SHAH PRATAP INDUSTRIES P. LTD,MUMBAI vs. DCIT CC 44, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM - अनुसार Challenging the order,dtd.13.05.14,of the CIT(A)-38,Mumbai, the assessee has filed appeals for the above mentioned seven AY.s.As the issue involved in all the appeals are common,so we are disposing them off by a consolidated order. Effective GOA for all the years is upholding the levy of penalty,imposed by the AO,u/s.271(1)(b) of the Act. ITA/4643/Mum/2014-AY.2005-06. Brief facts: 2.A search and seizure action u/s. 132 (1) of the Act was carried out in the case of M/s JIK Industries Ltd.(JIKIL)and at the premises of the CMD of the Company,namely,R G Parikh on 4.2.2011. The assessee-company is a subsidiary and group company of JIKIL.During the course of search and seizure proceedings certain incriminating documents and the computer backups were seized, that pertained to the assessee-company as well.Notices u/s.143(2) and 142(1) of the Act were issued to the assessee on 10.8.12 for the AY.s. 2005-06 to 2011-12. As per the AO it did not comply with the notices issued. In view of

3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him the assessee contended that due to huge volume of information,indisposition of the Chairman and the compulsions of frequent change of professional advisors resulted in unintended delays in responding to notices issued by the AO,that it had neither neglected /defaulted nor wilfully delayed in complying with the requirements of the notices,that it had only sought for reasonable time to furnish the required information, it had filed necessary details/clarifications/reply from time to time.

4.After considering the submission of the assessee and the penalty order,the FAA held that AO had issued notices u/s.143(2) and 142(1) of the Act 10.8.12, that it was not disputed by the assessee that it had not complied with the notices,

4643-49/M/14-Shah Pratap that it must have either complied with the notices or should have sought an adjournment in writing, that it neither complied not sought adjournment,that the AO had taken further follow up action by issue of a penalty notice on 26.03.2013 u/s. 271(1)(b) of the Act,that even in respect of penalty notice it did not respond by either appearing personally or through an Authorised Representative or by submitting some explanation with regard to the reasonable cause, that the assessee had taken a stand that the AO had completed the assessment u/s.143(3) r.w.s.153C of the Act and not u/s. 144, that it had complied with the notices issued, that penalty u/s. 271(1)(b) of the Act were not leviable.The FAA referred to case of Repaka Sitaramaswamy(42ITR829) of the Hon’ble Andhra Pradesh High Court.He further referred to the case of Standard Mercantile Company(160ITR613) and held that it was the duty of the assessee to show cause for not complying for the notice issued,that personal appearance was not required for providing the information sought,that it could have supplied the required information through an AR,that if notices issued could not be complied with for any medical reasons the assessee should have informed the AO by seeking adjournment on that ground, that such ground was not taken by the assessee during the penalty proceedings,that the dates of sickness of CMD and dates of hearing were different, that it was difficult to accept the medical ground as reasonable cause,that if information called for was voluminous, nothing could have prevented it from seeking adjournment on that ground,that it could have asked for adjournment while changing his tax advisors,that the purpose of section 271(1)(b) of the Act was to ensure that the assessees complied with the notices within reasonable time,that it had failed to established any reasonable casue,that the AO was justified in levying penalty u/s. 271(1)(b) of the Act.

5.Before us,the Authorised Representative (AR) referred to the cases of Rajendra G Parikh (ITA/6944-6950/ Mum/2014,dated 20.6.2016) and order of 3

4643-49/M/14-Shah Pratap JIKIL dtd.18.2.2016(4759/Mum/2014 ).The Department Representative (DR) supported the order of the FAA.

5.We have heard the rival submissions and perused the material available on record.We find that while deciding the appeals of the group cases i.e. Rajendra G. Parikh and JIKIL(supra),the Tribunal has decided the issue in favour of those assessees,that the tribunal had deleted the penalty levied by the AO and confirmed by the FAA. We would like to produce the relevant portion of the above orders. (ITA NOs.6944 to 6950-Mr.Rajendra G. Parikh, dt.20.6.2016)

“2.1. We have considered the rival submissions and perused the material available on record. Before coming to any conclusion, we are reproducing hereunder the relevant portion from the order of the Tribunal dated 18/02/2016 for ready reference and analysis:-

“These appeals have been filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-38, Mumbai {(in short ‘CIT(A)’}, dated 30.05.2014 for the assessment years 2005- 06 to 2011-12, passed against the penalty order passed by the Assessing Officer (in short ‘AO’) u/s 271(1)(b) of the Act, involving common issue of levy of penalty on the following grounds: “

1.On the facts and circumstances of the case and in law, the Commissioner of Income Tax,(Appeals)-38, Mumbai erred in upholding the action of the Assessing Officer, Mumbai in levying the penalty under section 271(1)(b) of the Income Tax Act, 1961.

2. The appellant carves to leave to add, to alter, to amend, to modify and to substitute the grounds of Appeal at any time before or at any time of hearing of the appeal.”

2. During the course of hearing, arguments were made by Ms. Nidhi Patel, Authorised Representative (AR) on behalf ofthe Assessee and by Shri K Mohandas, Senior Departmental Representative (DR) on behalf of the Revenue.

3. Since, common issue is involved in these appeals, therefore, these were heard together and are being disposed together by this order. 3.1. During the course of hearing detailed arguments have been made by Ms. Nidhi Patel, learned counsel of the assessee, assailing the order of the AO in levying the penalty u/s 271(1)(b) for alleged non-compliance of notice u/s 142(1) dated 04.09.2012, issued during the course of assessment proceedings. It has been submitted that assessee was sick company and approved by BIFR vide order dated 26.08.2008. The assessee has two directors and both are above the age of 60 years. The chemical recycling unit of the assessee was badly affected due to fire in July, 2004 and operation had to be discontinued. Further, due to negative net worth the company had to surrender its license to Reserve Bank of India. It was further submitted that income tax search had taken place in the case of company and in pursuance to the same assessment proceedings of seven years had been commenced by the Income Tax department, and the assessee company had no staff or infrastructure to take care of such a voluminous work of collection of huge details and documents for seven years and making representation 4

4643-49/M/14-Shah Pratap before the AO. The financial condition of the company was also very bad. Under these circumstances the AO claimed to have issue notice u/s 142(1) dated 04.09.2012 fixing the date of hearing on 10th September, 2012. She submitted that it has not been stated by the AO before levying the penalty that the notice was duly served upon the assessee. She further submitted that in any case, the time given was too short, and after excluding Saturday and Sunday and time taken for dispatch and delivery, there were hardly two or three days available with the assessee to respond. Under such circumstances the AO did not give proper opportunity of hearing. Further, in any case, subsequently, the assessee had sincerely attended and submitted whatever details and documents were available with the assessee, which is evident from this fact that assessment order was framed u/s 143(3) and not u/s 144, and therefore, it was not a fit case for levy of penalty u/s. 271(1)(b). In support of her arguments, she relied upon the judgment of Hon’ble Supreme Court in the case of M/s. Hindustan Steel Ltd. 83 ITR 26 and judgment of Honb’le Delhi Bench ITAT in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhavan Trust vs. ADIT 115 TTJ 419 (Del.) In nutshell she submitted that the penalty order passed by the AO was unfair and factually incorrect, unjustified and contrary to law and facts, and therefore, penalty levied by the AO should be deleted. 3.2. Per contra Ld. DR relied upon the orders of the lower authorities and submitted that since there was noncompliance on the part of the assessee, therefore, penalty was rightly levied by the AO and confirmed by Ld. CIT(A). 3.3. We have gone through the facts of the case brought before us. It is noted that in pursuance to the search, the assessment proceedings of seven years were commenced by the Income Tax Department. The admitted facts on record are that the assessee company was a sick company, and was under the scheme of BIFR. We have further noted that it has been stated by the AO while levying the penalty that he had issued notice u/s 142(1) dated 04.09.2012 fixing the hearing for 10.09.2012, and since noncompliance was made by the assessee on 10.09.2012, and therefore, it was a fit case for levy of penalty, and accordingly, penalty was levied. We are surprised to note that the AO has no where mentioned in the assessment or penalty order that whether the impugned notice was served at all upon the assessee. It is further noted that impugned notice claim to be issued on 04.09.2012, fixed the date for hearing on 10.09.2012. If, we exclude Saturday and Sunday and the time taken for dispatch and delivery of the notice, the assessee was left with hardly two or three day time, even if the notice was duly and expediently served upon the assessee. Further there is no case made out by the AO of any other non-compliance on the part of the assessee. Rather, it is noted that subsequently details and documents were filed by the assessee to the AO on the basis of which assessment proceedings were completed and assessment order was passed u/s 143(3) and not u/s 144. Thus, it shows that subsequently, compliance has been made by the assessee. Under such circumstances, in our considered opinion without giving adequate time and without making out a case of substantive non-compliance by the assessee, it was unfair and unjustified on the part of the AO in levying the penalty u/s 271(1)(b). In the totality of the facts and circumstances of the case, we find that levy of penalty was not justified. The action of the AO is unsustainable in the eyes of law, and therefore, we direct the AO to delete the penalty.

explained before us, the assessee was suffering from ailment, meaning thereby, sufficient time/opportunity for compliance was not provided to the assessee. This is clearly violation of principle of natural justice on the part of the Revenue. It is noted that the Tribunal in the aforesaid order dated 18/02/2016 has made an elaborate discussion on identical fact including the decision from Hon’ble Apex Court in M/s Hindustan Steel Ltd. 83 ITR 26 and the case of the assessee Delhi Bench of the Tribunal in Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs ADIT 115 TTJ 419 (Del.). If we exclude the Saturday and Sunday, falling within the given time in the notice, time taken for dispatch and delivery of the notice hardly two or three days left with the assessee. It is noted that the ld. Assessing Officer has not made a good case for non compliance on the part of the assessee. Considering the totality of facts and the circumstances narrated before us, we direct the ld. Assessing Officer to delete the penalty, imposed upon the assessee. Thus, the impugned appeals are allowed. Finally, the appeals of the assessee are allowed.”

-JIK Industries Ltd., dt.18.2.2016 reads as under:- “3.3. We have gone through the facts of the case brought before us. It is noted that in pursuance to the search, the assessment proceedings of seven years were commenced by the Income Tax Department. The admitted facts on record are that the assessee company was a sick company, and was under the scheme of BIFR. We have further noted that it has been stated by the AO while levying the penalty that he had issued notice u/s 142(1) dated 04.09.2012 fixing the hearing for 10.09.2012, and since non-compliance was made by the assessee on 10.09.2012, and therefore, it was a fit case for levy of penalty, and accordingly, penalty was levied. We are surprised to note that the AO has no where mentioned in the assessment or penalty order that whether the impugned notice was served at all upon the assessee. It is further noted that impugned notice claim to be issued on 04.09.2012, fixed the date for hearing on 10.09.2012. If, we exclude Saturday and Sunday and the time taken for dispatch and delivery of the notice, the assessee was left with hardly two or three day time, even if the notice was duly and expediently served upon the assessee. Further there is no case made out by the AO of any other non-compliance on the part of the assessee. Rather, it is noted that subsequently details and documents were filed by the assessee to the AO on the basis of which assessment proceedings were completed and assessment order was passed is] s 143(3) and not is] s 144. Thus, it shows that subsequently, compliance has been made by the assessee. Under such circumstances, in our considered opinion without giving adequate time and without making out a case of substantiate non-compliance by the assessee, it was unfair and unjustified on the part of the AO in levying the penal 271(1)(b). In the totality of the facts and circumstances case, we find that levy of penalty was not justified. The action of the AO is unsustainable in the eyes of law, and therefore we direct the AO to delete the penalty.

4. In the result, all above seven appeals filed the Assessee are allowed.”

4643-49/M/14-Shah Pratap