J.J. Exporters Limited, Kolkata v. DCIT, Circle - 12, Kolkata, Kolkata

ITA 315/KOL/2010 | 2005-2006
Pronouncement Date: 07-01-2011

Appeal Details

RSA Number 31523514 RSA 2010
Bench Kolkata
Appeal Number ITA 315/KOL/2010
Duration Of Justice 10 month(s) 25 day(s)
Appellant J.J. Exporters Limited, Kolkata
Respondent DCIT, Circle - 12, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 07-01-2011
Assessment Year 2005-2006
Appeal Filed On 12-02-2010
Judgment Text
1 B IN THE INCOME TAX APPELLATE TRIBUNAL BENCH- B KOL KATA [ . . . . . . . . . .. . . .. . !' ] BEFORE SHRI B.R.MITTAL JUDICIAL MEMBER & SRI C.D. RAO ACCOUNTANT MEMBER # # # # / ITA NO. 315 (KOL) OF 2010 $%& '( / ASSESSMENT YEAR 2005-06 M/S. J.J. EXPORTERS LTD. KOLKATA. (PAN-AAACJ6722H) DY.COMMISSIONER OF INCOME-TAX CIRCLE-12 KOLKATA.. (+ / APPELLANT ) - % - - VERSUS -. (/0+ / RESPONDENT ) + 1 2 !/ FOR THE APPELLANT: / SRI R.SALARPURIA /0+ 1 2 ! / FOR THE RESPONDENT: / SRI PIYUSH KOLHE !3 / ORDER ( . .. . . .. . ) !' (C.D. RAO) ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE OR DER DATED 04.11.2009 OF LD. C.I.T.(A)-XII KOLKATA PERTAINING TO ASSESSMENT YEA R 2005-06. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASSESSEE READS AS UNDER :- 1. FOR THAT IN VIEW OF THE FACTS AND IN T HE CIRCUMSTANCES THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO IN IMPOSING PENALTY OF RS.1 00 000/- U/S. 271BA OF THE I.T. ACT 1961 ON THE GROUND THAT THE ASSESSEE HAD FAILED TO OBTAIN AS WELL AS FURNISH THE AUDIT REPORT U/S 92E OF THE ACT ON OR B EFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND THAT THERE BEING REASONABLE CA USE FOR SUCH ALLEGED DELAY IN PENALTY SO IMPOSED BY THE AO AND CONFIRMED BY LD. C IT(A) IS LIABLE TO BE DELETED. THE ACTION OF THE CIT(A) IS WHOLLY UNREAS ONABLE UNCALLED FOR AND BAD IN LAW. 2. THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF SILK FABRICS GARMENTS WOOLEN FABRICS ETC. DURIN G THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE-C OMPANY HAD ENTERED INTO FOR THE FIRST TIME AN INTERNATIONAL TRANSACTION FOR EXPORT OF SAL E OF ITS PRODUCTS WITH ONE OF ITS ASSOCIATED ENTERPRISE M/S. SPIN INTERNATIONAL INC A COMPANY INCORPORATED IN USA AND SOME OTHER UNRELATED PARTIES AS MENTIONED IN THE AU DIT REPORT IN FORM NO. 3CEB READ WITH SECTION 92E OF THE I.T. ACT. RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL 2 WAS FILED ON 31/10/2005. THE A.O. OBSERVED THAT TH E ASSESSEE-COMPANY HAS NOT FILED A STATUTORY REPORT IN FORM 3CEB AS REQUIRED U/S. 92E OF THE ACT ON OR BEFORE THE SPECIFIED DATE. HE THEREFORE ISSUED A SHOW CAUSE NOTICE AND IN RESPONSE THE ASSESSEE EXPLAINED THAT AS IT WAS NOT FULLY AWARE OF THE PROVISIONS OF SEC. 92E OF THE ACT AN UNINTENDED AND BONA FIDE TECHNICAL MISTAKE HAD OCCURRED IN NOT GET TING THE ACCOUNTS RELATING TO INTERNATIONAL TRANSACTIONS AUDITED U/S. 92E OF THE ACT AND SUBMIT THE AUDIT REPORT ON OR BEFORE THE DUE DATE OF FILING THE RETURN WHICH WAS DULY FILED IN PRESCRIBED FORM DURING ASSESSMENT PROCEEDINGS ON 13/12/2007. THE A.O. WAS NOT IMPRESSED UPON THE EXPLANATION OF THE ASSESSEE AS ACCORDING TO HIM L APS ON THE PART OF THE ASSESSEE WAS NOT IN THE NATURE OF TECHNICAL DEFAULT. HE THEREFORE INITIATED PENALTY PROCEEDING FOR VIOLATION OF PROVISIONS OF SEC.92E AND IMPOSED A PE NALTY OF RS.1 00 000/- U/S. 271BA OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION. 3. ON APPEAL THE LD. C.I.T.(A) UPHELD THE ACTION OF THE A.O. IN LEVYING PENALTY OF RS. 1 LAKHS U/S. 271BA OF THE ACT BY HOLDING AS UND ER :- AS AGAINST THE LEVY OF PENALTY THE APPELLANT MA INLY SUBMITTED THAT THE APPELLANT FOR THE FIRST TIME ENTERED INTO SUCH TRANSACTIONS AND T HAT IN SUBSEQUENT YEARS THE AUDIT REPORT FILED WITHIN TIME LIMIT AND THAT THE ACCOUNT ANT WAS NOT KEEPING TO THE BEST OF HIS HEALTH AND ULTIMATELY LEFT THE ORGANIZATION AND THAT THE COURTS INCLUDING JURISDICTIONAL HIGH COURT HELD THAT THE PENALTY PRO VISIONS ARE DISCRETIONARY IN NATURE. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND T HE CASE LAWS RELIED ON BY THE APPELLANT. I AM NOT CONVINCED WITH THE APPELLANTS ARGUMENTS. ON THE OTHER HAND THE AO MADE OUT A CASE BASED ON A GOOD REASONING FO R LEVYING A PENALTY. AS OBSERVED BY THE AO THE APPELLANT HAD THE SUPPORT A ND GUIDANCE OF TAXATION EXPERTS AND HENCE THE CONTENTION THAT IT WAS NOT FULLY AWAR E OF THE PROVISIONS DOES NOT STAND TO LOGIC. IN THE NORMAL COURSE THE APPELLANT SHOUL D HAVE OBTAINED THE REPORT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME WHICH WA S 31.10.2005. THE APPELLANT HOWEVER GOT THE STATUTORY REPORT PREPARED VERY MUCH LATER I.E. ON 13.12.2007. FOR THIS THE APPELLANT CITED THE REASON THAT THE ACCOUN TANT WHO WAS LOOKING AFTER THE DAY TO DAY AFFAIRS OF THE APPELLANT WAS NOT KEEPING GOO D HEALTH AND ULTIMATELY LEFT THE ORGANIZATION. THIS KIND OF EXPLANATION NOT SUBSTAN TIATED WITH ANY KIND OF EVIDENCE BACKING THE EXPLANATION CANNOT BE CONSIDERED AS GEN UINE AND REASONABLE CAUSE. THE CASE LAWS RELIED ON BY THE APPELLANT IS MOSTLY ON T HE RATIO OF REASONABLE CAUSE. AS MENTIONED IN THE PRESENT CASE I DO NOT SEE ANY REAS ONABLE CAUSE THAT MADE THE APPELLANT TO OBTAIN THE STATUTORY REPORT VERY BELAT EDLY. AS SUCH THE LEVY OF PENALTY U/S. 271BA IS JUSTIFIED IN THIS CASE AND ACCORDINGL Y THE ACTION OF THE AO IS UPHELD. HENCE THIS APPEAL BY THE ASSESSEE. 