M/s Mahendra Industries (P)Ltd, Hyderabad V. ADDL.CIT, Hyderabad

ITA 1157/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3261 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: A V RAGHURAM
• Keywords: Reasonable cause; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT & SHRI AKBER BASHA, ACCOUNTANT MEMBER I.T.A. NO. 1157/HYD/2010 ASSESSMENT YEAR 2005-06 M/S. MAHENDRA INDUSTRIES (P) LTD., HYDERABAD PAN: AABCM3737C VS. ADDL. CIT, RANGE 16 HYDERABAD APPL IC ANT RESPONDENT APPELLANT BY: MR. A.V. RAGHURAM RESPONDENT BY: MR. T. DIWAKAR PRASAD O R D E R PER G.C. GUPTA, VP: THIS APPEAL BY THE ASSESSEE, FOR THE ASSESSMENT YE AR 2005-06, IS DIRECTED AGAINST THE ORDER OF THE CIT(A )-V, HYDERABAD DATED 11.06.2010. 2. THERE IS A DELAY OF 4 DAY IN FILING THE PRESENT APPEA L BY THE ASSESSEE BEFORE THE TRIBUNAL. WE HAVE HEARD TH E PARTIES REGARDING THE ISSUE OF CONDONATION OF DELAY I N FILING THE APPEAL BEFORE THE TRIBUNAL. IN THE FACTS OF THE C ASE AND IN VIEW OF THE CIRCUMSTANCES NARRATED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE ARE OF THE VIEW THAT IT IS A FIT CASE FOR CONDONATION OF DELAY OF 4 DAYS IN FILING TH E PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL AND ACCORD INGLY THE DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL IS CONDONED. 3. THE GROUNDS OF APPEAL BY THE ASSESSEE ARE AS UNDER: 1. THE ORDER OF THE LEARNED CIT(A) CONFIRMING LEVY OF PENALTY U/S. 271D OF THE ACT IS ERRONEOUS BOTH ON FACTS AND IN LAW. I.T.A. NO. 1157/HYD/2010 M/S. MAHENDRA INDUSTRIES (P) LTD.. ========================== 2 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AMOUNTS DEPOSITED BY DIRECTORS IN THE ASSESSEE COMPANY ARE IN VIOLATION OF SECTION 269SS AND THEREBY ERRED IN CONFIRMING THE LEVY OF PENALTY. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE AMOUNTS BROUGHT IN BY THE DIRECTORS IS NEITHER LOAN NOR DEPOSIT SINCE THERE IS NO PAYMENT OF INTEREST AND THEREBY ERRED IN HOLDING THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 269SS OF THE IT ACT AND CONFIRMING THE PENALTY U/S. 271D. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOANS TOTALLING TO RS. 5,75,300 WERE TAKEN IN CASH F ROM THE DIRECTORS OF THE ASSESSEE COMPANY AND THAT NO PENAL TY U/S. 271D OF THE INCOME-TAX ACT, 1961 COULD BE IMPOSE D ON THE ASSESSEE AND THAT THE ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE WITH THE DECISION OF HYDERABAD TRIBUNAL I N CITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT (2010) 41 D TR (HYD) (TRIB) 305. THE LEARNED COUNSEL FOR THE ASSES SEE FURTHER SUBMITTED THAT EVEN ON MERIT THERE WAS A REASONABLE CAUSE FOR ACCEPTING THE LOAN AMOUNTS IN CA SH AS THERE WAS AN URGENCY TO PAY THE CREDITORS. 5. THE LEARNED DR SUBMITTED THAT IT IS NOT CLEAR FROM THE ASSESSMENT ORDER THAT THE AMOUNTS TAKEN AS CASH LOANS B Y THE ASSESSEE WERE FROM ITS DIRECTORS ONLY. THERE WAS N O REASONABLE CAUSE FOR ACCEPTING THE LOAN AMOUNTS IN CA SH AND THE ONUS WAS ON THE ASSESSEE TO PROVE THE REASONAB LE CAUSE FOR ACCEPTING THE LOAN AMOUNTS IN CASH. HE SUBMITTED THAT THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THE POSITION OF AVAILABILITY OF C ASH ON THE DATE OF ACCEPTING THE LOAN AMOUNT IN CASH AND WHETH ER THE REPAYMENTS TO THE CREDITORS WERE MADE ON THE SAME I.T.A. NO. 1157/HYD/2010 M/S. MAHENDRA INDUSTRIES (P) LTD.. ========================== 3 DATE OF RAISING LOAN FROM THE DIRECTORS. HE RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. WE FIND THAT THE ISSUE THAT THE DIRECTORS OF THE ASSESSEE COMPANY DID NOT REPRESENT OTHER PERSONS AS MENTIONED IN SECTION 269SS OF THE ACT IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE HYDERABAD TRIBUNAL IN CITIZEN CO-OPERATIVE SOCIETY LTD. V. ACIT (SUPRA) WHER EIN IT WAS HELD THAT THE DIRECTOR OR MEMBER OF THE ASSESSEE SOCIETY WAS NOT COVERED BY THE EXPRESSION ANY OTHER PERSON OCCURRING IN SECTION 269SS AND THE TRANSACTION IN QUESTION COULD NOT BE CONSIDERED AS LOAN OR DEPOSIT S O AS TO ATTRACT SECTION 269SS OR SECTION 269T OF THE ACT. WE FIND THAT THE ASSESSEE HAS PLEADED BEFORE THE REVENUE AUTHORITIES THAT THE LOAN WAS GIVEN BY THE DIRECTORS AND THE SHAREHOLDERS OF THE PRIVATE LIMITED COMPANY AND THAT THE DIRECTORS OF THE ASSESSEE COMPANY DID NOT REPRESENT OTH ER PERSONS AS MENTIONED IN SECTION 269SS OF THE ACT. WE FIND THAT THERE IS NO FINDING BY THE REVENUE AUTHORITIES THAT THE PERSONS ADVANCING LOANS TO THE ASSESSEE COMPA NY WERE NOT THE DIRECTORS OF THE ASSESSEE COMPANY. THE ASSESSEE IS LIABLE TO SUCCEED ON THIS GROUND ALONE. 7. MOREOVER, EVEN ON MERIT, WE FIND THAT THERE WAS A REASONABLE CAUSE IN ACCEPTING THE AMOUNTS OF LOAN IN C ASH BY THE ASSESSEE COMPANY. THE ASSESSEE HAS PLEADED B EFORE THE REVENUE AUTHORITIES THAT THERE WAS AN URGENCY TO PAY THE CREDITORS AND, THEREFORE, THE ASSESSEE HAS TO RAISE THE LOAN AMOUNT IN CASH. THERE IS NO MATERIAL BROUGHT O N RECORD ON BEHALF OF THE REVENUE TO CONTROVERT THE I.T.A. NO. 1157/HYD/2010 M/S. MAHENDRA INDUSTRIES (P) LTD.. ========================== 4 SUBMISSIONS OF THE ASSESSEE. WE ARE UNABLE TO SUSTAIN THE ARGUMENTS OF THE LEARNED DR THAT TO PROVE THE URGENCY OF PAYING THE CREDITORS, THE ASSESSEE SHOULD HAVE SHOWN THAT THE REPAYMENT OF LOAN AMOUNT TO THE CREDITORS WAS MADE ON THE SAME DAY ON WHICH THE LOAN AMOUNTS WERE RAISED FROM THE DIRECTORS/CREDITORS. IN THE FACTS OF THE CASE, WE HOLD THAT NO CASE FOR IMPOSITION OF PENALTY U/S. 271D OF THE ACT COULD BE MADE OUT BY THE DEPARTMENT AND ACCORDINGL Y THE PENALTY IMPOSED U/S. 271D IS CANCELLED AND THE GROUNDS OF APPEAL BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2011. SD/- (AKBER BASHA) ACCOUNTANT MEMBER SD/- (G.C. GUPTA) VICE PRESIDENT HYDERABAD, DATED 15 TH JUNE, 2011 TPRAO COPY FORWARDED TO: 1. M/S. MAHENDRA INDUSTRIES (P) LTD., C/O. M/S. K. VASANT KUMAR, A.V. RAGHU RAM, P. VINOD & B. PEDDI RAJULU, ADVOCATES, FLAT NO. 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD-500 001 2. THE ADDL. CIT, RANGE 16, HYDERABAD. 3. THE CIT(A)-V, HYDERABAD 4 THE CIT-IV, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD `