RUCHI MAHILA MANDAL,CHHATARPUR vs. INCOME TAX OFFICER, CHHATARPUR

Per Manomohan Das, JM: This is an appeal preferred by the Assessee agitating the Order dated 13-07-2018 by the Commissioner of Income Tax (Appeals) (CIT-A) confirming the penalty under section 271B of the Income Tax Act, 1961 (“the Act” hereinafter) levied by the Income Tax Officer, Chhatarpur, Gwalior vide order dated 28-06-2017 ( “the AO” hereinafter) .

2.1 The facts leading to the appeal before the Tribunal are that the assessee- appellant is a society engaged in the activities of mid-day meal scheme run by the Women and Child Development Department. The case was reported in Non-filer Management System (NMS) due to non-filing of Income Tax Return for the assessment year (AY) 2010-11. During the Financial Year (F.Y.) 2009-10, TDS 1 | P a g e

ITA No.194/JAB/20198 (A.Y. 2010-11) Ruchi Mahila Mandal vs. ITO

was deducted by the contractor/supplier under section 194C of the Act and as per 26AS data a system generated notice was issued to the assessee-appellant on 14-03-2015 and 12-08-2015 for filing the return. The assessee-appellant did not file any return of income for A.Y. 2010-11. The case was reopened under section 147 of the Act by the issue of a notice to the assessee u/s. 148(1) of the Act. 2.2 During the assessment proceedings, the AO observed that the turnover of the assessee during the year under consideration is at Rs. 4,86,55,565. As per sub- section (a) of section 44AB of the Act, every person carrying on business shall, if his total sale, turnover or gross receipts, as the case may be, in business exceed or exceeds (one crore rupees) in any previous year, get his accounts of such previous year audited by an accountant and furnish the audit report obtained before the specified date, being the due date of filing the return, while the audit report in the instant case was submitted much later, i.e., at the time of assessment finalisation. It was informed to the AO by the counsel of the assessee that due to technical problem the audit report could not filed within the due date, but did not state the technical problem. It is also recorded by the AO that the assessee failed to file the return of income, nor filed the audit report by the due date prescribed under the Act. In his view, the audit for the relevant year was not completed within time.

2.3 In the penalty proceedings initiated by the issue of notice u/s. 271B on 28/12/2016, i.e., for non-compliance of the provisions of s. 44AB of the Act, the assessee neither appeared nor filed any reply even as hearing was fixed for 06-02- 2017 and 22-05-2017. The AO accordingly issued a final show-cause notice on 30- 05-2017, stating it to be the last opportunity to explain as to why penalty u/s. 271B be not imposed, to which the assessee responded; its’ reply reading as under: “Smt. Maida Bai who was president of society and having no PAN at that time. Only through the digital signature of her, return could not be filed but as she did not have PAN in her name hence within time the assessee could not get her digital signature and therefore return remained to be filled. There were certain 2 | P a g e

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shortcoming in getting Smt. Maida Bai’s PAN within time and when her PAN was received due date of filing of return expired. Also, as per section 139D(c ), if the documents, statements, receipts, certificates or audit report which may not be furnished along with return in electronic form but shall be produced before the assessing officer on demand.”

2.4 The AO found the explanation unacceptable as the assessee did not furnish any electronic return for the relevant assessment year, so that the question of submission of documents under section 139D(c) by the assessee does not arise. He, further, perused the audit report for the subsequent year, i.e., for A.Y. 2011-12, which was audited by Trivedi & Co., CAs, and observed that the audit was completed before the due date and return filed on the last date for filing a belated return. The audit report for the current year was, in his view, not made within due date, and was back-dated. He, accordingly, levied penalty u/s. 271B for Rs. 1,50,000 for the relevant year, i.e., A.Y. 2010-11, on 28/6/2017. 2.5 Being aggrieved with the said penalty order, the assessee filed an appeal before the ld. CIT (A), raising the following ground of appeal: “That the ld. AO was not justified imposing penalty merely on the premises and conjecture that the audit report obtained for the relevant assessment year is backdated and since the return was not filed there was no audit report and submitted audit report is backdated one. That the opinion of the ld. AO is based on mere presumption and without any concrete evidence and hence penalty imposed deserves to be quashed”. 2.6 The ld. CIT(A) vide order dated 13-07-2018 dismissed the appeal of the assessee and, thus, confirmed the order passed by the AO. One of the grounds for dismissal of appeal of the assessee is recorded as non-prosecution. Notices dated 07-06-2018 and 02-07-2018 fixing dates of hearing on 20-06-2018 and 12-07-2018 respectively were issued to the assessee by the ld. CIT(A). Nobody, however, attended or filed an application for adjournment or written submission on the said dates. No documentary evidence nor any details were also filed by the assessee

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and, therefore, vide para 7 of the order, the ld. CIT (A) dismissed the appeal of the assesse for non-prosecution of the appeal filed by the assessee. The ld. CIT(A) referred the following case laws in dismissing the assessee’s appeal: (i) CIT v. B N Bhattacharjee & Ors., 118 ITR 461 (ii) Estate of late Tukojirao Holkar v. CWT, 223 ITR 480 (MP) (iii) CIT v. Multiplan India (P) Ltd., 38 ITD 320 (Del)

2.7 Aggrieved, the assessee is in further appeal before us. 3. We have heard the parties, and perused the material on record. 3.1 We are not in agreement with the ld. CIT(A) about the dismissal of the appeal on the ground of non-prosecution. His order would therefore require being set aside for that reason. In our view, despite non-appearance of the assessee on the date/s of hearing before him, the ld. CIT(A) is to dispose an appeal on merits only. Reference is drawn to section 250(6) of the Act, which reads as under:– Procedure in appeal. 250. (6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. The Hon’ble Apex Court in CIT v. Cheniappa Mudaliar [1969] 74 ITR 41 (SC) held that even where the appellant does not appear on the date of hearing, appeal has to be decided on merits. 3.2 The ld. CIT(A) also states to have dismissed the appeal of the assessee on merits. But his order is not a speaking order. He has dismissed the appeal by writing a few lines only in para 7 of the impugned order. His order ought to reflect his independent application of mind to the assessee’s case as well as to its adjudication, under challenge before him, noting also the assessee’s conduct, of prime relevance in penalty proceedings, i.e., apart from the explanation/s furnished, including its substantiation. We find this as completely absent in his

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order, so that it does not satisfy the mandate of s. 250(6). The Hon’ble Apex Court per its’ recent judgment dated 07/4/2022 in Pr. CIT v. Bajaj Herbals Pvt. Ltd. held that a speaking and reasoned order has to be passed while disposing an appeal. 3.3 We, therefore, set aside the impugned order with a direction to the ld. CIT(A) to dispose the assessee’s appeal on merits by passing a speaking and reasoned order. While doing so the ld. CIT(A) shall give the assessee a reasonable opportunity of being heard in compliance with the principles of natural justice. We decide accordingly. 4. In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on April 29, 2022 sd/- sd/- (Sanjay Arora) (Manomohan Das) Accountant Member Judicial Member Dated: 29/04/2022 vr/- Copy to: 1. The Appellant: Ruchi Mahila Mandal, C/o Ramesh Chandra Namdeo, Behind Hero Honda Nawgaon Road, Chhatarpur (M.P.) 2. The Respondent: ITO, Chhatarpur. 3. The Pr. CIT, Gwalior. 4. The CIT(Appeals), Gwalior 5. The Sr. D.R., ITAT, Jablapur 6. Guard File By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.

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