ITO, Bangalore V. Sri. K. Srinivasulu Reddy, Bangalore

ITA 1132/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60720 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SARAVANAN B JT
• Assessee Lawyers: BALARAM R RAO
• Keywords: Reasonable cause; Ignorance of law
• Section: 273B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO. 1132/BANG/2010 ASSESSMENT YEAR : 2005-06 THE INCOME TAX OFFICER, WARD 3(1), BANGALORE. VS. SHRI K. SRINIVASULU REDDY, K.V. ENTERPRISES, 1542/41, SRI SRINIVASA NILAYA, SOUTH END B CROSS, 9 TH BLOCK JAYANAGAR, NEAR EAST END CIRCLE, BANGALORE 560 069. PAN: AFZPR 5518N APPELLANT RESPONDENT ITA NO. 571/BANG/2012 ASSESSMENT YEAR : 2005-06 SHRI K. SRINIVASULU REDDY, K.V. ENTERPRISES, 1542/41, SRI SRINIVASA NILAYA, SOUTH END B CROSS, 9 TH BLOCK JAYANAGAR, NEAR EAST END CIRCLE, BANGALORE 560 069. PAN: AFZPR 5518N VS. THE JCIT, RANGE 3, BANGALORE. APPELLANT RESPONDENT ITA NOS.1132/B/10 & 571/B/12 PAGE 2 OF 6 REVENUE BY : SHRI SARAVANAN B., JT. CIT(DR) ASSESSEE BY : SHRI BALARAM R. RAO, ADVOCATE DATE OF HEARING : 02.05.2012 DATE OF PRONOUNCEMENT : 02.05.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND THE DEPAR TMENT ARE DIRECTED AGAINST THE ORDER DATED 31.03.2010 OF THE CIT(APPEALS)-II, BANGALORE. SINCE THE APPEALS HAVING COMMON ISSUES WERE HEARD TOGETHER, SO THESE ARE DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GRIEVANCE OF BOTH THE PARTIES IN THEIR RESPE CTIVE APPEALS RELATES TO THE PENALTY LEVIED U/S. 271E OF THE INCOME-TAX A CT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT]. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF ADVERTISING AND MARKETING. THE ASS ESSEE FILED RETURN OF INCOME ON 29.10.2005 DECLARING A TOTAL INCOME OF Q 6,55,900. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS FRAMED ON 01. 06.2007, AFTER DETERMINING THE REFUND OF Q 896. THE AO ISSUED A LETTER TO THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S. 271E OF THE ACT S HOULD NOT BE LEVIED EQUAL TO AMOUNT OF LOAN REPAID AMOUNTING TO RS.4,64 ,540. IN RESPONSE TO THE SAID LETTER, THE ASSESSEE REPLIED THAT HE HAD M ADE ARRANGEMENTS WITH THE CREDITORS TO GIVE MONTHLY REPAYMENTS DUE TO FIN ANCIAL CONSTRAINTS AND THAT THOSE CREDITORS BEING AGRICULTURISTS CAME TO B ANGALORE AND RECEIVED ITA NOS.1132/B/10 & 571/B/12 PAGE 3 OF 6 PAYMENTS IN CASH. THE ASSESSEE ALSO STATED THAT HE WAS OF THE UNDERSTANDING THAT REPAYMENTS ABOVE Q 20,000 SHOULD NOT HAVE BEEN MADE IN CASH, BUT SHOULD HAVE BEEN MADE BELOW Q 20,000. IT WAS CONTENDED THAT BUSINESS EXIGENCIES AND PRESSURE FRO M CREDITORS MADE HIM TO REPAY THE LOAN IN CASH. THE AO DID NOT FIND MER IT IN THE EXPLANATION OF THE ASSESSEE AND OBSERVED THAT IGNORANCE OF LAW CAN NOT BE A GROUND FOR GIVING EXEMPTION AND THAT THE CREDITORS WERE AGRICU LTURISTS DID NOT BECOME A REASONABLE CAUSE FOR EXEMPTION. HE ACCORDINGLY L EVIED A PENALTY OF Q 4,64,540. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE LOANS WHICH WERE BORROWED WE RE HAND LOANS FROM AGRICULTURISTS WHO WERE RESIDING NEAR TO HIS PLACE IN ANDHRA PRADESH WHICH WERE REMOTE RURAL AREAS. IT WAS FURTHER SUBMITTED THAT THE PERSONS FROM WHOM THE ASSESSEE HAD BORROWED HAND LOANS WERE PERS ONS WHO DID NOT HAVE THE HABIT OF BANKING AND WERE ILLITERATE PEOPL E, WHOSE SOLE SOURCE OF INCOME WAS FROM SALE OF AGRICULTURAL PRODUCE. IT W AS CONTENDED THAT THE ASSESSEE HAS STARTED HIS BUSINESS IN BANGALORE AND WAS NOT FROM A VERY GOOD FAMILY BACKGROUND AND THAT HE WAS COMPELLED TO TAKE HAND LOANS FROM THOSE AGRICULTURISTS/FRIENDS RESIDING NEAR HIS PLACE IN ANDHRA PRADESH IN ORDER TO MEET HIS BUSINESS EXIGENCIES/WORKING CA PITAL REQUIREMENT. IT WAS FURTHER STATED THAT THE AMOUNTS WERE REPAID IN INSTALMENTS AS AND WHEN THE AGRICULTURISTS APPROACHED THE ASSESSEE, B UT NO SINGLE PAYMENT WAS MADE IN EXCESS OF Q 20,000 IN CASH. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD VIOLATED THE PROVISI ONS OF SECTION 269T OF ITA NOS.1132/B/10 & 571/B/12 PAGE 4 OF 6 THE ACT. HOWEVER, PENALTY HAD BEEN LEVIED ON THE E NTIRE REPAYMENT OF LOAN WITHOUT CONSIDERING THE QUESTION OF CASH REPAYMENT INVOLVED. HE FURTHER OBSERVED THAT THE AUDITORS HAD CERTIFIED THAT REPAY MENTS WERE MADE IN INSTALMENTS, BUT THE REPAYMENTS EXCEEDING Q 20,000 WAS IN 9 INSTALMENTS AND THE SAME ATTRACTED THE PROVISIONS OF SECTION 26 9 OF THE ACT. HE THEREFORE SUSTAINED THE PENALTY OF Q 1,80,000 AND ALLOWED A RELIEF OF Q 2,84,540. 6. NOW THE DEPARTMENT IS IN APPEAL AGAINST THE RELI EF OF Q 2,84,540, WHILE THE ASSESSEE IS IN APPEAL AGAINST THE SUSTENA NCE OF PENALTY OF Q 1,80,000. 7. THE LD. DR SUPPORTED THE ORDER OF THE AO AND FUR THER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 269T OF THE ACT, P ENALTY U/S. 271E OF THE ACT IS LEVIABLE WHEN THE REPAYMENT OF LOAN EXCEEDIN G Q 20,000 HAD BEEN MADE IN CASH, SO IT WAS IMMATERIAL WHETHER THAT RE PAYMENT WAS IN INSTALMENT OR IN LUMP SUM. HE FURTHER SUBMITTED TH AT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY FOR THOSE REPAYME NTS IN CASH WHICH WERE BELOW Q 20,000, WHEN THE TOTAL REPAYMENT OF LOAN WAS MADE IN CASH, IN VIOLATION OF PROVISIONS CONTAINED IN SECTION 269T O F THE ACT. HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAD NOT COMMENTED ABO UT THE BANKING FACILITIES IN AND AROUND PLACES WHERE THE LOAN CRED ITORS WERE RESIDING, THEREFORE RELIEF ALLOWED TO THE ASSESSEE WAS NOT JU STIFIED. 8. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND FURTHER SUBMITTED THAT THERE WAS A REASONABLE CAUSE FOR MAKING REPAYM ENT IN CASH BECAUSE ITA NOS.1132/B/10 & 571/B/12 PAGE 5 OF 6 THE CREDITORS WERE NEITHER HAVING BANKING FACILITIE S NOR THEY WERE IN THE HABIT OF BANKING AND DEMANDED THE REPAYMENT OF LOAN S IN CASH WHICH WAS RECEIVED BY THE ASSESSEE FOR BUSINESS EXIGENCY. TH EREFORE THE CASE OF THE ASSESSEE WAS COVERED BY THE PROVISIONS OF SEC. 273 B OF THE ACT, AS SUCH THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE PENALTY OF Q 1,80,000. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE MADE R EPAYMENT OF THE LOANS IN CASH, HOWEVER EXPLANATION WAS GIVEN TO THE AO THAT THE CREDITORS WERE INSISTING FOR REPAYMENT IN CASH BECAUSE THEY WERE A GRICULTURISTS AND WERE NOT HAVING MUCH KNOWLEDGE ABOUT THE BANKING FACILIT IES. THERE WAS AN EXPLANATION BY THE ASSESSEE THAT THERE WAS A REASON ABLE CAUSE FOR MAKING THE REPAYMENT OF THE LOAN IN CASH. SO IT BECOMES N ECESSARY TO DISCUSS THE PROVISIONS CONTAINED IN SECTION 273B OF THE ACT, WH ICH READS AS UNDER:- NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIO NS OF CLAUSE (B) OF SUB-SECTION (1) OF SECTION 271, SECTION 271A , SECTION 271AA, SECTION 271B, SECTION 271BA, SECTION 271BB, SECTION 271C, SECTION 271D, SECTION 271E, SECTION 271F, SEC TION 271FA, SECTION 271G, CLAUSE (C) OR CLAUSE (D) OF SUB-SECTI ON (1) OF SUB- SECTION (2) OF SECTION 272A, SUB-SECTION (1) OF SEC TION 272AA OR SECTION 272B OR SUB-SECTION (1) OF SECTION 272BB OR SUB-SECTION (1) OF SECTION 272BBB OR CLAUSE (B) OF SUB-SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION (2) OF SECTION 273 , NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. 10. FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT PEN ALTY U/S. 271E OF THE ACT SHALL NOT BE IMPOSABLE IF THE ASSESSEE PROVES T HAT THERE WAS REASONABLE CAUSE FOR FAILURE TO COMPLY WITH THE PRO VISIONS CONTAINED IN ITA NOS.1132/B/10 & 571/B/12 PAGE 6 OF 6 SECTION 269T (IN THE PRESENT CASE) OF THE ACT. IN THE INSTANT CASE, IT IS NOTICED THAT THE LD. CIT(A) HAD NOT COMMENTED ABOUT THE BANKING FACILITIES AVAILABLE IN AND AROUND PLACES WHERE LOAN CREDITORS WERE RESIDING. THE AO HAD ALSO NOT DISCUSSED AS TO WHETHER THE BANKING FA CILITIES WERE AVAILABLE TO THE CREDITORS. WE THEREFORE, CONSIDERING THE TO TALITY OF THE FACTS OF THE PRESENT CASE, DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(APPEALS) AND THE CASE IS REMANDED BA CK TO THE FILE OF THE ASSESSING OFFICER TO READJUDICATE IT AFRESH IN ACCO RDANCE WITH LAW, AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 11. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF MAY, 2012. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 2 ND MAY , 2012. DS/- COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.