Annapurna Agencies, Ahmedabad v. The Dy.CIT.,Circle-11,, Ahmedabad

ITA 3122/AHD/2010 | 2007-2008
Pronouncement Date: 21-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 312220514 RSA 2010
Assessee PAN AACFA7979C
Bench Ahmedabad
Appeal Number ITA 3122/AHD/2010
Duration Of Justice 7 month(s) 27 day(s)
Appellant Annapurna Agencies, Ahmedabad
Respondent The Dy.CIT.,Circle-11,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 21-07-2011
Date Of Final Hearing 15-07-2011
Next Hearing Date 15-07-2011
Assessment Year 2007-2008
Appeal Filed On 24-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. K. GARODIA AM) ITA NO.3121 AND 3122/AHD/2010 A.Y .: 2007-08 ANNAPURNA AGENCIES 4 JAIN MERCHANT SOCIETY PALDI AHMEDABAD VS THE D. C. I. T. CIRCLE-11 AAYAKAR BHAVAN AHMEDABAD PA NO. AACFA 7979 C (APPELLANT) (RESPONDENT) APPELLANT BY MS. URVASHI SHODHAN AR RESPONDENT BY SHRI S. K. MEENA SR. DR O R D E R PER BHAVNESH SAINI: BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE LE ARNED CIT(A)-XVI AHMEDABAD DATED 20-09-2010 AND 16-09-2010 RESPECTIV ELY FOR ASSESSMENT YEAR 2007-08. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. BOTH THE APPEALS ARE DISPOSED OF AS UNDER: ITA NO.3121/AHD/2010 3. ON GROUND NO.1 THE ASSESSEE CHALLENGED THE CONF IRMING OF DISALLOWANCE OF RS.2 83 942/-. IN THE ASSESSMENT OR DER THE AO HAS STATED THE ASSESSEE HAS MADE PAYMENT OF CONSULTANCY CHARGES TO SUPER CONSULTANCY SERVICES. THE AO HAS STATED THAT THE ASSESSEE ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 2 DID NOT DEDUCT TDS AND THEREFORE THE AO ASKED THE ASSESSEE AS TO WHY THE PAYMENT SHOULD NOT BE DISALLOWED U/S 40 (A) (IA) OF THE IT ACT. THE AO FURTHER ISSUED NOTICE STATING THE ASSE SSEE SHOULD PROVE THE SERVICES RENDERED AS WELL AS GENUINENESS OF THE TRANSACTIONS BY PRODUCING THE PERSON TO WHOM THESE CONSULTANCY SERV ICE CHARGES HAVE BEEN PAID. THE ASSESSEE WAS ALSO ASKED TO ESTA BLISH THE IDENTITY OF THE PERSON TO WHOM PAYMENT WAS MADE. TH E AO STATED THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUI NENESS OF THE TRANSACTION AND REQUIREMENT OF CONSULTANCY SERVICES ITS NATURE AND PURPOSE AND THEREFORE THE AO DISALLOWED THE PAYMEN T OF CONSULTANCY CHARGES. IT WAS SUBMITTED BEFORE THE LE ARNED CIT(A) THAT THE ASSESSEE HAD SUBMITTED THE NAME AND ADDRESS OF THE PERSON WITH PA NUMBER. THE ASSESSEE HAD ALSO DEDUCTED TDS AND S AME WAS PAID WITHIN THE PRESCRIBED TIME TO THE TREASURY. TH E ASSESSEE HAS FILED LEDGER ACCOUNTS OF THE SUPER CONSULTANCY SERV ICES AND SUPER TESTING LABORATORY TO SHOW THAT TDS HAS BEEN DEDUCT ED ON THE PROFESSIONAL FEES PAID TO THEM. THE ASSESSEE FURTHE R STATED THAT IT PROCURES YARN FROM VARIOUS SUPPLIERS AND SUPPLIES T HE SAME TO MAFATLAL INDUSTRIES LTD. IN ORDER TO MAINTAIN THE GOOD QUALITY OF YARN BEFORE IT IS APPLIED THE SERVICES OF SUPER CONSULTA NCY SERVICES WERE UNVEILED. THE ASSESSEE USES THE SERVICES TO FIND OU T COUNT STRENGTH AND PROPER COLOR OF THE YARN SO AS TO MAINTAIN STAN DARD QUALITY OF YARN. THE ASSESSEE ALSO PROVIDED COPY OF THE ACCOUN T AND ALL THE PAYMENTS WERE SUBJECTED TO TDS. WITH REGARD TO TDS THE LEARNED CIT(A) DIRECTED THE AO TO VERIFY THE SAME. HOWEVER WITH REGARD TO ALLOWABILITY OF THE EXPENSES THE LEARNED CIT(A) NO TED THAT SIMPLY GIVING LEDGER ACCOUNT COPY OF PA NUMBER AND THE PA YMENTS MADE ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 3 THROUGH CHEQUES DOES NOT PROVE THAT THE PAYMENT IS GENUINE AND SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUS INESS. THE ASSESSEE HAS NOT GIVEN ANY EVIDENCE OF ANY SERVICES RENDERED BY THIS PARTY. IN THE ABSENCE OF ANY EVIDENCE ON RECOR D THE LEARNED CIT(A) NOTED THAT THE ASSESSEE FAILED TO PROVE AS T O WHAT SERVICES HAVE BEEN RENDERED BY THESE PARTIES FOR THE BUSINES S PURPOSE OF THE ASSESSEE. ADDITION WAS ACCORDINGLY CONFIRMED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT WITH REGARD TO TDS ISSUE THE ASSESSEE IS NOT IN APPEAL BECAUSE THE LEARNED CIT(A) HAS ISSUED DIRECTION TO VERIFY THE T DS PAYMENT AS IS REQUIRED U/S 40 (A) (1A) OF THE IT ACT. HOWEVER T HE ASSESSEE IS IN APPEAL CHALLENGING THE ADDITION WITH REGARD TO REJE CTION OF THE CLAIM OF THE ASSESSEE ON MERIT. FOR THAT PURPOSE THE LEARNE D COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT EXPENSES WERE INCURRED FOR COTTON TESTING AND NOT AS COMMISS ION AS NOTED BY THE LEARNED CIT(A). SHE HAS SUBMITTED THAT COTTON T ESTING IS NECESSARY BEFORE SUPPLY TO MAFATLAL INDUSTRIES LTD. IN ORDER TO MAINTAIN STANDARD QUALITY OF YARN. SHE HAS HOWEVER CONCEDED THAT NO TESTING REPORT WAS FILED BEFORE THE AUTHORITIES BELOW AND THE SAME IS ALSO NOT FILED IN THE PAPER BOOK BEFORE THE TRIB UNAL. ON THE OTHER HAND LEARNED DR RELIED UPON THE ORDERS OF THE AUTH ORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED ANY EV IDENCE AS TO WHAT SERVICES HAVE BEEN RENDERED BY THIS PARTY FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THEREFORE ADDITION WAS RI GHTLY MADE. ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE A UTHORITIES BELOW. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE ASSESSEE SUBMITTED NAME AND ADDRESS OF THE PERSONS TO WHOM P AYMENTS WERE MADE WITH THEIR PA NUMBER. COPY OF THE LEDGER ACCOU NT WAS ALSO FIELD. THE LEARNED CIT(A) THEREFORE RIGHTLY NOTED THAT BY FILING THESE PAPERS WOULD NOT PROVE THAT PAYMENT IN QUESTION IS GENUINE AND WAS SPENT WHOLLY SAND EXCLUSIVELY FOR THE PURPOSE OF BU SINESS OF THE ASSESSEE. THE ASSESSEE CLAIMED THAT IT PROCURES YEA RN FROM VARIOUS SUPPLIERS AND THE SAME ARE SUPPLIED TO MAFATLAL IND USTRIES LTD. THEREFORE SERVICES OF SUPER CONSULTANCY SERVICES A ND SUPER TESTING LABORATORY WERE OBTAINED TO FIND OUT THE ST ANDARD QUALITY OF YARN. IT WOULD THEREFORE PROVE THAT THE ASSESSEE GOT THE YARN TESTED PRIOR TO SUPPLY TO MAFATLAL INDUSTRIES LTD. THE ASS ESSEE FAILED TO SUBMIT ANY TEST REPORT EITHER BEFORE THE AUTHORITIE S BELOW OR BEFORE THE TRIBUNAL. IN THE ABSENCE OF ANY EVIDENCE OF TES TING OF YEARN BY THIS CONSULTANCY SERVICES THE ASSESSEE FAILED TO P ROVE THAT THEY HAD RENDERED ANY SERVICES FOR THE PURPOSE OF BUSINESS O F THE ASSESSEE. THE AO ALSO SPECIFICALLY ASKED THE ASSESSEE TO PROD UCE THE PERSON TO WHOM CONSULTANCY SERVICE CHARGES HAVE BEEN PAID AND TO ESTABLISH THEIR IDENTITY. THE ASSESSEE HOWEVER DID NOT PRODUCE ANY SUCH PERSONS BEFORE THE AO AND EVEN THE IDENTITY IS NOT ESTABLISHED. THE AO ALSO NOTED IN THE ASSESSMENT ORDER THAT AS P ER INFORMATION AVAILABLE DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE ASSESSEE WAS PURCHASING SOME COTTON BALES FROM OTHER PARTIES FOR SUPPLY TO MAFATLAL INDUSTRIES LTD. CONSIDERING THE FACTS OF T HE CASE NOTED ABOVE AND FAILURE OF THE ASSESSEE TO PROVE THAT EXPENSES WERE INCURRED ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 5 WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSIN ESS THE AUTHORITIES BELOW WERE JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. ACCORDINGLY GROUND NO.1 OF THE APPEAL OF THE ASSES SEE IS DISMISSED. 6. ON GROUND NO.2 THE ASSESSEE CHALLENGED THE DISA LLOWANCE OF INTEREST OF RS.2 26 766/-. IN THE ASSESSMENT ORDER THE AO STATED THAT THE ASSESSEE HAS GIVEN LOAN AND ADVANCES OF RS.16 8 3 485/- UPON WHICH INTEREST HAS NOT BEEN CHARGED AND ITS RECOVER Y WAS REPORTED AS DOUBTFUL. THE AO ASKED THE ASSESSEE AS TO WHY INTER EST PAID BE NOT DISALLOWED. THE ASSESSEE DID NOT SUBMIT ANY REPLY THEREFORE THE INTEREST WAS CALCULATED @12% AND DISALLOWANCE WAS M ADE OF RS.22 67 766/- IN RESPECT OF LOANS AND ADVANCES GIV EN TO M/S. KARAN TRADERS RS.16 83 485/- RITA KAPOOR RS.1 00 000/- A ND LAXMI MILLS LTD. RS.1 06 238/-. IT WAS SUBMITTED BEFORE THE LEA RNED CIT(A) THAT THESE WERE OLD BALANCES COMING FROM EARLIER YEARS A S ON 01-04-2006. THEREFORE NO DISALLOWANCE SHOULD HAVE BEEN MADE. I T WAS SUBMITTED THAT SINCE THERE IS NO INCREASE IN THE DEBIT BALANC E DURING THE YEAR DISALLOWANCE OF INTEREST WOULD NOT ARISE. IT WAS FU RTHER SUBMITTED THAT NOTIONAL INTEREST CANNOT BE CHARGED. THE LEARNED CI T(A) HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE BECAUSE T HE ASSESSEE WAS NOT ABLE TO EXPLAIN WHY INTEREST-FREE LOANS HAD BEE N GIVEN TO THESE 3 PARTIES AND WHAT WAS THE BUSINESS EXIGENCY. THE LEA RNED CIT(A) RELYING UPON CERTAIN DECISIONS CONFIRMED THE ADDITI ON AND DISMISSED THE APPEAL OF THE ASSESSEE. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND REFE RRED TO PB-23 ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 6 24 AND 25 WHICH ARE THE COPIES OF THE ACCOUNTS OF T HESE PARTIES TO SHOW THAT THE AMOUNT IN QUESTION WERE THE OPENING B ALANCES AS ON 01-04-2006 IN THEIR CASES THEREFORE THE SAME WERE OLD BALANCES COMING UP FROM THE EARLIER YEARS. PB-26 IS ASSESSME NT ORDER FOR PRECEDING ASSESSMENT YEAR 2006-07. PB -13 IS THE BA LANCE SHEET OF THE ASSESSEE FOR RELEVANT ASSESSMENT YEAR UNDER APP EAL IN WHICH INTEREST-FREE LOANS FROM M/S. TRAVEL WORLD IS AVAIL ABLE TO THE ASSESSEE IN A SUM OF RS.30 00 000/- IT IS ALSO EXPL AINED THAT CAPITAL OF THE PARTNERS IS ALSO RS.29 52 319/- AND RS.1 03 87 659/-. THEREFORE THE ASSESSEE HAD SUFFICIENT BALANCE/FUND S TO GIVE INTEREST- FREE LOANS AND ADVANCES. SHE HAS RELIED UPON THE DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS SRIDEV ENTERPRISES 192 ITR 165 ON THE PROPOSITION THAT IF THE OPENING BALANCES ARE COMING IN THE YEAR UNDER CONSIDERATION NO DISALLOWANCE HAS BEEN MADE IN THE EARLIER YEAR NO ADDITION COUL D BE MADE BY DISALLOWING INTEREST. SHE HAS RELIED UPON THE ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF M. RAVI & CO. AND C ORE HEALTH CARE LTD. IN ITA NO. 1745/AHD/1995 AND ITA NOS. 85 & 86/AHD/2007 DATED 23-01-2001 AND 16-10-2009 RESPECTIVELY. ON TH E OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHOR ITIES BELOW AND SUBMITTED THAT SINCE NO INTEREST HAS BEEN CHARGED F ROM THESE 3 PARTIES THEREFORE INTEREST WAS RIGHTLY DISALLOWED . 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE AMOUNTS AGAINST THESE 3 PARTIES WERE OPENING BALANCES AS ON 01-04-2 006. COPIES OF THEIR LEDGER ACCOUNTS ARE ALSO FILED IN THE PAPER B OOK TO SUPPORT THE ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 7 SUBMISSIONS OF THE ASSESSEE. SAME SUBMISSION WAS AL SO MADE BEFORE THE LEARNED CIT(A) BUT THE LEARNED CIT(A) DI D NOT TAKE INTO CONSIDERATION AND NO FINDINGS HAVE BEEN GIVEN. COPY OF THE INTIMATION U/S 143 (1) OF THE IT ACT FOR PRECEDING ASSESSMENT YEAR 2006-07 IS ALSO FILED AT PB-26 IN WHICH NO DISALLOWANCE OUT OF INTEREST HAVE BEEN MADE. SINCE THE INTEREST HAS NOT BEEN DISALLOWED IN THE EARLIER YEAR ON THE SAME FACTS THEREFORE ON MERE OPENING BALAN CES IN THE ASSESSMENT YEAR UNDER APPEAL NO DISALLOWANCE COULD HAVE BEEN MADE. WE RELY UPON THE DECISION OF THE HONBLE KARN ATAKA HIGH COURT IN THE CASE OF SRIDEV ENTERPRISES (SUPRA). BY FOLLOWING THE SAME DECISION OF THE HONBLE KARNATAKA HIGH COURT ITAT AHMEDABAD BENCH DELETED THE DISALLOWANCE IN THE CASE OF M. RA VI & CO. (SUPRA). FURTHER THE ASSESSEE FILED COPY OF THE BALANCE SHE ET FOR THE ASSESSMENT YEAR UNDER APPEAL TO SHOW THAT INTEREST- FREE FUNDS FROM M/S. TRAVEL WORLD WAS AVAILABLE TO THE ASSESSEE IN A SUM OF RS.30 00 000/- AND SUFFICIENT CAPITAL WAS AVAILABLE IN THE CAPITAL ACCOUNT OF THE PARTNERS. THE PROFIT OF THE ASSESSEE AS PER PROFIT & LOSS ACCOUNT WAS ALSO SHOWN AT RS.28 95 852/-. THUS SUF FICIENT INTEREST- FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE TO GIVE INTEREST-FREE LOANS AND ADVANCES TO THESE 3 PARTIES. THE AO HAS ALSO NO T MADE OUT ANY CASE IF ANY BORROWED FUNDS HAVE BEEN DIVERTED FOR N ON-BUSINESS PURPOSES. THE HONBLE SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATION VS CIT AND ANOTHER 298 ITR 298 HELD AS UNDER: UNDER INCOME-TAX ACT 1961 AFTER AMENDMENT OF THE ACT BY THE FINANCE ACT 1992 IN ORDER THAT INTEREST PAID ON BORROWINGS CAN BE ALLOWED AS A DEDUCTION IN COMPUTING THE BUSINESS PROFITS EVERY ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 8 ASSESSEE INCLUDING A FIRM HAS TO ESTABLISH IN T HE FIRST INSTANCE THAT IT WAS ALLOWABLE UNDER SECTION 36(1) (III); AND IN THE CASE OF A FIRM FURTHER TH AT THE AMOUNT DOES NOT EXCEED THE LIMIT FIXED BY SECTION 40(B) (IV). HELD HOWEVER ON THE FACTS IN THIS CASE THAT SINCE THE ASSESSEE HAD BORROWED THE MONEYS FROM ITS PARTNERS AS EARLY AS 1991 AND THE APPELLATE TRIBUNAL HAD HELD THAT THE LOANS WERE GIVEN BY THE PARTNERS FOR BUSINESS PURPOSES AND THE INTEREST DID NOT EXCEED 18 PER CENT. PER ANNUM SIMPLE INTEREST THE ASSESSEE-FIRM WAS ENTITLED TO DEDUCTION OF INTEREST ON THE BORROWINGS FOR THE ASSESSMENT YEARS 1993-94 TO 1997-98. HELD ALSO THAT SINCE THE OPENING BALANCE OF THE PROFITS OF THE ASSESSEE-FIRM AS ON APRIL 1 1994 W AS RS.1.91 CRORES AND THE PROFITS WERE SUFFICIENT TO COVER THE LOAN GIVEN TO A SISTER CONCERN OF RS.5 LA KHS ONLY THE APPELLATE TRIBUNAL OUGHT TO HAVE HELD THA T HT LOAN GIVEN WAS FROM THE ASSESSEES OWN FUNDS. 9. CONSIDERING THE ABOVE DISCUSSIONS WE ARE OF THE VIEW THAT THERE IS NO BASIS TO DISALLOW THE INTEREST. WE ACCO RDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETED THE ADDITION. GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. NO OTHER POINT IS ARGUED OR PRESSED. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO.3122/AHD/2010 12. THE ASSESSEE IN THIS APPEAL CHALLENGED THE LEVY OF PENALTY U/S 271 (1) (B) OF THE IT ACT IN A SUM OF RS.20 000/-. IN THE PENALTY ORDER THE AO STATED THAT THE FIRST NOTICE U/S 143(2) OF T HE IT ACT WAS ISSUED ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 9 ON 29-09-2008 WHICH WAS SERVED ON THE SAME DAY AND THE ASSESSEE WAS REQUIRED TO COMPLY WITH THE SAME NOTICE ON 15-1 0-2008 BUT NOBODY ATTENDED. ANOTHER NOTICE U/S 142(1) AND 143( 2) OF THE IT ACT ALONG WITH QUESTIONNAIRE WAS ISSUED ON 3 RD / 6 TH JULY 2009 WHICH WAS ALSO SERVED THROUGH SPEED POST AND THE DATE WAS FIX ED ON 10-07- 2009. ON THE SAID DATE NONE ATTENDED AND NO DETAILS WERE FILED. THE AO AGAIN ISSUED NOTICE U/S 142(1) OF THE IT ACT AND WAS SERVED ON 17-12-2009 IN THE NAME OF PARTNER MR. MUNIR MEHTA T O ATTEND WITH BOOKS OF ACCOUNTS AND VOUCHERS ON 18-12-2009 BECAUS E THE MATTER WAS GETTING TIME BARRED. IN THIS LETTER THE ASSESS EE WAS ALSO ASKED TO SHOW CAUSE WHY PENALTY U/S 271 (1) (B) BE NOT LEVIE D FOR NON- COMPLIANCE. THE AO STATED THAT NONE ATTENDED NOR AN Y PERSON PRODUCED THE BOOKS OF ACCOUNTS. THE AO THEREFORE IMPOSED PENALTY OF RS.10 000/- EACH FOR TWO DEFAULTS TOTALING TO RS .20 000/-. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT IN RESPONS E TO NOTICE DATED 29-09-2008 THE ACCOUNTANT ATTENDED THE PROCEEDINGS BUT THE PROCEEDINGS WERE ADJOURNED BECAUSE IT WAS FIRST NOT ICE. ANOTHER NOTICE WAS SERVED ONLY ON 09-07-2009 FOR COMPLIANCE ON 10-07-2009. IT WAS ALSO EXPLAINED THAT SHOW CAUSE NOTICE U/S 27 1 (1) (B) OF THE IT ACT DATED 17-07-2009 WAS ISSUED FOR COMPLIANCE BUT NO TIME LIMIT WAS FIXED. THE LEARNED CIT(A) DID NOT ACCEPT THE CO NTENTION OF THE ASSESSEE BECAUSE NO EVIDENCE WAS FILED TO SHOW THAT THE ACCOUNTANT ATTENDED THE PROCEEDINGS IN RESPONSE TO NOTICE DAT ED 29-09-2008. FOR THE REMAINING NOTICE OF 03-07-2009 AND 06-07-20 09 THE LEARNED CIT(A) NOTED THAT EVEN IF ONE DAYS TIME WAS GIVEN FOR COMPLIANCE THE ASSESSEE COULD HAVE FILED ADJOURNMENT APPLICATI ON WHICH WAS NOT ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 10 DONE. ACCORDINGLY PENALTY WAS CONFIRMED AND THE AP PEAL OF THE ASSESSEE WAS DISMISSED. 13. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND REFE RRED TO THE REPLY OF THE ASSESSEE (PB-1) AND REFERRED TO PB-18 WHICH IS THE SHOW CAUSE NOTICE FOR LEVY OF PENALTY DATED 17-07-2009 A ND SUBMITTED THAT THE ASSESSEE REPLIED THE SAME VIDE REPLY DATED 23-0 7-2009 (PB-19) WHICH IS ALSO REFERRED BY THE AO IN THE ASSESSMENT ORDER DATED 21-12-2009. THE LD. AR HAS THEREFORE SUBMITTED TH AT THE AO HAS ORIGINALLY NOTED THAT NO REASONS HAVE BEEN GIVEN WH Y THE PENALTY BE NOT IMPOSED. SHE HAS SUBMITTED THAT SINCE ASSESSMEN T IS FRAMED U/S 143(3) OF THE IT ACT THEREFORE ASSESSEE COMPLIED WITH THE NOTICE AND RELIED UPON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF AKHIL BHARTIYA PRATHAMIK SHIKSHAK SANGH BHAWAN TRUST VS A DIT 5 DTR 429 IN WHICH IT WAS HELD THAT ASSESSMENT HAVING BEEN MADE UNDER SECTION 143(3) AND NOT UNDER SECTION 144 IT MEANS THAT SUBSEQUENT COMPLIANCE IN THE ASSESSMENT PROCEEDINGS WAS CONSIDERED AS GOOD COMPLIANCE AND THE DEFAULTS COMM ITTED EARLIER WERE IGNORED BY THE AO HENCE PENALTY UNDER SECTION 271 (1) (B) COULD NOT BE LEVIED. 14. ON THE OTHER HAND THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SINCE TWO STAT UTORY NOTICES WERE NOT COMPLIED WITH THEREFORE PENALTY HAS BEEN RIGH TLY IMPOSED. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE A UTHORITIES BELOW. THE ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 11 FIRST NOTICE WAS ISSUED U/S 143(2) OF THE IT ACT ON 29-09-2008 AND ACCORDING TO THE AO THE SAME WAS NOT COMPLIED WITH BECAUSE NOBODY ATTENDED THE PROCEEDINGS. IT WAS CLAIMED BEF ORE THE LEARNED CIT(A) THAT THE ACCOUNTANT HAD ATTENDED THE PROCEED INGS AND SINCE IT WAS THE FIRST NOTICE THEREFORE CASE WAS ADJOURNED . THE LEARNED CIT(A) HOWEVER ON GOING THROUGH THE RECORD FOUND T HAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO SHOW THAT THE ASSESSE E OR HIS ACCOUNTANT HAD ATTENDED THE PROCEEDINGS. NO EVIDENC E IS PRODUCED BEFORE US ALSO TO SUPPORT SUCH CONTENTIONS RAISED B EFORE THE LEARNED CIT(A). FOR THE REMAINING NOTICES OF 3 RD JULY AND 6 TH JULY 2009 THE ASSESSEE CLAIMED THAT ONLY ONE DAYS TIME WAS LEFT FOR GIVING THE REPLY. THE LEARNED CIT(A) THEREFORE RIGHTLY NOTED THAT IF ONE DAYS TIME WAS LEFT FOR COMPLIANCE THE ASSESSEE COULD HA VE MOVED FOR ADJOURNMENT WHICH WAS ALSO NOT DONE. THUS THE ASSE SSEE FAILED TO PROVE ANY REASONABLE CAUSE FOR FAILURE TO COMPLY WI TH THE STATUTORY NOTICES. THE AO NOTED IN THE PENALTY ORDER THAT DES PITE SHOW CAUSE NOTICE FOR LEVY OF PENALTY WAS SERVED UPON THE ASSE SSEE BUT THE ASSESSEE DID NOT GIVE ANY REASONS WHY PENALTY SHOUL D NOT BE IMPOSED. THUS ACCORDING TO THE AO NO EXPLANATION I S FILED FOR FAILURE TO COMPLY WITH STATUTORY NOTICE. THE LEARNED COUNSE L FOR THE ASSESSEE HOWEVER REFERRED TO THE SHOW CAUSE NOTICE DATED 17 -07-2009 AND THE REPLY FILED BY THE ASSESSEE ON 23-07-2009 (PB- 19) WHICH ACCORDING TO HER ALSO IS REFERRED TO IN THE ASSESSM ENT ORDER. WE FIND THAT THOUGH THIS REPLY DATED 23-07-2009 WAS FILED B EFORE THE AO BUT NO REASONS HAVE BEEN GIVEN FOR FAILURE TO COMPLY WI TH THE STATUTORY NOTICES. THE ASSESSEE FROM PARA 1 TO 8 SUBMITTED TH E DETAILS ON MERIT AND IN THE BOTTOM MERELY STATED THAT THE ASSESSEE H AS NO INTENTION TO ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 12 NOT TO COMPLY WITH THE STATUTORY NOTICES AND THAT T HE NOTICE U/S 143(2) OF THE IT ACT COULD NOT BE COMPLIED WITH BECAUSE IT WAS NOT POSSIBLE TO COLLECT VARIOUS INFORMATION. THUS THE ASSESSEE HAS NOT GIVEN ANY SPECIFIC OR REASONABLE CAUSE TO SHOW WHY THERE WAS FAILURE TO COMPLY WITH THE STATUTORY NOTICES. WHETHER THE ASSESSEE WA S HAVING INTENTION OR NOT FOR COMPLYING WITH STATUTORY NOTICES IS NOT RELEVANT TO THE MATTER IN CONTROVERSY BECAUSE THE ASSESSEE SHALL HA VE TO PROVE WHY THERE WAS FAILURE TO COMPLY WITH THE STATUTORY NOTI CES. THE EXPLANATION NOW GIVEN BEFORE THE LEARNED CIT(A) AT THE PENALTY STAGE WAS NOWHERE MENTIONED IN THIS REPLY DATED 23-07-2009 (P B-19). THUS THE REASONS NOW EXPLAINED BEFORE THE LEARNED CIT(A) IN THE PENALTY ORDER FOR THE FIRST TIME WAS NEVER EXPLAINED EITHER AT THE ASSESSMENT STAGE OR AT THE PENALTY STAGE BEFORE THE AO. THE AO THEREFORE RIGHTLY NOTED THAT THE ASSESSEE DID NOT GIVE ANY RE ASONS WHY PENALTY SHOULD NOT BE IMPOSED. THUS NO BENEFIT COULD BE GI VEN TO THE ASSESSEE FOR REPLY DATED 23-07-2009. THE HONBLE M. P. HIGH COURT IN THE CASE OF VIMAL GINNING AND PRESSING FACTORY V S CIT 279 ITR 100 AND IN THE CASE OF RUKMINI BAI VS CIT 276 ITR 650 HELD THAT THE EXPLANATION COULD BE SAME AS THAT GIVEN BEFORE THE AO AND IF THAT HAD BEEN SO IT WOULD HAVE HAD TO BE LOOKED INTO IN THE PENALTY PROCEEDINGS BUT WHEN NO EXPLANATION WAS FIL ED IT COULD NOT BE TAKEN INTO CONSIDERATION . IF THE ASSESSEE FAILS TO EXPLAIN THE ISSUE AT THE PENALTY STAGE LEVY OF PENALTY IS JUSTIFIED. 16. CONSIDERING THE ABOVE WE ARE OF THE VIEW THAT THE ASSESSEE FAILED TO COMPLY WITH THE STATUTORY NOTICES. WHATE VER EXPLANATION WAS GIVEN BEFORE THE LEARNED CIT(A) WAS NOT SUBSTANTIAT ED THROUGH ANY ITA NO.3121 AND 3122/AHD/2010 ANANPURNA AGENCIES VS DCIT CIR-11 AHMEDABAD 13 MATERIAL ON RECORD. WE THEREFORE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). WE CONFIRM THE SAME AND DISMISS THE APPEAL OF THE ASSESSEE. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE IN IT A NO.3121/AHD/2010 IS PARTLY ALLOWED; WHEREAS THE APP EAL OF THE ASSESSEE IN ITA NO.3122/AHD/2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-07-2011 SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 21-07-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD