ACIT Central Circle 2(1), CHENNAI V. RMG Benefit Fund Ltd., CHENNAI

ITA 1077/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6594 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 28-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Search and seizure; Opportunity of being heard; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , , & BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.1077/CHNY/2018 ' ' /ASSESSMENT YEAR: 2013-14 & C.O.NO.77/CHNY/2018 (IN ITA NO.1077/CHNY/2018) THE ASST. COMMISSIONER OF- INCOME TAX, CENTRAL CIRCLE-2(1), ROOM NO.122, FIRST FLOOR, INVESTIGATION WING, 46, NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 034. VS. M/S.RMG BENEFIT FUND LTD., NO.38, JEENIS ROAD, SAIDAPET, CHENNAI-600 015. [PAN: AAACR 5172 K] ( * /APPELLANT) ( +,* /RESPONDENT/CROSS- OBJECTOR) * - / APPELLANT BY : MR. AR.V.SREENIVASAN, JCIT +,* - /RESPONDENT BY : MR. G.BASKAR, ADV. - /DATE OF HEARING : 20.02.2019 - /DATE OF PRONOUNCEMENT : 27.02.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE LEARNED COMMISSION OF INCOME TAX (APPEALS)-18, CHENNAI, DATED 20.12.2017 FOR THE AY 2013-14 DELETING THE PENALTY OF RS.77,89,500/- LEVIED U/S.271(D) OF THE INCOME TAX ACT. ITA NO.1077/CHNY/2018 & CO NO.77/CHNY/2018 :- 2 -: 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPE ALS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) IS ERRONEOUS ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. 2. THE LD. CIT(A) RRED IN DELETING THE PENALTY OF RS .75,14,000/- LEVIED BY THE ADDL. CIT, CENTRAL RANGE-2, CHENNAI, IN THE ORDER PASSED U/S.27 1D OF THE IT ACT, 1961 FOR THE AY 2013-14. 2.1. THE LD. CIT(A) ERRED BY NOT CONSIDERING THE FAC T THAT THE ASSESSEE FAILED TO PROVE DURING THE COURSE OF PENALTY PROCEEDINGS THAT THE F UNDS WERE TRANSFERRED FROM ONE ACCOUNT TO THE OTHER ACCOUNT BY WAY OF JOINT VENTURE AS HEL D BY HIM. 2.2. THE LD. CIT(A) OUGHT TO HAVE TAKEN INTO ACCOUNT , THE DECISION RENDERED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS M/S. SUNI L SUGAR CO. KANPUR, WHEREIN IT HAS BEEN HELD THAT, ONCE ANY AMOUNT HAS BEEN RECEIVED B Y THE ASSESSEE AND THE SAME IS SHOWN TO HAVE BEEN RECEIVED IN ITS BOOKS OF ACCOUNT S, IT PARTAKES THE NATURE OF THE DEPOSIT AND ACCORDINGLY THE PROVISIONS OF SEC.271D IS ATTRA CTED, WHICH DECISION IS SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE AS SESSEES CASE. 2.3. HAVING REGARD TO THE DETAILED DISCUSSIONS MADE BY THE ADDL. CIT IN THE PENALTY ORDER U/S.271D FOR THE AY 2013-14 IN THE ASSESSEES CASE T HE LD. CIT(A) OUGHT TO HAVE SUSTAINED THE ENTIRE PENALTY LEVIED U/S.271D AMOUNTING TO RS.7 7,89,500/-. 