Dy. CIT, CIRCLE - 2(1), Vijayawada V. Sri Tirumalaraju Trinadha Raju, Vijayawada

ITA 116/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2150 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KOMALI KRISHNA ACIT
• Keywords: Reasonable cause; Corroborative evidences
• Section: 273B; 143(3); 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.116/VIZ/2013 ( / ASSESSMENT YEAR : 2008-09) DCIT, CIRCLE - 2(1), VIJAYAWADA. VS. SRI TIRUMALARAJU TRINADHA RAJU, PROP. SRI VINAYAKA TRADERS, 40-15-12, 2 ND FLOOR, RAKESH MANSION, BRINDAVAN COLONY, VIJAYAWADA. [ PAN: ABXPT 3269 N] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI A.S.R.S.S. SIVA PRASAD FCA '(& ) / RESPONDENT BY SMT. KOMALI KRISHNA ACIT ) - / DATE OF HEARING 09/12/2015 ) - / DATE OF PRONOUNCEMENT : 06 / 0 1/201 6 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), VIJAYAWADA DATED 21/12/2012 FOR THE A.Y. 20 08-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2 ITA NO.116/VIZ/2013 A. THE LD. CIT(A) ERRED BOTH IN LAW AND IN FACTS O F THE CASE. B. THE LD. CIT(A) OUGHT NOT HAVE DELETE THE PENALTY U/S. 271E AMOUNTING TO RS. 21,73,162/- AS THE ASSESSEE DID NO T SUBSTANTIATE HIS CLAIM OF MERGING OF ACCOUNTS IN TH E NAME OF SMT. T.V. NARASAYAMMA, WIFE OF THE ASSESSEE AND HER BUSINESS CONCERNS. C. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT MER E EXPLANATION IS NOT SUFFICIENT TO TAKEN OUT TRANSACT ION FROM THE AMBIT OF SECTION 271E BUT THE TRANSACTION SHOULD BE PROVED AS GENUINE WITH SUPPORTING EVIDENCES. D. THE LD. CIT(A) OUGHT NOT HAVE CONSIDERED THE REL IANCE PLACED BY THE ASSESSEE AS THE FACTS OF THE CASE OF THE ASS ESSEE ARE DIFFERENT TO THAT OF THOSE CASES. E. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 2 . BRIEF FACTS OF THE CASE, ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. SRI VINAYAKA TRADERS, FILED HIS RETURN OF INCOME FO R THE A.Y. 2008-09 ON 28/09/2008 DECLARING TOTAL INCOME OF RS. 10,47,240/ -. THE ASSESSING OFFICER, COMPLETED THE ASSESSMENT UNDER SEC. 143(3) OF THE ACT ON 12/05/2010 AND DETERMINED TOTAL INCOME OF RS. 12,37 ,439/-, BESIDES AGRICULTURAL INCOME OF RS.1,70,000/-. THE ADDL. CIT , RANGE-2, VIJAYAWADA INITIATED PENALTY PROCEEDINGS UNDER SEC. 271E OF THE ACT, FOR CONTRAVENTION OF THE PROVISIONS OF SEC. 269SS OF TH E ACT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS VI OLATED THE PROVISIONS OF SEC. 269SS BY ACCEPTING THE LOAN IN EXCESS OF TH E SPECIFIED AMOUNT AS PER SEC. 269SS, HENCE, ISSUED A SHOW-CAUSE NOTICE A S TO WHY PENALTY UNDER SEC. 271D SHALL NOT BE LEVIED FOR THE SAID VI OLATION. IN RESPONSE TO 3 ITA NO.116/VIZ/2013 THE SHOW-CAUSE NOTICE, THE ASSESSEES AUTHORIZED RE PRESENTATIVE APPEARED AND FILED WRITTEN SUBMISSION, WHEREIN THE ASSESSEE HAS CONTENDED THAT THE LOAN ACCEPTED BY HIM FROM HIS WI FE REPRESENTS ONLY TRANSFER OF MONEY BETWEEN TWO SISTER CONCERNS, OWNE D BY HIS WIFE AND HIMSELF, THEREFORE, IT CANNOT BE TERMED AS LOAN OR DEPOSIT AS CONTEMPLATED UNDER SEC. 269SS OF THE ACT, SO AS TO LEVY PENALTY. THE ASSESSEE FURTHER SUBMITTED THAT HE IS RUNNING HIS B USINESS UNDER TWO FIRMS, I.E. SRI VINAYAKA TRADERS, OWNED BY HIMSELF AND ANOTHER PROPRIETY CONCERN M/S.SRI VENKATA VINAYAKA PAPER LOGISTICS OW NED BY HIS WIFE. THERE IS A TRANSFER OF FUND BETWEEN TWO FIRMS, AS A ND WHEN FUND REQUIRED BY EACH OTHER FOR URGENT BUSINESS NECESSIT Y. THE ASSESSEE FURTHER SUBMITTED THAT ALL THE TRANSACTIONS HAVE BE EN MADE THROUGH ACCOUNT PAYEE CHEQUES OR THROUGH BANK TRANSFERS AND NOWHERE CASH HAS BEEN PAID OR RECEIVED BETWEEN THE TWO CONCERNS, THEREFORE, THE QUESTION OF VIOLATION OF SEC. 269SS AND LEVY OF PEN ALTY UNDER SEC. 271D DOES NOT ARISE. THE ASSESSING OFFICER, HOWEVER, DI D NOT CONVINCE WITH THE EXPLANATION FURNISHED BY THE ASSESSEE, HELD THA T THE ASSESSEE HAS ACCEPTED LOAN IN EXCESS OF SPECIFIED AMOUNT UNDER S EC. 269SS, WHICH ATTRACTS PENALTY PROVISIONS, THEREFORE, LEVIED PENA LTY UNDER SEC. 271D OF THE ACT. WHILE DOING SO, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM B Y FURNISHING REQUISITE 4 ITA NO.116/VIZ/2013 EVIDENCES IN SUPPORT OF HIS CLAIM. THE ASSESSING O FFICER FURTHER WAS OF THE OPINION THAT AS PER THE AUDIT REPORT ISSUED BY THE TAX AUDITOR IN FORM NO. 3CD, THE AUDITOR MENTIONED THAT THE ASSESS EE HAS ACCEPTED THE LOAN IN CONTRAVENTION OF THE PROVISIONS OF SEC. 269SS OF THE ACT. THEREFORE, IT IS A FIT CASE FOR LEVY OF PENALTY, HE NCE, LEVIED PENALTY OF RS. 21,73,162/- UNDER SEC. 271D OF THE ACT. 3 . AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER WAS ERRED IN LEVYING PENALTY OF R S. 21,73,162/-, AS THERE WAS NO VIOLATION OF THE PROVISIONS OF SEC. 26 9SS OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT PENALTY UNDER SEC. 271D CAN BE LEVIED, WHERE ANY PERSON ACCEPTS OR REPAYS LOAN IN EXCESS O F RS. 20,000/- OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CROSSED CHEQ UES OR DEMAND DRAFTS, BUT IN THIS CASE, THE LOAN IS ACCEPTED BY W AY OF ACCOUNT PAYEE CHEQUE OR BANK TRANSFER, THEREFORE, THE PROVISIONS OF SEC. 271D CANNOT BE APPLIED. THE ASSESSEE FURTHER SUBMITTED THAT TH E SAID LOAN AMOUNT OF RS. 21,73,162/- IS CONSISTING OF RS. 15,47,287/- WHICH IS THE OPENING BALANCE BROUGHT FORWARD FROM THE EARLIER YEARS AND THE BALANCE AMOUNT OF RS. 6,25,875/- WAS THE LOAN ACCEPTED DURING THE YEAR BY WAY OF ACCOUNT PAYEE CHEQUE OR BANK TRANSFER. THE ASSESSE E FURTHER SUBMITTED THAT THE TRANSACTIONS TAKEN PLACE BETWEEN HUSBAND A ND WIFE AND ALSO 5 ITA NO.116/VIZ/2013 THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNEL B Y WAY OF MONEY TRANSFER FROM ONE BANK TO ANOTHER, THEREFORE, THERE IS NO CONTRAVENTION OF SEC. 269SS OF THE ACT, TO LEVY PENALTY UNDER SEC . 271D OF THE ACT. 4 . THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER . WHILE DOING SO, THE CIT(A) HELD THAT IN THIS CASE, THE LOAN WAS ACCEPTE D BY WAY OF A JOURNAL ENTRY THROUGH BOOK ADJUSTMENTS BETWEEN THE HUSBAND AND WIFE, THEREFORE, VIOLATION OF SEC. 269SS DOES NOT ARISE. THE CIT(A) FURTHER WAS OF THE OPINION THAT PAYMENT OF LOAN OR DEPOSIT BY WAY OF BOOK ADJUSTMENT IN THE FORM OF JOURNAL ENTRY IN THE BOOK S OF ACCOUNTS OF THE ASSESSEE WOULD NOT ATTRACT THE PROVISIONS OF SEC. 2 69SS, CONSEQUENTLY, PENALTY UNDER SEC. 271D IS NOT LEVIABLE. IN SUPPOR T OF HIS CLAIM, THE CIT(A) RELIED UPON THE HON'BLE DELHI HIGH COURTS J UDGMENT IN THE CASE OF CIT VS. NOIDA TOLL BRIDGE CO. LTD. (2003) 262 ITR 260 (DEL.) AND ALSO THE HON'BLE MADRAS HIGH COURTS JUDGMENT IN THE CAS E OF CIT VS. RATNA AGENCIES (2006) 284 ITR 609 (MAD.). AGGRIEVED BY THE CIT(A) S ORDER, THE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 269SS OF THE ACT, AS HE HAS