Shri Ram Kishore Sapra, New Delhi V. ITO, New Delhi

CO 141/DEL/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6580 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 19-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: RAM KISHORE SAPRA
• Keywords: Income from undisclosed sources; Reasonable cause; Ignorance of law
• Section: 273B; 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI A.N. PAHUJA ITA NO. 1497/DEL/2011 ASSTT. YR: 2006-07 INCOME-TAX OFFICER, VS. SHRI RAM KISHORE SAPRA, WARD 22(4), NEW DELHI. S-39, OKHLA INDL. AREA, PH ASE-II, NEW DELHI. PAN/GIR NO. ABIPS9138G C.O. NO. 141/DEL/2011 ( IN ITA NO. 1497/DEL/2011) ASSTT. YR: 2006-07 SHRI RAM KISHORE SAPRA, VS. INCOME-TAX OFFICER, S-39, OKHLA INDL. AREA, PHASE-II, WARD 22(4), NEW D ELHI. NEW DELHI. (APPELLANT ) ( RESPONDENT ) REVENUE BY : SHRI A.K. MONGA SR. DR ASSESSEE BY : SHRI RAM KISHORE SAPRA, (ASSESSEE ) O R D E R PER R.P. TOLANI, J.M : THESE ARE REVENUES APPEAL AND ASSESSEES CROSS-OB JECTION AGAINST CIT(A)S ORDER DATED 8-12-2010 RELATING TO A.Y. 200 6-07. 2. SOLE EFFECTIVE GROUND RAISED IN REVENUES APPEAL IS AS UNDER: ON THE FACTS AND 0N THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETI NG THE PENALTY OF RS. 27,33,000/- IMPOSED BY ADDL. CIT RANGE-22, N EW DELHI U/S 271E OF THE I.T. ACT. 3. BRIEF FACTS ARE: ASSESSEE IS A RETIRED ARMY OFFI CER. DURING THE HEARING ASSESSEE APPEARED IN PERSON AND CONTENDS THAT THE C ASH TRANSACTIONS IN QUESTION WERE WITH HIS SON WHO IS ALSO AN INCOME-TA X ASSESSEE, TO BUY AGRICULTURAL LAND. AO HAD IMPOSED SIMILAR TYPE OF P ENALTY ON CASH DEPOSITS 2 U/S 271D, WHICH WAS CHALLENGED BY THE ASSESSEE TO THE ITAT AND THE ITAT DELHI BENCH F VIDE ORDER DATED 7-7-2010 RENDERED IN ITA NOS. 2115 & 2116/DEL/2010 DELETED THE PENALTY BY FOLLOWING OBS ERVATIONS: 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE G ONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THIS WAS A SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFF ICER ALSO IN THE COURSE OF PENALTY PROCEEDINGS THAT THE ASSESSEE HAD NO IDEA THAT ACCEPTANCE OF LOAN AMOUNT OF RS. 20,000/- ARE MORE IN CASH WILL ATTRACT THE VIOLATION OF PROVISION OF SECTION 269SS OF THE ACT AND HE WAS UNDER BONA FIDE BELIEF THAT ACCEPTAN CE OF SUCH LOAN DOES NOT INVOLVE ANY VIOLATION OF ANY LAW. THE ASSESSING OFFICER AHS COME TO THE CONCLUSION THAT THE ASSESSE E AHS NOT MADE OUT A CASE OF REASONABLE CAUSE FOR THE FAILURE AS REQUIRED U/S 273B OF THE ACT WITHOUT GIVING ANY FINDING AS T O WHETHER THE IGNORANCE OF THE ASSESSEE REGARDING PROVISION O F SECTION 269SS IS A REASONABLE CAUSE OR NOT. THE SAME ARGUME NT WAS TAKEN BY THE ASSESSEE BEFORE THE LD. CIT(A) AND IT IS STATED BY THE LD. CIT(A) IN PARA NO. 15 OF HIS ORDER THAT THI S ARGUMENT HAS NOT BEEN TAKEN BEFORE HIM ALTHOUGH IN PARA NO. 14 O F HIS ORDER, HE IS SAYING THAT ANOTHER PLEA TAKEN BY THE ASSESSE E WAS THAT HE WAS EARLIER IN THE ARMED FORCES AND HE WAS IGNORANT OF LAW. LD. CIT(A) HAS STATED IN PARA NO. 16 OF HIS ORDER THAT IT WOULD BE RELEVANT TO MENTION THAT THE ASSESSEE HAS BEEN IN B USINESS FOR ALMOST A DECADE AND HENCE TO ATTRIBUTE IGNORANCE OF LAW TO HIS BACKGROUND IN THE ARMED FORCES IS UNJUSTIFIED. WE A RE NOT IN AGREEMENT WITH LD. CIT(A) ON THIS ASPECT BECAUSE WE HAVE ALREADY NOTICED WHILE DECIDING THE APPEAL OF THE A SSESSEE REGARDING VARIOUS ADDITIONS AND DISALLOWANCES MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS U/S 143(3) THAT THE ASSESSEE WAS NOT HAVING ANY OFFICE AND THERE WA S NO PURCHASE AND SALE OF STOCK AND THE ASSESSEE WAS DOI NG BUSINESS OF SOFTWARE DEVELOPMENT WHICH IS WORK OF A TECHNICA L NATURE AND HENCE IT IS SEEN THAT THE ASSESSEE WAS NOT INVO LVED IN ANY REGULAR AND TRADITIONAL TYPE OF BUSINESS. THE ASSES SEE WAS ADMITTEDLY IN ARMED FORCES AND IS EARNING PENSION I NCOME AND AFTER TAKING RETIREMENT FROM THE OFFICE, HE WAS ACT ING AS SOFTWARE DEVELOPER WHICH IS ALSO A TECHNICAL TYPE O F WORK WITHOUT ANY ASSISTANCE OF ANY ACCOUNTANT, CA OR LEG AL PERSON. 3 ONE MORE FACT IS RELEVANT THAT THE LOAN AMOUNT IN Q UESTION IS OF RS. 20,000/- IN CASE OF 22 PARTIES AGGREGATING TO R S. 4.40 LAKHS OUT OF TOTAL CASH LOAN OF RS. 5.83 LAKHS FROM 26 P ERSONS. HENCE, THIS VERY CONDUCT OF THE ASSESSEE ALSO SHOWS THAT T HE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THERE IS NO VIOLATI ON OF ANY LAW IN ACCEPTING CASH LOAN OF RS. 20,000/- OR MORE BECA USE HAD IT BEEN KNOWN TO THE ASSESSEE, THE ASSESSEE COULD HAVE TAKEN SUCH CASH LOAN BELOW RS. 20,000/- FROM EACH PERSON I.E. OF RS. 19,500/- FROM EACH PERSON AND COULD HAVE EASILY AVO IDED THE VIOLATION OF SECTION 269S AND AT THE SAME TIME, WOU LD HAVE ACCEPTED THE LOAN OF ALMOST EQUAL AMOUNT IN CASH. C ONSIDERING THIS POSITION, WE ARE OF THE CONSIDERED OPINION THA T THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT ACCEPTING OF SUCH C ASH LOAN DOES NOT VIOLATE ANY PROVISIONS OF INCOME TAX ACT RESULT ING INTO SUCH HUGE PENALTY OF 100% OF SUCH LOAN AMOUNT AND H ENCE AS PER THE PROVISIONS OF SECTION 273B, IT HAS TO BE AC CEPTED THAT THERE WAS REASONABLE CAUSE FOR THE FAILURE OF THE A SSESSEE IN COMPLYING WITH THE PROVISIONS OF SECTION 269SS AND HENCE, NO PENALTY SHOULD BE IMPOSED U/S 271D OF THE ACT. WE, THEREFORE, DELETE THE PENALTY. 3.1. IT IS CONTENDED THAT FACTS AND CIRCUMSTANCES A BOUT BONA FIDE BELIEF ARE SIMILAR. BEFORE THE CIT(A), THE ASSESSEE FILED WRIT TEN SUBMISSIONS WHEREIN IT WAS PLEADED THAT ASSESSEES SON SHRI DEEPAK SAPRA I S ALSO AN INCOME-TAX ASSESSEE. BOTH FATHER AND SON LIVED AS A JOINT FAMI LY AND THE TRANSACTIONS BETWEEN SON AND FATHER WERE TO HELP EACH OTHER FOR PURCHASE OF AGRICULTURAL LANDS. ASSESSEE HAD WITHDRAWN CASH FROM HIS SONS B ANK A/C FOR PURCHASING AGRICULTURAL LAND AND SINCE THE AMOUNT WAS NOT UTIL IZED, THE MONEY WAS REDEPOSITED IN THE BANK A/C OF THE ASSESSEES SON. BOTH FATHER AND SON, UTILIZED EACH OTHERS CAPITAL FOR COMMON CAUSE OF B UYING THE AGRICULTURAL LAND FOR THE PROSPERITY OF THE FAMILY. SINCE THE TR ANSACTIONS IN QUESTION WERE NEITHER LOAN NOR DEPOSIT, THE PENALTY WAS NOT LEVIA BLE. THE ASSESSEE FILED EVIDENCE IN THIS BEHALF BEFORE CIT(A), WHICH WAS FO RWARDED TO AO FOR HIS 4 REMAND REPORT, WHICH WAS DULY FILED. CIT(A) AFTER C ONSIDERING ALL THE FACTS AND ITATS ORDER DELETED THE PENALTY U/S 271D, BY F OLLOWING OBSERVATIONS: 6.4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT AND OF THE ASSESSING OFFICER. I FIND FROM THE ORDER OF THE ITAT IN APPEAL FILED AGAINST THE ASSESSMENT ORD ER U/S 143(3) FOR THE SAME A.Y. THAT THE APPELLANT AND HIS SON AR E CO- BORROWERS FOR THE APPELLANTS HOUSING LOAN. IT IS S EEN THAT REPAYMENT OF HOUSING LOAN WAS MADE FROM THE ACCOUNT OF THE SON. THESE TRANSACTIONS ALSO SUPPORT THE APPELLANT S CONTENTION THAT THE FUNDS OF BOTH HAVE BEEN INTERMINGLED. THE HONBLE ITAT, JABALPUR BENCH, IN THE CASE OF MAHESH PRASAD SONI V. ADDL. CIT (2003) 128 TAXMAN 9 1, HELD THAT WHEN THE LOANS/ DEPOSIT BROUGHT IN BY THE ASSE SSEE WAS NOT TO EXPLAIN ITS UNACCOUNTED CASH, THEN THE QUESTION OF VIOLATING PROVISIONS OF SECTION 269SS AND 269T DID NOT ARISE. WHEN THE FACTS CLEARLY INDICATED THAT THERE WAS NO ACTUAL AC CEPTANCE OF LOAN OR DEPOSIT BY THE ASSESSEE, THE PENALTY PROVIS IONS U/S 271D DID NOT ARISE. MOREOVER, THE PENALTY U/S 271D IS SU BJECT TO THE PROVISIONS OF SECTION 273B AND THE ASSESSEE HAD A B ONA FIDE BELIEF THAT THERE WAS NO VIOLATION OF THE PROVISION S OF THE I.T. ACT. THE HYDERABAD BENCH OF THE ITAT IN THE CASE OF INDUSTRIAL ENTERPRISES REPORTED IN 73 ITD 252 HELD THAT THE PROVISIONS OF SECTION 269SS WERE BROUGHT IN THE STA TUTE BOOK TO COUNTER THE EVASION OF TAX. IN A CASE WHERE THE TRA NSACTIONS HAD NOTHING TO DO WITH EVASION OF TAX OR CONCEALMENT OF INCOME, IT MAY BE ONLY A CASE OF NEGLIGENCE. BUT A NEGLIGENT P ERSON DOES NOT HAVE ANY INTENTION OR MENS REA TO PURPOSELY VIO LATE ANY PROVISIONS OF LAW, SO AS TO BE VISITED WITH STRINGE NT PUNISHMENT OF HEAVY PENALTY. THE JODHPUR BENCH OF THE ITAT IN THE CASE OF M/S CHAUDHARY CO. BHUJIAWALA REPORTED IN 33 BCAJ 1021 H ELD THAT IN INTRODUCING THE PROVISIONS OF SECTIONS 269SS AND 269T, IT WAS NOT THE INTENTION OF THE LEGISLATURE TO PENALIZ E THE GENUINE FLOW OF FUNDS. 5 THE CBDT CIRCULAR NO. 387 DTD. 06-07-1984 EXPLAINED THE INTENTION BEHIND BRINGING THE PROVISIONS OF SEC TION 269SS AND 269T ON THE STATUTE. THE RELEVANT PART OF THE C IRCULAR STATES THAT UNACCOUNTED CASH FOUND IN THE COURSE OF SEARCH CARRIED OUT BY THE INCOME-TAX DEPARTMENT IS OFTEN EXPLAINED BY TAXPAYERS AS REPRESENTING LOANS OR DEPOSITS MADE BY VARIOUS P ERSONS. UNACCOUNTED INCOME IS ALSO BROUGHT INTO THE BOOKS O F ACCOUNT IN THE FORM OF SUCH LOANS AND DEPOSITS. THE NEW PRO VISIONS HAVE BEEN INTRODUCED WITH A VIEW TO CIRCUMVENTING T HIS DEVICE, WHICH ENABLES TAXPAYERS TO EXPLAIN AWAY UNACCOUNTED CASH OR UNACCOUNTED INCOME. 6.5. KEEPING IN VIEW THE INTENTION OF THE LEGISLATU RE BEHIND ENACTING THE ABOVE SECTION AND LOOKING TO THE JUDIC IAL PRONOUNCEMENTS ON THIS ISSUE, I HOLD THAT THE SUMS REPAID TO THE APPELLANTS SON DID NOT REPRESENT UNACCOUNTED C ASH, BUT CASH WITHDRAWN FROM THE BANK ACCOUNT OF THE SON, HELD BY THE APPELLANT FOR THE PURPOSES OF INVESTMENT, AND RE-DE POSITED IN THE BANK ACCOUNT, WITHOUT ANY ELEMENT OF CONCEALMEN T, OR EVEN OF LOAN. CONSIDERING THE BONA FIDE BELIEF OF THE APPELLANT THAT THE ABOVE TRANSACTION WAS NOT VIOLATIVE OF THE PROV ISIONS OF SECTION 269T READ WITH SECTION 271E, IT IS ALSO HEL D THAT THERE WAS REASONABLE CAUSE FOR THE DEFAULT. THEREFORE, NO PENALTY U/S 271E WAS LEVIABLE, AND THE PENALTY LEVIED IS CANCEL LED. 3.2. THE ASSESSEE VEHEMENTLY ARGUES THAT THE PENALT Y U/S 271D, LEVIED ON ACCOUNT OF ACCEPTING CASH DEPOSITS, HAS BEEN DELETE D BY THE ITAT IN THE SIMILAR FACTS AND CIRCUMSTANCES ABOUT BONA FIDE BEL IEF. THE CIT(A)S ORDER IS PERFECTLY JUSTIFIED, WHICH HAS DELETED THIS PENALTY RELYING ON THESE FACTS AND CIRCUMSTANCES, HOLDING THAT THE REPAYMENT IS NOT IN THE NATURE OF LOANS, VARIOUS JUDGMENTS OF ITAT JABALPUR, HYDERABAD, JODH PUR BENCHES, CBDT CIRCULARS AND ABOVE ALL UPHOLDING THE BONA FIDE BEL IEF OF THE ASSESSEE. 4. LEARNED DR IS HEARD WHO RELIES ON THE ORDER OF A O. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. WE FIND NO INFIRMITY IN THE OR DER OF CIT(A) WHICH 6 DETAILS ALL THE FACTS, IT HAS NOT BEEN CONTROVERTED THAT THE FATHER AND SON, BOTH ASSESSED TO INCOME-TAX, WERE LIVING IN JOINT FAMILY AND WERE HELPING EACH OTHER TO BUY AGRICULTURAL LAND FOR THE PURPOSE OF S ECURING BETTER FAMILY INVESTMENTS. THE AMOUNT IN QUESTION HAS BEEN WITHDR AWN FROM THE BANK ACCOUNT OF THE SON AND REDEPOSITED BACK IN HIS ACCO UNT DUE TO NON- UTILIZATION. IN OUR VIEW THE ITAT IN ASSESSEES OW N CASE, REPRODUCED ABOVE, BY ELABORATE OBSERVATIONS, UPHELD BONA FIDE BELI EF OF THE ASSESSEE IN RESPECT OF THE DEPOSITS. WE SEE NO REASON TO DEVIAT E FROM THE VIEW TAKEN BY THE ITAT ABOUT EXISTENCE OF BONA FIDE IN ASSESSEES OWN CASE WHILE DELETING THE PENALTY U/S 271D. IN THESE FACTS AND CIRCUMSTAN CES, THE VIEW ADOPTED BY THE CIT(A) IN HOLDING THAT CASH TRANSACTIONS WERE N OT IN THE NATURE OF REPAYMENT OF LOANS OR DEPOSITS AND UPHELD THE BONA FIDE BELIEF OF ASSESSEE WHICH IS FURTHER SUPPORTED BY THE ITAT IN RESPECT O F BONA FIDE BELIEF. CONSEQUENTLY, WE SEE NO INFIRMITY IN THE ORDER OF C IT(A), DELETING THE PENALTY IN QUESTION. WE UPHOLD THE SAME. REVENUES APPEAL IS DISMISSED. 6. ASSESSEES C.O. ONLY NARRATES THE FACTS OF THE C ASE AND HAS BEEN RENDERED INFRUCTUOUS. 7. IN THE RESULT, REVENUES APPEAL AS WELL AS ASSES SEES CROSS-OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 19-10-2011. SD/- SD/- (A.N. PAHUJA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19-10-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT 7