3 4. AT THE TIME OF HEARING BEFORE US THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE YEAR UNDER CONSIDERATION WAS THE FIRST YEA R OF ASSESSEES INTERNATIONAL TRANSACTION WITH ITS WHOLLY OWNED SUBSIDIARY COMPAN Y AT USA M/S. SPIN INTERNATIONAL INC. AND THEREFORE IT WAS NOT FULLY AWARE ABOUT P ROVISIONS OF SEC. 92E REQUIRING THE ASSESSEE TO FURNISH AUDIT REPORT ON OR BEFORE THE D UE DATE OF FILING THE RETURN OF INCOME. HE FURTHER SUBMITTED THAT THE INTERNATIONAL TRANSAC TIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISE WERE AT ARMS LENGTH PRICE (ALP) AS ENVISAGED IN SEC. 92C OF THE ACT. HOWEVER THE RELEVANT REPORT U/S. 92E WAS FURNISHED WITH THE A.O. DURING ASSESSMENT PROCEEDING AND THE A.O. DID NOT REJECT T HE SAID AUDIT REPORT AND METHOD OF ACCOUNTING AND ON THE BASIS OF THE SAID AUDIT REPOR T COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT THEREBY MAKING SOME DISALLOWANCE S/ADDITIONS. HE SUBMITTED THAT THEREAFTER FOR THE SUBSEQUENT ASSESSMENT YEARS THE ASSESSEE HAS BEEN FILING THE REQUIRED AUDIT REPORT U/S. 92E IN PRESCRIBED FORM WITHIN THE DUE DATE. HE FURTHER POINTED OUT THAT THE ASSESSEE NEVER HAD ANY INTENTION OF EVADING ANY TAX AS THE FOREIGN COMPANY HAD PAID TAX @ 34% IN USA AND THE DELAY IN OBTAINING/FILING OF AUDIT REPORT WAS DUE TO LACK OF KNOWLEDGE ON THE PART OF THE ACCOUNTANT OF THE ASSE SSEE-COMPANY WHO WAS AT THE RELEVANT TIME MORE THAN 65 YEARS OLD AND DUE TO HEA LTH REASON HE HAD ULTIMATELY LEFT THE ORGANIZATION. HE FURTHER POINTED OUT THAT THE RETUR N WAS FILED ALONG WITH THE AUDITED ACCOUNTS AND TAX AUDIT REPORT U/S. 44AB OF THE ACT. THEREFORE THERE HAD BEEN NO INTENTION TO SUPPRESS ANYTHING BEFORE THE DEPARTMEN T. HE THEREFORE SUBMITTED THAT THERE BEING REASONABLE CAUSE FOR SUCH ALLEGED DELAY THE PENALTY SO IMPOSED BY THE A.O. U/S. 271BA OF THE ACT AND CONFIRMED BY THE LD. C.I.T.(A) SHOULD BE CANCELLED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE LD. C. I.T.(A) AFTER DISCUSSING SEVERAL CASE LAWS AND ALSO INTERPRETING SEC. 92E R.W.S. 271BA OF THE ACT HAS RIGHTLY UPHELD THE PENALTY IMPOSED BY THE A.O. AND THE SAME SHOULD BE UPHELD. HE ALSO RELIED ON THE DECISION IN THE CASE OF CIT VS. SUNIL KUMAR GOEL [2 74 ITR 53 (P&H)]. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. SECTION 92E OF THE ACT READS AS UNDER :- 4 92E EVERY PERSON WHO HAS ENTERED INTO AN INTERNATIONA L TRANSACTION DURING A PREVIOUS YEAR SHALL OBTAIN A REPORT FROM AN ACCOUNTANT AND F URNISH SUCH REPORT ON OR BEFORE THE SPECIFIED DATE IN THE PRESCRIBED FORM DULY SIGNED A ND VERIFIED IN THE PRESCRIBED MANNER BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULA RS AS MAY BE PRESCRIBED. FROM THE ABOVE IT IS EVIDENT THAT AN ASSESSEE WHO HAS ENTERED INTO AN INTERNATIONAL TRANSACTION SHALL OBTAIN A REPORT FROM AN ACCOUNTAN T AND FURNISH THE SAME BEFORE THE A.O. ON OR BEFORE THE SPECIFIED DATE I.E. THE DATE OF FILING RETURN U/S. 139(1). SEC. 271BA OF THE ACT READS AS UNDER :- 271BA. IF ANY PERSON FAILS TO FURNISH A REPORT FROM AN ACCOUNTANT AS REQUIRED BY SECTION 92E THE ASSESSING OFFICER MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY A SUM OF ONE HUNDRED THOUSAND RUPEES. IT IS THUS EVIDENT THAT PENALTY U/S.271BA CAN BE LE VIED IF ANY PERSON FAILS TO FURNISH A REPORT FROM THE ACCOUNTANT AS REQUIRED U/S. 92E OF THE ACT. THERE IS NO DISPUTE THAT THE REQUIRED AUDIT REPORT U/S. 92E WAS NOT FILED WITHIN THE PRESCRIBED TIME RESULTING IN PENALTY ACTION U/S. 271BA OF THE ACT. ACCORDING TO THE ASSESSEE IT WAS DUE TO BONA FIDE AND TECHNICAL MISTAKE THAT SUCH DEFAULT COMMITTED O NLY FOR THE FIRST YEAR OF ITS INTERNATIONAL TRANSACTIONS. IT IS A WELL-SETTLED PR INCIPLE AS LAID DOWN BY THE VARIOUS COURTS THAT THE WORD MAY EMPLOYED IN PENAL PROVISIONS OF THE ACT MAY BE INTERPRETED AS DISCRETIONARY AND THAT DISCRETION IS LIMITED WITHIN THE MEANING OF SUCH PROVISIONS PROVIDING THE PROCEDURE THREROF. THE PROVISIONS GI VE DISCRETION TO THE TAXING AUTHORITY NOT TO IMPOSE PENALTY HAVING REGARD TO THE FACTS AN D CIRCUMSTANCES OF THE CASE. THE A.O. HAS BEEN CONFERRED UPON WITH THE INHERENT DISC RETION IN THE MATTER OF IMPOSING PENALTY. IN OUR CONSIDERED OPINION TAX AUTHORITY I S TO SEE WHAT INFORMATION AND DOCUMENTS ARE RELEVANT FOR DETERMINING THE ALP BEFO RE ISSUING NOTICE U/S. 92E OF THE ACT. IN THIS CONNECTION WE MAY REFER TO SEC. 92D WHICH SPEAKS OF MAINTENANCE AND KEEPING OF INFORMATION & DOCUMENT BY PERSONS ENTERI NG INTO AN INTERNATIONAL TRANSACTION. SUB-CLAUSE (3) OF THAT SECTION READS AS UNDER :- THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) MAY IN THE COURSE OF ANY PROCEEDING UNDER THIS ACT REQUIRE ANY PERSON WHO H AS ENTERED INTO AN INTERNATIONAL TRANSACTION TO FURNISH ANY INFORMATION OR DOCUMENT IN RESPECT THEREOF AS MAY BE PRESCRIBED UNDER SUB-SECTION (1) WITHIN A PERIOD O F THIRTY DAYS FROM THE DATE OF RECEIPT OF A NOTICE ISSUED IN THIS REGARD: 5 AS STATED ABOVE THE ASSESSEE DURING COURSE OF ASSE SSMENT PROCEEDING HAD FILED THE REPORT OF THE ACCOUNTANT IN FORM 3CEB AS PER SEC. 9 2E OF THE ACT IN RESPECT OF ITS INTERNATIONAL TRANSACTIONS AND ON THE BASIS OF WHIC H THE A.O. HIMSELF DETERMINED THE ALP OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATIO N. THEREFORE ALL THE INFORMATION AND EVIDENCES WERE WELL WITH THE A.O. FOR COMPLETING TH E ASSESSMENT U/S. 143(3) OF THE ACT. FURTHER IT IS ALSO NOT DISPUTED THAT THE ASSESSMEN T YEAR UNDER CONSIDERATION WAS THE FIRST YEAR OF ASSESSEES INTERNATIONAL BUSINESS AND THAT BEING SO AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THERE MAY BE REASONABLE G ROUND FOR SUCH LAPS IN NOT GETTING THE ACCOUNTS AUDITED U/S. 92E AND FILING OF THE SAME WI THIN THE PRESCRIBED TIME. IT IS ALSO PERTINENT TO MENTION HERE THAT FOR THE SUBSEQUENT Y EARS THERE HAD BEEN NO SUCH DEFAULT AS COMMITTED IN THE FIRST YEAR OF ITS INTERNATIONAL BUSINESS. FURTHER THE ASSESSEES ACCOUNTS ARE DULY AUDITED U/S. 44AB OF THE ACT AND THERE IS NO SUCH DEFAULT AS OCCURRED IN RESPECT OF INTERNATIONAL BUSINESS. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS OF THE PA RTIES WE ARE OF THE OPINION THAT THE DELAY IN SUBMISSION OF THE REPORT U/S. 92E OF THE A CT WITHIN THE PRESCRIBED TIME BY THE ASSESSEE WAS DUE TO A REASONABLE CAUSE AND THEREFO RE PENALTY IS NOT SUSTAINABLE ON THIS GROUND. MOREOVER THE PENALTY HAS BEEN IMPOSED ON MERE TECHNICAL GROUND. IN VIEW OF SETTLED LAW NO PENALTY IS IMPOSABLE FOR TECHNICAL OR VENIAL DEFAULT. 6.1. AT THE TIME OF HEARING THE LD. DEPARTMENTAL REPRESENTATIVE FILED A COPY OF JUDGMENT IN THE CASE OF CIT VS. SUNIL KUMAR GOEL (S UPRA) WHEREIN IT HAS BEEN HELD THAT THAT THE TRIBUNAL IS DUTY BOUND TO RECORD TANGIBLE AND COGENT REASONS FOR UPSETTING THE ORDERS PASSED BY THE TAX AUTHORTIES IN PENALTY MATT ERS U/S. 271D AND 271E OF THE ACT. SECTIONS 271D AND 271E ARE DIRECTED IN RESPECT OF P ENALTY FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SEC. 269SS AND 269T IF A PERSONS ACCE PTS OR REPAYS ANY LOAN OR DEPOSIT IN CASH AS THE CASE MAY BE. IN SUCH CASES THERE IS NO REQUIREMENT OF SPECIAL INFORMATION AS IS REQUIRED IN THE CASE OF INTERNATIONAL TRANSAC TION REQUIRING THE ASSESSEE TO FURNISH REPORT OF THE ACCOUNTANT ABOUT SUCH INTERNATIONAL T RANSACTIONS. FURTHER AS PER SEC. 271BA THE A.O. MAY DIRECT AN ASSESSEE TO PAY BY WA Y OF PENALTY OF RS. 1 LAKH ON HIS FAILURE TO FURNISH REPORT U/S. 92E OF THE ACT. THER EFORE THE POWER OF THE A.O. IS DISCRETIONARY WHICH IS BASED ON FACTS AND CIRCUMST ANCES OF EACH CASE. THAT BEING SO AS 6 WE HAVE ALREADY HELD THAT THE ASSESSEE WAS PREVENTE D BY REASONABLE CAUSE THAT DECISION RELIED UPON BY THE LD. DEPARTMENTAL REPRESENTATIVE WOULD NOT BE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN VIEW OF THE ABOVE WE D ELETE THE PENALTY OF RS.1 00 000/- SUSTAINED BY THE LD. C.I.T.(A) U/S. 271BA OF THE AC T. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. 4 !3 '5! 6 5% 7 48 THIS ORDER IS PRONOUNCED IN OPEN COURT ON 07.01.2011. SD/- SD/- ( . . . . . .. . $ $ $ $ ) ( . .. . . .. . ) !' (B.R.MITTAL) JUDICIAL MEMBER (C.D.RAO) ACCOUNTANT MEMBER ( (( ( ' ' ' ') )) ) DATE: 07 -01-2011 !3 1 /$$9 :!9';- COPY OF THE ORDER FORWARDED TO : 1. + / THE APPELLANT : M/S.J.J. EXPORTS LTD. C/O. SALARPURIA JAJODIA & CO . 7 C.R. AVENU E KLKATA-700 072 2 /0+ / THE RESPONDENT : DCIT CIRCLE - 12 KOLKATA. 3. $3% () : THE CIT(A)-XII KOLKATA. 4. $3%/ THE CIT KOL- 5 . ?$7 /$% / DR ITAT KOLKATA BENCHES KOLKATA 6 . GUARD FILE . 09 /$/ TRUE COPY !3%5/ BY ORDER (DKP) @ A / DEPUTY REGISTRAR .