO.247/M/2009 ASSESSMENT YEAR : 2005-06 ITA NO.248/M/2009 ASSESSMENT YEAR : 2006-07 SHREE JALARAM LOTTERY AGENCY 258 WADIA BUILDING PRINCESS STREET MUMBAI-2. ..( APPELLANT ) P.A. NO. (AAAFS 7040 Q) VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-32 MUMBAI. ..( RESPONDENT ) ASSESSEE BY : SHRI SATISH MODI DEPARTMENT BY : SHRI KISHAN VYAS O R D E R PER BENCH. ALL THESE APPEALS PREFERRED BY FOUR RESPECTIVE ASSESSEES AR E DIRECTED AGAINST THE SEPARATE ORDERS DATED 15.10.2008 P ASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 SUSTAINING THE PENALTY IMPOSED BY THE AO AMOUNTING TO RS.1.00 L ACS EACH U/S.271B OF THE INCOME TAX ACT 1961(THE ACT). 2. FOR THE SAKE OF BREVITY THE BRIEF FACTS EXTRACTED FROM ITA NO.242/M/09 FOR ASSESSMENT YEAR 2005-06 IN THE CASE OF SHREE LAXMI ENTERPRISES ARE THAT THE ASSESSEE FIRM IS A DISTRIBUTOR OF GOVERNMENT LOTTERY TICKETS. THERE WAS A SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT ON 5.5.2005 AT THE OFFICE PREMISES OF M/S. SHREE JA LARAM LOTTERY ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 3 AGENCY AND M/S. JALARAM LOTTERY BHANDAR WHEREIN CER TAIN DOCUMENTS PERTAINING TO THE ASSESSEES WERE FOUND AND SEIZED. IN R ESPONSE TO NOTICE ISSUED U/S.153C THE ASSESSEE FILED RETURN DECLARIN G TOTAL INCOME OF RS.4 24 330/-. THE ASSESSMENT WAS ALSO COMPLETED AT THE SAME INCOME OF RS.4 24 330/- VIDE ORDER DATED 28.12.20 07 PASSED U/S.143(3) R.W.S. 153C OF THE ACT. THE AO ALSO INITIATE D PENALTY PROCEEDING U/S.271B OF THE ACT AND ACCORDINGLY ISSUED NOTI CE TO THE ASSESSEE TO SHOWCAUSE AS TO WHY PENALTY U/S.271B SHOULD NOT BE IMPOSED. IN RESPONSE THE ASSESSEE SUBMITTED HIS EXPLANATIO N VIDE LETTER DT.27.5.2008 WHICH HAS BEEN REPRODUCED BY THE A O IN PARA-3 OF THE IMPUGNED ORDER AS UNDER : THE SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THIS CASE. LOTS OF BOOKS AND DOCUMENTS WERE IMPOUNDED DURING THE COURSE OF ACTION. FURTHER THE SOFTWARE PROGRAMME WHICH WAS USED FOR WRITING BOOKS OF ACCOUNTS ALSO GOT CORRUPT AND CRASHED THE WHOLE SYS TEM. THE SYSTEM NEEDED THOROUGH UPDATION AND REVAMP. FURTHER ALL THE BOOKS WERE RE-WRITTEN AFTER GETTING ZEROX COPIES OF PAPERS AND DOCUMENTS SEIZED. FURTHER THE FIRM WAS MAIN TRADING CONCERN OF THE GROUP AND HENCE LOT OF RECONCILIATION WORK WAS INVOLVED WITH VARIOUS AGENTS/STOCKIST AND GOVERNMENT AGENCIES. THE FIRM HAS AFTER GETTING THE ZEROX COPIES OF DOCUMENTS SEIZED COMPILED BOOKS OF ACCOUNTS GOT TH EM AUDITED AND FILE RETURN OF INCOME WITH THE DEPARTME NT. YOUR HONOUR WOULD APPRECIATE THAT HUGE AMOUNT OF WO RK IS INVOLVED IN FURNISHING DETAILS DURING THE COURSE OF SEARCH AND AFTERWARDS. FURTHER ASSESSEE HAD NO MAL AFIDE INTENTION IN NOT FILING THE REPORT IN TIME. YOUR HO NOUR MAY ALSO APPRECIATE THAT THE RETURN FOR THE YEAR 2005-0 6 AND 2006-07 FALL UNDER BLOCK PERIOD U/S. 153A/153C AND ALL EXISTING PROCEEDINGS GETS ANNULLED. HENCE NON-FILI NG OF RETURN OF INCOME UNDER REGULAR PROVISION IS INCONSEQUENTIAL. ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 4 THE AO AFTER CONSIDERING THE ASSESSEES EXPLANATION WHILE OBSERVING THAT NO DOCUMENTARY EVIDENCE HAS BEEN FILED TO SHOW THA T THE SOFTWARE PROGRAMME FOR WRITING THE ACCOUNTS HAD CRASHED W AS OF THE VIEW THAT THE ASSESSEE HAS WITHOUT REASONABLE CAUSE FAILED TO COMPLY WITH THE PROVISIONS OF THE SEC.44AB AND ACCORDINGLY HE I MPOSED A PENALTY OF RS.1.00 LACS VIDE ORDER DATED 19.6.2008 PASSE D U/S.271B OF THE ACT. ON APPEAL THE ASSESSEE FILED A CERTIFICATE DT. 9.6.06 FROM KIMAYA SOFTWARE IN WHICH IT HAS BEEN CERTIFIED THAT DU E TO FAILURE OF SERVER INSTALLED AT ZAVERI ARCADE ZAVER ROAD MULUND (W) MUMBAI- 400 080 RELATING TO JALARAM GROUP OF COMPANIES THE DATA RECOVERY IS NOT POSSIBLE FROM HARD-DISK. THE ERROR IS TECHNICAL AND BEYOND THE CONTROL OF JALARAM GROUP. HOWEVER THE LD. CIT(A) O BSERVED THAT THE SAID CERTIFICATE WAS NOT FURNISHED BEFORE THE AO NO REA SON FOR NOT FURNISHING THE SAME BEFORE THE AO HAS BEEN GIVEN SO FAR THE CERTIFICATE IS DT.9.6.06 WHEREAS THE APPELLANT WAS REQUI RED TO GET ITS ACCOUNTS AUDITED UPTO 31.10.2005 MEANING THEREBY PRIOR TO THIS DATE THERE IS NO CORRESPONDENCE WITH THE AGENCY REGARDING CRASH OF COMPUTER OR LOSS OF DATA IN THE COMPUTER THEREFORE I T CANNOT BE SAID THAT THE DATA WAS CORRUPTED . HE FURTHER OBSERVED THA T THE APPELLANT HAS STATED THAT THERE WAS SEARCH AND SEIZURE OPERATIONS I N THE PREMISES OF THE ASSESSEE WHICH CAUSES DELAY IN GETTING THE A CCOUNTS ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 5 AUDITED BUT THE APPELLANT HAS NOT CLAIMED THAT THE CER TIFIED COPIES OF THE SEIZED DOCUMENTS WERE NOT PROVIDED BY THE DEPARTME NT TO THE APPELLANT IN DUE COURSE AND HENCE HE REJECTED THE PLE A TAKEN BY THE ASSESSEE. THE LD. CIT(A) WHILE DISTINGUISHING THE DECISION S RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE HELD THAT THERE WA S NO REASONABLE CAUSE IN NOT GETTING THE ACCOUNTS AUDITED WITHIN TIME AL LOWED U/S.44AB OF THE ACT AND HENCE HE UPHELD THE ORDER OF THE AO IMPOSING PENALTY U/S.271B OF THE ACT AND DISMISSED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SU STENANCE OF PENALTY IMPOSED BY THE AO U/S.271B OF THE ACT. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE TH E AO AND THE LD. CIT(A) FURTHER SUBMITS THAT THE ASSESSEE WAS REQUIR ED TO GET THE ACCOUNTS AUDITED AND FILE THE AUDIT REPORT ON OR BEFOR E 31.10.05. HOWEVER AFTER RECEIPT OF ZEROX COPIES OF SEIZED ACCOUNT S AND OTHER DOCUMENTS IN SEPT. 2005 THE ASSESSEE AFTER RE-WRITING TH E BOOKS OF ACCOUNTS GOT THE ACCOUNTS AUDITED ON 2.8.2006 AND FILED THE SAME ALONGWITH THE RETURN OF INCOME 31.10.2006. HE FURTHE R SUBMITS THAT THE SOFTWARE PROGRAMME WHICH WAS USED FOR WRITING BOOK S OF ACCOUNT ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 6 GOT CORRUPTED AND CRASHED THE WHOLE SYSTEM OF ACCOUNTING AND IN SUPPORT A CERTIFICATE DT.9.6.2006 OF KIMAYA SOFTWARE W AS FILED BEFORE THE LD. CIT(A). HOWEVER THE LD. CIT(A) HAS NOT ADMI TTED THE SAME AND REJECTED THE EVIDENCE FILED BY THE ASSESSEE. HE THERE FORE SUBMITS THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE FOR NOT GETTING ITS BOOKS OF ACCOUNTS AUDITED IN TIME. THE RELIANCE WAS A LSO PLACED ON THE ORDER OF THE TRIBUNAL IN THE GROUP CASE OF THE A SSESSEE IN LALJIBHAI THAKKAR VS. DCIT IN ITA NO.240 & 241/M/2009 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 DATED 18.11.2009 TO SHOW TH AT ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE THE TRIBUNAL HAS D ELETED THE PENALTY FOR THE ASSESSMENT YEAR 2005-06. WITH REGAR D TO THE PENALTY FOR THE ASSESSMENT YEAR 2006-07 THE LD. COUNSE L FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF THE TRIBUNA L IN ACIT VS. KAMLESH R. AGARWAL (HUF) (2006) 282 ITR (AT)117(AH D.)(TM) TO CONTEND THAT IF THERE WAS REASONABLE CAUSE FOR THE DELA Y IN THE EARLIER YEAR IT HAD TO BE A REASONABLE CAUSE FOR THE SUBSEQUENT YEAR AS WELL THE REASON BEING THAT IN THE ABSENCE OF AUDIT OF THE E ARLIER YEAR THE OPENING BALANCES OF THE ACCOUNTS WOULD NOT BE AVAILABLE AND WITHOUT WHICH NO AUDIT COULD BE COMPLETED VALIDLY. HE THEREFO RE SUBMITS THAT IN THE LIGHT OF THE ABOVE DECISIONS OF THE TRIBUNAL T HE PENALTY IMPOSED BY THE AO AND SUSTAINED BY THE LD. CIT(A) BE DELETED . ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 7 5. ON THE OTHER HAND THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ORDER OF PENALTY AND IN THE ORDER OF THE LD. CIT(A) THE PENALTY IMPOSED BY THE AO AND SUSTAINED BY THE LD . CIT(A) BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT IN THIS GROUP A SEARCH TOOK PLACE ON 5.5.20 05 AND ALL THE DOCUMENTS INCLUDING THE BOOKS OF ACCOUNTS OF THE ASSESSEE WE RE SEIZED BY THE DEPARTMENT. UNDER THE PROVISIONS OF SECTI ON 44AB THE ASSESSEE IS REQUIRED TO GET ITS ACCOUNTS AUDITED BEFORE THE SPECIFIED DATED AND FURNISH BY THAT DATE SUCH REPORT ALONGWITH R ETURN OF INCOME BEFORE THE DUE DATE WHICH IN THE PRESENT CASE WAS 31.10 .2005. HOWEVER THE ASSESSEE GOT THE ACCOUNTS AUDITED ON 2.8.2006 AND FILED THE SAME ALONGWITH THE RETURN OF INCOME ON 31.10.2006 . THE ASSESSEES EXPLANATION THAT THE COPIES OF SEIZED PAPERS AND ACCOUNTS ETC. WERE RECEIVED IN SEPTEMBER 2005 AND THAT ON ACCOUN T OF SEARCH NORMAL ACTIVITIES OF THE ASSESSEE GOT DISTURBED AND TO BRI NG THEM IN ORDER IT TOOK SOMETIME WAS NOT CONTROVERTED BY THE REVENUE. 