SANKAR DATTA,KOLKATA vs. DCIT, CIRCLE -54, KOLKATA, KOLKATA

As the issues involved are identical in nature, they are taken together and these appeals are disposed off by this common order for the sake of convenience

The only issue be decided in these appeals is as to whether the penalty u/s. 271B of the Act is leviable as per the provisions of the I.T Act 1961 in the facts and circumstances of the case.

Brief facts of this issue are that the assessee is a practising Chartered Accountant and a partner of Chartered Accountant Firm under the name and style M/s. & 871/Kol/2012- 1 C-AM Sankar Datta Price Waterhouse, Kolkata. During the assessment year under appeal, the assessee was in receipt of salary or remuneration from the aforesaid partnership firm amounting to Rs.70,62,000 and Rs.77,76,000/- for the A.Ys 2005-06 & 2006-07 respectively. The ld.AO proceeded to levy the penalty u/s. 271B of the Act as gross receipts of the assessee from his profession exceeded Rs. 10 lakhs being the limit prescribed u/s. 44AB of the Act. On 1st appeal, the same was confirmed by the ld. CIT(A) on the ground that the receipts of the assessee squarely fall within the meaning of section 28(v) of the Act and are to be taxed as ‘ Profits & Gains from Business or Profession’. Aggrieved, the assessee is in appeal before us.

Shri Somnath Choudhury, Advocate, ld.AR argued on behalf of the assessee and Shri Uday Kr. Sarkar, ld. Addl.CIT/DR argued on behalf of the revenue.

The ld.AR argued that the assessee is practising Chartered Accountant and a partner in a firm, M/s. Price Waterhouse, Kolkata. The said partnership firm is duly subjected to tax audit u/s. 44AB of the Act and the assessee was merely in receipt of salary or remuneration from the said firm as his business income and accordingly assessee was under bonafide belief that his accounts need not be subjected to any tax audit u/s. 44AB of the Act. He also argued that the assessee does not have any clientele in his individual capacity and carries out all attestation functions only in the capacity of a partner of firm for which salary is received by him from the firm. He further placed his reliance on the Tribunal’s order passed in the case of his partner, Shri Natarajan Ramesh Rajan, Kolkata Vs. DCIT, Cir-54, Kol in dated 01-12-2014 in support of his contentions. In response to this, the ld. DR vehemently supported the orders of the lower authorities.

We have heard the rival submissions and perused the material available on record. We find that the assessee being a chartered accountant has not carried out any attest function in his individual capacity and does not have any clientele in his individual capacity. All the functions are carried out by the assessee only in the capacity of partner & 871/Kol/2012- 2 C-AM Sankar Datta of M/s. Price Waterhouse, Kolkata. Moreover, we find that the issue is squarely covered by the decision of this tribunal passed in the case of partner of assessee, Shri Natarajan Ramesh Rajan Vs. DCIT, Cir-54, Kolkata in dated 01-12-2014, wherein it was held as under:- 5. We have heard both the counsel and perused the records. The ld. Counsel of the assessee reiterated the submissions as referred to herein above as made before the ld. CIT(A). The ld. Counsel of the assesse claimed that on the facts and circumstances of the case the assessee was in the bona fide belief that he has received salary and share of profit from Chartered Accountant partnership firm and his income was not liable to be audited u/s 44AB of the Act. Hence the ld. Counsel of the assessee pleaded that there was a reasonable cause for the failure on the part of the assessee to comply with ITA.No.872 /K/2012 Natarajan Ramesh Rajan A.Yr.2006-07 3 the provisions of the Act and hence he claimed that section 273B of the Act should come to the rescue to the assessee and assessee should not be visited with the rigour of penalty u/s 271B of the Act. The ld. DR, on the other hand, relied upon the orders of the authorities below. 5.1. Upon careful consideration we note that the assessee is a professional Chartered Accountant. He is not practicing in his individual capacity. The receipts are from the partnership firm in the shape of salary and share of profit. The assesee was in the bona fide belief that in these circumstance his receipt by way of salary and share of profit did not qualify as turn over for the purpose of section 44AB of the Act. Hence we agree with the ld.counsel of the assessee that assessee’s case does fall u/s 273B of the Act. The said section provides that no penalty shall be imposable on the person for any failure including that under which penalty u/s 271B of the Act is leviable if there was a reasonable cause for the said failure. In our considered opinion on the facts and circumstances of the case it can be said that assessee was in the bona fide belief that his individual case does not fall for audit u/s 44AB of the Act. We further note that the assessee’s conduct cannot be said to be contumacious to warrant levy of penalty. In this regard we draw support from the decision of the Hon’ble Apex Court in the case of Hindustan Steel Ltd vs State of Orissa 83 ITR 26 (SC) which held as under : “An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed & 871/Kol/2012- 3 C-AM Sankar Datta

merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.” 5.2. In the background of the aforesaid discussion and in our considered opinion the assessee is not liable for levy of penalty u/s 271B of the Act. Hence we set aside the orders of the authorities below and delete the levy of penalty of Rs.29,340/- 7.2 We find that the ld.CIT(A) has placed his reliance on the decision of this tribunal in the case of Sri Amal Ganguly Vs. DCIT Cir-54, Kolkata in dated 20-02-2009. We hold that the issue under appeal has been properly dealt in the subsequent decision by this tribunal in ITA No.872/Kol/2012 vide order dated 01/12/2014 and moreover, as held by the Hon’ble Supreme Court in the case of Vegetable Products Ltd reported in (1973) 88 ITR 192 (SC), when two views are possible on an issue, the view that is favourable to the assessee should be adopted.