ITO, New Delhi V. M/s. Mahajan Industries P. Ltd., New Delhi

ITA 1191/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6390 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJANA
• Assessee Lawyers: ASHOK MALIK F
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E: NEW DELHI BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 1191/DEL/2014 ASSESSMENT YEAR: 2009-10 ITO WARD-6(1) NEW DELHI VS. MAHAJAN INDUSTRIES P. LTD. E-1, NDSE, PART-II NEW DELHI PAN:AAACM0878R (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI ASHOK MALIK, F. C.A REVENUE BY SHRI P.DAM KANUNJANA, SR. DR DATE OF HEARING 29.02.2016 DATE OF PRONOUNCEMENT 09 .03.2016 ORDER PER O.P. KANT, A.M.: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 13.12.2013 OF THE LD. CIT(APPEALS)-IX, NEW DELHI DELETING THE PENALTY U/S 271E OF THE ACT, RAISING GROUNDS AS FOLLOWS : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S 271E I MPOSED BY THE ADDL. CIT ON THE VIOLATION OF SECTION 269T AS THE ASSESSE E REPAID THE LOANS OF RS. 2,50,000/- AND RS. 49,00,000/- OTHER THAN TH E ACCOUNT PAYEE CHEQUE? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT TRANSACTION WITH THE D IRECTOR OF COMPANY CANNOT BE HELD AS A LOAN OR DEPOSIT AS NO S UCH LIMITATION IS GIVEN IN THE SECTION 269SS/269T? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THERE WERE WAS A REASO NABLE CAUSE FOR THE ABOVE VIOLATION ? 2 IT A NO. 1191/DEL/2014 M AHAJAN INDUSTRIES P. LTD. 4. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 5. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDI CED TO EACH OTHER. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER , AMEND OR FORGO ANY GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL. 2. THE FACTS IN BRIEF AS CULLED OUT FROM THE ORD ERS OF THE LOWER AUTHORITIES ARE THAT THE ASSESSEE COMPANY HAS BEEN ALLEGED TO M AKE REPAYMENT IN RESPECT OF TWO TRANSACTIONS OF LOANS/DEPOSITS BY OTHERWISE THA N ACCOUNT PAYEE CHEQUE. IN FIRST TRANSACTION, THE DIRECTOR OF THE COMPANY, SHR I RAKESH MAHAJAN MADE AN ADVANCE PAYMENT OF RS. 2.5 LAKHS TO THE ASSESSEE CO MPANY ON 30 TH MARCH, 2009, WHICH WAS CREDITED AS ADVANCE IN CURRENT ACCOUNT OF RAKESH MAHAJAN, MAINTAINED IN THE BOOKS OF THE ASSESSEE COMPANY. ON 31 ST MARCH, 2009, THE ASSESSEE COMPANY SOLD FURNITURE OF EQUIVALENT AMOUN T TO SH RAKESH MAHAJAN AND THE ADVANCE OF RS. 2.5 LAKHS WAS ADJUSTED BY WA Y OF PASSING A JOURNAL ENTRY. IN SECOND TRANSACTION, THE ASSESSING OFFICER OBSERV ED AN ENTRY IN THE LEDGER ACCOUNT OF SH RAKESH MOHAN , MAINTAINED IN THE BOOK S OF THE ASSESSEE COMPANY , ACCORDING TO WHICH, ASSESSEE COMPANY RETURNED THE LOAN PAYMENT OF RS. 49.00 LAKHS TO SHRI RAKESH MOHAN ON BEHALF OF M/S. TINA O RGANICS PVT. LTD., ON 15- 05-2008. THE ADDITIONAL COMMISSIONER OF INCOME-TAX ACT, WHO LEVIED THE PENALTY, WAS OF THE VIEW THAT RETURN OF LOAN IN BO TH THE TRANSACTIONS WAS OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE I.E. THROUGH JOURNAL ENTRY, WHICH WAS A VIOLATION OF PROVISION OF 269T OF THE ACT AND THERE FORE, HE LEVIED PENALTY U/S 271E OF THE ACT. ON APPEAL, THE LD. CIT(A) HELD THA T THERE WAS NO REPAYMENT OF LOAN OR DEPOSIT OTHERWISE THAN BY ACCOUNT PAYEE CH EQUE AND THUS PROVISION OF 269T WERE NOT ATTRACTED, ACCORDINGLY, RELYING ON VA RIOUS DECISIONS/JUDGMENTS CITED IN HIS ORDER, HE DELETED THE PENALTY LEVIED U /S 271E IN RESPECT OF BOTH THE TRANSACTIONS. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 3. THE GROUNDS NO. 1 TO 3 OF THE APPEAL ARE RELA TED TO LEVY OF PENALTY, U/S 271E OF THE ACT AND THUS HEARD TOGETHER. 3 IT A NO. 1191/DEL/2014 M AHAJAN INDUSTRIES P. LTD. 4. 1 THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE ( SR DR), RELYING ON THE ORDER OF THE ADDL. CIT SUBMITTED THAT THE ASSESSEE WAS LI ABLE FOR PENALTY ON LOANS REPAID TO SHRI RAKESH MHAJAN & M/S TINA ORGANIC OF RS. 2.5 LAKHS & RS. 49.00 LAKHS RESPECTIVELY THROUGH PASSING JOURNAL ENTRIES IN BOOKS OF ACCOUNT, WHICH BEING A CLEAR VIOLATION OF PROVISIONS OF SECTION 26 9T OF THE ACT. HE REFERRED TO PAGE NO. 4 OF THE ASSESSEES PAPER BOOK AND SUBMITT ED THAT THE FACT OF PAYMENT OF LOAN TO SHRI RAKESH MAHAJAN ON BEHALF OF M/S TIN A ORGANICS WAS CLEARLY MENTIONED IN ENTRY DATED 15.5.2008 OF THE SAID LEDG ER ACCOUNT OF SHRI RAKESH MAHAJAN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE ALSO RELIED ON JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF TRIUMPH INTERNATIO NAL REPORTED IN 345 ITR 270 , WHERE IN IT IS HELD THAT WHERE LOAN/DEPOSIT H AS BEEN REPAID BY DEBITING THE ACCOUNT THROUGH JOURNAL ENTRIES, IT MUST BE HELD TH AT THE ASSESSEE HAS CONTRAVENED THE PROVISIONS OF S. 269T OF THE ACT, HOWEVER S. 2 73B PROVIDES THAT NO PENALTY UNDER S. 271E SHALL BE IMPOSED FOR CONTRAVENTION OF S. 269T IF REASONABLE CAUSE FOR SUCH CONTRAVENTION IS SHOWN. 4.2 ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENT ATIVE ( AR) SUBMITTED THAT THE FIRST TRANSACTION STATED TO BE OF LOAN, WA S ACTUALLY PURCHASE OF FURNITURE BY SHRI RAKESH MAHAJAN FROM THE ASSESSEE COMPANY. T HE LD. AR SUBMITTED THAT AN ADVANCE PAYMENT OF RS. 2.5 LAKHS WAS PAID BY SHR I RAKESH MAHAJAN ON 30 TH MARCH, 2009 FOR PURCHASE OF FURNITURE, WHICH WAS IN ADVERTENTLY ENTERED IN CURRENT ACCOUNT, HOWEVER, ON SALE OF FURNITURE ON 3 1 ST MARCH, 2009 THAT ENTRY WAS CLOSED BY WAY OF A JOURNAL ENTRY & THUS THERE W AS NO REPAYMENT OF LOAN BY THE ASSESSEE. SIMILARLY IN RESPECT OF THE SECOND TR ANSACTION, IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT TAKEN ANY LOAN FROM M/S TINA O RGANICS AND LOAN TAKEN FROM SHRI RAKESH MAHAJAN WAS ONLY PAID TO HIM THROUGH AC COUNT PAYEE CHEQUE. THE LD. AR REFERRED TO THE COPY OF BANK STATEMENT OF SH RI RAKESH MAHAJAN PLACED ON PAGE NO. 9 OF THE PAPER BOOK, WHEREIN THE RECEIPT O F THE AMOUNT OF RS. 49.00 LAKH IS APPEARING. THE LD. AR STATED THAT THE NAME OF M/S TINA ORGANICS P. LTD. WAS MENTIONED INADVERTENTLY IN THE LEDGER ACCOUNT O F SHRI RAKESH MAHAJAN AND THERE WAS NO LOAN OUTSTANDING IN THE NAME OF M/S TI NA ORGANICS P. LTD. HE 4 IT A NO. 1191/DEL/2014 M AHAJAN INDUSTRIES P. LTD. FURTHER SUBMITTED THAT EVEN IF ANY LOAN OR DEPOSITS THROUGH CURRENT ACCOUNT, THEN, SAME ARE NOT IN THE CATEGORY OF LOAN OR DEPOS IT AS PER THE PROVISION OF THE COMOPANIES ACT, AS UPHELD BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS. IDHAYAM PUBLICATION LTD. 285 ITR 281 AND CHHATTISGA RH HIGH COURT IN CASE OF CIT VS. PREETI FUELS AND FLAMES LTD. 238 CTR 226. 5. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. FROM THE ORDER OF THE LOWER AUTHORITIES AND SUBMISSIONS OF BOTH THE PARTIES, WE FIND THAT AS FAR AS FIRST TRANSACTION OF RS. 2.5 LAKH IS CONCERNED, IT IS EVIDENT THAT IT WAS NOT A LOAN TRANSACTION AND IT WAS MERELY A PURC HASE/SALE TRANSACTION BETWEEN THE ASSESSEE COMPANY AND ITS DIRECTOR SHRI RAKESH M AHAJAN AND IN SUCH CIRCUMSTANCES, THE PROVISION OF SECTION 269T ARE NO T ATTRACTED AND HENCE THE TRANSACTION IS NOT LIABLE FOR PENALTY U/S 271E OF T HE ACT. 6. AS REGARDS TO THE SECOND TRANSACTION OF RS. 49 .00 LAKHS , THE LD AR HAS SUBMITTED THAT THERE WAS NO LOAN OUTSTANDING FROM M /S. TINA ORGANICS P. LTD. THIS FACT HAS BEEN OBSERVED BY THE LD CIT(A) ALSO A ND THE SR. DR HAS NOT CONTROVERTED, AND THUS, WE DONT HAVE ANY REASON TO DISBELIEVE THE FACT . IN SUCH CIRCUMSTANCES, THERE BEING, NO REPAYMENT BY OTHERWI SE THAN ACCOUNT PAYEE CHEQUE, PENALTY LEVIED U/S 271E OF THE ACT DESERVED TO BE DELETED. THE RATIO OF THE JUDGEMENT IN THE CASE OF TRIUMPH INTERNATIONAL (SUPRA) IS NOT APPLICABLE OVER THE FACTS OF THE ASSESSEE AS THERE IS NO REPAY MENT OF LOAN OR DEPOSIT BY OTHERWISE THAN ACCOUNT PAYEE CHEQUE. IN VIEW OF ABO VE FINDING, THE ARGUMENTS OF THE LD AR AS TO WHETHER THE ANY AMOUNT RECEIVED FROM THE DIRECTOR OR SHAREHOLDER OF A COMPANY IS NOT LOAN OR DEPOSIT UND ER THE COMPANIES RULES 26(1X), ARE RENDERED ACADEMIC ONLY AND NOT REQUIRED TO ADJUDICATE UPON. FURTHER WE FIND THAT WHEN THERE WAS NO REPAYMENT OF LOAN OR DEPOSIT OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE, THE QUESTION OF REASONABLE CA USE FOR VIOLATION OF 269T ALSO DOES NOT ARISE IN THE CASE OF THE ASSESSEE. AC CORDINGLY, WE DISMISS THE GROUND NOS. 1 TO 3 OF THE REVENUE. 5 IT A NO. 1191/DEL/2014 M AHAJAN INDUSTRIES P. LTD. 7. THE GROUNDS NO. 4 TO 6 OF THE APPEAL ARE GENERA L IN NATURE AND HENCE WE ARE NOT REQUIRED TO ADJUDICATE UPON. ACCORDINGLY, THE G ROUNDS ARE HELD INFRUCTUOUS AND DISMISSED. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2016. SD/- SD/- (C.M.GARG) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 9 TH MARCH, 2016. BINITA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 6 IT A NO. 1191/DEL/2014 M AHAJAN INDUSTRIES P. LTD. SL. NO. PARTICULARS DATE 1. DATE OF DICTATION (HAND WRITTEN ) 01.03.2016 2. DATE ON WHICH THE DRAFT IS PLACED BEFORE THE DICTATING MEMBER 02.03.2016 3. DRAFT PLACED BEFORE THE OTHER MEMBER 4. APPROVED DRAFT COMES TO THE SR. PS/PS 5. KEPT FOR PRONOUNCEMENT ON 6. FINAL ORDER RECEIVED AFTER PRONOUNCEMENT 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILES GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR 10. DATE OF DISPATCH OF ORDER