Income Tax Appellate Tribunal - Lucknow
M/S. Bansal Suppliers Pvt. Ltd.,, ... vs The Dcit, Cc-I, Kanpur on 26 December, 2022
1
ITA Nos.270 to 276 /LKW/2020
M./s. Nikki Global Finance Ltd. &
ITA Nos. 284 to 290/LKW/2020
M/s. Bansal Suppliers Pvt. Ltd. &
AYs: 2010-11 to 2016-17.
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, LUCKNOW
BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT
AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER
ITA Nos. 284 to 290/LKW/2020
Assessment Years: 2010-11 to 2016-17
M/s. Bansal Suppliers Pvt. Dy. Commissioner of Income-
Ltd., Tax, Central circle-1, Kanpur-
Vs.
7/125, C-2,Swaroop Nagar, 208002.
Kanpur-208022.
(PAN: AADCB7622F)
(Appellant) (Respondent)
&
ITA Nos. 270 to 276/LKW/2020
Assessment Years: 2010-11 to 2016-17
M/s. Nikki Global Finance Dy. Commissioner of Income-
Ltd. 1-9, KGF, Lajpat Nagar, Vs. Tax, Central circle-1, Kanpur-
New Delhi-110024. 208002.
(PAN: AAACN0244L)
(Appellant) (Respondent)
Present for:
Appellant by : Shri Rakesh Garg, Advocate
Respondent by : Shri Amit Nigam, DR
Date of Hearing : 30.11.2022
Date of Pronouncement : 26.12.2022
ORDER
PER BENCH:
2ITA Nos.270 to 276 /LKW/2020 M./s. Nikki Global Finance Ltd. & ITA Nos. 284 to 290/LKW/2020 M/s. Bansal Suppliers Pvt. Ltd. & AYs: 2010-11 to 2016-17.
All the above captioned appeals filed by two different assessees are against the respective orders of Ld. CIT(A), Kanpur-4, Kanpur all dated 27.07.2020 u/s 250(6) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") passed against the penalty orders by the DCIT, Central Circle-1, Kanpur u/s. 271(1)(b) of the Act, all dated 27.03.2019 . Since all the appeals relating to both the two assessees belong to one group of Rich Udyog Net Worth Ltd. and facts are identical, arising out of respective consolidated orders of Ld. CIT(A), we dispose of all these appeals by this consolidated order for the sake of convenience.
2. Assessee has taken as many as nine/ten grounds in the appeals challenging the levy of penalty of Rs. 10,000/- u/s. 271(1)(b) of the Act for each of the seven years involved, respectively.
3. The issue in these present appeals before us was elaborately dealt in another set of appeals in the case of Ashesh Agrawal Vs. DCIT, Central Circle-1 in ITA No. 292 to 298/LKW/2020 for AYs. 2010-11 to 2016-17. As this case of Ashesh Agrawal was also part of the same group of Rich Udyog Net Worth Ltd., the observations and findings given by us in the case of Ashesh Agrawal (supra) applies mutatis mutandis in the present set of appeals before us. The observations and findings in the case of Ashesh Agrawal (supra) are reproduced hereunder, for ease of reference.
"3. Brief facts of the case are that a survey u/s. 133A was carried out on 28.04.2015 at the office of Rich Udyog Network Ltd. and other concerns belonging to Rich Udyog Network group of Kanpur. The survey u/s. 133A of the Act was converted into search u/s. 132 of the Act. In the course of search, various incriminating documents/information relating to the assessee were also found and seized as noted by the Ld. AO in the order. In the course of assessment, Ld. AO found that accounts of the assessee were voluminous and complex and, therefore, referred the case of the assessee to Pr. CIT(C), Kanpur for seeking approval for condu ct of special audit u/s. 142(2A) of the Act. Base d o n the app roval of Ld. Pr . CI T(C) , Kanpu r, asse ssee was required to g et its books of accounts audite d by the Spe cial Auditor and su bm it a report the reon within nine ty days. Ld. AO 3 ITA Nos.270 to 276 /LKW/2020 M./s. Nikki Global Finance Ltd. & ITA Nos. 284 to 290/LKW/2020 M/s. Bansal Suppliers Pvt. Ltd. & AYs: 2010-11 to 2016-17.
issued notices u/s. 142(1) of the Act which we re complie d in part only. It i s cl aime d that on 15. 12.2017, Ld . A .R. of t he asse ssee attended the hearing and produced books of account be fore the Ld. AO. Assessee furt her claimed that t he said books of accou nt we re impounded by the Ld. AO without assigning any re ason inasmuch as the said bo oks we re impounded in the course of asse ssme nt proceedings wi thou t any authority to do so u/s. 142(1) of the Act. Subsequently, Special Au ditors also repeate dl y state d be fore the Income Tax Depart me nt about the non-compliance by the asse ssee in the special audi t procee dings for getting the accounts au dite d.
3.1. Owing to non-compliance by the asse ssee , Ld. AO issue d show cause notice u/s. 144 of the A ct date d 31.07.2018 against which assessee file d its re ply on 07 .08.2018 . Ld. A O passe d the assessment orde r on 24.08. 2018 u/s. 144 r.w .s. 153A of the Act by making various ad ditions. Thereafter, Ld . AO issue d notice u /s. 271(1)(b) of the A ct to show cause as to why a pe nalty should no t be levied against which assessee filed its submi ssion date d 26.09.2018 requesting the Ld . AO to keep the pe nalty procee ding in abeyance until the disposal of ap peal filed be fore the Ld. C IT(A)-IV, Kanpu r against the assessment orde r. Ld . A O without t aking into cognizance of the reque st of kee ping the pe nalty procee ding in abeyance, procee de d to comple te the pe nalty proce e ding by le vying a penalty of Rs. 10,000/- u/s. 271(1)(b) of the Act . Aggri eve d, assessee went in appe al before the Ld. CI T(A ), who confirme d the action o f the Ld. A O. 3.2. While dismissing t he appeal of the as se ssee , Ld . CIT(A) state d in par a 9.1, vari ous principle s which are re le vant in pe nalty imposition and are e x tracted as under:
"9.1 Section 271(1)(b) of the Ac t lays do wn that if the Assessing of f ice r, in the cour se of any proceeding under this Ac t, is s atisf ied that any person who h as f ailed to c omply with a d ire c tion under sub-sec tio n (2A) of sectio n 142, he may d irec t th at such person shall pay by way of penal ty. Fur ther, var ious pr incip le s wh ich ar e relev ant in pen alty imposition are as under:
(a) There is no room f or br ing ing in the rules of crimin al la w.
(b) Ref erence to the absence of mens rea or f ailure of the Re venue to es tab lish me ns rea is entirely irre levant.
(c) The onus was on the assessee to answer the charge of hav ing f ailed to co mply with the direc tio n.
(d) Impos ition of penalty u nder sec tion 2 71(1)(b) is d is cre tio nar y, is no t correc t. It is true tha t the words used in section 271 is "may d irect".
The expression "may" in the con tex t in whic h it h as bee n used mus t be held to be manda tory."
4. Ld. CI T(A ) l aid em phasize on the require me nt that onu s is on the assessee to show that there is a re asonable cause as pre scribe d 4 ITA Nos.270 to 276 /LKW/2020 M./s. Nikki Global Finance Ltd. & ITA Nos. 284 to 290/LKW/2020 M/s. Bansal Suppliers Pvt. Ltd. & AYs: 2010-11 to 2016-17.
u/s. 273B o f the Act to answer t he charge of h aving fail e d to comply with the re qui rement pose d by the Ld. AO in the assessment proce edings. While dismissi ng the appe al, Ld. C IT(A) noted that asse ssee had not disch arg ed the onu s that t he re e xiste d reaso nabl e cause fo r non-compliance of sta tutory re quire me nts u/s. 142(2A) of th e Act. Ld. CI T(A) also note d that i mposition of penalty u/s. 271(1 )(b) of the Act is not qua asse ssme nt and is not dependent u pon the outcome of the assessment. He is of the vie w that the conduct o f assessee shows that he is non-coope rative to the authorities an d thus, dismisse d the a ppe al of th e assessee . Aggri eved, the asse ssee is in appeal b efore the Tribunal .
5. Before us Shri Rakesh Garg, Ad vocate re pre se nted the assessee and Shri Amit Nigam, CI T, D R repre sente d the re ve nue .
6. Ld. Cou nse l fo r the assessee, at the outse t, pl ace d on re cord, copies of o rde r sheet of the assessme nt proce e ding to de monstrate the existence of reasonable cause which pre ve nte d the assessee in complying with the statutory require ments as re quire d by the Ld. AO in the assessment proceedings vis-à-vis se ction 142(2A) of the Act. From the o r der sheet entry dated 15 .12.2017, Ld. Counse l pointed o ut that S hri Rahul Ku mar Mittal, A dvocate /Ld. AR of the assessee, attende d the hearing on that date and all t he re le vant ledgers for AYs. 2010-11 to 2016- 17 were produce d which we re impounded by the Ld. AO in his p resence . He thus, submitte d that once the books of account p roduced be fore the Ld. AO we re impounded by the Ld. AO i n the course of asse ssment proce e ding, assessee was prevente d from p roducing the same be fore the Spe cial Auditor fo r the conduct of the special audi t u/s . 142(2A ) of the A ct and fu lfil the st atu tory re qui rements.
6.1. He strongl y submitted that the allegation of the ld. A O that books of accou nt have not been mai ntaine d and asse ssee has no t got his acco unts au dited as re quired u /s. 1 42(2A) of th e Act in the captioned asse ssme nt years are misc onceive d as borne out from the facts on record from the noting of the orde r she e t e ntrie s. Accordingly, Ld. Cou nsel submitte d that the re e xists re asonable cause within the meaning of section 273B of the Act and , the refore , the penalty so impose d is ought to be de lete d.
7. Per co ntra, Ld . CI T, DR pl aced reliance on the orde rs of the authoriti es be lo w.
8. We have heard the rival contentions and have care fu lly gone through the m aterial avail abl e on re cord and hav e gi ve n our thoughtful conside ration to the submissions made be fore us. Before adverti ng on the i ssue, we appr aise ourse lve s with the relevant provisio ns of law which are reproduce d hereunde r:
5ITA Nos.270 to 276 /LKW/2020 M./s. Nikki Global Finance Ltd. & ITA Nos. 284 to 290/LKW/2020 M/s. Bansal Suppliers Pvt. Ltd. & AYs: 2010-11 to 2016-17.
"271(1) If the Asse ss ing of f icer or the Commiss ioner ( Appeals) or the Pr inc ipal Co mmiss ioner or Commissioner in the cour se of any proceed ing s under th is Ac t, is satisf ied that an y person -
(a).....
(b) has f ailed to co mply with a notice (under sub-se c tion (2) of sec tio n 115WD or under sub-sec tion ( 2) of s ection 115W E or) under sub-sec tio n (1) of sectio n 142 or sub-sec tion (2) of sec tion 143 (or f ails to co mply with a dire ction issued under sub-sec tion (2 A) of sec tio n 142) or..."
he may direc t th at such person shall pay by way of penalty ( i).... .
( ii) In the c ases ref erred to in c lause (b), in add ition to tax, if any, payable by him a sum of ten thous and rupees f or each such f ailure .....
8.1. Also, se ction 273B provides for penalty not to be i mpose d in certain cases. Section 273B is reproduced as unde r:
"273B. Penalty not to be imposed in certain cases.
Notwithstanding anything contained in the provisions of clause (b) of sub- section (1) of] section 271, section 271A, section 271B section 271BB,] section 271C, section 271D, section 271E, clause (c) or clause (d) of sub- section (1) or sub- section (2) of section 272A, sub- section (1) of section 272AA] or sub- section (1) of section 272BB or] clause (b) of subsection (1) or clause (b) or clause (c) of sub- section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.]"
9. From the perusal of the above provisions of the Act, w e no te that where a reasonable cause exists wi th the asse ssee for the failure on his part to comply with the st atutory re quire me nt, penalty need no t to be imposed. B efore us, Ld. Counse l for the assessee, through the order she et e ntrie s of the asse ssme nt proceedings, e vidently demonstrated that re le vant le dge rs for all the years unde r conside ration were impounde d by the Ld. A O in the course of asse ssme nt itself which has pre ve nte d the asse ssee in making co mpl i ance to the requirements of the spe cial auditors fo r getti ng the special audit u/s. 142A o f the Act compl e ted. We also note that the Ld . CIT(A) hi mself while noting down va rious principles relating to penalty imposi tion h as state d in one of the points that o nus was on the assessee to answe r the cha rge of having failed to comply with the di rection (e xtracte d supra) .
6ITA Nos.270 to 276 /LKW/2020 M./s. Nikki Global Finance Ltd. & ITA Nos. 284 to 290/LKW/2020 M/s. Bansal Suppliers Pvt. Ltd. & AYs: 2010-11 to 2016-17.
9.1. Ld. C I(A) also obs erved i n para 9.2 that wordings of s e ction 273B are explicit that a pe rson who has faile d to comp ly with the notice/direction must show reasonable cause for wh i ch onus is upon the asse ssee. We also t ake note of the obse rvation made by the Ld. CIT(A) in re spect of "reasonable cause " as me ntione d in secti on 273B that "reasonable cause" as in l aw, pr ima f acie meani ng o f reaso nable with regard s to those circumstance s of which the actor, called on to act re asonabl y, knows or ought to know. Reasonable cause can be re asonably sai d to be a cause which prevents a man of average inte llige nce and ordin ary prudence, acting unde r normal ci rc umstance s, without ne gli ge nce or inaction o r w ant of bonafi de .
9.2. Reference is also made to the legal maxim 'impotentia excusat legam' and 'lex non cogit ad impossibilia' in this respect. When there is an invincible disability to perform mandatory part of the law that impotentia excuses. Law does not compel one to do that which one cannot possibly perform. Where the law creates a duty or charge and the party is disabled to perform it, without any default in him and has no remedy over it, there the law will, in general, excuse him. Therefore, when it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the person interested had no control, the circumstances will be taken as a valid excuse.
10. It is also pertinent to note that ideally an appe al arisin g fro m penalty o rder is t o be decided afte r final ization of the quantum proceedings. This p rac tice embargo is not ap plicable on the ld. Assessing Officer for visiting the assessee with pe nalty but a fte r passing the penal ty order, the Appe llate Authori ty, i .e . CIT(Appe als) or ITAT o ught to have waited completion of the quantu m proce e ding at appellate level. Howe ve r, after goi ng thro ugh the re cord avail able before us, we deem it app ropri ate to adjudicate thi s appe al without getti ng ourse lves influenced of the quantum proceedings pe nding before the Appe llate A uthority. The reason we assign for adopting such a course of action is the f act that o rde r she e ts of asse ssme nt proceedings pl aced before us e vi dently de monstrate s e xiste nce o f reaso nabl e cause at the end of the assessee in te rms of se ction 273B.
11. Considering the facts o n record and entry in the orde r shee ts of the assessme nt p rocee dings furni shed by the Ld. Counsel , it is evidently demonstrated that there exists a re asonable cause within the meaning of s ection 273B of t he Act which pre ve nte d the assessee in mee ting the complianc e require me nt in re spe ct o f special audit u/s. 142(2A) of the A ct. Assessee has discharge d its onus to explain the e xistence of re asonable cause le ading to impossibility of pe rfo rm ance as di scusse d above i n refe re nce to the two l egal maxims. Accordingly, we u nhesi tati ngly dire ct the Ld. AO to delete the penalty impose d u/s . 27 1(1)( b) of the Act. Accordingl y, all the appeals o f t he assessee are al l owed. As we have al lowe d the 7 ITA Nos.270 to 276 /LKW/2020 M./s. Nikki Global Finance Ltd. & ITA Nos. 284 to 290/LKW/2020 M/s. Bansal Suppliers Pvt. Ltd. & AYs: 2010-11 to 2016-17.
appeal by conside ring the e xistence of reasonable cause within the meani ng o f se ctio n 273B of the Act, all the other g rounds t ake n by the assessee are rendere d academic for adju dica tion, i n the give n context, and hence, no t adjudicate d upon.
12. Since fact pattern are ide ntical in all the othe r c apt ione d appeals before us, our fi ndings in ITA No. 292/LKW/2020 give n above applies mutatis mutandis to all these appe al s which are also , accordingly allowe d."
4. In the light of the above findings in the case of Ashesh Agrawal (supra), the pre sent set of appeals before us for the two assessees on similar fact pattern are also accordingly allowed.
Order pronounce d in the open Court on 26 t h December, 2022 as per the rules framed under Rule 34(4) of the Income Tax Appellate Tribunal Rules, Sd/- Sd/-
(Mahavir Singh) (Girish Agrawal)
Vice president Accountant Member
Dated: 26 t h December, 2022.
JD, Sr. P.S.
Copy to:
1. The Appellant:
2. The Respondent:.
3. CIT(A), Kanpur-4, Kanpur
4. CIT, Kanpur
5. DR, ITAT, Lucknow Bench, Lucknow
6. Guard file.
//True Copy//
By Order
Assistant Registrar
ITAT, Lucknow Benches, Lucknow