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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: Shri Mahavir Singh, & Shri M. Balaganesh
SHRI M.BALAGANESH, AM :
These appeals of the assessee arise out of the common order of the Learned CIT(A), Central-1, Kolkata in Appeal Nos. 384-388/CC-VII/CIT(A)C-I/12-13 dated 28.2.2013 against the order for the Asst Years 2004-05 to 2008-09 by the Learned AO levying penalty u/s 271B of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The only issue to be decided in all these appeals is as to whether penalty u/s 271B of the Act could be levied in the facts and circumstances of the case. As the issue involved in all these appeals are identical, the same are taken up together and disposed off by this consolidated order for the sake of convenience.
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The brief facts of this issue is that the assessee is engaged in the business of running a nursing home. There was a search u/s 132 of the Act in the premises of the assessee on 2.12.2009 and it was unearthed that the assessee had not filed its return of income u/s 139(1) of the Act for the Asst Years 2004-05 to 2008-09. The assessee explained that it had incurred only losses in the earlier years and had entrusted the handling of tax matters to a chartered accountant and pleaded complete ignorance of non-filing of income tax returns and stated that the fact of non-filing of income tax returns had come to its knowledge only pursuant to the search conducted in the premises. In the course of assessment proceedings u/s 153A of the Act, the assessee admitted undisclosed income of Rs. 92,85,985/- on account of suppressed receipts on the basis of the seized documents marked RMD/1 to RMD/53 and addition was accordingly made in the assessment. The assessee filed the tax audit report during the course of assessment proceedings. But the Learned AO found that the tax audit report was not signed by the tax auditor and hence the Learned AO ignored the same. The Learned AO accordingly levied penalty @ 0.5% of gross receipts in terms of section 271B of the Act. On first appeal, the Learned CITA confirmed the levy of penalty and also enhanced the penalty to be levied on suppressed receipts which were accepted by the assessee. Aggrieved, the assessee is in appeal before us .
The Learned AR argued that the assessee was completely in dark about the taxation laws and had with bonafide belief had entrusted the job of handling the entire taxation matters to a chartered accountant and to its utter dismay and shock, pursuant to the search by the Income tax department, it came to know that the income tax returns had not been filed by the chartered accountant. He argued that even the returns in response to notice u/s 153A of the Act were not advised to be filed by the chartered accountant. No proper representation had been made before the Learned AO during the course of assessment proceedings and ultimately the assessments u/s 153A of the Act were completed u/s 144 of the Act by estimation of profits @ 35% of gross receipts. He argued that the tax audit report submitted by the tax auditor was not ITA Nos.518-522/Kol/2013 2 A AM M/s. Calcutta Urology Research Centre P.Ltd
signed by him . In view of all these facts , the assessee thought it fit to prefer a complaint against the said chartered accountant who had signed the accounts before the Disciplinary Committee of The Institute of Chartered Accountants of India (ICAI) . The Learned AR also produced evidence of lodging the complaint to ICAI and ICAI in turn acknowledging the receipt of the complaint and allotting compliant number to the assessee for future correspondence. He also stated that the proceedings before the ICAI against the chartered accountant are still pending disposal. He pleaded that the assessee’s bonafide belief of entrusting the job to the chartered accountant cannot be doubted with and the assessee had actually got its accounts tax audited but the tax auditor for reasons best known to him had chosen not to sign the tax audit report while submitting the same before the income tax department. Accordingly, he prayed for cancellation of penalty levied u/s 271B of the Act which has happened due to reasons beyond the control of the assessee. He also argued that due to mistake of the chartered accountant, the assessee should not be penalized. In response to this, the Learned DR vehemently supported the orders of the lower authorities.
We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee containing the complaint lodged before ICAI against the chartered accountant for alleged professional negligence and ICAI acknowledging the receipt of compliant thereon, among others. We find that in the facts nad circumstances before us, the assessee had believed the chartered accountant to a large extent as it is not aware of the rigourous provisions of taxation laws. It only amounts to sheer ignorance of law. However, the belief of the assessee seems to be bonafide and that cannot be doubted with. It is well settled that ‘Ignorantia juris non excusat’ meaning ‘ignorance of law is of no excuse’. However, this maxim has been duly considered by the Hon’ble Apex Court in the case of Motilal Padampat Sugar Mills Co. Ltd vs State of Uttar Pradesh & Ors reported in (1979) 118 ITR 326 (SC) wherein it was observed that
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there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement ; there is no such maxim known to the law. Over a hundred and thirty years ago , Maula J. pointed out in Martindale v Falkner (1846) 2 CB 706 : “ There is no presumption in this country that every person knows the law : it would be contrary to common sense and reason if it were so.” Scrutton L.J. also once said : “ It is impossible to know all the statutory law, and not very possible to know all the common law. ” But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans vs Bartlam (1937) AC 473 :” …. The fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application.” It is, therefore, not possible to presume, in the absence of any material placed before the court , that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dt 25th June , 1970 . We, accordingly, reject the plea of waiver raised on behalf of the State Government.
5.1. It was the submission of the Learned AR that the assessee had entrusted the entire jobof handling the tax affairs to a chartered accountant and assessee should not be penalized for any mistake committed by him. We find that the decision of the Hon’ble Madhya Pradesh High Court in the case of CIT vs Khemraj Laxmichand reported in (1978) 114 ITR 75 (MP) supports this proposition , wherein it placed reliance on the decision of Hon’ble Apex Court in the case of Mata Din vs A. Narayanan , AIR 1970 SC 1953, 1954, Hidayatullah C.J. speaking for the court said :
“ The law is well settled that mistake of counsel may in certain circumstances be taken into account in condoning delay although there is no general proposition that mistake of counsel by itself is always a sufficient ground. It is always a question whether the mistake was bona fide or was merely a device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in an underhand way.” So also in Punjabi University vs Acharya Swami Ganesh, AIR 1972 SC 1973, 1974 , their Lordships held that bona fide mistakes have got to be taken note of by the Courts in considering whether the delay in filing an appeal should be condoned or not. It was observed : “ It has been repeatedly held by Courts that a mistake by a lawyer is good ground for ITA Nos.518-522/Kol/2013 4 A AM M/s. Calcutta Urology Research Centre P.Ltd
condoning the delay in filing the appeal”. Thus , it is essentially a question of fact whether the mistake of the counsel was bona fide. That is the crux of the matter.”
5.2. In the instant case, we are convinced that the assessee had placed a bona fide belief on its chartered accountant who has been entrusted to handle the tax matters of the assessee and the said bonafide belief cannot be doubted with. Hence we find that the assessee had adduced reasonable cause in terms of section 273B of the Act and accordingly is entitled for immunity from levy of penalty u/s 271B of the Act. We are making it clear that this order shall not have any bearing on the proceedings pending before the Disciplinary Committee of ICAI against the complaint lodged by the assessee on its chartered accountant and this decision should not be used in the said proceedings thereon.
In the result, the appeals of the assessee are allowed.
Order pronounced in the open court on 21 -03-2016.
Sd/- Sd/- ( Mahavir Singh, Judicial Member ) ( M.Balaganesh, Accountant Member)
Date : 21 -03-2016
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Copy of the order forwarded to: 1. The Appellant/Assessee: M/s. Calcutta Urology Research Centre Pvt. Ltd C/o V.N Purohit & Co., Chatrered Accountants, Diamond Chambers, Unit-III, 4th Fl., Suit no.4G, 4 Chowringhee Lane, Kol-16. 2 The Respondent/Department; The Asstt. Commissioner of Income Tax Central Circle-VI, Aaykar Bhawan Purva, 110 Shantipally, 6th Fl., Kolkata-107. 3 /The CIT, 4.The CIT(A)
DR, Kolkata Bench 6. Guard file. True Copy, By order, Asstt Registrar **PRADIP/SPS
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