Dr. Hardayal Chauhan, Shimla V. JCIT, Shimla

ITA 1165/CHANDI/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5414 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: NEINI GUPTA
• Keywords: Reasonable cause; Ignorance of law
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS.1165 & 1166/CHD/2009 (ASSESSMENT YEARS : 2004-05 & 2005-06) DR.HARDAYAL CHAUHAN VS. THE J.C.I.T., H.NO.18D, SECTOR-1, LANE-4, RAILWAY BOARD BUILD ING, NEW SHIMLA. SHIMLA. PAN: AASPC-5916-F (APPELLANT) (RESPONDENT) APPELLANT BY : MS.NEINI GUPTA RESPONDENT BY : SMT.JAISHREE SHARMA, DR O R D E R THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME-TA X (A), DATED 12.10.2009 RELATING TO ASSESSMENT YEARS 2004-05 & 2 005-06 AGAINST PENALTY LEVIED UNDER SECTION 271E OF THE INCOME-TAX ACT. 2. THE ONLY ISSUE RAISED IN BOTH THE APPEALS FILED BY THE ASSESSEE ARE AGAINST THE IMPOSITION OF PENALTY UNDER SECTION 271 E OF THE ACT AMOUNTING TO RS.50,000/- AND RS.4,50,000/- RELATING TO ASSESSMENT YEARS 2004-05 AND 2005-06. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD TAKEN A LOAN OF RS.5 LACS VIDE CHEQUE FROM ONE SHRI PRAKASH TAJTA ON 20.11.2003. THE SAID AMOUNT WAS UTILIZED FOR REPAY MENT OF HOUSING LOAN TAKEN BY THE ASSESSEE FOR THE CONSTRUCTION OF HIS H OUSE. THEREAFTER THE SAID PROPERTY WAS MORTGAGED WITH H.P. FINANCIAL COR PORATION, SHIMLA FOR RAISING LOANS TO BE INVESTED IN A HOSPITAL RUN BY T HE FAMILY MEMBERS I.E. WIFE AND SONS OF THE ASSESSEE. THE ASSESSEE WAS E MPLOYED WITH DEPARTMENT OF HEALTH, HIMACHAL PRADESH THE SAID LO AN WAS REPAID OUT OF HIS SAVING BANK ACCOUNT WITH SBI, IGMC, SHIMLA. THE ASSESSEE 2 REPAID THE AMOUNT THROUGH SELF DRAWN CHEQUES BY WA Y OF RS.50,000/- PAID ON 25.3.2004 AND RS.4,50,000/- PAID ON VARIOUS DATES RANGING FROM APRIL, 2004 TO AUGUST 2004 AS TABULATED BY THE ASSE SSING OFFICER IN PARA-1 IN THE ORDER PASSED LEVYING PENALTY UNDER SE CTION 271E OF THE ACT RELATING TO ASSESSMENT YEARS 2005-06. THE EXPLANAT ION OF THE ASSESSEE THAT IT HAD NO BUSINESS BACKGROUND AND THE PROVISIO NS OF REPAYMENT OF LOAN THROUGH ACCOUNT PAYEE CHEQUE WAS NOT KNOWN TO HIM AND HENCE, HE SHOULD NOT BE PENALIZED, WAS REJECTED. THE ASSESS ING OFFICER HELD THE ASSESSEE TO HAVE COMMITTED DEFAULT IN VIEW OF THE P ROVISIONS OF SECTION 271E OF THE ACT AND PENALTY OF RS.50,000/- AND RS.4 ,50,000/- RELATING TO ASSESSMENT YEARS 2004-05 AND 2005-06 WERE LEVIED. THE CIT(A) REJECTING THE CLAIM OF THE ASSESSEE UPHELD THE IMPO SITION OF PENALTY UNDER SECTION 271E OF THE ACT AS ACCORDING TO HER, IGNORANCE OF LAW WAS NO EXCUSE WHERE THE ASSESSEE WAS ADVISED BY AN ADVO CATE AS WELL AS C.A. TO RAISE THE LOAN THROUGH ACCOUNT PAYEE CHEQUE. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID ORDER OF THE CIT(A). 3. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. IN THE FACTS OF THE PRESENT CASE THE ASSESSEE HAD RECEIVED A SUM OF RS.5 LACS AS LOAN FROM ONE PARTY SHRI PRAKASH TAJTA WHICH IN TUR N WAS UTILIZED FOR REPAYMENT OF HOUSING LOAN RAISED BY THE ASSESSEE. THEREAFTER THE SAID PROPERTY WAS PLEDGED WITH THE BANK FOR RAISING LOAN , WHICH IN TURN WAS UTILIZED FOR INVESTMENT. THE SAID LOAN OF RS.5 LAC S WAS REPAID BY THE ASSESSEE DURING THE YEARS UNDER CONSIDERATION. A S UM OF RS.50,000/- WAS REPAID ON 25.3.2004 AND A SUM OF RS.4,50,000/- WAS REPAID ON DIFFERENT DATES RANGING BETWEEN APRIL, 2004 TO AUGUST, 2004. THE SAID PAYMENTS WERE MADE THROUGH SELF DRAWN CHEQUES AND NOT THROUG H ACCOUNT PAYEE CHEQUES. THE ASSESSEE WAS HELD TO HAVE VIOLATED T HE PROVISIONS OF SECTION 269T OF THE ACT BY NOT REPAYING THE SAID LO AN THROUGH ACCOUNT 3 PAYEE CHEQUES. THE AMOUNTS WERE ADMITTEDLY WITHDRA WN FROM THE BANK ACCOUNT OF THE ASSESSEE BUT THROUGH SELF DRAWN CHEQ UES ON THE DIFFERENT DATES OF REPAYMENT. IN VIEW OF THE SAID VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT, THE ASSESSEE WAS HELD TO B E LIABLE FOR LEVY OF PENALTY UNDER SECTION 271E OF THE ACT. THE EXPLANA TION OF THE ASSESSEE WAS THAT IT HAD REPAID THE LOAN IN GOOD FAITH THROU GH SELF DRAWN CHEQUES AND FURTHER SUBMISSION OF THE ASSESSEE WAS THAT THE PROVISIONS OF SECTION 269T OF THE ACT WERE PREVIOUSLY APPLICABLE FOR REPA YMENT OF DEPOSITS AND THE WORD LOAN WAS INCORPORATED IN THE AMENDED PROVISIONS OF SECTION 269T OF THE ACT W.E.F. 1.6.2003. THE ASSE SSEE CLAIMED TO HAVE BONAFIDELY REPAID THE AMOUNT BY WITHDRAWALS FROM IT S BANK ACCOUNT THOUGH THROUGH SELF DRAWN CHEQUES. THE ASSESSEE FU RTHER CLAIMS THAT DURING THE ASSESSMENT PROCEEDINGS HE HAD EXPLAINED THE SOURCES OF FUND IN HIS BANK ACCOUNT. 4. THE PROVISIONS OF SECTIONS 269SS AND 269T OF THE ACT WERE BROUGHT ON THE STATUTE IN ORDER TO PLUG THE LOOPHOLES IN CA SES OF CASH TRANSACTIONS. UNDER THE SAID PROVISIONS OF THE ACT , EACH ACCEPTANCE OR REPAYMENT OF LOAN OR DEPOSITS EXCEEDING RS.20,000/- , IN CASH, IS COVERED. IN CASE OF VIOLATION OF THE PROVISIONS OF THE AFORE SAID ACT, THE ASSESSEE IS LIABLE TO LEVY OF PENALTY UNDER SECTIONS 271D AN D 271E FOR FAILURE TO COMPLY WITH PROVISIONS OF SECTIONS 269SS AND 269T O F THE ACT, REPECTIVELY. HOWEVER, IN CASE THE ASSESSEE OFFERS A REASONABLE EXPLANATION FOR THE DEFAULT COMMITTED, SECTION 273B OF THE ACT PROVIDES THAT NO PENALTY IS TO BE LEVIED ON SUCH PERSON FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS. 5. IN THE FACTS OF THE PRESENT CASE THE ASSESSEE HA D RECEIVED THE LOAN VIDE CHEQUE BUT HAD REPAID THE AMOUNTS BY WAY OF WI THDRAWALS FROM HIS SAVING ACCOUNT WITH BANK THROUGH SELF DRAWN CHEQUES . THE SOURCE OF THE 4 SAID AMOUNT UTILIZED FOR REPAYMENT OF LOAN STANDS E STABLISHED BEFORE THE ASSESSING OFFICER. IN THE TOTALITY OF FACTS AND CI RCUMSTANCES WHERE THE ASSESSEE HAD REPAID THE SAID AMOUNT THROUGH SELF DR AWN CHEQUES INSTEAD OF ACCOUNT PAYEE CHEQUES ESTABLISHES THE BONAFIDES OF THE ASSESSEE AND DOES NOT JUSTIFY THE LEVY OF PENALTY UNDER SECTION 271E OF THE ACT. THOUGH THERE IS FAILURE ON THE PART OF THE ASSESSEE BUT THE ASSESSEE HAS PROVED ITS STAND OF THERE BEING A REASONABLE CAUSE FOR THE SAID FAILURE. FURTHER THERE IS MERIT IN THE CONTENTION OF THE ASS ESSEE THAT PROVISIONS OF SECTION 271E OF THE ACT WERE MODIFIED DURING THE YE AR ITSELF I.E. FROM 1.6.2003 UNDER WHICH IT WAS PROVIDED THAT IN ADDITI ON TO THE DEFAULT COMMITTED IN CONNECTION WITH THE REPAYMENT OF DEPOS ITS, EVEN REPAYMENTS OF LOANS ARE COVERED UNDER THE PROVISION S OF SECTION 271E OF THE ACT. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES THE ASSESSEE IS NOT LIABLE TO THE LEVY OF PENALTY UNDER SECTION 271E OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO D ELETE THE PENALTY LEVIED UNDER SECTION 271E OF THE ACT FOR THE CAPTIO NED ASSESSMENT YEARS. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE TH US ALLOWED. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF MAY, 2011. SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED : 31 ST MAY, 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5