ACCEPTED LOAN OR DEPOSIT IN EXCESS OF RS. 20,000/-, OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT, THEREF ORE, ASSESSING 6 ITA NO.116/VIZ/2013 OFFICER HAS RIGHTLY LEVIED PENALTY UNDER SEC. 271D. THE DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE TAX AUDIT OR IN HIS AUDIT REPORT IN FORM NO. 3CD HAS CLEARLY MENTIONED THAT THE ASSE SSEE HAS ACCEPTED THE LOAN IN EXCESS OF RS.20,000/- OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT. THEREFORE, BASED ON THE INFORMATION FROM THE TAX AUDITORS REPORT, THE ASSESSING OFFICE R LEVIED PENALTY UNDER SEC. 271D OF THE ACT. THE D.R. FURTHER SUBMITTED TH AT THE ASSESSEE HAS FAILED TO FURNISH THE DETAILS BEFORE THE A.O. TO SU BSTANTIATE HIS CASE, WHICH IS EVIDENT FROM THE PENALTY ORDER. NOW, HE HA S COME WITH A EXPLANATION STATING THAT THE LOAN WAS ACCEPTED BY B OOK ADJUSTMENT WHICH CANNOT BE ACCEPTED. THEREFORE, THE ORDER OF THE ASSESSING OFFICER SHOULD BE UPHELD. 6 . ON THE OTHER HAND, AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). THE AUT HORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED TH AT THE ASSESSEE HAS NOT ACCEPTED LOAN OR DEPOSIT IN CONTRAVENTION OF TH E PROVISIONS OF SEC. 269SS, THEREFORE, PENALTY CANNOT BE LEVIED UNDER SE C. 271D OF THE ACT. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTH ER SUBMITTED THAT THE ASSESSEE HAS ACCEPTED LOAN FROM SISTER CONCERN THAT TOO BY WAY OF A BOOK ADJUSTMENTS, WHICH CANNOT BE TERMED AS LOAN OR DEPOSIT AS CONTEMPLATED UNDER SEC. 269SS. THE AUTHORIZED REPR ESENTATIVE OF THE 7 ITA NO.116/VIZ/2013 ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS AC CEPTED TWO LOANS FROM HIS WIFE, ONE IN HER INDIVIDUAL CAPACITY AND A NOTHER IN THE CAPACITY OF PROPRIETOR OF A FIRM AND BOTH THE AMOUNTS WERE T RANSFERRED BY WAY OF ACCOUNT PAYEE CHEQUES OR BANK TRANSFER. DURING TH E YEAR, THE ASSESSEE HAS MERGED BOTH THE ACCOUNTS INTO ONE ACCOUNT FOR S AKE OF CONVENIENCE, THEREFORE, IT CANNOT BE CONSIDERED AS ACCEPTANCE OF LOAN IN CONTRAVENTION OF THE PROVISIONS OF SEC. 269SS. THE MERGER OF TWO ACCOUNTS BELONGING TO ONE PERSON IS ONLY AN ACCOUNT ING TREATMENT OF TRANSACTIONS AND IT DOES NOT AMOUNT TO REPAYMENT OF LOAN AS THERE WAS NO EXCHANGE OF MONEY IN CASH BETWEEN THE TWO PARTIE S. THE A.R. FURTHER SUBMITTED THAT THE SAID LOAN AMOUNT OF RS. 21,73,162/- IS CONSISTING OF RS. 15,47,287/- WHICH IS THE OPENING BALANCE BROUGHT FORWARD FROM THE EARLIER YEARS AND THE BALANCE AMOU NT OF RS. 6,25,875/- WAS THE LOAN ACCEPTED DURING THE YEAR BY WAY OF ACC OUNT PAYEE CHEQUE OR BANK TRANSFER, WHICH WAS MISREAD BY THE A.O. THE ASSESSEE HAS NOT ACCEPTED ANY LOAN OR DEPOSIT IN EXCESS OF THE LIMIT S SPECIFIED UNDER SEC. 269SS, SO AS TO LEVY PENALTY UNDER SEC. 271D OF THE ACT. IN SUPPORT OF HIS CONTENTIONS, THE AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE RELIED UPON THE JUDGMENT OF HON'BLE ANDHRA PRADESH HIGH CO URT IN THE CASE OF GURURAJ MINI ROLLER FLOUR MILLS VS. ADDITIONAL COMM ISSIONER OF INCOME-TAX VS. ACIT (2015) 56 TAXMAN.COM 336. 8 ITA NO.116/VIZ/2013 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER LEVIED PENALTY UNDER SEC. 271D OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SEC. 269SS. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSES SEE HAS ACCEPTED THE LOAN IN EXCESS OF SPECIFIED AMOUNT OTHER THAN BY WA Y OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT, THEREFORE, THERE IS A CONTR AVENTION OF SEC. 269SS WHICH ATTRACTS PENALTY UNDER SEC. 271D OF TH E ACT. THE ASSESSEE CONTENTION IS THAT HE HAS NOT ACCEPTED THE LOAN IN CONTRAVENTION OF SEC. 269SS AND THE LOAN WAS ACCEPTED BY BOOK ADJUSTMENT FROM SISTER CONCERN BELONGING TO HIS WIFE, THEREFORE, IT CANNOT BE TERMED AS LOAN OR DEPOSIT AS CONTEMPLATED UNDER SEC. 269SS, SO AS TO LEVY PENALTY UNDER SEC. 271D. 8 . THE QUESTION BEFORE US, IS WHETHER THE LOAN ACCEP TED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SEC. 269SS OF THE ACT, WHICH ATTRACTS THE PENALTY UNDER SEC. 271D OF THE ACT. SEC. 271D PROVIDES FOR LEVY OF PENALTY FOR VIOLATION OF THE P ROVISIONS OF SEC. 269SS. SEC. 269SS OF THE ACT, PROHIBITS ACCEPTANCE OF LOAN OR DEPOSIT IN EXCESS OF THE SPECIFIED AMOUNT, OTHERWISE THAN BY WAY OF A CCOUNT PAYEE CHEQUE OR DEMAND DRAFT. THE ALLEGATION AGAINST THE ASSESSEE IS THAT HE HAS ACCEPTED LOAN IN CONTRAVENTION OF SEC. 269SS. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS VIOLATED T HE PROVISIONS OF SEC. 9 ITA NO.116/VIZ/2013 269SS, THEREFORE, PENALTY IS LEVIABLE UNDER SEC. 27 1D. THE ASSESSING OFFICER HAS TAKEN A CLUE FROM THE TAX AUDIT REPORT ISSUED BY THE AUDITOR IN FORM NO. 3CD, WHEREIN THE TAX AUDITOR REPORTED T HAT THE ASSESSEE HAS ACCEPTED LOAN OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT. THE ASSESSING OFFICER, BASED ON AUDIT REPORT COME TO THE CONCLUSION THAT THE ASSESSEE HAS ACCEPTED THE LOAN BY CASH. DURING THE COURSE OF HEARING, THE ASSESSEE HAS FILED A PAPER B OOK CONTAINING LEDGER EXTRACT OF THE LOAN ACCOUNT. ON PERUSAL OF THE LED GER COPIES OF THE LOAN ACCOUNT, WE FIND THAT OUT OF TOTAL AMOUNT OF RS.21, 73,162/-, THERE WAS A OPENING BALANCE OF RS. 15,47,287/- AND FURTHER CRED ITS OF RS. 6,25,875/-. THE CREDITS OF THE CURRENT YEAR ARE EITHER BANK TRA NSFER OR JOURNAL ENTRIES. DURING THE FINANCIAL YEAR, THE ASSESSEE H AS ACCEPTED TWO DEPOSITS OF RS. 4,70,000/- AND RS. 1,35,000/- BY WA Y OF MONEY TRANSFER FROM INDIAN OVERSEAS BANK. THE BALANCE AMOUNT OF RS . 20,875/- WAS ACCEPTED BY BOOK ADJUSTMENT. THE ASSESSEE EXPLAINE D THAT AN AMOUNT OF RS. 20,875/- WAS TRANSFERRED FROM HIS WIFE ACCOU NT TOWARDS AMOUNT PAID TO THIRD PARTY BY WAY OF CHEQUE ON BEHALF OF T HE ASSESSEE. ON GOING THROUGH THE DETAILS SUBMITTED BY THE ASSESSEE , WE FIND THAT THE ASSESSEE HAS NOT ACCEPTED ANY LOANS OR DEPOSIT BY C ASH IN CONTRAVENTION OF SEC. 269SS OF THE ACT. THE ASSESSING OFFICER WI THOUT EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE, SIMPLY ON SUSPIC IOUS AND SURMISES, 10 ITA NO.116/VIZ/2013 COME TO THE CONCLUSION THAT THE ASSESSEE HAS ACCEPT ED LOAN IN CASH, THEREBY VIOLATED THE PROVISIONS OF SEC. 269SS OF TH E ACT SO AS TO LEVY PENALTY UNDER SEC. 271D OF THE ACT. 9 . THE QUESTION WHETHER THERE WAS A REASONABLE CAUSE , BECAUSE OF WHICH THE REQUIREMENT OF CONCERNED PROVISIONS COULD NOT BE COMPLIED WITH IS PRIMARILY AN ESSENTIAL QUESTION OF FACT AND IT HAS TO BE DECIDED IN EACH CASE ON CONSIDERATION OF MATERIAL PLACED BEFOR E THE CONCERNED AUTHORITY. THE LEVY OF PENALTY UNDER SEC. 271D OF THE ACT IS NOT AUTOMATIC. BEFORE LEVYING PENALTY, THE CONCERNED OF FICER IS REQUIRED TO FIND OUT THAT EVEN THERE WAS ANY VIOLATION REFERRED TO IN THE SAID