Rajinder Kumar Dhawan, New Delhi V. JCIT, New Delhi

ITA 1234/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2939 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B K DHINGRA
• Keywords: Salary income; Principle of natural justice; Reasonable cause; Tax effect
• Section: 273B; 143(3); 142(1); 14A; 131; 68

Judgement Text

1 ITA NO. 1234/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTAN T MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A .NO . 1234/DEL/2015 (ASSESSMENT Y EAR-2010-11) RAJINDER KUMAR DHAWAN 206, EMCA HOUSE, 23/23B ANSARI ROAD NEW DELHI AAKPD0316Q (APPELLANT) VS JCIT RANGE-30, ROOM NO. 207, DRUM SHAPE BUILDING NEW DELHI (RESPONDENT) APPELLANT BY SH. B. K. DHINGRA, CA RESPONDENT BY SH. ATIQ AHMAD, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 08/01/2015 PASSED BY CIT(A)- XXV, NEW DELHI FOR AS SESSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF LAW, THE LD. CIT APPEALS HAS FAILED TO APPRECIAT E THAT THE ORDER LEVYING PENALTY PASSED BY THE LD. AO U/S 271D IS ILLEGAL, B AD IN LAW AND WRONG ON FACTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF LAW, THE LD. ASSESSING OFFICER HAS ERRED IN LEVY ING AND LD.CIT APPEALS HAS ERRED IN CONFIRMING THE PENALTY OF RS.4,00,000/ - LEVIED U/S 271D OF THE INCOME TAX ACT, 1961. DATE OF HEARING 27.12.2017 DATE OF PRONOUNCEMENT 13.03.2018 2 ITA NO. 1234/DEL/2015 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND THE PROVISION OF LAW, THE LD CIT APPEAL HAS FAILED TO A PPRECIATE THAT THE LD AO. WAS NOT JUSTIFIED TO IGNORE THE SUBMISSIONS OF THE APPELLANT. 4. THAT THE LD. CIT APPEAL HAS FAILED TO APPRECIAT E THAT THE STATUTORY PROVISIONS OF SEC. 27ID OF THE INCOME TAX ACT, 1961 , FOR LEVY OF PENALTY IS NOT FOR MERE TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATU TE. 5. THAT THE LD. CIT APPEAL HAS FURTHER FAILED TO A PPRECIATE THAT THE STATUTORY PROVISIONS OF SEC. 27ID OF THE INCOME TAX ACT, 1961, FOR LEVY OF PENALTY IS NOT FOR MERE TECHNICAL NON-COMPLIANCE BU T FOR ACTUAL OR HABITUAL DEFAULTERS. 6. THAT THE LD CIT APPEAL HAS FAILED TO APPRECIATE THAT IMPUGNED PENALTY ORDER PASSED BY THE LD. AO IS AGAINST THE P RINCIPLES OF NATURAL JUSTICE. 3. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SHAR ES AND EMPLOYED AS WELL WITH SHEEL BUILDCON PRIVATE LTD. AND PROGRESSI VE BUILDTECH P. LTD. AS AN EMPLOYEE EARNING SALARY INCOME. THE ASSESSEE FILED RETURN OF INCOME ELECTRONICALLY DECLARING TOTAL INCOME OF RS. 49,78, 580/- ON 27.09.2010 WHICH WAS REVISED ON 27.09.2011 AND THE TOTAL INCOME WAS SHOWN AT RS.51,16,580/-. THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE INC OME TAX ACT, 1961. LATER ON THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND THE ASSESSMENT WAS COMPLETED U/S 143(1) OF THE INCOME TAX ACT ON 21.03 .2013 ENHANCING THE TOTAL INCOME OF THE ASSESSEE TO RS.52,27,899/- AFTER MAKI NG THE FOLLOWING ADDITIONS:- I) SALARY