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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SMT DIVA SINGH
Date of Hearing 14.03.2016 Date of Pronouncement 12.05.2016 ORDER The present appeal has been filed by the assessee assailing the correctness of the order dated 06/10/2015 of CIT(A), Karnal pertaining to 2009 – 10 assessment year on the following grounds:-
1. “That on the facts and in the circumstances of the case, the Assessing Officer has wrongly & arbitrarily imposed penalty of Rs.100000/- and the Ld. CIT(A) erred in partly confirming the same.
2. That during the proceedings initiated u/s 154 of the IT Act, 1961 which were not finalized and penalty proceedings initiated u/s 271(B) of the IT Act, 1961 which are wrong & two parell proceedings are not warranted by law.” 2. No one was present on behalf of the Revenue at the time of hearing and an adjournment application has been placed on record stating that the Sr. DR is on leave. The application so placed on record which merely has been initialed by some unknown person without caring to indicate either the name or the designation of the person moving an adjournment is not proper. The necessary information needs to be made available. Considering the material available on record and after hearing the Ld. AR it was considered appropriate to reject the same and proceed with the I.T.A .No.-68/Del/2016 present appeal ex parte qua the Revenue respondent on merits. Accordingly the application moved was rejected.
The Ld. AR inviting attention to the material available on record submitted that the assessee by way of filing its return declared an income of Rs.2,50,590/-.
The AO has made various additions in an ad hoc manner on an estimate basis disallowing sales promotion expenses, staff welfare expenses, travelling expenses, diwali expenses etc. Apart from that the AO disregarding the fact that the assessee’s wife was having a rental income and also interest income made an addition on account of low household withdrawals amounting to Rs.30,000/-. As a result of this the assessment was concluded at Rs.3,15,440/-.
3.1. The present appeal it was said has been filed where penalty u/s 271B has been imposed on the ground that the assessee who is proprietor of M/s Navyug Textiles and M/s Hi Choice furnishings only got his accounts audited for M/s Navyug Textiles where the turn over was Rs.429.39 lacs and the accounts for M/s Hi choice furnishings whose turnover was Rs.25.64 lacs were not audited. It was submitted by the Ld.AR that this order was assailed before the CIT(A). In both the forums it was submitted the assessee apart from arguing that the assessee was under a bonafide belief and of the view that only for the concern whose turnover was in excess of the prescribed limits the accounts u/s 44AB were to be audited. It was also submitted that nothing has been referred to in the Assessment Order dated 05.12.2010 to warrant such an action. On the said issue, it was his claim that the proceedings u/s 154 & 155 had been initiated by the AO on 05.04.2013 which were pending before him. It was submitted the issue being debatable further made the orders passed as not justified in law. It was submitted referring to the impugned
I.T.A .No.-68/Del/2016 order that 154 proceedings were not maintainable as these had been initiated at the instance of the audit objection and anyway it was still pending adjudication therefore penalty under section 271B could not have been imposed. Reliance was placed upon Trustees of HEH The Nizam’s Supplemental Family Trust vs. CIT 2000, 242 ITR (SC) 381 and Mohindra Freight Carrier vs. DCIT 2011, 139 TTT 422. Relying upon the decision of the Allahabad High Court in the case of Smt. Shobha Govil vs. Addl.CIT. 2013, 354 ITR 668 (ALL.), it was further submitted by him that once the issue whether the order is rectifiable or not itself is pending the occasion to levy penalty and uphold the same does not arise.
Having heard the submissions and perused the material available on record, I am of the view that the explanation offered by the assessee at the stage of the penalty proceedings deserves to be accepted. The conclusion of the CIT(A) in limiting the penalty to the extent of half percent of receipts of M/s Navyug Textiles cannot be sustained in law. Admittedly the assessee did not get his accounts audited for M/s Navyug Textiles under the bonafide belief that it’s turnover was less than the statutory limit. There is nothing on record to show that the assessee was a habitual defaulter. Even otherwise, it is seen that the AO in the midst of rectifying the assessment order without passing the order one way or the other could not have said to have formed the belief that the assessee had deliberately violated the provisions of the Act. The issue was open to the challenge of being debatable.
Accordingly on a consideration of the entirety of the facts and circumstances of the case, I am of the view that the impugned order deserves to be set aside and the penalty order has to be quashed. Accepting the explanation offered as bonafide and I.T.A .No.-68/Del/2016 holding it to be reasonable cause as contemplated in terms of section 273B, the appeal of the assessee is allowed.
In the result the appeal of the assessee is allowed.
The order is pronounced in the open court on 12th of May, 2016.