Mahmood Associates(P)Ltd, Kolkata V. JCIT, Range - 12, Kolkata, Kolkata

ITA 1112/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91909 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 30-07-2012
• Court: TRIBUNAL
• Keywords: Gift; Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM ] I.T.A NO. 1112 /KOL/201 2 ASSESSMENT YEAR : 200 4 - 0 5 MAHMOOD ASSOCIATES (P) LTD. VS. JOINT COMMISSIONER OF INCOME - TAX, (PAN: AA DCM2533L ) RANGE - 12, KOLKATA ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 31 .0 3 .2015 DATE OF PRONOUNCEMENT: 29. 04 . 2015 FOR THE APPELLANT: SHRI SUBHAS AGARWAL , ADVOCATE FOR THE RESPONDENT: S HRI KANHIYA LAL KANAK, JCIT, SR. DR, ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A) - XXIV , KOLKATA IN APPEAL NO. 3 96 /CIT(A) - XXIV/12(4)/08 - 09 DATED 30 .0 4 .2012. ASSESSMENT WAS FRAMED BY ITO, WARD - 12(4), KOLKATA U/S. 143(3) OF THE INCOME - TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 4 - 0 5 VIDE HIS ORDER DATED 27 .12.200 6 . PENALTY UNDER DISPUTE WAS IMPOSED BY JCIT, RANGE - 12, KOLKATA U/S. 271D OF THE ACT VIDE HIS ORDER DATED 29.06.2007. 2. THE SOLE ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE PENALTY IMPOSED BY JCIT U/S. 271D OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING CONCISE GROUND: FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY IMPOSED BY THE AO U/S. 271D AMOUNTING TO RS.3,98,719/ - . 3 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND FILED ITS RETURN OF INCOME ON 11.10.2004 FOR AY 2004 - 05. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE COMPLETING ASSESSMENT U/S. 143(3) OF THE ACT VIDE O RDER DATED 27.12.2006, THE AO NOTICED THAT THE ASSESSEE COMPANY TOOK LOANS FROM ITS DIRECTORS IN CASH IN VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. ACCORDINGLY, THE AO INITIATED PENALTY PROCEEDINGS U/S. 271D OF THE ACT. THE AO I.E. ITO, WAR D - 12(4), KOLKATA REFERRED THE LEVY OF PENALTY TO THE JCIT, RANGE - 12, KOLKATA, 2 ITA NO. 1112 /K/201 2 MAHMOOD ASSOCIATES (P) LTD. AY 200 4 - 0 5 WHO STARTED THE PENALTY PROCEEDING BY ISSUING SHOW CAUSE NOTICE TO THE ASSESSEE COMPANY AS TO WHY PENALTY U/S. 271D OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT BE NOT LEVIED AS THE ASSESSEE IS RECEIVED CASH LOAN OF RS. 6 LACS ON DIFFERENT DATES FROM ITS DIRECTORS AND OTHERS. THE JCIT, RANGE - 12, KOLKATA, RECEIVED INFORMATION FROM AO AND NOTED THE FACT IN PENALTY ORDER U/S. 271D OF THE ACT IN VERY FIRST P ARA AS UNDER: AN INFORMATION WAS RECEIVED FROM ITO, WARD - 12(4) VIDE HIS LETTER NO. ITO - WD.12(4)/AADCM2533L/06 - 07/589 DATED 27.12.2006 IN WHICH IT WAS INTIMATED THAT DURING THE COURSE OF SCRUTINY PROCEEDINGS OF THE AFORESAID ASSESSEE AND ASSESSMENT YEAR, IT WAS OBSERVED THAT THE ASSESSEE COMPANY RECEIVED CASH LOAN OF RS.6,00,000/ - ON DIFFERENT DATES FROM HIS DIRECTORS AND OTHERS AS MENTIONED IN THE TAX AUDIT REPORT FILED ALONG WITH THE RETURN OF INCOME, THEREBY VIOLATING THE PROVISION U/S. 269SS OF THE I. T. ACT, 1961. ACCORDINGLY IT WAS REQUESTED BY THE ITO TO ISSUE THE PENALTY SHOW CAUSE NOTICE U/S. 271D OF THE I. T. ACT, 1961 TO THE ASSESSEE FOR THE AFORESAID DEFAULT. 4. THE ASSESSEE REPLIED THAT ONLY RS.3,98,719/ - IS UNSECURED LOAN RECEIVED IN CASH F ROM DIRECTOR OF THE COMPANY MD. MAHMOOD AND NOT RS. 6 LACS AS ALLEGED. FINALLY, IT WAS CONFIRMED THAT ONLY RS.3,98,719/ - WAS CASH LOAN. THE JCIT AFTER CONSIDERING THE REPLY NOTED THE FACT THAT THE ASSESSEE COMPANY RECEIVED CASH LOAN FROM ITS DIRECTOR MD. MAHMOOD AND THE RELEVANT FINDING OF FACT BY HIM IN PAGE 3 OF PENALTY ORDER READS AS UNDER: THE ASSESSEE HAS ALSO FILED A COPY OF THE LEDGER ACCOUNT OF UNSECURED LOAN, A CERTIFICATE FROM RUPANJAN ASSOCIATES, CHARTERED ACCOUNTANT, THE DETAILS OF UNSECURED LOAN TAKEN FROM DIRECTOR, COPY OF THE BANK ACCOUNT OF THE COMPANY M/S. MAHMOOD ASSOCIATES PVT. LTD. WITH ALLAHABAD BANK, PARK CIRCUS BRANCH AND COPY OF THE BANK ACCOUNT OF MD. MAHMOOD THE DIRECTOR OF THE COMPANY WITH ALLAHABAD BANK, PARK CIRCUS BRANCH IN SUPPORT OF HIS CONTENTION. THE ASSESSEE ALSO FILED OTHER EXPLANATIONS BEFORE THE JCIT, RANGE - 12, KOLKATA BUT HE LEVIED THE PENALTY FOR CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THE QUANTUM OF PENALTY LEVIED BY JCIT IS AT RS.3,98,719/ - U/S. 271D OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE TRIBUNAL. 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SHRI SUBHAS AGARWAL CONTENDED THAT THE ADMI TTED FACTS ARE THAT THE UNSECURED LOAN OF CASH IS TAKEN FROM THE DIRECTOR BY THE ASSESSEE COMPANY. HE STATED THAT THE ASSESSEE COMPANY M/S. MAHMOOD ASSOCIATES PVT. 3 ITA NO. 1112 /K/201 2 MAHMOOD ASSOCIATES (P) LTD. AY 200 4 - 0 5 LTD. RECEIVED A SUM OF RS.3,98,719/ - IN CASH FROM SHRI MD. MAHMOOD , WHO IS DIRECTOR OF THE ASSESSEE COMPANY . HE STATED THAT THE ISSUE OF RECEIPT OF CASH LOAN BY ASSESSEE COMPANY FROM ITS DIRECTOR IS NOW SETTLED ISSUE BY VARIOUS HIGH COURTS. FIRST , HE RELIED ON THE DECISION OF HON BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. INDORE PLAS TICS P. LTD. (2003) 262 ITR 163 (MP) , WHERE HON BLE HIGH COURT HAS OBSERVED THAT ( FROM HEAD NOTES) THE ASSESSEE W AS A PRIVA T E LIMITED COMPANY. ONE RCK WAS ITS PROMOTER AND DIRECTOR DUR IN G THE PERIOD RELEVANT TO ASSESSMENT YEAR 1990 - 91. DURING THAT YEAR, THE ASSESSEE - COMPANY ACCEPTED DEPOSITS IN CASH FROM THE PROMOTER FROM TIME TO TIME AGGREGATING IN ALL RS. 2,31,320. ACCORDING TO THE ASSESSING OFFICER AS ALSO THE COMMISSIONER (APPEALS), THE SAID PAYMENT WAS IN CONTRAVENTION OF SECTION 269 SS OF THE INCOME - TAX ACT, 1961, AND THE ASSES SEE WAS LIABLE TO PAY PENALTY UNDER SECTION 271D. HOWEVER, THE TRIBUNAL VACATED THE PENALTY SO IMPOSED ON THE FINDING THAT THE SAID PAYMENT WAS NOT BY WAY OF DEPOSIT OR LOAN, BUT TOWARDS ADJUSTMENTS OF THE AMOUNT DRAWN BY THE PR OMOTER FROM THE COMPANY'S ACCOUNT. ON AN APPLICATION PRAYING FOR AN ORDER CALLING FOR A REFERENCE FROM THE ORDER OF THE TRIBUNAL: HELD, THAT THE FINDING ARRIVED AT BY THE TRIBUNAL WAS A FINDING OF FACT AND, THEREFORE, DID NOT GIVE RISE TO ANY QUESTION OF LAW TO BE ANSWERED BY THE COURT . 6. HE ALSO REFERRED TO THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD. (2006) 285 ITR 221 (MAD) , WHEREIN THE HON BLE HIGH COURT HAS HELD AS UNDER: WE HEARD THE AR G UMENTS OF LEARNED COUNSEL FOR THE REVENUE . WE HA V E PERUSED THE MATE R I A L S AVAILABLE IN RECORD. ADMITTEDLY MR . S. V . S. MA NI AN WAS ONE OF THE DIR EC TO RS. THEREFORE THE ORDER OF THE LOWER AUTHORIT Y CL EARL Y SHOWS THAT THERE W A S A RUNNING CURRENT ACCOUNT IN THE BOOKS OF ACC OUNT OF THE ASSESSEE IN THE N A ME OF MR . S. V . S . MANIAN . MR . S. V . S. MA NIAN USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND USED TO WITHDRA W TH E MON EY ALSO FROM THE CURRENT AC COUNT . THE REVENUE SHOULD ESTABLISH THAT WHAT W AS RECEIVED BY THE ASSESS E E IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECT I ON 269SS. THE DEPOSIT A N D THE WITHDRAWAL OF THE MONEY FROM TH E CUR R ENT ACCOUNT COULD NOT BE C ONSIDERED AS A LOAN OR ADVANCE . FURTH E R IT WAS A L SO FOUND THAT THE ASSESS E E FILED A LETT E R DATED SEPTEMBER 29, 1 997 , AN D I N T HAT LETTER HE EXPLAINED THAT THE AMOUNT RECEIVED FROM MR. S. V . S. M A NI AN HAD BEEN SHOWN AS SEC U R E D LOAN FROM DIRECTORS' IN THE BALANCE - S H EET . AS PER THE COMPANIES ACT, UNDER THE COMPANIES (ACCEPTANCE OF D E P OSITS ) RULES, 1975, UNDER R UL E 2 (B) (IX) , DEPOSIT DOES NOT INCLUDE AN Y AMOUN T RECEIVED FROM A DIRECTOR OR A SHAREHOLDER OF A PRIVATE LIMITED COMP AN Y . THEREFORE, THE TRANSACTION BETWEEN THE APPELLANT AND THE DIR E CT O R CU M SHAREHOLDER IS NOT A LOAN OR DEPOSIT AND IT IS O NL Y A CURRENT A CCOU NT IN NATURE AND NO INTEREST I S BEING CHARGED FOR TH E ABOVE TRANSACTION. IN THE FOREGOING CONCLUSIONS , WE ARE OF THE VIEW THA T SI NC E TH E SAID TRANSACTION DOES NOT FALL 4 ITA NO. 1112 /K/201 2 MAHMOOD ASSOCIATES (P) LTD. AY 200 4 - 0 5 WI T HIN THE MEANING OF L O AN OR ADVAN CE , TH ER E I S NO VIOLATION OF SECTION 269SS OF THE INCOME - TAX ACT. WE FIND NO ERROR IN THE ORDER OF THE TRIBUNAL AND THE SAME REQUIRES NO INTERFERENCE . HENCE, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION OF THE COURT. ACCORDINGLY, WE DISMISS THE ABOVE TAX CAS E. 7. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NATVARLAL PURSHOTTAMDAS PAREEKH (2008)303 ITR 5 (GUJ), WHEREIN HON BLE HIGH COURT HAS REPRODUCED PARA 18 OF TRIBUNAL S ORDER AND CONFIRM ED THE ISSUE AS UNDER: 18. AS DISCUSSED ABOVE, THE ANNEXURE ATTACHED TO THE PENALTY O RDER GOES TO SHOW THAT EACH OF THE FAMILY MEMBERS OF THE ASSESSEE A ND EACH ONE OF THEM WAS HAVING SUFFICIENT OPENING BALANCE AS ON AP RIL 1, 1990 . AFTER THAT WE HAVE TO LOOK INTO SOURCES OF THE AMOUNTS RE CEI V ED BY THE ASSESSEE ON BEHALF OF HIS FAMILY MEMBERS AS THE S A ME IS AN IMPORTANT FACTOR . HANDSOME AMOUNT HAS BEEN RECEIVED O N ACCOUNT OF MATURITY OF NSCS AND THEN MOST OF THE AMOUNTS HAVE B E EN CRE DITED ON ACCOUNT OF GIFTS RECEIVED FROM ONE FAMILY MEMBER TO O THER AND THAT WAS THROUGH JOURNAL ENTRY EXCEPT RS . 32,000 WHICH W A S GIFT BY ONE FAMILY MEMBER TO OTHER . THESE AMOUNTS WERE NOT REC EIVED BY THE ASSESSEE IN CASH AS THESE WERE MERE BOOK ENTRIES. THESE AMOUNTS CANNOT BE EQUATED WITH ANY OF THE AMOUNTS INVOLVED IN TH E CASES RELIED ON BY BOTH THE PARTIES AS IN THOSE CASES , THE AM O UNTS WERE RECEIVED BY THE ASSESSEE AS DEPOSITS IN CASH AND THAT IS NO T THE POSITION HERE BECAUSE THESE WERE BOOK ENTRIES EXCEPT THE AM O U NTS OF N S CS AND OTHER CASH LOAN OF RS . 11 , 910. IN THE SAME BREATH, THE AMOUNT OF RS. 1,920 CREDITED ON ACCOUNT OF RENT AND RS. 2 4 , 360 CREDIT IN THE ACCOUNT OF HARENDRAKUMAR AND HITESHKUMAR C A N NO T BE TREATED AS DEPOSITS OR LOAN BECAUSE THESE WERE CREDIT EN TRI ES ON ACCOUNT OF SALARY AND BONUS . ACCORDINGLY , THE CRUX OF THE MATTER IS THAT MOST OF THE AMOUNTS AS REFERRED TO ABOVE WAS BASED ON M ERE BOOK ENTRIES AND NOT RECEIVED IN CASH B Y THE ASSE SSEE FROM FAMILY MEMBERS EXCEPT THE AMOUNT OF NSCS AND OTHER CASH LOAN AND THAT CANNOT BE TREATED AS LOAN OR DEPOSITS FOR THE PURPOSE OF SECTION 269SS. 8. LD. SR. DR SHRI KANHIYA LAL KANAK WAS SPECIFICALLY ASKED WHETHER THE FACTUM OF RECEIPT OF UNSECURED LOAN IN CASH BY ASSESSEE COMPANY FROM ITS DIRECTOR IS IN DISPUTE OR NOT . H E CATEGORICALLY ADMITTED THE FACT AND STATED THAT YES, THE UNSECURED LOAN IN CASH IS RECEIVED BY ASSESSEE COMPANY FROM ITS DIRECTOR. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THR OUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE FACTS ARE THAT THE ASSESSEE COMPANY MAHMOOD ASSOCIATES (P) LTD. RECEIVED CASH LOAN FROM ITS DIRECTOR MD. MAHMOOD. IN VIEW OF THE ABOVE PROPOSITION OF LAW LAID DOWN BY VARIOUS HIGH COURTS I.E. HON BLE M.P. HIGH COURT IN THE CASE OF INDORE PLASTICS P. LTD., SUPRA, HON BLE MADRAS HIGH COURT IN THE CASE OF IDHAYAM PUBLICATIONS LTD., SUPRA AND HON BLE GUJARAT HIGH COURT IN THE CASE OF NATVARLAL PURSHOTTAMDAS PAREEKH, SUPRA, WE FIND THAT THE PENALTY LEV IED BY JCIT, RANGE - 12, KOLKATA AND CONFIRMED BY CIT(A) NEEDS TO BE QUASHED. NO CONTRARY DECISION WAS 5 ITA NO. 1112 /K/201 2 MAHMOOD ASSOCIATES (P) LTD. AY 200 4 - 0 5 POINTED OUT BY LD. SR. DR DESPITE WE SPECIFICALLY ASKED HIM WHETHER ANY HIGH COURT DECISION IS AVAILABLE AGAINST THE ASSESSEE OR NOT. IN TERM OF THE ABOV E, WE DELETE THE PENALTY LEVIED BY JCIT AND CONFIRMED BY CIT(A). 10. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED . 11 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 29.04.2015 . SD/ - SD/ - (B. P. JAIN) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 29TH APRIL , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT SHRI MAHMOOD ASSOCIATES (P) LTD., 30/2, JOWTALA ROAD, 2 ND FLOOR, KOLKATA - 17 . 2 RESPONDENT J CIT, RANGE - 12, KOLKATA. 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .