Precision Shears & Knives P.Ltd, Mumbai vs Assessee

सव ी जोगीं संह, या यक सद य एवं नरे कुमार ब लै या, लेखा सद य के सम

BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं/ I.T.A. No. 6606/Mum2011 ( नधारण वष / Assessment Year :2000-01 M/s. Precision Shears & बनाम/ The ITO, Ward 1(2)(4), Knives Pvt. Ltd., Aayakar Bhavan, Vs. 2/C, Lawrence & Mayo Mumbai-400 020 House, 276, Dr. D.N. Road, Fort, Mumbai-400 001 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AACCP 2722M (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से/ Appellant by: Shri Vimal Punmiya यथ क ओर से/Respondent by: Shri Neil Philip

सन ु वाई क तार ख / Date of Hearing :18.05.2015 घोषणा क तार ख /Date of Pronouncement :20.05.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This is an appeal by the assessee directed against the order of the Ld. CIT(A)-2, Mumbai dt. 12.7.2011 pertaining to assessment year 2000-

01.

2. The sole grievance of the assessee is that the Ld. CIT(A) has erred in confirming penalty u/s. 271B of the Act.

2 ITA. No. 6606/M/2011 3. The assessee is a company in which public are not interested. The assessee is a garment trader. In this case, the assessment was made u/s. 144 of the Act r.w. Sec. 147 vide order dt. 17.3.2006. While scrutinizing the return of income, the Assessing Officer noticed that the turnover of the assessee exceeded the maximum amount prescribed u/s. 44AB of the Act for getting the account audited and noticing that the assessee has failed to get its account audited, the penalty proceedings u/s. 271B of the Act was initiated. An opportunity was given to the assessee to show cause as to why penalty should not be levied u/s. 271B of the Act. On receiving no plausible reply, the AO proceeded by levying penalty at Rs. 77,927/-.

4. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) but without any success.

5. Before us, Ld. Counsel for the assessee brought to our notice that the quantum additions have been restored to the file of the AO therefore there exist no assessment order for the levy of penalty. In support, the Ld. Counsel relied upon the decision of the Tribunal in the case of Cash Flow Investment (I) Ltd Vs ITO in ITA No. 4146/M/2012, CIT Vs Shah Alloys Ltd (2013) 35 taxmann.com 532 (Gujarat HC) and ITO Vs Kataria Logistics, ITA No. 2825/Ahd/2011. The Ld. Counsel further stated that the penalty is bad in law as it is in contravention to the provisions of Sec. 274 of the Act.

6. Per contra, the Ld. Departmental Representative supported the orders of the authorities below.

7. We have given a thoughtful consideration to the orders of the authorities below and the judicial decisions relied upon by the Ld. Counsel. The undisputed fact is that the Enforcement Directorate took 3 ITA. No. 6606/M/2011

action against the assessee on 29.12.2012 taking away all the papers, books and vouchers etc. It is also a fact that Director of the Company was arrested. The issue before us is can this be considered a reasonable and sufficient cause for not getting the books of account audited. We are in assessment year 2000-01. The due date for filing the return of income was 30.11.2000 which means that the assessee was suppose to get the books of account audited before 30.11.2000. More so, because assessee is also a Private Limited Company and as per the provisions of the Company Law, assessee was mandatorily required to get the books of account audited. Enforcement Directorate took action on 29.12.2000 which means that the assessee had grossly failed to get its books of account audited on or before the due date i.e. 30.11.2000 much before the books and other documents were impounded by Enforcement Directorate. The assessee fails on this ground.

8. Before us, the Ld. Counsel has relied upon certain judicial decisions (supra) in support of his contention that quantum additions have been set aside therefore no penalty is leviable. We do not agree with this contention of the Ld. Counsel because levy of penalty u/s. 271B of the Act is nothing to do with the return of income or the quantum additions. Once, the turnover exceeds the limit prescribed u/s. 44AB of the Act, the assessee has to get its books of account audited. As mentioned elsewhere, the assessee being a Private Limited Company, it was otherwise under statutory obligation to get its book audited. The decision relied upon by the assessee do not support the provisions of law. However having said all that, we find that the penalty has been levied by ITO 1(2)-4, Mumbai. The relevant provisions of Sec. 274 read as under:

"(1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard.

4 ITA. No. 6606/M/2011 (2) No order imposing a penalty under this Chapter shall be made--

(a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees ;

(b) by the Assistant Commissioner or Deputy Commissioner, where the penalty exceeds twenty thousand rupees,

except with the prior approval of the Joint Commissioner.

(3) An income-tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer."

8.1. A perusal of the above Section clearly shows that the AO had to take permission from the Joint Commissioner before levying the penalty as the amount of penalty exceeded Rs. 10,000/-. There is nothing in the order of the penalty which could show that the ITO has taken prior permission from the Joint Commissioner. When a statute required a thing to be done in a certain manner, it shall be done in that manner alone. When a particular authority has been designated to record his satisfaction on any particular issue, then it is that authority alone who should apply his independent mind to record his satisfaction and satisfaction so recorded should be independent and not borrowed or dictated satisfaction. Considering the facts of the case, in the light of the provisions of Sec. 274 of the Act, we have no hesitation to hold that the AO has levied penalty incontravention to the provisions of Sec. 274 of the Act and, therefore, the order of the First Appellate authority is liable to be set aside. We direct the AO to delete the penalty so levied.

9. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 20th May, 2015 Sd/- Sd/-

(JOGINDER SING ) (N.K. BILLAIYA) या यक सद य/JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मंब ु ई Mumbai; दनांक Dated :20 May , 2015 th

व. न.स./ RJ , Sr. PS 5 ITA. No. 6606/M/2011

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)-

4. आयकर आयु त / CIT

5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai