M/s Anglican India Consultancy Pvt. Ltd, New Delhi V. ACIT, New Delhi

ITA 121/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4336 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 08-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

1 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCHES: E NEW DELHI ] BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER. I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. M/S. ANGLICAN INDIA CONSULTANCY PVT. LTD., ADDL. COMMISSIONER A 13, GREEN PARK EXTN., VS. OF INCOME TAX, N E W D E L H I 110 016. RANGE : 2, NEW DELHI. PAN : AAHCA 5457 D (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. RASHMI CHOPRA, ADV.; DEPARTMENT BY : MS. RAKHI VIMAL, SR. D. R.; DATE OF HEARING : 26.09.2017 DATE OF PRONOUNCEMENT : 03.10.2017 O R D E R . PER BHAVNESH SAINI, J. M. : THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LEARNED CIT (APPEALS)-I, NEW DELHI, DATED 19 TH OCTOBER, 2015, FOR THE ASSESSMENT YEAR 2011-12, CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271D OF THE INCOME TAX ACT, 1961. 2 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.16,04,765/-. THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) VIDE ORDER DATED 27 TH FEBRUARY, 2014 DETERMINING THE TOTAL INCOME AT RS.49,86,116/-. THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS OBSERVED THAT THERE ARE CASH DEPOSITS AND WITHDRAWALS FROM THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE EXPLAINED THAT TOTAL WITHDRAWAL WAS RS.1,08,45,348/- AS AGAINST THE CASH DEPOSITS OF RS.74,25,348/-. FURTHER, THE ASSESSEE SUBMITTED CASH FLOW STATEMENT IN WHICH IT HAS BEEN INDICATED THAT WHEREVER THERE WAS A SHORT-FALL IN DAY-TO-DAY EXPENSES, SAME WAS MET BY THE DIRECTOR, SHRI RANDEEP SINGH, THROUGH HIS RUNNING ACCOUNT I.E. DUE TO DIRECTOR BY WAY OF CASH DEPOSIT. THE SOURCE OF THE CASH GIVEN BY SHRI RANDEEP SINGH WAS EXPLAINED THROUGH AGRICULTURAL INCOME, CASH WITHDRAWAL FROM HIS PROPRIETARY CONCERN AND FROM SAVING BANK ACCOUNT FOR A SUM OF RS.21,07,080/-. THE CASH FLOW STATEMENT SUBMITTED REVEALED THAT THE AMOUNT OF CASH OF RS.27 LAKHS WAS RECEIVED AND RS.26 LAKHS WAS PAID BY / TO HIM IN CASH ON VARIOUS DATES DURING THE YEAR. THE CASH FLOW STATEMENT FOR DEPOSIT AND WITHDRAWAL IS REPRODUCED AT PAGES 3 TO 7 OF THE PENALTY ORDER. 3 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. 3. FROM THE TABLE, IT IS CLEAR THAT THE COMPANY HAS ACCEPTED CASH LOAN / CASH DEPOSITS FROM DIRECTOR AMOUNTING TO RS.27,00,000/- AND REPAYMENT OF THE SAME OF RS.26,00,000/- WAS ALSO MADE IN CASH, WHICH IS IN VIOLATION OF THE PROVISIONS OF SECTION 269SS AS WELL AS SECTION 269T OF THE I. T. ACT, 1961. 4. THE MATTER RELATING TO IMPOSITION OF PENALTY U/S 271D OF THE ACT WAS REFERRED TO THE ADDL. CIT BY INCOME TAX OFFICER, WARD 2(4) , NEW DELHI. ACCORDINGLY, NOTICE UNDER SECTION 274 READ WITH SECTION 271D OF THE I. T. ACT, 1961 DATED 22.08.2014 WAS ISSUED FIXING THE DATE FOR COMPLIANCE ON 29.08.2014. THE ASSESSEE WAS HEARD THROUGH HIS AR, SHRI SANJESH JAWARANI, C.A. ON 23.02.2015. 