7. IN LALJIBHAI THAKKAR (SUPRA) IT HAS BEEN OBSERVED AND HELD BY THE TRIBUNAL VIDE PARA 6 AND 7 OF ITS ORDER DATED 18 .11.2009 AS UNDER: ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 8 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. ADMITTEDLY A SEARC H TOOK PLACE ON 08.05.2005 AND ALL THE DOCUMENTS WERE SEIZ ED BY THE DEPARTMENT. THE ASSESSEE WAS REQUIRED TO G ET ITS ACCOUNTS AUDITED BY 31.10.2005 BUT THE ASSESSEE GOT THE ACCOUNTS AUDITED ON 27.04.2006 AND FILED THE SAME A LONG WITH RETURN OF INCOME ON 12.05.2006. THUS THERE WAS EFFECTIVELY DELAY OF SIX MONTHS IN GETTING THE ACCO UNTS AUDITED. BEFORE THE ASSESSING OFFICER DURING THE PE NALTY PROCEEDINGS IT WAS INTER ALIA ASSESSEES SUBMISSI ONS AS REPRODUCED IN HIS ORDER THAT THE SOFTWARE PROGRAMM E WHICH WAS USED IN WRITING THE BOOKS OF ACCOUNT GOT CORRUPTED AND CRASHED THE WHOLE SYSTEM. IT IS TRUE THAT DOCUMENTARY EVIDENCE WAS FILED IN SUPPORT OF ITS CL AIM AND ONLY BEFORE LEARNED CIT(A) A CERTIFICATE DATED 9 TH JUNE 2006 WAS FURNISHED. HOWEVER BEFORE WE CONSID ER THE ASSESSEES REQUEST FOR RESTORING THE MATTER BAC K TO THE FILE OF ASSESSING OFFICER LET US EXAMINE THE C ONTENTS OF THIS CERTIFICATE. IN THIS CERTIFICATE IT IS ST ATED AS UNDER: THIS IS TO CONFIRM THAT DUE TO FAILURE OF SERVER INSTALLED AT ZAVERI ARCADE ZAVERI ROAD MULUND (W) MUMBAI 400 080 RELATING TO JALARAM GROUP OF COMPANIES. THE DATA RECOVERY IS NOT POSSIBLE FROM HARD DISK WHICH IS BADLY MEDIA DAMAGED. THE DATA PERTAINS TO FINANCIAL YEAR 2005-06 AND OTHER PREVIOUS YEARS. THE ERROR IS TECHNICAL AND BEYOND THE CONTROL OF THE JALARAM GROUP. REGARDS FOR KIMAYA SOFTWARE PROPRIETOR SD/- MANGESH EKBOTE FROM THE CONTENTS OF THE CERTIFICATE IT IS CLEAR T HAT DATA RECOVERY WAS NOT POSSIBLE FROM THE HARD DISK WHICH WAS BADLY DAMAGED AS ON 09.06.2006. THEREFORE WHEN T HE ASSESSEE FILED ITS RETURN ON 12.05.2006 (I.E. PRIOR TO THE DATE OF CERTIFICATE) IT HAD IN ANY CASE PREPARED THE ACCOUNTS AFRESH. THEREFORE THIS CERTIFICATE IS NO T OF MUCH RELEVANCE AND THEREFORE WE DO NOT CONSIDER IT NEC ESSARY TO REMIT THE MATTER BACK TO THE FILE OF ASSESSING O FFICER. FROM THE ORDERS OF THE AUTHORITIES BELOW IT IS NOT CLEAR AS TO WHEN THE COPIES OF IMPOUNDED DOCUMENTS WERE MADE AVAILABLE TO THE ASSESSEE. LEARNED COUNSEL SUBMITT ED THAT THE PAPERS WERE RECEIVED IN SEPTEMBER 2005. BE THAT AS IT MAY IT CANNOT BE DENIED THAT ON ACCOUNT OF SEARCH NORMAL ACTIVITIES OF THE ASSESSEE GOT DISTUR BED AND THEREFORE IN ORDER TO BRING THEM IN ORDER IT CAN ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 9 REASONABLY BE CONCLUDED THAT SOME TIME MUST HAVE BE EN LOST PARTICULARLY KEEPING IN VIEW THE NATURE OF AC TIVITIES CARRIED ON BY ASSESSEE. CONSIDERING THE ENTIRETY OF FACTS OF THE CASE WE ARE OF THE OPINION THAT DELAY IN GE TTING THE ACCOUNTS AUDITED FOR A.Y.2005-06 BEING OF ABOUT 6 MONTHS CAN BE TAKEN AS REASONABLE. 7. HOWEVER AS FAR AS ASSESSMENT YEAR 2006-07 IS CONCERNED WE ARE OF THE OPINION THAT THE DELAY IN GETTING THE ACCOUNTS CANNOT BE SAID TO BE REASONABLY EXPLAI NED BECAUSE ONCE THE ACCOUNTS FOR THE ASSESSMENT YEAR 2 005- 06 WERE DULY AUDITED ON 27.04.2006 THEN FOR A.Y.200 6- 07 THE ASSESSEE HAD SUFFICIENT TIME TO GET ITS ACC OUNTED COMPLETED AND AUDITED BY 31.10.2006. WE ACCORDING LY ALLOW THE ASSESSEES APPEAL FOR A.Y.2005-06 AND DIS MISS FOR A.Y.2006-07. 8. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL(SUPRA) HOLD THAT THERE WAS A REASONABLE CAU SE IN GETTING THE ACCOUNTS AUDITED FOR THE ASSESSMENT YEAR 2005-06 AND ACCORDINGLY THE PENALTY IMPOSED BY THE AO AND SUSTAINE D BY THE LD. CIT(A) IS DELETED. THE GROUNDS TAKEN BY THE ASSESSEE AR E THEREFORE ALLOWED. ITA NO.243/MUM/09 (ASSESSMENT YEAR 2006-07): 9. FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSEE GOT THE BOO KS OF ACCOUNT AUDITED ON 20.3.2007 AND FILED THE AUDIT REPO RT ALONGWITH RETURN OF INCOME ON 30.3.2007 AS AGAINST THE DUE DATE OF FILING AUDIT REPORT AND RETURN ON 31.10.06. THUS THERE WAS A DELA Y OF ABOUT 5 MONTHS. THE ASSESSEES PLEA THAT AFTER THE SEARCH AND SEIZ URE ACTION THE PAPERS WERE RECEIVED FROM THE DEPARTMENT IN SEPT. 05 AND ON THAT ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 10 ACCOUNT NORMAL ACTIVITIES OF THE ASSESSEE GOT DISTURBED WH ICH TOOK CONSIDERABLE TIME TO BRING THEM IN ORDER AND FURTHER THAT THE SOFTWARE PROGRAMME WHICH WAS USED IN WRITING THE BOOKS OF ACCOUNT S GOT CORRUPTED AND CRASHED THE WHOLE SYSTEM OF ACCOUNTING SUPPO RTED BY CERTIFICATE OF DT. 9.6.06 OF KIMAYA SOFTWARE HAS NOT B EEN ACCEPTED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006-07 IN THE ASSE SSEES GROUP CASE IN LALJIBHAI THAKKAR (SUPRA). 10. IN KAMLESH R. AGARWAL(HUF) (SUPRA) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE THE ASSESSEE FILED ITS RETURN FOR T HE ASSESSMENT YEAR 1994-95 ON AUGUST 31 1995 ALONGWITH AU DIT REPORT DATED MARCH 27 1995 WHILE THE DUE DATE FOR OBTAINI NG THE SAME WAS BEFORE OCT. 31 1994. THUS THERE WAS A DELAY OF 4 MONT HS AND 27 DAYS IN OBTAINING THE SAME LEADING TO A CONTRAVENTION OF SE C. 44AB RESULTING IN LEVY OF PENALTY U/S.271B. IT WAS EXPLAINED BY TH E ASSESSEE THAT THERE WAS SEARCH BY THE DEPARTMENT AND ALL THE RECORDS FOR THE CURRENT AS WELL AS PAST YEARS INCLUDING VOUCHERS AND REL ATED DOCUMENTS WERE SEIZED BY THE DEPARTMENT AND IT WAS ONL Y MUCH LATER I.E. IN DECEMBER 1992 THAT THE ASSESSEES REQUEST FOR T HE COPIES OF THE SEIZED MATERIAL WAS GRANTED. THERE THUS OCCURRED CONSIDERABLE DELAY IN FIRSTLY THE PREPARATION ACCOUNTS FOR ASSESSMENT YEAR 1993- 94 AND THEN ITS AUDIT WHICH WAS COMPLETED IN THE MONTH OF DEC. 94 AND THE SAID DELAY IPSO FACTO LED TO THE DELAY IN THE COMPILING OF ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 11 ACCOUNTS OF THE ASSESSMENT YEAR 1994-95 AND ITS AUDIT WHI CH WAS COMPLETED ON MARCH 27 1995. IT WAS THUS PLEADED THA T THERE WAS A REASONABLE CAUSE OF FOUR MONTHS AND 27 DAYS. IT HAS BEEN HELD ( AT PAGE-118 OF 282 ITR(AT) HEADNOTE): HELD PER R.P. GARG (VICE-PRESIDENT) AGREEING WITH I.P. BANSAL (JUDICIAL MEMBER): SANJAY ARORA (ACCOUNTANT MEMBER) (DISSENTING) DISMISSING THE AP PEAL THAT IF THERE WAS A REASONABLE CAUSE FOR THE DELAY IN THE EARLIER YEAR IT HAD TO BE A REASONABLE CAUSE FOR T HE SUBSEQUENT YEAR AS WELL. IF THERE WAS NO REASONABL E CAUSE FOR THAT YEAR IT WOULD STILL BE A REASONABLE CAUSE FOR THE YEAR UNDER CONSIDERATION THE REASON BEING THAT IN THE ABSENCE OF AUDIT OF THE EARLIER YEAR THE OPENI NG BALANCES OF THE ACCOUNTS WOULD NOT BE AVAILABLE AND WITHOUT WHICH NO AUDIT COULD BE COMPLETED VALIDLY. THE AUDIT WITHOUT CONSIDERATION OF OPENING BALANCES WOU LD BE INCOMPLETE AND WOULD HAVE NO SANCTITY. TO THIS EXT ENT THE ASSESSEE COULD NOT BE SAID TO BE IN DEFAULT. I T WAS NOT NECESSARY TO EXAMINE AS TO WHETHER THE DELAY WA S A VALID CAUSE FOR GETTING THE ACCOUNTS AUDITED IN THE EARLIER YEAR OR NOT BECAUSE IN CONSIDERING THE DELAY IN TH E YEAR UNDER CONSIDERATION ONE NEED NOT GO INTO THAT ASPEC T AS THE FACT THAT THE EARLIER YEARS AUDIT WAS DELAYED BY ITSELF WOULD BE A REASONABLE CAUSE FOR GETTING THE ACCOUNT S AUDITED OF THIS YEAR. AFTER THE AUDIT OF THE EARL IER YEARS ACCOUNTS ON OCTOBER 29 1994 THE ASSESSEE TOOK ABO UT FOUR TO FIVE MONTHS IN GETTING THE ACCOUNTS AUDITED FOR THE YEAR UNDER CONSIDERATION ON MARCH 27 1995. THIS PERIOD ALSO COULD NOT BE SAID TO BE UNREASONABLE AS THE AU DIT FOR THE WHOLE YEARS ACCOUNT GENERALLY TAKES THIS MUCH TIME AND THAT WAS THE REASON OF ALLOWING SEVEN MONTHS P ERIOD FOR GETTING THE ACCOUNTS AUDITED AFTER THE CLOSE OF THE YEAR NAMELY WHERE THE ACCOUNTS WERE CLOSED ON MAR CH 31 OF A PARTICULAR YEAR THE AUDIT WAS REQUIRED TO B E DONE ON OCTOBER 31 OF THAT YEAR. THEREFORE IT WOULD NO T BE ADVISABLE TO COMMENT ON THE ACTION OF THE AUDITOR A ND ATTEMPT TO FIND REASONS AS TO WHY HE HAD TAKEN THAT MUCH TIME PARTICULARLY WHEN THE LEGISLATURE ITSELF PROVIDED FOR A TIME-LIMIT OF SEVEN MONTHS IN OBTAIN ING THE AUDIT AFTER THE CLOSE OF THE ACCOUNTS AT THE END OF HE ACCOUNTING YEAR. THE PENALTY HAD BEEN LEVIED BY TH E ASSESSING OFFICER UNDER THE PRE-AMENDED PROVISIONS. AT THAT TIME THE REQUIREMENT WAS TO OBTAIN THE REPORT ON OR ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 12 BEFORE THE SPECIFIED DATE. THEREFORE ANY DELAY I N FURNISHING THE SAME AS WAS MADE A REQUIREMENT UNDER THE AMENDED PROVISIONS WITH EFFECT FROM JULY 1 199 5 BY THE FINANCE ACT 1995 WOULD NOT BE OF ANY CONSIDER ATION. THEREFORE THIS WAS NOT A FIT CASE FOR PENALTY. 11. IN THE CASE BEFORE US THERE IS NO DISPUTE THAT THE A SSESSEE GOT ZEROX COPIES OF SEIZED MATERIAL IN SEPT.05 AND THE A UDIT OF THE EARLIER YEAR I.E. FOR ASSESSMENT YEAR 2005-06 WAS COMPLETED ON 2. 8.2006 HENCE THE ASSESSEE HAD SUFFICIENT TIME GET ITS ACCOUNT COM PLETED AND AUDITED BY 31.10.2006. THE FACTS OF THE CASE RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN KAMLESH R. AGARWAL (HUF) SUPR A) ARE DIFFERENT IN AS MUCH AS THE SAID CASE IS PRIOR TO THE AMEN DMENT FINANCE ACT 1995 WHEREIN THE REQUIREMENT WAS TO OBTAIN THE AUDIT REPORT BEFORE THE SPECIFIED DATE AND AFTER THE AMENDM ENT THE ASSESSEE IS REQUIRED TO FILE AUDIT REPORT ALONGWITH THE RETURN BEFORE THE DUE DATE OF FILING OF THE RETURN THEREFORE TH E DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS DISTINGUISHABLE AND N OT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTE R AND KEEPING IN VIEW THE RULE OF CONSISTENCY WE ARE OF THE VIEW THA T THERE WAS NO REASONABLE CAUSE FOR THE ASSESSMENT YEAR 2006-07 AND HENCE THE PENALTY OF RS.1.00 LACS IMPOSED BY THE AO U/S.271B AND SU STAINED BY THE LD. CIT(A) IS UPHELD. THE GROUNDS TAKEN BY THE ASSE SSEE ARE THEREFORE REJECTED. ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 13 ITA NO.244/M/2009 ASSESSMENT YEAR : 2006-07 ITA NO.245/M/2009 ASSESSMENT YEAR : 2005-06 ITA NO.246/M/2009 ASSESSMENT YEAR : 2006-07 ITA NO.247/M/2009 ASSESSMENT YEAR : 2005-06 AND ITA NO.248/M/2009 ASSESSMENT YEAR : 2006-07 12. AT THE TIME OF HEARING IT HAS BEEN AGREED BY BOT H THE PARTIES THAT THE FACTS AND THE ISSUE INVOLVED IN ALL THESE APPEA LS ARE SAME THEREFORE THE PLEA TAKEN BY THEM IN THE EARLIER AP PEALS MAY BE CONSIDERED IN THESE APPEALS ALSO AND THE APPEALS MAY BE DECIDED ACCORDINGLY. 13. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OUR FINDING RECORDED IN PARA-8- 11 OF THIS ORDER WE HOLD AND ORDER ACCORDINGLY. 14. IN THE RESULT THE ASSESSEES APPEALS FOR ASSESSMENT YEAR 2 005-06 STAND ALLOWED AND THE APPEALS FOR THE ASSESSMENT YEARS 200 6-07 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.1.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 22.1.2010. JV. ITA NO.244 TO 248/M/09 A.Y: 05-06 & 06-07 14 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 13.1.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 14.1.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 22.1.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 22.1.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER