The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the assessee clearly deserves to be considered under Section 274 where in it is provided that if assessee is able to establish the reasonable cause.
The assessee company filed its return of income on 30.09.2007 declaring NIL income. The case of assessee was selected for scrutiny and an inquiry, with reference to the amounts received from the directors were made.
However, neither any of the principal officers of the company nor the AR furnished the relevant details. Ultimately, resulting into an addition of Rs. 6.28 lakhs. The Appellant comprises of 3 Directors.
That Appellant had discontinued its business, and had informed the Registrar of Companies, of this fact; and that said Companies office had deleted Company’s name from its Register of Companies. That vide letter dt 22-3-2019 (copy Enclosed) the Appellant’s CA, filed with the AO 3(1)(3) then sitting in room No: 66 Aayakar Bhavan had informed that the Appellant Company had been “struck off” from registrar of company, vide Extract of Gazette dt 18-6- 2011. That the business has been discontinued. Also the office at 1201/1202 Maker Chamber-V, 221, Nariman Point 400021 had been surrendered, also the residential premises had been shifted.
However the Assessee’s Chartered Accountant had attended before the Assessing Officer and informed him of all the Facts and explained to him, due to adverse circumstance the Assessee not able to give information. However replies were given from time to time. The AO, in haste arrived at adverse conclusion against the Applicant, though in fact the Applicant was suffering, the business had been discontinued, the premises has been surrendered, and the Appellant was compelled to place (Keep in safety) its books etc. at known friend’s industrial factory, in a trunk for the purpose of safety.
However, in the great flood of 2005 the factory premises got flooded and the Applicant’s books etc. lying in the truck were destroyed. The AO failed to appreciate these circumstances, and decided to punish the Appellant. It was further contented that the AO was aware and informed of the discontinue of business of the Nonexistence of Business premises, of the complete damage caused to the records, and therefore erred in invoking 144 and passing an Ex party Order. It is also observed that quantum appeal is still pending before the CIT (A) and the business of the assessee is discontinued long before as mentioned (supra) and was duly communicated to the AO during the penalty proceedings. As far as the levy of penalty under Section 271B of the Income Tax Act is concerned, It was found that with the factual matrix reproduced, case of the assessee clearly deserves to be considered under Section 274 of the Income Tax Act.
The two member bench of the tribunal consisting of Amit Shukla (Judicial member) and Gagan Goyal (Accountant member) held that the assessee clearly deserves to be considered under Section 274 wherein it is provided that if assessee is able to establish the reasonable cause behind its failure, no penalty can be imposed. In the given circumstances, the action of AO were not accepeted and appeal order passed by . CIT(A), in the result penalty imposed is directed to be deleted. Thus the appeal was allowed.
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