AVARSEKAR & SONS P.LTD,MUMBAI vs. ASST CIT CEN CIR 45, MUMBAI

आदेश / O R D E R PER BENCH: These are the appeals filed by the assessee against the order of CIT(A) for the assessment years 2006-2007 to 2012-2013, in the matter of imposition of penalty u/s.271(1)(b) of the IT Act. 2. Grievance of assessee in all the years are common, therefore all the appeals were heard together and are now disposed of in this consolidated order. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is a company and is in the business of construction contracts and property development. The assessee e-filed return of income u/s 139(1) for the aforesaid assessment

2 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd., year on 30.11.2006 declaring total income at Rs. 65,29,216/-. Subsequently search was undertaken at the official and residential premises of Unity Group on 10.02.2012 and in response to the notice of 153C the assessee filed the return of income on 23.07.2013 declaring total income at Rs. 43,94,090/-. Similarly notice u/s 153A were issued to 11 other assessees belonging to the Unity Group including the directors, wife of directors, CFO of the Group, wife of the CFO and other group companies. Accordingly 12 assessees belonging to the Unity Group were issued notices u/s 153A of the Act and hence a total of 84 assessments were taking place simultaneously. The assessment of all the assessees were centralized and assessed by the Assistant Commissioner of Income tax Central Circle 45. 5. During the course of assessment proceedings, AO called for the information and details, part of which was supplied by the assessee, however, on the plea that assessee could not supply full information and evidence as desired by the AO, penalty u/s.271(1)(b) of Rs.10,000 was imposed in each year under consideration and the same was confirmed by the CIT(A). 6. Learned AR placed on record the order of the Tribunal in case of another group, assessee M/s. Megnum Infraprojects Pvt. Ltd., dated 21/10/2016, wherein under similar facts and circumstances, penalty of Rs.10,000 so levied u/s.271(1)(b) was deleted by Tribunal. Our attention was invited to the penalty order passed by the AO dated 20/12/2013, appellate order passed facts, by CIT(A) dated 31/07/2014 to indicate that on similar penalty was imposed and confirmed by CIT(A). Accordingly it was argued

3 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd., by learned AR that facts and circumstances in case of Magnum Infraprojects Pvt. Ltd., decided by Tribunal vide order dated 21/10/2016 are similar to the facts and circumstances during the years under consideration, accordingly issue is covered by the order of the Tribunal. 7. We had carefully gone through the order of the Tribunal in case of Magnum Infraprojects Pvt. Ltd., dated 21/10/2016 for the assessment years 2006-07 to 2012-13 wherein Tribunal deleted the penalty after observing as under:- 2. In brief, the relevant facts are that the assessee company is a part of Unity Group of cases, wherein a search and seizure action under section 132(1) of the Act was carried out by the Department on 10/2/2012. A notice under section 142(1) of the Act dated 14/09/2013 was issued by the Assessing Officer for all the seven captioned assessment years fixing the date of hearing on 19/10/2013. Since the notice was received by the assessee only on 17/10/2013, assessee sought adjournment and next date of hearing on 29/10/2013 assessee company furnished only a part of the details called for vide notice under section 142(1) of the Act. The Assessing Officer has noted in her order dated 20/12/2013(supra) that in response to the show cause notice issued under section 271(1)(b) of the Act assessee submitted that due to heavy work lead complete details could not be furnished in time. Not being satisfied with the reply of the assessee, the Assessing Officer held that in view of the reluctance of the assessee in filing the details called for, it was a fit case for imposition of penalty under section 271(1)(b) of the Act. Accordingly, penalty of Rs.10,000/- for each of the captioned assessment years have been levied. Such levy has since been affirmed by the CIT(A) also, against which assessee is in further appeal before the Tribunal. 3. Before us, it has been pointed out that the main entity of the Group is M/s. Unity Infraprojects Ltd., in whose case also similar penalties for the captioned assessment years were levied by the assessing authority, which has been deleted by the Tribunal vide ITA No.5079 to 5085/Mum/2014 dated 17/05/2016. It was pointed out that the penalties in the instant case have also been levied under identical circumstances and, therefore, following the decision of the Tribunal in the case of M/s. Unity Infraprojects Ltd. (supra), such penalties are liable to be deleted. 4. In order to appreciate the case of the assessee, it would be appropriate to note that assessee is part of a group which has multiple entities. As a consequence of search action, assessments were carried out in all the group cases. It has been pointed out that notices under section 142(1) of the Act were issued in the case of all the entities and the date was fixed on 19/10/2013 in many of the cases including in the case of M/s. Unity Infraprojects Ltd. (supra), which was the flagship Company of the group. It

4 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd., has been pointed out that various details has been called for and even the details furnished at the time of levy of penalty under section 271(1)(b) of the Act would show that it is not a case of complete non-compliance, but it is a case where the details/ submissions were made in a piecemeal manner. It has been pointed out that ultimately assessment for all the seven years were completed under section 153A r.w.s. 143(3) of the Act on the basis of the material and submissions put-forth by the assessee. Before CIT(A) assessee also pointed out that since the search was conducted with respect to certain purchase transactions carried out in the case of M/s. Unity Infraprojects Ltd. (supra), the compliance was made in that case on priority basis. Before the CIT(A), assessee also furnished a copy of the proceedings sheet in the case of M/s. Unity Infraprojects Ltd. (supra) to show that it had complied with significant requirement of the Assessing Officer. The Ld. Representative for the assessee pointed out that the detailed explanation rendered by the assessee has been unjustifiably rejected by the CIT(A) also. 5. On the other hand, Ld. Departmental Representative defended levy of penalty under section 271(1)(b) of the Act for each of the assessment year by pointing out that the explanation rendered by the assessee for non- compliance was a very generalized explanation to the effect that there was heavy work load. It is pointed out that reasons advanced by the assessee for noncompliance do not justify the deletion of penalty imposed under section 271(1)(b) of the Act. 6. We have carefully considered the rival submissions. Ostensibly, assessee is a part of Unity Group of cases, wherein assessment for the captioned assessment years were carried out after search and seizure action on 10/02/2012. In the instant case, penalty has been levied under section 271(1)(b) of the Act for Rs.10,000/- for each of the assessment years from 2006-07 to 2012-13, primarily for the reason that assessee did not comply with the requirements contained in the notice issued under section142(1) of the Act dated 14/10/2013. In this context, we find that similar action was taken by the assessing authority in the case of M/s. Unity Infraprojects Ltd. (supra). In the case of M/s. Unity Infraprojects Ltd. (supra), the CIT(A) had also upheld the levy of penalty and a copy of his order dated 30/6/2014 shows that the same is almost identically worded as in the present case. The reasons advanced for levy of penalty in each of the assessment years also remain on similar footing. The Tribunal in the case of M/s. Unity Infraprojects Ltd. (supra) found it expedient to delete the penalty considering that there was a reasonable cause with the assessee for not complying with the requirement contained in the notice issued under section 142(1) of the Act . The relevant discussion in the order of the Tribunal in this regard is as under:- “ 4.4.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record. The facts of the matter as emanate from the record are that in the course of assessment proceedings, the AO issued a notice under section 142(1) of the Act dated 11.10.2013 for assessment years 2006-07 to 2012-13, calling upon the assessee to furnish the details, mentioned in the questionnaire annexed thereto, to be filed on 17.10.2013 at the hearing scheduled for 10.30 a.m. (copy of the same is placed at pages 2 to 7 of the assessee’s paper book). It is apparent that the penalty under section 271(1)(b) of the Act was levied on the assessee for the said seven assessment years, for failure on its part to comply with filing the requirements called in the questionnaire annexed to the notice under section

5 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd., 142(1) of the Act dated 11.10.2013. In our view, it is relevant to extract hereunder the questionnaire appended to the notice under section 142(1) of the Act dated 11.10.2013: - “QUESTIONNAIRE/A.Y.2006-07 TO 2012-13/UNITY INFRAPROJECTS LTD Please furnish the following details/documents as indicated with respect to hearings for A.Y. 2007-07 TO 2012-13 1. If you wish to be represented by an authorized representative, please furnish a letter of Authority in prescribed form. Without letter of authority no cognizance of his/her attendance shall be taken. 2. Kindly narrate brief history of assessment for A.Y. 2007-07 to 2012-13 along with all supporting documents including assessment orders, appellate orders, copies of returns, audit report, balance sheet, P&L a/c, computation of income etc. 3. Please provide details of earlier search assessments. 4. Please specify whether any claim u/s. 80IA/IB is made in return this time & in earlier search assessment proceedings. 5. Please submit challans for the payment of taxes in following manner for A.Y. 2006-07 TO 2012-13: Disclosure Description Date & amount Manner of Date of Date of return made of issue of payment of earning notice filed taxes wrt income issued disclosure earned on u/s.153A made which disclosure is made

Name of the project Description Address of site Client name Date of start Date of completion Current Status Contract value

6 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd.,

Name, address and Sale Name of Bill No. and Name PAN of bill / the date of of the Purchase Corresponding the sell invoice A.Y. comp any purchase Quantity material Amount sell amount party No.

Also furnish corresponding delivery challan, Octroi receipt/challan, Weigh Bill, Material Receipt Note, Stock Book Entry at site/project office in case of each purchase. Submit evidence in support of claim. 8. Details of scrap sale made by the assessee. 9. Provide details of Fixed assets, Fixed Deposits and Shares and securities held by the assessee in the captioned assessment years. 10. Produce foreign Travels details alongwith reason for the period A.Y. 2006-07 to A.Y. 2012-13 in case of all the members of Unity Group with supporting bills & documents. 11. Please submit the details with documentary evidences of all the items inventorized during the course of search conducted in the premises of Unity group. 12. During the course of search/Survey action at the premises, certain loose papers/documents, along with digital data were found and seized/impounded. Page wise explanation of the papers impounded during the course of the search/survey for the period A.Y. wise in format as per annexure. 13. During the course of search/Survey action at the premises, cash of Rs.11,74,030/- was found, of which Rs.10,00,000/- was seized. Please furnish explanation for the same. 14. In respect of all the loans & advances given during the A.Y. 2006-07 to 2012-13. 15. Furnish details of advance & amount included in sundry debtors which are not for business purpose during the A.Y. 2006-07 to 2012-13.

7 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd.,

Name, PAN, Address and contact Closing no. of Addition Reduction balance the Opening during during as on PY Sr.No. party Purpose Balance the year the year ending Purpose

Name, PAN, Address and Addition Reduction contact no. of Opening during during Closing balance Sr.No. the party Purpose Balance the P.Y. the PY as on PY ending

8 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd.,

Gross Name, PAN, income Address and Nature of credited as Income as contact no. of business per books of per TDS TDS Deduction Sr.No. the party transaction account certificate deducted u/s.

Name, PAN, Any sum Specify Address and credited to head & contact no. No.of %shareh equity amount Sr.No. of the party shares held olding shareholder and date

9 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd., Sd/- Seema Dhankhar, IRS Asst. Commissioner of Income Tax, Central Circle-45, Mumbai”

4.4.2 The provisions of section 271(1)(b) of the Act read as under: “Failure to furnish returns, comply with notices, etc. 271(1) If the [Assessing] Officer or the [Commissioner (Appeals)] [or the Principal Commissioner or Commissioner] in the course of any proceedings under this Act, is satisfied that any person— (a) [---------------] (b) has [* * *] failed to comply with a notice [under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or] under sub-section (1) of section 142 or subsection (2) of section 143 [or fails to comply with a direction issued under sub-section (2A) of section 142], or (c) has concealed the particulars of his income or [* * *] furnished inaccurate particulars of [such income, or] [(d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits,] he may direct that such person shall pay by way of penalty,— (i) [* * *] (ii) in the cases referred to in clause (b), [in addition to tax, if any, payable] by him, [a sum of ten thousand rupees] for each such failure ;]” The provisions of section 273B of the Act read as under: - “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 pet- son 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.]” On a conjoint reading of the provisions of section 271(1)(b) and section 273B of the Act, it is clear that no penalty shall be imposed on the assessee for failure referred to in section under section 271(1)(b) of the Act if the assessee were to establish that there was reasonable cause for the said failure; in the case on hand, the alleged failure to comply with the notice issues under section 142(1) of the Act dated 11.10.2013. 4.4.3 According to the assessee and as per the material on record, the said notice issued under section 142(1) of the Act enclosing the questionnaire calling for 26 details (supra) was received by the assessee only on 17.10.2013. The assessee vide letter dated 18.10.2013 brought the fact of having received the said notice/questionnaire only on 17.10.2013 to the notice of the AO; which fact has not been controverted by either the authorities below or the learned D.R. in the proceedings before us. It is not comprehensible to us as to how the assessee could have complied with the notice under section 142(1) of the Act and the questionnaire enclosed thereto

10 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd., (supra) by filing such voluminous data called for on 26 items, some in prescribed format etc. by 10.30 a.m. on 17.10.2013 when the said notice/questionnaire had been received by the assessee only on 17.10.2013. In our view, in the factual matrix of the matter as laid out above, it was impossible for the assessee to have complied with the requirements of filing the aforesaid details by 10.30 a.m. on 17.10.2013 required by the notice under section 142(1) of the Act, as there was no time available to the assessee to do so. We find that, inspite of this, the assessee vide letter dated 18.10.2013 has filed part details of purchases for A.Y. 2006-07 before the AO. In this factual matrix of the case, we are of the considered opinion that since compliance with the requirements of the notice under section 142(1) of the Act dated 11.10.2013/ questionnaire annexed thereto was not humanly possible, this constituted and established that the assessee had reasonable cause, as envisaged in section 273B r.w.s. 271(1)(b) of the Act for failure to comply with the requirements called for by the notice under section 142(1) dated 11.10.2013 and the questionnaire attached thereto. In this view of the matter, we delete the penalty levied on the assessee under section 271(1)(b) of the Act @ Rs.10,000/- for each of the assessment years 2006-07 to 2012- 13. It is accordingly ordered.” 6.1 Apart from the aforesaid, the Ld. Representative for the assessee also relied upon the decision of our Co-ordinate Bench in the case of Kripa Realtors Ltd., & Others in ITA Nos.2950/Mum/2015& others dated 20/7/2016, where it has been held that even if assessee had not complied with the requirements of the notice issued under section 142(1) of the Act at a particular stage but later the assessment was finalized under section 143(3) of the Act and not as a best judgment assessment under section 144 of the Act, the subsequent compliance mitigates the rigors of penalty contained in section 271(1)(b) of the Act. In this context, the Tribunal relied upon the following decisions:- 1. Shri Ramesh Kumar Jain vs. ACIT, ITA No.464/Mum/2013 dated 23/9/2015 2. Akhil Bharatiya Prathmik Shmshak Sangh Bhavan Trust v. ADIT (2008) 115 TTJ 419 (Del). and concluded as under:- “4. After hearing both the parties and on considering the above detailed factual matrix of each of the seven appeals, we are of the opinion, the assessee under consideration are eligible for relief. Further, we have also perused the cited decisions of the Tribunal (supra) which are relevant for the proposition that where the assessee had not complied with the notice under section.142(1) but the assessment order was passed under section 143(3) and not under section. 144 of the Act, that meant the subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO and, therefore, the levy of penalty u/s 271(1)(b) was not justified. Considering the same as well as respectfully following the decision of the Tribunal and also following the principle of consistency, we are of the opinion that these are not the fit case for invoking the provisions of section 271(1)(b) of the Act. Accordingly, grounds raised by the assessee in all the seven appeals are allowed.”

11 ITA No.5804 to 5810/Mum/2014 M/s. Avarsekar & Sons Pvt. Ltd., 6.2 The aforesaid parity of reasoning is squarely applicable in the instant case also as the assessments for all the captioned assessment years have been completed under section 143(3) r.w.s.153A of the Act and, therefore, the initial non-compliance with the notice issued under section 142(1) of the Act can be understood to be made-up subsequently and, therefore, the levy of penalty under section 271(1)(b) of the Act is not justified. We order accordingly. 7. It was a common point between the parties that facts and circumstances leading to imposition of penalty under section 271(1)(b) of the Act in all other captioned assessment years i.e. assessment years 2007-08 to 2012-13 are pari-materia to those considered by us in ITA No. 5642/Mum/2014 for assessment year 2006-07, thus, our decision therein shall apply mutatis mutandis in the appeals for assessment years 2007-08 to 2012- 13 also. 8. In the result, the penalty levied of Rs.10,000/- under section 271(1)(b) of the Act for all the assessment years is hereby deleted and all the appeals are allowed, as above. 8. As the facts and circumstances during the years under consideration are same, respectfully following the order of the Tribunal in group cases, we delete the penalty of Rs.10,000/- so imposed by AO in each year under consideration. 9. In the result, appeals of the assessee are allowed.

Order pronounced in the open court on this 09/11/2016 Sd/- Sd/- (RAVISH SOOD) (R.C.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 09/11/2016 Karuna Sr.PS Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. BY ORDER, 6. Guard file. सत्यापित प्रतत //True Copy// (Asstt. Registrar) ITAT, Mumbai