3. FOR THESE GROUNDS AND ANY OTHER GROUND INCLUDING AMENDMENT OF GROUNDS THAT MAY BE RAISED DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ORDER OF LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RE STORED. RELIEF CLAIMED IN APPEAL THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE SET AS IDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEFLY, THE FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE IS A COMPANY FORMED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS FUNCTIONING AS A NID HI COMPANY ACCEPTING DEPOSITS AND GRANTING LOANS TO ITS MEMBERS. CONSEQ UENT UPON THE SEARCH AND SEIZURE OPERATIONS U/S.132 OF THE ACT CONDUCTED IN THE CASE OF M/S.MEENAKSHI AMMAL TRUST AND SRI MUTHUKUMARAN EDUC ATION TRUST ON 30.07.2013, IN WHICH, DIRECTORS OF THE RESPONDENT-A SSESSEE COMPANY ARE INTERESTED AS TRUSTEES, THE PREMISES OF THE RESPOND ENT-ASSESSEE WERE ALSO SEARCHED. THEREFORE, THE ASSESSING OFFICER ISSUED NOTICE U/S.153A OF THE ACT AND THE ASSESSMENTS WERE COMPLETED FOR THE AYS 2008-09 TO 2014-15 ITA NO.1077/CHNY/2018 & CO NO.77/CHNY/2018 :- 3 -: U/S.143(3) R.W.S.153A OF THE ACT VIDE ORDER DATED 2 9.02.2016. DURING THE COURSE OF THESE ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER OBSERVED THAT THE RESPONDENT-ASSESSEE HAD BEEN ACCEPTING THE LOANS AND DEPOSITS IN CASH EXCEEDING SUM OF RS.20,000/- IN VIOLATION O F PROVISIONS OF SEC.269SS OF THE ACT. THE DETAILS OF SUCH LOANS AN D DEPOSITS WERE AS FOLLOWS: SL.NO. DEPOSIT RECEIVED IN CASH FROM DATE OF DEPOSIT AMOUNT (IN RS.) TOTAL 1 SMMCH & RI 20.03.2013 75,14,000/- 75,14,000/- 2 SHRI SETHURAMAN. R 10.11.2012 45,000/- 45,000/- 3 SHRI VENKATRAMAN.S 10.11.2012 45,000/- 45,000/- 4 SHRI JAYARAMAN 10.11.2012 45,000/- 45,000/- 5 SMT. BASHEERA BANU M 08.03.2013 99,800/- 99,800/- 6 SMT. RANI. A.N. 18.01.2013 40,700/- 40,700/- TOTAL 77,89,500/- 4. BASED ON THIS INTIMATION, THE ASSESSING OFFICER HAD CALLED UPON THE RESPONDENT-ASSESSEE TO SHOW CAUSE WHY AN ORDER IMPO SING PENALTY SHOULD NOT BE PASSED U/S.271D OF THE IT ACT VIDE HIS LETTE R DATED 28.10.2016. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE RESPONDENT-A SSESSEE HAD SUBMITTED AS FOLLOWS: A) AS REGARDS THE AMOUNT RECEIVED FROM SMMCHR&I, IT WAS STATED THAT THE SAME WAS RECEIVED BY WAY OF TRANSFER FROM AMACE SAVING BANK ACCOUNT. B) AS REGARDS INDIVIDUAL DEPOSITS IT WAS STATED THAT THESE DEPOSITORS HAVE GIVEN CONFIRMATION LETTERS TO THE EFFECT THAT THEY HAVE M ADE THE DEPOSITS IN SMALL AMOUNTS AND THE DEPOSITS WERE ACCEPTED IN THE EVENING HOURS AFT ER THE BANK HOURS. C) AS THE SAME WAS NOT ALLOWED IN THE EARLIER YEARS OUR COMPANY REDUCED ACCEPTING DEPOSITS FROM STUDENTS OF THE INSTITUTIONS IN LATER YEARS. D) THIS PRACTICE OF ACCEPTING DEPOSITS IN CASH WAS C OMPLETELY AVOIDED IN THE LATER YEARS. E) WE HAVE COMPLETELY AVOIDED CASH DEPOSITS IN THE S UBSEQUENT YEARS AND THERE ARE ABSOLUTELY NO SUCH DEVIATIONS IN THE YEARS RELEVANT TO AYS 2013-14 AND 2014-15. F) WE HAVE ACCEPTED THESE DEPOSITS WITH OUR COMPANY IN ORDER TO EARN FAVOURABLE RATES OF INTEREST AND THE AMOUNTS WERE UTILISED ONLY FOR GRA NTING SECURED LOANS TO THE SHAREHOLDERS. G) THERE WERE NO REPAYMENTS MADE AND THE DEPOSITS WE RE RENEWED AND ONLY JOURNAL ENTRIES HAVE BEEN PASSED AND THERE WAS NO DEVIATION U/S 269T OF THE I T ACT. ITA NO.1077/CHNY/2018 & CO NO.77/CHNY/2018 :- 4 -: H) WE SUBMIT WE ARE A NIDHI COMPANY AND LOANS ARE GI VEN MOSTLY TO SALARIED AND LOWER MIDDLE INCOME GROUP AT FAVOURABLE RATES OF INTEREST STRICTLY IN ACCORDANCE WITH THE NORMS PRESCRIBED BY THE MINISTRY OF CORPORATE AFFAIRS AND RBI AND SO ANY PENAL ACTION AGAINST OUR COMPANY WOULD AFFECT THE FINANCIAL POSITION OF THE COMPANY AND WILL AFFECT THE NIDHI APPROVAL AND LEGAL STATUS OF THE COMPANY. 5. THE ASSESSING OFFICER AFTER CONSIDERING THE ABOV E SUBMISSIONS HELD THAT THE PROVISIONS OF SEC.269SS ARE ATTRACTED ONCE THE AGGREGATE OF THE AMOUNTS RECEIVED EXCEEDS SUM OF RS.20,000/- EVEN IF SINGLE AMOUNT RECEIVED DOES NOT EXCEED RS.20,000/-. AS REGARDS T O AMOUNT OF LOAN RECEIVED FROM SRI MUTHUKUMARAN MEDICAL COLLEGE, HOS PITAL RESEARCH INSTITUTE, THE ASSESSING OFFICER HELD THAT THE RESP ONDENT-ASSESSEE HAD FAILED TO SUBSTANTIATE HIS SUBMISSIONS BY PRODUCING THE NECESSARY EVIDENCE, HE WAS ALSO OF THE OPINION THAT THE PROVI SIONS OF SEC.269SS ARE ATTRACTED EVEN IN THE CASE OF JOURNAL ENTRY. THUS, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE RESPONDENT-ASSESSE E HAD LEVIED PENALTY OF RS.77,89,500/- U/S.271D VIDE ORDER DATED 27.04.2017 . 6. BEING AGGRIEVED BY THE ABOVE ORDER OF THE PENALT Y, RESPONDENT- ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO VIDE IMPUGNED ORDER DELETED PENALTY IN RESPECT OF DEPOSITS RECEIVED FRO M SRI MUTHUKUMARAN MEDICAL COLLEGE & RESEARCH INSTITUTE PLACING RELIAN CE ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT OF MADRAS IN THE CASE OF WORLDWIDE TOWNSHIP PROJECTS LTD., WHEREIN, IT WAS HELD THAT THE AMBIT OF THE PROVISIONS OF SEC.269SS IS RESTRICTED TO TRANSACTIONS INVOLVING A CCEPTANCE OF DEPOSITS IN CASH AND DOES NOT EXTEND TO THE BOOK ENTRIES. HOWE VER, THE LD.CIT(A) ITA NO.1077/CHNY/2018 & CO NO.77/CHNY/2018 :- 5 -: HAS SUSTAINED THE PENALTY IN RESPECT OF THE DEPOSIT S ACCEPTED IN CASH FROM OTHER PARTIES TO THE EXTENT OF RS.2,75,500/-. 