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Income Tax Appellate Tribunal, BANGALORE BENCHES : “A”, BANGALORE
Before: SHRI N.V.VASUDEVAN & SHRI A.K.GARODIA
O R D E R PER BENCH: These are appeals by the Assessees against six different orders of CIT(A), Mysore, as per the following details; -958,961,964&965 & 967(B)/2018 2
I. & 958(B)/2018 & 964 & 965(B)/2018 are appeals by the Assessee against the orders of CIT(A), Mysore dated 28-09-2017 for assessment years: 2007-08,2008-09 & 2009-10 and 2011-12 & 2012-13.
II. is an appeal of the Assessee against the order of CIT(A), Mysore dated 31-03-2017 for assessment year 2010-11.
In all these appeals, the Assessee has challenged the order of CIT(A), whereby the CIT(A had confirmed the order of AO imposing penalty on the Assessee u/s 271B of the IT Act, 1961 (Act). The Assessee in all these appeals is one Shri K.Ramaswamy. is an appeal by the Assessee by name Shri R. Ajith against the order dated 28-09-2017 of CIT(A), Mysore relating to assessment year 2010-11. In this appeal, the Assessee challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO imposing penalty on the Assessee u/s 271B of the Act.
The Assessee by name Shri K.Ramaswamy, is an individual engaged in real estate business. In the course of his business he acquired agricultural land measuring approximately 16 acres at Marase village, Mysore Taluk. The Assessee converted the said land into non-agricultural land and formed housing layout and sold sites after such conversion. These lands were subsequently, acquired by the Karnataka Industrial Area Development Board (KIADB) under the KIADB Act, 1966. After such acquisition, possession of the lands were forcibly taken from the Assessee and in the buildings owned by the Assessee in which the books of accounts were allegedly kept had been destroyed in the process of demolition while taking forceful possession from the Assessee. The possession of the land was taken sometime in the month of July, 2007. -958,961,964&965 & 967(B)/2018 3 7. A survey u/s 133A of the Act was conducted on 22-07-2013. It is consequent that the survey proceedings u/s 148 of the Act were initiated in the case of the Assessee. In the proceedings u/s 148 of the Act, the Assessee filed return of income on the following dates: Assessment years Date of filing the return of income 2007-08 28-08-2013 2008-09 13-09-2013 2009-10 07-11-2013 2010-11 31-12-2013 2011-12 19-03-2014 2012-13 12-06-2014 It is not in dispute that alongwith the return of income Assessee filed audit report u/s 44AB of the Act. It is not disputed that the provisions of sec.44AB of the Act were applicable in the case of the Assessee in all the assessment years referred to above. The Assessee was required to get the books of accounts audited and file such report before the specified date. Admittedly, the audit report was not obtained and filed before the specified date and therefore, there was a default on the part of the Assessee u/s 44AB of the Act. As per 271B of the Act, if any person who fails to furnish a report of audit as is required by sec.44AB of the Act within the specified date, is liable for penalty. As per Section 273B of the Act no penalty can be imposed, if there was reasonable cause for failure to get the report of audit on or before the specified date and furnish the same on or before the specified date.
The facts in the case of Shri R.Ajith are identical. In ITA No.967(B)/2018. he filed return of income in response to notice u/s 148 of the Act for the assessment year 2010-11 on 30-12-2014 alongwith the return he also filed report of audit but that report was not obtained and filed before the specified date as required u/s 44AB of the Act. Hence, penalty u/s 271B of the Act, was initiated on the Assessee by the AO which was confirmed by the CIT(A). -958,961,964&965 & 967(B)/2018 4 8. Aggrieved by the order of CIT(A), Assessee’s have filed these appeals before the Tribunal.
Before us, several contentions were put forth by the ld.counsel for the Assessee on the validity of the imposition of penalty u/s 271B of the Act. We shall first take up the ground with regard to absence of prior approval having been taken by the AO who was of the rank of ACIT, as contemplated by the provisions of sec.274(2) of the Act. This ground would be relevant for appeals in the case of Shri K.Ramaswamy for assessment years 2009-10 to 2012-13. i.e 964, 965(B)/2018 and the appeal of Shri R.Ajith in ITA No.967(B)/2018 for assessment year 2010-11. As far as the aforesaid issue is concerned sec.274(2) of the Act, provides that no order imposing penalty under Chapter XXI which also includes sec.271B shall be made by ACIT or DCIT where the penalty exceeds Rs.20,000/- without the prior approval of the Joint CIT. It is not in dispute before us that the penalty imposed for aforesaid assessment years exceeds Rs.20,000/- and therefore, the prior approval of the JCIT was required to be obtained. The order imposing penalty was passed by the ACIT in the case of Shri R Ajith, was passed on 23-09-2015 and in the case of Shri K.Ramaswamy, was passed on 23-09-2015 in all these assessment years.
The ld. counsel for the Assessee filed before us copies of approval given by the JCIT and the approval in the case of Shri R.Ajith, is dated 28-09-2015 and in the case of Shri K.Ramaswamy dated 24-09-2015. It is thus clear that there has been violation of the provisions of sec.274(2) of the Act in as much as the prior approval of the JCIT has not been obtained before imposing penalty u/s 271B of the Act. The consequence of not getting prior approval is that the order imposing penalty has to be held as invalid. In this regard the ld.counsel for the Assessee has placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Pr.CIT Vs Sunrise Finlease (P) Ltd.,(2018) 89 Taxmann.com 1(Guj.) In the aforesaid case, there was a requirement that an order u/s 153C can be passed only after obtaining prior approval u/s 153D of the Act, by JCIT. -958,961,964&965 & 967(B)/2018 5 The question before the Court was that absence of such prior approval would render the order of assessment and the proceedings would stand invalidated. The Hon’ble Gujarat High Court held that absence of prior approval renders the proceedings invalid. The ld. counsel also placed reliance on the decision of the Hon’ble ITAT, Delhi ‘C’ Bench in the case of M.P.Jain Vs ITO wherein, it was held that the penalty imposed by the ITO without prior approval of IAC was invalid and it had to be cancelled. The imposition of penalty in that case was u/s 273A of the Act which required the ITO to obtain the approval of IAC.
The ld.DR submitted that it was only a procedural irregularity which will not invalidate the order imposing penalty u/s 273B of the Act.
We have given a careful consideration to the rival submissions and are of the view that in the light of the admitted factual position the order imposing penalty u/s 273B of the Act, was passed without obtaining prior approval of the JCIT, as required by the provisions of sec.274(2) of the Act. The order imposing penalty for the aforesaid assessment years are invalid and liable to be cancelled on this ground. Thus, the appeals of Shri K.Ramaswamy, for assessment years 2009-10 to 2012-13 i.e. in ITA Nos.958.961,964 & 965(B)/2018 and the appeal of Shri R Ajith being for assessment year 2010-11 are allowed.
What remains for consideration is & 958 of Shri K.Ramaswamy for assessment years 2007-08 & 2008-09. As far as these two appeals are concerned, we deem it appropriate to deal with the arguments of the ld. counsel for the Assessee that the penalty imposed in these two appeals also deserves to be cancelled for the reasons that in the quantum order i.e. the order of assessment the AO has not recorded any satisfaction regarding levy of penalty u/s 271B of the Act. In this regard, the ld.counsel for the Assessee drew our attention to the orders of assessment dated 08-05-2014 for assessment years 2007-08 and 2008-09. Copies of which are placed at page-81-86 of the Assessee’s paper book. -958,961,964&965 & 967(B)/2018 6
In the aforesaid orders of assessment, the AO has not recorded any satisfaction regarding the violation of Assessee u/s 44AB of the Act and initiation of penalty proceedings for such violation. The ld. counsel for the Assessee drew our attention to the decision of the Hon’ble Allahabad High Court in the case of CIT vs E.C.C.Project (P) Ltd., (2014) 49 Taxmann.com 17 (Allahabad) wherein it was held that if the AO has not recorded satisfaction in the assessment order regarding violation of sec.44AB of the Act and initiated proceedings u/s 271B of the Act, then the order imposing penalty u/s 271B of the Act is liable to be cancelled on that ground. Our attention was also drawn to a decision of the Hon’ble Supreme Court in the case of CIT vs Jai Laxmi Rice Mill, Amabala City (379 ITR 521(SC) wherein, in the context of imposition of penalty u/s 271E of the Act (which is akin to sec.271D) the Hon’ble Supreme Court held that recording of satisfaction and initiation of penalty proceedings in the assessment order is required and in the absence of the same the penalty proceedings u/s 27E of the Act are liable to be cancelled.
The ld. DR submitted that for initiating proceedings u/s 271B of the Act no such satisfaction has to be recorded in the order of assessment as it is a distinct default, diverse from the assessment proceedings.
We have given a careful consideration to the rival submissions and are of the view that there has been no recording of satisfaction in the order of assessment proceedings. Therefore, as per the law laid down in the decisions cited by the ld. counsel for the Assessee, imposition of penalty u/s 271B of the Act cannot be sustained. Therefore, the orders imposing penalty for these two assessment years are also liable to be cancelled. -958,961,964&965 & 967(B)/2018 7 18. In the result, all these appeals filed by the assessees are allowed.
Order pronounced in the open court on 12th Feb.2020.