LAUREL WIRES LTD,MUMBAI vs. ITO 8(2)(2), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the order dt.26.06.2012 and 27.6.2012 of CIT(A)-19 the assessee, has raised following Grounds of Appeal: A.Y.04-05: 1) The penalty of Rs.1,00,000/- levied after 7 -8years of completion of FY.03-04 "Bad in Law". “The time limit for levy of penalty is prescribed in section 275. Clause (c) of sub- section (1) dealing with levy of penalty per se by the AO gives two time limits. Where penalty proceedings are initiated in the course of proceedings: Before the expiry of financial year in which the proceedings are initiated or 6 months from the end of the month in which it was initiated - whichever period expires later.For example, if penalty proceedings are initiated in April 2009, the time limit would expire on 31.03.2010. Where penalty proceedings are initiated without pending or subsisting proceedings: The time limit would be 6 months from the end of the month in which the penalty proceeding is initiated. The reference to financial year of initiation has no relevance in such cases. For example, if penalty proceedings are initiated in April, 2009 the time limit would expire by 31.10. 2009. Note: The expiry of financial year of initiation is not to be considered. For interpretation of section 275(1)(c) please refer Subodh Kumar Bhargava v. CIT (2009)

17. DTR (Del.) 14." 2) Income Tax Officials are already a witness for non-availability of documents during their Survey Action u/s 133A of IT. Act on 14/02/2007 within all the premises of our establishment. 3) The Assessing officer who passed the order ex-party is at liberty to levy penalty without going through the contents mentioned in the previous assessing officer Mr Rajgopal K.P.'s order dated 31/12/2007 and without refereeing to our submission during the period of assessment. 4) The sole reason for the delay in filing late return was due to the seizure of all related documents by DGCEI New Delhi on 20/08/2004 at Dhule, factory and office at Mumbai. Copy of DGCEI seizure panchnama enclosed here with. Many submissions were done during the assessment proceedings for AY:-2004-05 and noting's were also done in proceeding sheet with regards to late filling of IT return. Assessing Officer Mr. Rajgopal K.P. in his order dated 31/12/ 07 has clearly acknowledged the facts of seizure of documents. 5) The Commissioner Appeals in his order upheld the penalty while giving following reasons;

5466 & 5465/M/13 Laurel Wires Ltd. a) Audit report was prepared on 31.10.2007 although department handed over the seized documents on 27/05/2009. Due to which CIT Appeal presumed that the return of income could have been filed on time i.e. on the due date 31/10/2004. In order to prove this contention Learned Commissioner Appeals is making following presumption; 1) Copy/Duplicate of books of accounts were with us before 31/10/2004. However, survey conducted by income tax officials have already witnessed non availability of documents during the raid on 14/02/2007. Hence over last several years 271 B penalty was not levied considering the genuine reason of the case. 2) Secondly, Balance Sheet found during the survey was provisional and not the final. BS was only made in order to stop the bank from declaring our account as NPA. Tax Audit Report was prepared only on 31/10/2007 and not before. It should also be noted that there had been substantial variations in provisional & final submitted balance sheet. With great difficulties we could get the photocopies from our suppliers, customers, bankers, DGCEI etc., that too after we had informed them about the income tax survey being conducted u/s. 133A of the LT. Act, 1961 on 14/02/2007. 5) The Appellant reserve his right to add, alter, modify, amend and withdraw any grounds of Appeal

. A.Y.05-06: 1) The penalty of Rs. 1,00,000/- levied after 7 -8 years of completion of FY 04-05. "Bad in Law". "The time limit for levy of penalty is prescribed in section 275. Clause (c) of sub-section (1) dealing with levy of penalty per se by the AO gives two time limits. Where penalty proceedings are initiated in the course of proceedings: Before the expiry of financial year in which the proceedings are initiated or 6 months from the end of the month in which it was initiated - whichever period expires later. For example, if penalty proceedings are initiated in April 2009, the time limit would expire on 31.03.2010. Where penalty proceedings are initiated without pending or subsisting proceedings: The time limit would be 6 months from the end of the month in which the penalty proceeding is initiated. The reference to financial year of initiation has no relevance in such cases. For example, if penalty proceedings are initiated in April, 2009 the time limit would expire by 31. 10.2009. Note: The expiry of financial year of initiation is not to be considered. For interpretation of section 275(1)(c) please refer Subodh Kumar Bhargava v. CIT (2009)

17. DTR (Del.) 14. 2) Income Tax Officials are already a witness for non-availability of documents during their Survey Action u/s 133A of I.T. Act on 14/02/2007 within all the premises of our establishment. 3) The Assessing officer who passed the order ex-party is at liberty to levy penalty without going through the contents mentioned in the previous assessing officer Mr Rajgopal K.P.'s order dated 31/12/2007 and without refereeing to our submission during the period of assessment. 4) The sole reason for the delay in filing late return was due to the seizure of all related documents by DGCEI New Delhi on 20/08/2004 at Dhule, factory and office at Mumbai. Copy of DGCEI seizure panchnama enclosed here with. Many submissions were done during the assessment proceedings for AY:-2005-06 and noting's were also done in proceeding sheet with regards to late filling of IT return. Assessing Officer Mr. Rajgopal K.P. in his order dated 31/12/07 has clearly acknowledged the facts of seizure of documents. 5) The Commissioner Appeals in his order upheld the penalty while giving following reasons; a) Audit report was prepared on 31.10.2007 although department handed over the seized documents on 27/05/2009. Due to which CIT Appeal presumed that the return of income could have been filed on time i.e. on the due date 31/10/2005.

5466 & 5465/M/13 Laurel Wires Ltd.

In order to prove this contention Learned Commissioner Appeals is making following presumption; 1) Copy/Duplicate of books of accounts were with us before 31/10/2005. However, survey conducted by income tax officials have already witnessed non availability of documents during the raid on 14/02/2007. Hence over last several years 2718 penalty was not levied considering the genuine reason of the case. 2) Secondly, Balance Sheet found during the survey was provisional and not the final. BS was only made in order to stop the bank from declaring our account as NPA. Tax Audit Report was prepared only on 31/10/2007 and not before. It should also be noted that there had been substantial variations in provisional & final submitted balance sheet.With great difficulties we could get the photocopies from our suppliers, customers, bankers, DGeEI etc,that too after we had informed them about the income tax survey being conducted uls 133A of the IT. Act, 1961 on 14/02/2007. 5) The Appellant reserve his right to add,alter,modify,amend and withdraw any grounds of Appeal. During the course of hearing before us,the Authorised Representative(AR)did not press ground no.1 for both the AY.s.Henc,same stand dismissed. Brief facts: 2.In this case the return of income for the AY.2004-05,which was due for filing on or before 31/ 10/2004,was not filed by the assessee even after due date as provided in section 139(1) of the Act.Hence,a notice u/s.148 dated 01/03/ 2007 was issued to the assessee calling for return of income.In response to the notice, assessee company had filed its return of income on 22.11.2007 declaring total income at Rs.2,80,068/-.Assessment was completed u/s 143(3) r.w.s.147 of the Act on 31.12.2007,assessing the total income at Rs.14,97,019/-. Against the assessment order, it filed an appeal before the First Appellate Authority(FAA),who vide his order,dated 25/11/2010, partly allowed the appeal. During the course of assessment proceedings,it was noticed that tax audit report furnished by the assessee in Forms No.3CA and 3CD was dated 31.10.2007,that its turnover/gross receipts for the year under consideration amounted to Rs.26,03,74,624/-.Since the provisions of Section 44AB of the Act were not complied with penalty proceedings were initiated u/s.271B of the Act by issue of notice u/s 274 r.w.s.271B of the Act on 31.12.2007. In response to the said notice issued,assessee did not filed any reply.In view of non-compliance,the AO inferred that assessee had nothing to say in this regard.Referring to the provisions of section 44AB of the Act,he held that in the instant case the accounts of the assessee-company had been audited and the report issued by the accountant on 31.10.2007,that the specified date u/s.44AB for AY.2004-05 was 31.10.2004,that the assessee had failed to comply with the terms of Section 44AB of the Act,that it did not have any plausible explanation for the non-compliance of the said Section,that it had committed a default u/s.271B of the Act,that it had failed to furnish any explanations and/or reasons for not complying with the provisions of section 44AB of the Act,that no relief was available to it as per the provisions of Section 273B of the Act.He levied a penalty of Rs.1 lakhs, invoking the provisions of section 271B of the Act.

3.Aggrieved by the order of the AO,the assessee agitated the matter before the FAA and contended that the Audit Report could not be filed in time because there was an action of Director General of Central Excise Intelligence,that vide punchama,dated 20.08.2004,the books of accounts of the assessee were seized, that the P&L account and balance sheet found at the time of survey was provisional statements prepared for limited purpose submitting with the bank,that its books of account and supporting documents and computer hard disk had been 3

5466 & 5465/M/13 Laurel Wires Ltd. seized by DGCEI,that the Tax Audit Report as required u/ s.44AB of the Act was not prepared at that time,that they wanted to verify certain figures and documents which had been seized by DGCI,hat the P&L account and balance sheet filed along with the return of income had been prepared after obtaining photocopies of bills,vouchers and other, supporting documents from DGCI,that the P&L account and the balance sheet,tax audit report which have been duly audited and filed along with the return should be considered as final and correct annual statement. During the course of hearing on 17. 05.2013 before the FAA,the assessee filed a letter dated 27. 05.2009 wherein the Superintendent of Central Excise and Customs,Dhule had directed it to collect the documents seized by the DGCEI and asked him to drop the penalty. After consider - ing the submissions of the assessee,he held that the that Director General of Central Excise Intelligence had conducted a search operation at the office and factory premises of the assessee on 20.08.2004 and seized all the books of accounts maintained by it at both the premises,that it was asked to collect the copy of the same along with non relied upon documents which were seized by the DGCEl vide letter F.No. DR/SCN/LW / 2008 dated 27.05.2009,that it was surprising that how the Audit Report dated 3l.10.2007 was prepared when the books of accounts were not made available to the appellant till March,2009,that it could be concluded that the assessee had either a copy/duplicate of the books of accounts,that then the Audit Report should have been submitted in time,that there was no violation of the statutory provisions of the Act, that the turnover of the assessee was more than the limit of Rs.40 lacs,that there was no doubt that the assessee had committed a default and there was no reasonable cause for the said default. Finally,he confirmed the order of the AO.

4.Before us,the AR stated that the books of accounts were with the Central Excise Authorities, that during the survey only provisional financial statements were found,that the documents were received by the assessee in the year 2009,that there was reasonable cause for not getting the books audited.Departmental Represnetative(DR)contended that during the survey proceedings balance sheet and audited statements were available,that there was no reason preparing financials and getting them audited.

5.We have heard the rival submission and perused the material before us.We find that the books of accounts of the assessee were seized by DGCE on 20.08.2004 and the same were made available to it vide letter dated 27.05.2009,that during the survey proceedings-carried out by the officers/officials of the income-tax department-at the business premises of the assessee a copy of the balance sheet and profit and loss account for the year ending on 31.03.2004,duly signed by the Chartered Accountant and two directors was found,that it was stated by the Directors that it was a provisional balance-sheet and profit and loss account was prepared on the basis of documents available with them,that the assessee had filed return of income for the year under appeal after a notice u/s.148 was issued,that the turnover/gross receipts for the year were more than 26 Crores,that it did not file audit report as required by the provisions of section 44AB of the Act,that in response to the penalty notice,issued by the AO,it did not file any reply,that before the FAA it was stated that the balance sheet and P & L a/c.was prepared for the bank purposes.If the financial statements could be prepared for bank purposes,then the audit report could have been easily filed.We find no justification for not filing the same.

5466 & 5465/M/13 Laurel Wires Ltd.