7. BEING AGGRIEVED BY THE DECISION OF THE LD.CIT(A) , THE REVENUE IS IN APPEAL IN ITA NO.1077/CHNY/2018 AND THE ASSESSED IS FILED CROSS- OBJECTION NO.77/CHNY/2018. NOW, WE SHALL TAKE UP T HE REVENUE APPEAL. 8. THE LD.SR.DR SUBMITTED THAT THE RESPONDENT-ASSES SEE HAD FAILED TO SUBSTANTIATE THE EXPLANATION FILED BEFORE THE ASSES SING OFFICER AND THE LD.CIT(A) OUGHT NOT HAVE CONSIDERED THE FRESH MATER IAL FILED BEFORE HIM FOR THE FIRST TIME IN VIOLATION OF PROVISIONS OF RU LE 46A AND ALSO SUBMITTED THAT ANY AMOUNT RECEIVED OTHERWISE THAN BY WAY OF C HEQUE OR DEMAND DRAFT ARE HIT BY THE PROVISIONS OF SEC.269SS OF THE IT ACT AND RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HONB LE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. SUNIL SUGAR CO. KANPUR. ON T HE OTHER HAND, THE LD.COUNSEL, SHRI G.BASKAR HAS SUBMITTED THAT THE DE POSITS WERE RENEWED THROUGH TRANSFER ENTRIES. THE JOURNAL ENTRIES PASS ED IN RESPECT OF THE DEPOSITS OF THE STUDENTS BELONGING TO SRI MUTHUKUMA RAN MEDICAL COLLEGE & RESEARCH INSTITUTE (SMMCH & RI) AMOUNTING TO RS.75, 14,000/- THROUGH JOURNAL BY TRANSFERRING THE SAME FROM ARULMIGU MEEN AKSHI AMMAN COLLEGE OF ENGINEERING (AMACE) ON THE SAME DAY OF 20.03.201 3 IN WHICH BOTH DEBIT AND CREDIT ARE CLEARLY SHOWN AND THE SAME WAS PRODUCED BEFORE ASSESSING OFFICER. HE ALSO DRAWN OUR ATTENTION TO PAGE NO.17 OF THE PAPER BOOK, WHEREIN, THE DETAILS OF RENEWAL OF FIXED DEPO SITS ARE PLACED. HE ALSO ITA NO.1077/CHNY/2018 & CO NO.77/CHNY/2018 :- 6 -: PLACED BEFORE US COPY OF SHEET OF TRANSACTIONS FOR THE DAY OF 20.03.2013, WHEREIN, THE TRANSFER ENTRIES RELATING TO THE DEPOS ITS OF RS.75,14,319/- WAS REFLECTED AT PAGE NO.6 OF THE PAPER BOOK. THER EFORE, HE SUBMITTED THAT THE ORDER OF THE CITA(A) DELETING PENALTY OF R S.75,14,000/- SHOULD BE SUSTAINED. 9. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIALS ON RECORD. THE SOLITARY ISSUE THAT ARISES FOR CONSIDERATION BE FORE US, WHETHER THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LEV IED U/S.271D HAVING REGARDING TO THE FACTS AND CIRCUMSTANCES OF THE CAS E. THE ASSESSING OFFICER HAD FOUND THAT THE DEPOSITS WERE RECEIVED F ROM SRI MUTHUKUMARAN MEDICAL COLLEGE & RESEARCH INSTITUTE (SMMCH & RI) O THERWISE THAN BY WAY OF CROSSED-CHEQUE OR DEMAND DRAFT. THE EXPLANATION TENDERED BY THE RESPONDENT-ASSESSEE IS THAT THE DEPOSITS WERE RECEI VED BY WAY OF JOURNAL ENTRY. THE ASSESSING OFFICER REJECTED THIS EXPLANA TION, AS ACCORDING TO HIM, THIS CLAIM WAS NOT SUBSTANTIATED BY FILING NEC ESSARY EVIDENCE AND ALSO THE ASSESSING OFFICER WAS OF THE OPINION THAT THE PROVISIONS OF SEC.269SS ARE ATTRACTED EVEN IN THE CASE THE DEPOSI TS ARE RECEIVED BY WAY OF TRANSFER ENTRIES. ON APPEAL BEFORE THE LD.C IT(A), THE PENALTY CAME TO BE DELETED CONSIDERING THE FACTS THAT THE DEPOSI TS WERE RECEIVED BY WAY OF JOURNAL ENTRY IN WHICH CASE THE PROVISIONS OF SE C.269SS ARE NOT ATTRACTED, PLACING RELIANCE ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF WORLDWIDE TOWNSHIP PROJECTS LT D. IT IS A MATTER OF RECORD THAT BEFORE THE ASSESSING OFFICER THE STAND RESPONDENT-ASSESSEE ITA NO.1077/CHNY/2018 & CO NO.77/CHNY/2018 :- 7 -: WAS THAT THE AMOUNT WAS RECEIVED BY WAY OF TRANSFER FROM AMACE SAVING BANK ACCOUNT. BEFORE US, IT WAS STATED THAT AMACE IS ANOTHER DIVISION OF THE RESPONDENT-ASSESSEE. WHEREAS DURING THE COURSE OF PROCEEDINGS BEFORE THE LD.CIT(A), THE EXPLANATION OFFERED WAS T HAT JOURNAL ENTRY WAS PASSED BY TRANSFERRING THE SAID AMOUNT FROM ARULMIG U MEENAKSHI AMMAN COLLEGE OF ENGINEERING (AMACE) TO SRI MUTHUKUMARAN MEDICAL COLLEGE & RESEARCH INSTITUTE (SMMCH & RI) ON 20.03.2013. IN SUPPORT OF THIS THE COPY OF THE DAY-BOOK WAS FURNISHED. BASED ON THIS SUBMISSION OF THE RESPONDENT-ASSESSEE, THE LD.CIT(A) HAD COME TO CONC LUSION THAT IS ONLY JOURNAL ENTRY AND THEREFORE, THE PROVISIONS OF SEC. 269SS ARE NOT ATTRACTED. THERE IS NOTHING ON THE RECORD TO SHOW THAT THE COP IES OF THE JOURNAL ENTRY WERE FURNISHED BEFORE THE ASSESSING OFFICER AND ALS O THE LD.CIT(A) HAD NOT EXAMINED THE BASIS ON WHICH THESE JOURNAL ENTRY WAS PASSED. FURTHER, THE LD.CIT(A) HAD NOT EXAMINED THE CRUCIAL ASPECT W HETHER THESE TWO ORGANIZATIONS VIZ., SRI MUTHUKUMARAN MEDICAL COLLEG E & RESEARCH INSTITUTE (SMMCH & RI) & ARULMIGU MEENAKSHI AMMAN COLLEGE OF ENGINEERING (AMACE) ARE PART OF THE RESPONDENT-ASSESSEE ARE A D IFFERENT ENTITIES AND ALSO FAILED TO EXAMINE WHETHER DEPOSITS ARE ORIGINA LLY ACCEPTED IN CASH IN THE CASE OF ARULMIGU MEENAKSHI AMMAN COLLEGE OF ENG INEERING (AMACE). IN OUR CONSIDERED OPINION, THESE FACTS WOULD BE CRU CIAL TO DECIDE WHETHER JOURNAL ENTRY WERE PASSED AS A COVER UP EXERCISE IN ORDER TO AVOID THE PENAL CONSEQUENCES OF ACCEPTING DEPOSITS IN CASH. THEREFORE, WE REMAND THE MATTER TO THE FILE OF ASSESSING OFFICER FOR FRE SH ADJUDICATION IN ITA NO.1077/CHNY/2018 & CO NO.77/CHNY/2018 :- 8 -: ACCORDANCE WITH LAW AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE RESPONDENT-ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE CO FILED BY THE ASSESSE E IS DISMISSED AS WITHDRAWN. ORDER PRONOUNCED ON THE 27 TH FEBRUARY, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 27 TH FEBRUARY, 2019. TLN - +45 65 /COPY TO: 1. * /APPELLANT 4. 7 /CIT 2. +,* /RESPONDENT 5. 5 + /DR 3. 7 ( ) /CIT(A) 6. ' /GF