PROVISIONS AND THE SAME WAS WITHOUT A REASONABLE CA USE. THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT THERE EXISTS A REASONABLE CAUSE, WHICH WAS THE REASON FOR THE FAILURE REFERRED TO IN THE CONCERNED PROVISIONS. THEREFORE, THE ASSESSING OFFICER DEALI NG WITH THE MATTER IS TO CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE OR THE PERSON, AS THE CASE MAY BE, AS REGARDS THE REASON W AS ON ACCOUNT OF REASONABLE CAUSE. IN THE INSTANT CASE, THE ASSESSE E RIGHT FROM THE BEGINNING CONTENDED THAT HE HAS NOT ACCEPTED THE LO AN IN CONTRAVENTION OF THE PROVISIONS OF SEC. 269SS OF THE ACT. THE AS SESSEE MADE OUT HIS CASE THAT THE LOAN BETWEEN TWO SISTER CONCERN WAS T RANSFERRED THROUGH PROPER BANKING CHANNEL. ON VERIFICATION OF THE LEDG ER EXTRACT OF LOAN 11 ITA NO.116/VIZ/2013 ACCOUNT, WE FIND THAT THE LOAN WAS ACCEPTED BY BANK TRANSFERS. THE ASSESSING OFFICER WITHOUT EXAMINING THE DETAILS FUR NISHED BY THE ASSESSEE ON SUSPICIOUS AND SURMISES, COME TO THE CO NCLUSION THAT ALL THE TRANSACTIONS HAVE BEEN DONE IN CASH. THE VERY FACT THAT THE ASSESSEE HAS FURNISHED THE LEDGER EXTRACT BEFORE THE ASSESSI NG OFFICER, WHEREIN IT WAS FOUND THAT THE TRANSFER OF MONEY IS THROUGH BAN K TRANSFERS. ON FURTHER VERIFICATION OF THE LEDGER ACCOUNT, AT THE END OF THE FINANCIAL YEAR, THE REMAINING UNPAID BALANCE WAS TRANSFERRED TO ANOTHER LEDGER ACCOUNT MAINTAINED IN THE NAME OF THE ASSESSEES WI FE IN THE CAPACITY OF PROPRIETOR OF THE CONCERN. THEREFORE, IN OUR OPINI ON, THE ASSESSING OFFICER, WITHOUT EXAMINING THE DETAILS LEVIED PENAL TY UNDER SEC. 271D OF THE ACT, ON SUSPICIOUS AND SURMISES MANNER. THE AS SESSING OFFICER, SIMPLY BELIEVED THE TAX AUDIT REPORT ISSUED BY THE TAX AUDITOR SPECIFYING THE REASONS FOR ACCEPTING THE LOAN AS OTHERWISE THA N BY WAY OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT. JUST BECAUSE, IT IS M ENTIONED THAT OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DE MAND DRAFT, IT DOES NOT MEAN THAT THE LOAN WAS ACCEPTED IN CASH. E VEN IN THE CASES, WHERE THE LOAN HAS BEEN ACCEPTED BY WAY OF BOOK ADJ USTMENTS THROUGH JOURNAL ENTRIES, THE AUDITOR NEEDS TO RECORD THE RE ASONS THAT IT SHOULD BE OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DE MAND DRAFT. THEREFORE, WE ARE OF THE OPINION, THAT THE ASSESSEE HAS NOT ACCEPTED THE 12 ITA NO.116/VIZ/2013 LOAN OR DEPOSIT IN CONTRAVENTION OF SEC. 269SS OF T HE ACT, CONSEQUENTLY LEVY OF PENALTY UNDER SEC. 271D IS UNWARRANTED. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS, DELETED THE PENAL TY AND HIS ORDER DOES NOT REQUIRE ANY INTERFERENCE. 10. THE ASSESSEE HAS RELIED UPON THE HON'BLE ANDHRA PRA DESH HIGH COURTS JUDGMENT IN THE CASE OF GURURAJ MINI ROLLER FLOUR MILLS (SUPRA) , WHEREIN THE HONBLE ANDHRA PRADESH HIGH COURT HELD THAT MAKING BOOK ADJUSTMENTS OF FUNDS BY ASSESSEE FIRM WITH SISTER C ONCERN WITHOUT MAKING PAYMENT OF CASH, COULD NOT SAID TO BE VIOLAT ION OR CONTRAVENTION OF SEC. 269SS AND 269T OF THE ACT. THE RELEVANT PO RTION IS REPRODUCED HEREINUNDER:- 8. THE CASH TRANSACTIONS BY THE ASSESSEES OR THE PUBL IC IN GENERAL WERE TREATED AS ONE OF THE DEVICES TO CREATE BLACK OR UNACCOUNTED MONEY SINCE IT BECOMES DIFFICULT TO VERIFY THE SAME . AS A STEP TO CURB THIS, PARLIAMENT AMENDED SECTION 40A OF THE AC T BY INTRODUCING SUB-SECTION (3). IT MANDATES THAT WHERE AN INDIVIDUAL INCURS EXPENDITURE EXCEEDING A SUM OF RS. 20,000, P AYMENT THEREOF SHALL BE THROUGH CROSSED CHEQUE, OR DEMAND DRAFT, AND ANY DEVIATION THEREFROM SHALL ENTAIL IN DENIAL OF R EDUCTION TO THE EXTENT OF 20 PER CENT. FURTHER STEPS IN THAT DIRECT ION WERE TAKEN BY INTRODUCING CHAPTER XX-B, THROUGH THE INCOME-TAX (S ECOND AMENDMENT) ACT, 1981. THIS CHAPTER COMPRISES SECTIO NS 269SS, 269T AND 269TT. CORRESPONDING PROVISIONS IN CHAPTER XXI RELATING TO PENALTIES WERE ALSO INCLUDED AND CAME TO BE RENU MBERED AS SECTION 271D AND SECTION 271E. 9. SECTION 269SS PROHIBITS ANY PERSON FROM ACCEPTING LOAN OR DEPOSIT, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR DRAFT, IF THE AGGREGATE OF THE AMOUNT EXCEEDS RS. 20,000. THE GOVERNMENT BANKING COMPANIES ESTABLISHED BY THE STATE OR CENTR AL 13 ITA NO.116/VIZ/2013 GOVERNMENT, ETC., ARE KEPT OUTSIDE THIS PROHIBITION . THE PROVISION READS : '269SS. MODE OF TAKING OR ACCEPTING CERTAIN LOANS A ND DEPOSITS. NO PERSON SHALL, AFTER THE 30TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SECTION REFERRED TO AS THE DEPOSITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BA NK DRAFT IF ( A ) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMOUNT OF SUCH LOAN AND DEPOSIT ; OR ( B ) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEP OSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH P ERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HAS FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID ; OR ( C ) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN C LAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUN T REFERRED TO IN CLAUSE (B), TWENTY THOUSAND RUPEES O R MORE.' 10. SECTION 271D PROHIBITS A COMPANY OR CO-OPERATIVE S OCIETY FROM REPAYING TO ANY PERSON, ANY DEPOSIT, OTHERWISE THAN THROUGH ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, I F THE AMOUNT EXCEEDS RS. 10,000. HERE AGAIN, CERTAIN EXCEPTIONS ARE PROVIDED. PENAL PROVISIONS CORRESPONDING TO SECTION 269SS AND SECTION 269T ARE SECTIONS 271D AND 271E. THEY READ AS UNDER : '271D. PENALTY FOR FAILURE TO COMPLY WITH THE PROVI SIONS OF SECTION 269SS. (1) IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOSITS IN CONTRAVENTION OF THE PROVISIONS OF SECT ION 269SS, HE SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT SO TAKEN OR ACCEP TED. (2) ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1) SH ALL BE IMPOSED BY THE DEPUTY COMMISSIONER. 271E. PENALTY FOR FAILURE TO COMPLY WITH THE PROV ISIONS OF SECTION 269T. (1) IF A PERSON REPAYS ANY DEPOSIT REFERRED TO IN SECTION 269T OTHERWISE THAN IN ACCORDANCE WITH THE PROVISIONS OF THAT SECTION, HE SHALL BE LIABLE TO P AY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE DEPOSI T SO REPAID. (2) ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1) SH ALL BE IMPOSED BY THE DEPUTY COMMISSIONER.' 14 ITA NO.116/VIZ/2013 11. THE ALLEGATION AGAINST THE APPELLANT IS THAT IT RE CEIVED TWO DEPOSITS IN CONTRAVENTION OF SECTION 269SS AND MADE TWO PAYMENTS IN CONTRAVENTION OF SECTION 269T OF THE AC T IN A SPAN OF THREE ASSESSMENT YEARS. OUT OF THEM, ONE PAYMENT IS TO A PERSON BY NAME SMT. SARADA MOHAN. THE PLEA OF THE APPELLAN T WAS THAT THE ALLEGED PAYMENTS, IN FAVOUR OF M/S YELLAIAH GUP TA, OR RECEIPTS FROM IT ARE NOTHING BUT BOOK ADJUSTMENTS THAT TOO I N THE LIGHT OF DISSOLUTION OF A FIRM, BY NAME, M/S. VENKATESHWARA RICE MILLS. THE PAYMENT TO SMT. SARADA MOHAN IS SAID TO BE AN ACCOU NT OF THE DEATH OF HER HUSBAND, WHO WAS A LEGAL ADVISOR TO TH E APPELLANT. THOUGH AT THE STAGE OF PASSING OF ORDERS UNDER SECT ION 143(3) OF THE ACT THESE CONTENTIONS WERE ACCEPTED, THEY WERE DISBELIEVED, AT A LATER STAGE. 12. RECEIPT OF RS. 20,000 OR MORE, IN CASH, OR PAYMENT OF THE SAME TO A DEPOSITOR, IN A SUM, EXCEEDING RS. 10,000 , IS NOT ONLY PROHIBITED BUT ALSO VISITS THE ASSESSEE WITH PENAL CONSEQUENCES. THE ASSESSEE ACCUSED OF VIOLATING IT WOULD BE EXPOS ED TO THE PENALTY OF EQUAL AMOUNTS. THE OTHER GENERAL PENALTI ES IN THE ACT MAY ALSO BE IN STORE. THEREFORE, IT IS ONLY WHEN TH E INGREDIENTS OF THE PROVISIONS OF THE ACT ARE PROVED TO BE EXISTING THAT THE PENAL ACTION CAN BE TAKEN. SECTION 269SS CAN BE SAID TO H AVE BEEN CONTRAVENED, IF ONLY IT IS ESTABLISHED AS A FACT, T HAT CERTAIN AMOUNT, EXCEEDING RS. 20,000 WAS RECEIVED AS LOAN OR DEPOSI T, IN CASH, FROM A DEPOSITOR, OTHERWISE THAN IN THE FORM OF ACC OUNT PAYEE CHEQUE OR BANK DRAFT. THE PROVISION HAS ALREADY BEE N EXTRACTED. 13. EXCEPT MAKING REFERENCE TO THE RELEVANT PROVISIONS OF THE ACT AND THE ALLEGATION CONTAINED IN THE SHOW-CAUSE NOTI CES, THE ASSESSING OFFICER DID NOT INDICATE THE METHOD OF PA YMENT. IT WAS SIMPLY MENTIONED THAT EVERYTHING WAS DONE IN CASH. THE VERY FACT THAT FROM THE SAME AGENCIES, AMOUNTS WERE SAID TO H AVE BEEN RECEIVED AND REPAID, AS REFLECTED IN THE BOOKS, DIS CLOSES THAT IT WAS NOTHING BUT BOOK ADJUSTMENT. FURTHER, HE DID NOT GI VE ANY SPECIFIC FINDING THAT THE SO-CALLED RECEIPTS ARE IN THE FORM OF LOAN OR DEPOSIT OR THE REPAYMENT WAS MADE THEREOF. ALL THE THREE ORDERS PASSED BY THE ASSESSING OFFICER ARE SILENT ABOUT TH E PAYMENT MADE TO SMT. SARADA MOHAN. THE APPELLATE COMMISSION ER AS WELL AS THE TRIBUNAL PROCEEDED ON THE SAME LINES. THEY D ID NOT BESTOW ANY ATTENTION AS TO WHETHER ONE OF THE SISTER CONCE RNS CAN TAKE DEPOSIT, OR LOAN, FROM ANOTHER, WITHOUT REFLECTING THE SAME IN THE BOOKS OF ACCOUNT. THE PROCEEDINGS INITIATED UNDER S ECTIONS 271D AND 271E WERE TREATED ALMOST IN THE ORDINARY SENSE. 15 ITA NO.116/VIZ/2013 14. OBVIOUSLY, ANTICIPATING THAT INSTANCES OF INDISCRI MINATE INVOCATION OF SECTIONS 271D AND 271E AND OTHER ANAL OGOUS PROVISIONS MAY TAKE PLACE, PARLIAMENT INTRODUCED SE CTION 273B. IT READS. '273B. PENALTY NOT TO BE IMPOSED IN CERTAIN CASES. NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISION S OF CLAUSE (B) OF SUB-SECTION (1) OF SECTION 271, SECTION 271A , SECTION 271B, SECTION 271BB, SECTION 271C, SECTION 271D, SE CTION 271E, SECTION 271F, CLAUSE (C) OR CLAUSE (D) OF SUB -SECTION (1) OR SUB-SECTION (2) OF SECTION 272A, SUB-SECTION (1) OF SECTION 272AA OR SUB-SECTION (1) OF SECTION 272BB OR CLAUSE (B) OF SUB- SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECT ION (2) OF SECTION 273, NO PENALTY SHALL BE IMPOSABLE ON THE P ERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE R EFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REA SONABLE CAUSE FOR THE SAID FAILURE.' 15. FROM THIS, IT BECOMES CLEAR THAT IF THERE EXISTS R EASONABLE CAUSE FOR FAILURE TO COMPLY WITH SECTIONS 271D AND 271E, OR OTHER RELATED PROVISIONS, PENALTY NEED NOT BE IMPOSED. IN OTHER WORDS, IF AN ASSESSEE BONA FIDELY TOOK A PARTICULAR STEP AND THAT IN TURN, RESULTED IN CONTRAVENTION OF SECTION 269SS OR SECTI ON 269T OF THE ACT PENALTY CANNOT BE IMPOSED, AS A MATTER OF COURS E. 16. MAKING BOOK ADJUSTMENT OF THE FUNDS, BY A FIRM VIS -A-VIS ITS SISTER CONCERN, CAN BY NO MEANS BE SAID TO BE THE O NE TAKEN IN CLEAR VIOLATION OR CONTRAVENTION OF THE SAID PROVIS IONS. IT IS ONLY WHEN AN ASSESSEE HAS TAKEN A DECISION TO MOBILISE L OANS OR DEPOSITS AND IN THE PROCESS IT HAS RECEIVED AMOUNTS EXCEEDING RS. 20,000, OTHERWISE THAN THROUGH CASH THAT THE CONTRA VENTION CAN BE SAID TO HAVE BEEN TAKEN PLACE. 17. SIMILARLY, SECTION 269T CAN BE SAID TO HAVE BEEN V IOLATED IF ONLY THE REPAYMENT TO A DEPOSITOR OR A LOANEE EXCEE DING A SUM OF RS. 10,000 WAS MADE OTHERWISE THAN THROUGH CROSSED CHEQUE OR DEMAND DRAFT. IN THE INSTANT CASE, THE ASSESSING OF FICER DID NOT IDENTIFY THE LOANEE OR DEPOSITOR AND HAS SIMPLY INV OKED THE PROVISIONS IN RELATION TO AN INTERNAL FINANCIAL ADJ USTMENT AMONG THE FIRMS. 18. THEREFORE, THIS COURT IS OF THE VIEW THAT THE ACTS AND OMISSIONS ATTRIBUTED TO THE APPELLANT DO NOT CONSTITUTE VIOLA TION OF SECTIONS 269SS AND 269T, AND IF FOR ANY REASON, SUCH CONTRAV ENTION IS NOTICED, IT STANDS CONDONED UNDER SECTION 273B AND THEREBY, THE 16 ITA NO.116/VIZ/2013 PROCEEDINGS INITIATED UNDER SECTIONS 271D AND 271E OF THE ACT ARE DECLARED AS UNTENABLE. 11 . IT IS FURTHER OBSERVED THAT THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE TO LEVY PENALTY UNDER SEC. 271E OF THE ACT, BUT FINALLY LEVIED PENALTY UNDER SEC. 271D OF THE ACT. SEC. 271E DEAL S WITH LEVY OF PENALTY FOR VIOLATION OF THE PROVISIONS OF SEC. 269TT OF TH E ACT. IN THE PRESENT CASE ON HAND, THE ASSESSING OFFICER INITIATED THE P ENALTY UNDER SEC. 271E FOR VIOLATION OF SEC. 269TT OF THE ACT, BUT LEVIED PENALTY UNDER SEC. 271D FOR VIOLATION OF THE PROVISIONS OF SEC. 269SS. FRO M THIS CONDUCT OF THE ASSESSING OFFICER, IT WAS CLEAR THAT THE ASSESSING OFFICER DID NOT APPLIED HIS MIND BEFORE LEVYING PENALTY. THE A.O. HIMSELF C ONFUSED, WHETHER THE ASSESSEE ACCEPTED OR REPAID LOAN, WHICH CLEARLY SHO WS THAT HE HAS PASSED PENALTY ORDER WITHOUT APPLICATION OF MIND. THEREFORE, THE PENALTY ORDER CANNOT BE SUSTAINED IN THE EYES OF LA W. 12 . CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CA SE AND ALSO APPLYING THE RATIO OF THE HON'BLE ANDHRA PRADESH HI GH COURTS JUDGMENT IN THE CASE OF GURURAJ MINI ROLLER FLOUR MILLS (SUPRA), WE ARE OF THE OPINION THAT THE ASSESSEE HAS NOT ACCEPTED THE LOAN OR DEPOSIT IN CONTRAVENTION OF THE PROVISIONS OF SEC. 269SS OF TH E ACT SO AS TO LEVY 17 ITA NO.116/VIZ/2013 PENALTY UNDER SEC. 271D OF THE ACT. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED UNDER SEC. 271 D OF THE ACT. 13 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY, 2016. SD/- SD/- ( . ) ( . . . . ) ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 2 / DATED : 06/01/2016 VR/SPS ) ' 3 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT DCIT, CIRCLE-2(1), VIJAYAWADA 2. '(& / THE RESPONDENT SRI TIRUMALARAJU TRINADHA RAJU, PROP. SRI VINAYAKA TRADERS, 40-15-12, 2ND FLOOR, RAKESH MANSION, BRIND AVAN COLONY, VIJAYAWADA. 3. 4 / THE CIT, VIJAYAWADA 4. 4 () / THE CIT (A), VIJAYAWADA 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM