JUPALLI RAMACHANDRA RAO & CO.,ELURU vs. ITO, WARD-1, ELURU

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the assessee is directed against order of the

Commissioner of Income Tax (Appeals)-2, Guntur, Camp:

Visakhapatnam {CIT(A)} vide Appeal No.212/2011-12 dated 14.3.2017

for the assessment year 2006-07.

ITA No.436 /Vizag/2017 Jupalli Ramachandra Rao Sons & Co., Eluru 2. All the grounds of appeal are related to the levy of penalty u/s

271FB of the Fringe Benefit Tax (FBT). The A.O. issued notice u/s

271FB (hereinafter called as 'the Act') on 2.12.2010 directing the

assessee to explain as to why penalty should not be levied against the

assessee for failure of the assessee to file the FBT return for the

A.Y.2006-07. The said notice could not be served on the assessee,

since the assessee firm has discontinued the business, hence the A.O.

served the notice by affixture on 22.6.2011 in the residential premises of

the Managing Partner Mr. S. Rama Krishna Rao and there was no

response from the assessee. Therefore, the A.O. imposed penalty of `

1,79,300/- @ ` `100/- per day from1.8.2006 to 28.6.2011 for a total

period of 1793 days of default.

before the CIT(A) and made written submission stating that the

assessee has carried on the business during the previous year relevant

to the assessment year 2006-07 and subsequently closed the business

due to unfavorable conditions. Fringe Benefit Tax Act was introduced in

the year 2006-07 and FBT payable works out to ` 542/- against which

the penalty levied was ` 1,79,300/- and the same is beyond the capacity

of the assessee. Assessee filed written submissions before the CIT(A)

stating as under: 2

ITA No.436 /Vizag/2017 Jupalli Ramachandra Rao Sons & Co., Eluru 1. The appellant was a wholesale tobacco merchant, The firm did business till the assessment year 2007-08 and closed its business due to unfavourable conditions. Thereafter the place of business was surrendered to its owner and all the partners left the place and settled permanently at Hyderabad. 2. Fringe Benefit Tax (FBT) was introduced from the assessment year 2006-07.. In view of the first year, the filing of FBT return was not done by inadvertence. For the assessment year 2007-08 FBT return was filed and tax was paid. The FBT amount paid was Rs 377 or the assessment year 2007-08. For the asst. year 2006-07, FBT payable comes to Rs 542 as per the following calculation.

Expenditure Amount Rate Fringe Benefit Telephone ` 3,445 @ 20% 689 Travelling ` 18,417 @ 5% 921 Total 1610 FBT @ 30% 483 Add: SC @10% 48 Add: Cess@ 2% 11 Total Payable 542

ITA No.436 /Vizag/2017 Jupalli Ramachandra Rao Sons & Co., Eluru The case was posted for hearing by the CIT(A) but none

appeared before the CIT(A). Hence, the CIT(A) upheld the penalty.

before this Tribunal. During the appeal hearing, the Ld. A.R. argued that

the assessee had carried on the business during the year 2006-07 and

the FBT payable was ` 542/-. The firm was closed subsequently. Since,

it was the first year of introduction of FBT, the assessee was not

understood the provisions of FBT fully and there was no willful intention

to evade or not to file the return. Since the amount involved is very

paltry amount of Rs.542/- and the penalty imposed was ` 1,79,300/-

which is highly unjustified, the Ld. A.R. requested to cancel the penalty

imposed by the A.O. The Ld. A.R. also argued that the A.O. has issued

penalty notices after lapse of 5 years of time from the due date of filing

the return which resulted in increased quantum of penalty.

authorities.

on record and gone through the orders of the authorities below. In this

case, the assessment year involved is 2006-07 and the penalty u/s

271FB of the Act was initiated by the A.O. by issue of notice u/s 271FB

ITA No.436 /Vizag/2017 Jupalli Ramachandra Rao Sons & Co., Eluru on 2.12.2010 after the lapse of 3 years and the notice was served on

22/06/2011 i.e after the lapse of 4 years which resulted in increase of

quantum of penalty. Had the AO woke up in time and issued the notice

requiring the assessee to file the FBT return as required under section

115WD(2), the situation would not have worsened like this. Inaction of

the assessing officer coupled with the ignorance of the assessee resulted

in levy substantial amount of penalty on the tax payer.

As per the provisions of section 115WD of the Act, the assessee required to file the FBT return before the due date i.e. 31st July of the

assessment year and in case the return was not filed before the due

date the assessee is allowed to file the return within one year from the

end of the relevant A.Y. as provided in section 115WD(3) of the act.

In case the A.O. is of the opinion that the assessee is responsible for

paying the FBT and has not furnished the return under sub-section (1)

of section 115WD of the Act, the AO required to issue the notice after

the due date of filing the FBT return calling for the return. In the instant case, the due date was 31st July of 2006 for filing the return of FBT and

the A.O. required to issue notice calling for the return and the A.O. has

not issued any notice requiring the assessee to file the FBT return as

required under sub-section (2) of section 115WD of the Act. For

imposing the penalty, the A.O. should give a finding that the assessee is 5

ITA No.436 /Vizag/2017 Jupalli Ramachandra Rao Sons & Co., Eluru liable for payment of FBT and required to file the FBT return by initiating

proceedings for non-furnishing of the FBT return and for non-payment

of FBT. In this case, the A.O. neither initiated proceedings for non filing

of the return nor for payment of FBT and there was no finding with of

the A.O. with regard to the liability for FBT of the assessee. In the

absence of any proceedings against the assessee for the assessee’s

liability for FBT, there is no case for initiation of penalty proceedings and

for non furnishing the FBT return.

by the A.O. u/s 271FB of the Act dated 2.12.2010, which was served by

an affixture on 22.6.2011 fixing date for hearing on 13.6.2011. The

notice was served on the assessee after the date of hearing was over,

hence the notice issued on 02/12/2010 is invalid and there is no valid

notice issued by the Department calling for the explanation of the

assessee for the assessee’s failure to file the FBT return. Hence, penalty

levied on in valid notice is unsustainable and accordingly, we cancel the

penalty imposed on the assessee u/s 271FB.

ITA No.436 /Vizag/2017 Jupalli Ramachandra Rao Sons & Co., Eluru

The above order was pronounced in the open court on 11th Jul’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 11.07.2018 VG/SPS

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-

आदेशानुसार / BY ORDER // True Copy //

Sr. Private Secretary ITAT, VISAKHAPATNAM

Sl. Description Date Initials No. 1. Date of dictation by the Author 05.07.2018 Sr.PS 2. Draft placed before the Dictating Member 06.07.2018 Sr.PS 3. Draft placed before the Second Member Sr. PS 4. Draft approved by the Second Member Sr. PS 5. Date of approved order comes to the Sr. PS Sr. PS 6. Date of pronouncement of order Sr. PS 7. Date of file sent to the Bench Clerk Sr. PS 8. Date on which file goes to the Head Clerk Hd. Clk 9. Date of dispatch of order Sr. PS