5. IN RESPONSE TO THE NOTICE, THE ASSESSEE COMPANY, VIDE LETTER DATED 29.08,2014 HAS MADE ITS SUBMISSION, AS UNDER :- ' YOU MAY RECALL THAT THE TOTAL CASH DEPOSIT IN THE BANK ACCOUNT OF THE ASSESSEE COMPANY WAS RS.74,25,348'/- AND CASH WITHDRAWALS WAS RS.1.08.45.348. HENCE WITHDRAWALS ARE MUCH IN EXCESS OF DEPOSITS. FURTHER WE HAD SUBMITTED, A CASH FLOW STATEMENT IN WHICH WE HAD INDICATED THAT WHEREVER THERE WAS A SHORTFALL IN DAY TO DAY EXPENSES THAT WAS MET BY THE DIRECTOR 4 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. RANDIP SINGH THROUGH A RUNNING ACCOUNT VIZ. DUE TO DIRECTOR BY WAY OF CASH DEPOSITS. FINALLY, THE SAID AMOUNT WAS ALSO REPAID AS THE CASH SITUATION IMPROVED BACK TO THE DIRECTOR BY WAY OF WITHDRAWALS. FURTHER, AS PER THE COMPANIES ACT, UNDER THE COMPANIES (ACCEPTANCE OF DEPOSITS) RULE UNDER RULE 2(B) (IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A SHARE-HOLDER OF A PRIVATE LIMITED COMPANY, THEREFORE THE TRANSACTION BETWEEN THE COMPANY AND THE DIRECTOR IS NOT A LOAN OR DEPOSIT AND IT IS ONLY OF CURRENT ACCOUNT NATURE FOR THE ABOVE TRANSACTION. UNDER NO CIRCUMSTANCES THIS IS IN THE VALUE OF CASH LOAN TO COME EVEN UNDER THE MISCHIEF OF SECTION 269SS OR SECTION 269T OR UNDER SECTION 27IE. ISSUE ON SECTION 269SS AND 269T : WHETHER CURRENT ACCOUNT TRANSACTIONS BETWEEN SISTER CONCERNS OR RELATED PARTIES (DIRECTOR) AMOUNTS TO VIOLATION OF SECTION 269SS AND 269T. ANY PAYMENTS OR REPAYMENTS MADE PURSUANT TO CURRENT ACCOUNT MAINTAINED BETWEEN PANICS CANNOT BE CONSIDERED AS VIOLATION OF 269SS AND 269T CIT VS. IDHAYAM PUBLICATIONS LTD., (2006) 285 ITR 221 (MAD). 5 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. IN THIS CASE THERE WAS A CURRENT ACCOUNT IN THE BOOKS OF THE ASSESSEE IN THE NAME OF THE ONE OF THE DIRECTORS WHO USED TO PAY MONEY INTO THE CURRENT ACCOUNT AND ALSO WITHDRAW MONEY FROM THE SAME. THE DEPARTMENT TREATED THESE PAYMENTS AND WITHDRAWALS AS VIOLATION OF SECTION 269T AS THEY WERE MADE IN CASH. DISAPPROVING THE ACTION OF THE DEPARTMENT THE HIGH COURT HAS HELD THAT 'THE DEPOSIT AND WITHDRAWAL OF MONEY FROM THE CURRENT ACCOUNT COULD NOT HE CONSIDERED AS A LOAN OR ADVANCE. ACCORDINGLY THE ORDER OF THE TRIBUNAL BY WHICH THE PENALTY WAS CANCELLED WAS AFFIRMED. SIMILAR VIEW TAKEN BY ITAT BENCH, B, BANGALORE IN THE CASE OF M/S CANARA HOUSING DEVELOPMENT CO. VS. ACIT ITA. NO. 1425/BANG/2008. ' 6. THE FINDINGS OF ASSESSING OFFICER IN PENALTY ORDER ARE AS UNDER :- 6) THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED WITH REFERENCE TO THE FACTS OF THE CASE. IN THIS CASE, IT HAS BEEN SUBMITTED THAT THE CASH RECEIVED BY THE ASSESSEE FROM ITS DIRECTOR WAS TO MEET DAY TO DAY EXPENSES AND THE SAME HAS BEEN LINKED WITH THE CURRENT ACCOUNT. 6.1) EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE. AS A NORMAL BUSINESS PRACTICE, THE EXPENSES ARE MET OUT OF THE AVAILABLE CASH IN HAND OR BANK BALANCES. THE FUNDS IN SUCH ACCOUNTS ARE ARRANGED EITHER OUT OF SALES OR LOANS TAKEN TO 6 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. MEET SUCH OBLIGATIONS. THEREFORE, THE FUNDS OBTAINED FROM THE DIRECTOR IN CASH AND INTRODUCED IN THE CASH BOOK ARE CLEARLY BY WAY OF LOAN TAKEN. IT IS NOT A CASE WHERE THE FUNDS RECEIVED FROM THE DIRECTOR HAVE SIMPLY BEEN BOOKED IN THE CASH BOOK, REMAINED UNUTILIZED AND REPAID IN CASH. IN TINE INSTANT CASE, THE CASH RECEIVED HAS BEEN UTILIZED FOR THE PURPOSES OF MEETING DAY TO DAY OBLIGATIONS. THE SUBMISSION MADE BY THE ASSESSEE TO LINK THE RECEIPTS TO THE CURRENT ACCOUNT IS CLEARLY AN AFTERTHOUGHT AND CANNOT BE RELIED UPON. THEREFORE, THE FACTS OF THE INSTANT CASE CLEARLY ESTABLISHES THAT THE AGGREGATE AMOUNT OF CASH OF RS. 27,000,00/- RECEIVED IS IN THE NATURE OF LOAN WHICH IS IN VIOLATIONS OF PROVISIONS OF SECTION 269SS ON WHICH PENALTY U/S 271D OF THE ACT IS ATTRACTED. 6.2) WITHOUT PREJUDICE TO THE ABOVE, EVEN IF THE SAID TRANSACTION IS NOT CONSIDERED AS LOAN, THE ACCEPTANCE OF THE ABOVE AMOUNT IN CASH CLEARLY ESTABLISHES ITS NATURE AS DEPOSIT WHICH IS IN VIOLATION OF PROVISIONS OF SECTION 269SS FOR WHICH PENALTY UNDER SECTION 271D IS ATTRACTED. 7) AS PER PROVISIONS OF SEC.271D OF THE ACT, A PENALTY EQUIVALENT TO THE AGGREGATE AMOUNT OF LOAN/DEPOSITS RECEIVED IS IMPOSABLE UPON THE ASSESSEE. ACCORDINGLY, A PENALTY OF RS.27,00,00.0/-, BEING THE SUM EQUAL TO THE AGGREGATE AMOUNT OF LOAN OR DEPOSIT: RECEIVED IN CASH, AS DETAILED ABOVE, IS IMPOSED U/S 271D OF THE ACT FOR VIOLATION OF PROVISIONS OF SEC.269SS OF THE ACT. 7 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. 7. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LEARNED CIT (APPEALS). HOWEVER, APPEAL OF THE ASSESSEE HAS BEEN DISMISSED. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE PENALTY IS NOT LEVIABLE IN THE MATTER. HONBLE SUPREME COURT IN THE CASE OF CIT VS. JAI LAXMI RICE MILLS (2015) 379 ITR 521 (SC) HELD AS UNDER :- FOR THE ASSESSMENT YEAR 1992-93, THE ASSESSMENT ORDER WAS PASSED ON THE ASSESSEE ON FEBRUARY 26,1996, EX PARTE. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CONTRAVENED THE PROVISIONS OF SECTION 269SS OF THE INCOME-TAX ACT, 1961, AND BECAUSE OF THIS THE ASSESSING OFFICER WAS SATISFIED THAT PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT WERE TO BE INITIATED. ON APPEAL, THE COMMISSIONER (APPEALS) BY ORDER DATED DECEMBER 5, 1996, SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO FRAME THE ASSESSMENT DE NOVO AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. MEANWHILE PENALTY UNDER SECTION 271D WAS LEVIED BY ORDER DATED SEPTEMBER 23, 1996, I.E., BEFORE THE APPEAL OF THE ASSESSEE AGAINST THE ORIGINAL ASSESSMENT ORDER WAS HEARD AND ALLOWED THEREBY SETTING ASIDE THE ASSESSMENT ORDER ITSELF. AFTER REMAND, THE ASSESSING OFFICE PASSED AFRESH ASSESSMENT ORDER 8 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. BUT IN THIS ASSESSMENT ORDER, NO SATISFACTION REGARDING INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT WAS RECORDED. THE TRIBUNAL AS WELL AS THE HIGH COURT HELD THAT THE PENALTY ORDER PASSED ON THE BASIS OF THE ORIGINAL ASSESSMENT ORDER COULD NOT STILL SURVIVE WHEN THAT ASSESSMENT ORDER HAD BEEN SET ASIDE BECAUSE THE SATISFACTION RECORDED THEREIN FOR THE PURPOSE OF INITIATION OF THE PENALTY PROCEEDINGS WOULD ALSO NOT SURVIVE. ON FURTHER APPEALS : HELD, DISMISSING THE APPEALS, THAT IN THE FRESH ASSESSMENT ORDER THERE WAS NO SATISFACTION RECORDED REGARDING PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT THOUGH IN THAT ORDER THE ASSESSING OFFICER WANTED PENALTY PROCEEDING TO BE INITIATED UNDER SECTION 271(1)(C) OF THE ACT. THUS, THE PENALTY UNDER SECTION 271D WAS WITHOUT ANY SATISFACTION AND, THEREFORE, NO SUCH PENALTY COULD BE LEVIED. 8.1 THE ASSESSEE FILED COPY OF THE ASSESSMENT ORDER, WHICH REVEALED THAT THE ASSESSING OFFICER HAS NOT RECORDED ANYTHING AS REGARDS VIOLATION OF PROVISIONS OF SECTION 271D OF THE INCOME TAX ACT. THE ASSESSING OFFICER DID NOT RECORD ANY SATISFACTION REGARDING PENALTY PROCEEDINGS UNDER SECTION 271D OF THE I. T. ACT IN THE ASSESSMENT ORDER. THOUGH IN THAT ORDER THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. THUS, THE PENALTY UNDER SECTION 271D WAS WITHOUT ANY SATISFACTION AND, THEREFORE, NO SUCH PENALTY COULD BE LEVIED. THE ISSUE IS, THEREFORE, COVERED IN FAVOUR OF THE ASSESSEE BY JUDGEMENT OF HONBLE 9 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. SUPREME COURT IN THE CASE OF CIT VS. JAI LAXMI RICE MILLS (SUPRA). WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY UNDER SECTION 271D OF THE INCOME TAX ACT. IN VIEW OF THE ABOVE, THERE IS NO NEED TO DECIDE APPEAL OF THE ASSESSEE ON MERITS. 9. IN THE RESULT, THE APPEAL OF ASSESSEE, IS ALLOWED. 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( L. P. SAHU ) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : THE 03 RD OCTOBER, 2017. *MEHTA* COPY OF THE ORDER FORWARDED TO :- 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT (APPEALS); 5. DR, ITAT, ND. BY ORDER ASSISTANT REGISTRAR 10 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112. DATE DRAFT DICTATED ON 26/29.09.2017 DRAFT PLACED BEFORE AUTHOR 29.09.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 03.10.2017. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 03.10.2017. APPROVED DRAFT COMES TO THE SR.PS/PS 03.10.2017. KEPT FOR PRONOUNCEMENT ON 03.10.2017. FILE SENT TO THE BENCH CLERK 03.10.2017. DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. 11 I. T. APPEAL NO. 121/DEL/2016 ASSESSMENT YEAR : 201112.