Case Law Details
Hanuman Singh Vs Income Tax Officer (ITAT Jaipur)
The ld AR submitted that a consolidated audit of all the shops to whom license was granted by the Excise department, was carried out at Udaipur by the Chartered Accountant and a consolidated audit report was furnished by him in the name of AOP M/s Umrao Singh & Party (Kota Bundi) group, Udaipur. The consolidated audit report was prepared after taking into account all relevant factors of the assessee as well as of other license holders. The consolidated report in the name of AOP M/s Umrao Singh and party of which the assessee is one of the member. Once the assessment in the hands of AOP has been made then the assessment of the same income in the individual capacity tantamount to double assessment of the same income, which is impermissible in the eyes of law. After considering the facts and circumstances of the case as well as various case laws as mentioned in the submissions of the ld. AR of the assessee, the Bench direct to delete the penalty levied U/s 271B of the Act.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This is an appeal filed by the assessee emanates from the order of the ld. CIT(A), Alwar dated 02/03/2017 for the A.Y. 2009-10. The only issue involved in this appeal is against sustaining the penalty of Rs. 54,710/- U/s 271B of the Income Tax Act, 1961 (hereinafter referred as the Act).
2. Briefly stated facts of the case are that the assessee filed his return of income declaring total income of Rs. 1,27,900/- and agricultural income of Rs. 70,200/- on 16/03/2010 and the same was processed U/s 143(1) of the Act on 24/04/2010. The assessee was also deriving income from liquor business carried on in AOP’s status. The gross receipt shown by the assessee in the liquor business were Rs. 1,09,42,255/-. As per provisions of law, the assessee was to keep its account audited but the assessee has failed to do so, therefore, a Show cause was issued to the assessee in this regard and the Assessing Officer levied the penalty @ 1/2% of the gross turnover U/s 271B of the Act.
3. The ld. CIT(A) had sustained the penalty levied by the Assessing Officer by holding as under:
“5.3 I have gone through the penalty order as well as submissions made by the appellant. In the present case, the assessee is a member of AOP M/s Umrao & Party which deals in the trade o f liquor business. During the course of assessment proceedings it was found that the assessee has not declared the turnover o f liquor business. The assessee had submitted that the turnover was included in the books of accounts of AOP M/s Umrao & Party and i.e. why no turnover was declared by him. The A.O. did not accept the reasons given by the assessee and initiated proceedings U/s 271B of the Act. I have considered the submissions made by the appellant and come to the conclusion that the turnover of liquor business of his part should have been declared in his return of income. Therefore, A.O. is justified in treating the assessee as defaulter for violating the provision of Section 44AB of the Act. Therefore, A.O. is also justified in imposing the penalty of Rs. 54,710/- U/s 271B o f the Act. Accordingly, the penalty is sustained and appellant’s ground of appeal is dismissed. ”
4. Now the assessee is in appeal before the ITAT. While pleading on behalf of the assessee, the ld AR has submitted as under:
1. The facts of the case are that the assessee filed his return for the a. year 2009-10 on 16-3-2010 declaring an income of Rs. 127900/- plus agriculture income of Rs. 70200/-. The return was processed u/s 143(1) on 24-4-2010. Subsequently the ITO picked up the case for scrutiny and notice u/s 143(2) was issued. Besides income from salary and interest plus agriculture income, the assessee was also deriving income from liquor business carried on in A.O.P.’s status. For this reason, income from liquor business was not declared in the Ind. return. The ITO however, assessed the income from liquor business for which license was granted by the Distt. Excise Officer, Bundi. The ITO also mentioned that the assessee did not produce the books of accounts and after taking into account the total purchases of liquor at Rs. 10942255/- he computed the income from liquor business at Rs. 13130,000/-. He also initiated proceedings u/s 271B for non compliance of the provisions of sec. 44AB.
2. As stated above, the appellant is one of the members of the A.O.P. named M/s Umrao Singh & Party (Kota-Bundi) Udaipur There are 103 members of the A.O.P. including the assessee. They entered into an agreement on 1-2-2007, copy of which is enclosed. This may kindly be perused. On page 4 of the agreement it is stated that the AOP shall participate in the open tender of the state government for liquor shops in the name of its members and make all investment for obtaining the contracts and the shops in the name of member shall be the shops of the AOP Further all the income/revenue and expenditure relating to these shops will also be treated as income/revenue and expenditure of the AOP. Further on page 8 of the agreement (Paper book) it is stated that the above parties 1 to 103 have to do the business in association and will be carried on in the name and style of M/s Umraosingh & Party That the TCS in the name of member individually or AOP will be treated as the TCS of M/s Umraosingh & Party; That all records will be maintained at Flead Office situated at UDAIPUR, (clause 16) The work has been taken in the name of M/s umraosingh & Party Kota Bundi group (Raj.) which will be treated as firm M/s Umraosingh & Party Kota Bundi group (Raj.) and will be binding to all the members (clause 17).
3. All these facts were brought to the notice of the learned ITO and he was requested not to make any asstt. in respect of liquor business in his individual hands as the asstt. of the A.O.P in the name and style of M/s Umraosingh & party has already been made by the ACIT Circle -2, Udaipur vide order u/s 143 (3) dated 14-5-2009 for a. year 2008-09 and order u/s 143(1) dated 23-3-2010 for the asstt. year 2009-10 after thoroughly examining all the books of accounts which were audited by the chartered Accountant firm of M/s Sampatilal Bohra & Co. Udaipur vide report dated 29-9-2009. Therefore, in the facts and circumstances of the case, the books which were maintained at the Head office at Udaipur could not be produced. Further all the accounts i.e. accounts of all the shops to whom licenses were granted were subjected to audit so as to make a final audit report of the A.O. P. in the name of M/s Umraosingh & Party (Kota Bundi) Udaipur, and hence there was no question of any separate audit report of the shop licensed to the assessee. The audit report in the name of AOP M/s Umraosingh & Party consisted of report in respect of all shops licensed by the excise department, including the assessee-appellant. The entire purchase/sales and TCs were considered in the hands of A.O.P. as is evident from the statement of P&L/account and Balance sheet. The total purchases and sales during the period ended 31/3/2009 amounted to Rs. 238701993 and 283079373/-respectively. The gross profit was worked out at Rs. 40461440/0- Members credit balance in capital a/c amounted to Rs. 13503922/-.
4. The ld. ITO estimated the profit at the rate of 12% but the same was reduced to 2% by the ld. CIT (A), and sustained the addition on of Rs. 211186/-. Further he deleted the entire addition of Rs. 912000/- made by the AO u/s 69B of the IT Act. The CIT (A) however, confirmed the ITO’s order on the point of assessment in the hands of the assessee on the ground that the license was in his name and was not transferred to A.O. P. An appeal was filed by the department on the ground of net profit rate and deletion of addition u/s 69B. On the other hand cross objections was filed against the CIT’s order confirming the assessment of liquor business in Ind. hands. The departmental appeal was subsequently dismissed on the ground of monetary limit for filing appeals before ITAT and consequently the CO also became redundant.
5. The contention of the learned AO and the CIT are not justified. Once the asstt. in the hands of A.O.P. has already been made the assessment of the same income in the individual hands tantamount to double assessment of the same income which is impermissible under the law. In other cases of members of the same A.O.P. i.e. Vijendra Singh; Raghubeersingh and Ravindersingh (members at S.O. 102,41 and 38 of the agreement dated 1 -2-2007) the successor CIT (A) has struck down the ITO’s order on this point with the observation that the ITO’s contention does not hold good in view of the fact that asstt. in the case of A.O.P. having already reached finality. He relied on the third member decision in the case of IT Appeal No. 1058 (MDS) of 2010 (A.Y) 2007-08 vide its order dated 23rd January 2013 in the case of R. Natrajan v/s ACIT. There are plethora of judgment, where in the courts have held that income has to assessed only once i.e. individual or A.O. P. and the same cannot be taxed in the hands of other entry.
In the case of Durga Madira Sangh vs. CIT (1985) 153 ITR 226 the Hon’ble Rajasthan High Court approved the formation of the partnership firm by various license holders after discussing the provisions of the Rajasthan Excise Act and relevant rules and delivered its judgement in favour of the assessee. Similar view was taken in the case of Baru Ram Milkhi Ram vs ITO (1988) 32 TTJ 164 (Delhi) Reliance is also placed on CIT Vs A.U. Chandrasekharan (1998) 229 ITR 406 (Mad) and Murlidhar Jhanwar & Purna Ginning and pressing factory (SC) following decision in the case of Kanpur coal syndicate (1964) 53 ITR 225 (SC). In view of the aforesaid facts and circumstances of the case, the asstt. in the case of assessee in respect of liquor Business was not justified.
As stated above, after initiating proceedings, the ld. ITO imposed penalty of Rs. 54711/- i.e. 1/2% of the total turnover of Rs. 10942255/- u/s 271B of the Act for noncompliance of the provisions of section 44AB. As submitted a consolidated audit of all the shops to whom license was granted by the Excise department, was carried out at Udaipur by the Chartered Accountant and a consolidated audit report was furnished by him in the name of AOP M/s Umraosingh & Party (Kota Bundi) group Udaipur and therefore it is not correct to say that no audit was got done the assessee in respect of his liquor business. The consolidated audit report was prepared after taking into a/c all relevant factors of the assessee as well as of other license holders. The consolidated audit of the group (AOP) members obviously takes into consideration the audit of the assessee’s books of account. The consolidated report in the name of AOP M/s Umrao Singh and party of which the assessee Shri Hanumansingh is one of the members at S.O. 14th of the agreement dated 1-2-2007, may kindly be taken as audit report on behalf of the assessee in terms of section 44AB. and the order of the ld. AO and that of the CIT(A) may kindly be held to be unjustified and be quashed and the appeal may very kindly be allowed.”
5. On the contrary, the ld DR has relied on the orders of the authorities below. She also pleaded that the levy of penalty should be sustained.
6. The Bench have heard both the sides on this issue and perused the material available on the record. The ld AR submitted that a consolidated audit of all the shops to whom license was granted by the Excise department, was carried out at Udaipur by the Chartered Accountant and a consolidated audit report was furnished by him in the name of AOP M/s Umrao Singh & Party (Kota Bundi) group, Udaipur. The consolidated audit report was prepared after taking into account all relevant factors of the assessee as well as of other license holders. The consolidated report in the name of AOP M/s Umrao Singh and party of which the assessee is one of the member. Once the assessment in the hands of AOP has been made then the assessment of the same income in the individual capacity tantamount to double assessment of the same income, which is impermissible in the eyes of law. After considering the facts and circumstances of the case as well as various case laws as mentioned in the submissions of the ld. AR of the assessee, the Bench direct to delete the penalty levied U/s 271B of the Act.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11/01/2018.