TO THE HELPER RS.72,000/- II) ADDITION U/S 14A RS.39,319/- DURING THE COURSE OF SCRUTINY PROCEEDINGS THE ASSES SING OFFICER EXAMINED THE BOOKS OF ACCOUNT AND THE RELEVANT DETAILS FILED BY THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DECLARED RS.4,00 ,000/- AS CONTRIBUTION PAYABLE IN THE AUDITED BALANCE SHEET AS ON 31.03.20 10 UNDER THE HEAD CURRENT LIABILITY. HE THEREFORE, MADE DETAILED ENQUIRIES BY ISSUING NOTICE U/S 142(1) 3 ITA NO. 1234/DEL/2015 DT.16.11.2012 IN THIS REGARD. IN REPLY, THE ASSESSE E SUBMITTED THAT THE COMPLETE NAME AND ADDRESS OF THE PARTY, NATURE OF T RANSACTION MADE WITH TAKSHILA FINANCE AND LEASING COMPANY PVT. LTD. (TFL CPL) ALONG WITH CONFIRMATION AND MOU EXECUTED WITH THE TFLCPL IN RE SPECT OF THE ABOVE TRANSACTION OF RS.4,00,000/- FOR ACQUISITION OF EQU ITY SHARES LISTED IN NATIONAL STOCK EXCHANGE WERE FILED BEFORE THE ASSESSING OFFI CER. THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION U/S 68 OF THE ACT. BUT HE LD THAT THE ASSESSEE CONTRAVENED THE PROVISIONS OF SECTION 269SS OF THE ACT AND HENCE, INITIATED PENALTY PROCEEDINGS U/S 271D OF THE ACT. A SHOW CAU SE NOTICE U/S 274 R.W.S. 271D OF THE ACT WAS ISSUED ON 21.03.2013. THE ASSES SEE FILED REPLY WHICH WAS CONSIDERED BY THE ASSESSING OFFICER AND PASSED PENA LTY ORDER U/S 271D OF THE ACT VIDE ORDER DATED 25.09.2013. 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSE SSEE. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE RECEIVED A CONTRIBUTION OF RS.4,00,000/- FROM TFLCPL ON 12.01.2010, IN PURSUAN CE TO A MEMORANDUM OF UNDERSTANDING (MOU) DATED 12.01.2010 EXECUTED B ETWEEN THE PARTIES MUTUALLY FOR INVESTMENT TRANSACTION TO BUY SHARES O F RELIANCE INDUSTRIES LIMITED. BUT THE DEAL WAS NOT MATERIALIZED AND THER EFORE THE ENTIRE RS.4,00,000/- WAS REFUNDED TO TFLCPL THROUGH THE AC COUNT PAYEE CHEQUE. THUS, THE LD. AR SUBMITS THAT HOLDING OF FUNDS OF R S. 4,00,000/- FOR A PERIOD OF AROUND 10 MONTHS WAS NOT INTENTIONAL BUT WAS A F ALLOUT OF THE TERMS OF THE MOU. REGARDING THE URGENCY OF TAKING CASH, THE LD. AR SUBMITS THAT THE DEAL WITH THE MANAGEMENT OF TFLCPL WAS WITH AN INTENTION TO PURCHASE THE LISTED EQUITY SHARES INSTANTLY, BUT THE TIME/RATES OF PURC HASE WAS TO BE DECIDED BY THE ASSESSEE. AS CIRCUMSTANCES PREVAILED AT THE TIM E OF ENTERING INTO SUCH AGREEMENT ON 12.01.2010, THE MANAGEMENT OF TFLCPL A ND THE ASSESSEE NEGOTIATED THE TERMS AND CONDITIONS, ENTERED INTO W RITTEN MOU ON THE SAME DATE AND TOOK THE MARGIN IN CASH. IMMEDIATE INTENTI ON WAS TO BUY THE EQUITY 4 ITA NO. 1234/DEL/2015 SHARES AND THEREFORE HE DEMANDED THE MARGIN MONEY, TOWARDS CONTRIBUTION FROM THE COMPANY AT THE SPOT AS THE SAME WAS REQUIR ED TO MAKE PAYMENT INSTANTLY TO THE SHARE BROKER. FURTHER IN SHARE TRA NSACTIONS BUSINESS THE SEBI & NSE DOES NOT ALLOW THE TRANSACTION IF THE MARGIN IS NOT PAID. THEREFORE THE ASSESSEE DEMANDED RS. 4.00 LACS IMMEDIATELY, WHICH THE COMPANY GAVE THE ASSESSEE IN CASH, AS IT HAD SUFFICIENT CASH BALANCE WITH IT. RECEIVING THE MONEY INSTANTLY WAS TO KEEP ASSESSEE SAFEGUARD FROM THE F UTURE SHARE PRICE BEHAVIOR, WHICH MAY VARY ON DAY TO DAY BASIS. 6. THE LD. AR FURTHER SUBMITTED THAT THE DEFINITION OF A LOAN OR DEPOSIT IN SECTION 269SS MERELY SAYS THAT IT MEANS A LOAN OR D EPOSIT OF MONEY [AS PER EXPLN(III) BELOW THE SECTION]. UNDER EXPLANATION (I II) BELOW S. 269T IT IS DEFINED AS MONEY WHICH IS REPAYABLE AFTER NOTICE OR AFTER A PERIOD AND IN THE CASE OF A PERSON OTHER THAN A COMPANY INCLUDES LOAN OR DEPOSI T OF ANY NATURE. THE POPULAR MEANING OF A LOAN OR DEPOSIT INVOLVES THE I DEA OF CHARGING INTEREST AND IN ORDINARY PARLANCE IT WOULD BE DIFFICULT TO CONCE IVE OF A LOAN OR DEPOSIT OF MONEY WITHOUT ANY PROVISION FOR PAYMENT OF INTEREST . THE LD. AR SUBMITTED THAT THE ASSESSEE DID NOT RECEIVE ANY LOAN OR DEPOS IT FROM THE TFLCPL, RATHER IT WAS A CAPITAL CONTRIBUTION IN PURSUANT TO AN MOU DA TED 12.01.2010, AS TO TFLCPL 50% SHARE OF INVESTMENT IN EQUITY SHARES OF RELIANCE INDUSTRIES LIMITED. THUS, SECTION 269SS IS NOT APPLICABLE TO T HE FACT OF THE CASE. FURTHER, THE ASSESSEE HAD NO MALA FIDE INTENTION OF TAX EVAS ION. 7. THE LD. AR FURTHER SUBMITTED THAT CONTRIBUTION O F RS.4,00,000/- FROM TFLCPL HAS BEEN ACCEPTED AS GENUINE BECAUSE THE ASS ESSMENT HAS BEEN FRAMED U/S 143(3) AND NO ADDITION U/S 68 HAS BEEN M ADE. ACCOUNTS WERE AUDITED BY THE CHARTERED ACCOUNTANTS WHO NEVER POIN TED OUT THAT THERE WAS ANY VIOLATION OF ANY PROVISIONS OF THE IT ACT AND T HIS WOULD ALSO LEAD TO CONCLUSION THAT THERE WAS A BONA FIDE BELIEF AND RE ASONABLE CAUSE FOR ACCEPTING CONTRIBUTION IN CASH. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD DULY DESCRIBED ITS URGENT NEEDS OR CIRCUMSTANCES IN WHIC H INITIAL MARGIN WAS 5 ITA NO. 1234/DEL/2015 ACCEPTED IN CASH, DISCLOSURE THEREOF WAS CONTAINED IN THE COMPILATION OF AUDITED ACCOUNTS, TRANSACTION WAS ACCEPTED AS GENUI NE IN ASSESSMENT U/S 143(3), WHICH HAD NO TAX EFFECT, ESTABLISHED REASO NABLE CAUSE UNDER SECTION 273B. SINCE, THE ASSESSEE HAD SATISFACTORILY ESTABL ISHED REASONABLE CAUSE UNDER S. 273B, THE ASSESSEE DEEMED TO HAVE ESTABLIS HED SUFFICIENT CAUSE FOR NOT INVOKING THE PENAL PROVISIONS OF SECTION 271D. THE LD. AR RELIED UPON THE VARIOUS DECISION OF THE HONBLE SUPREME COURT AND H IGH COURTS. 8. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY IMPOSED THE PENALTY U/S 271D OF THE ACT AS THE ASSESSEE CONTRAV ENED THE PROVISIONS OF SECTION 269SS OF THE ACT AND HENCE, LIABLE FOR PENA LTY U/S 271D OF THE ACT. THE CIT(A) ALSO HELD THAT THE EXPLANATION GIVEN BY THE ASSESSEE LACKED HONESTY AND TRUTHFULNESS. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE RECEIVED CONTRIBUTION OF RS. 4 LACS FROM TFLCPL IN PURSUANCE TO A MOU. THE SAME AMOUNT WAS RETURNED B Y THE ASSESSEE TO THE TFLCPL ON 12 TH MARCH, 2011 THROUGH CHEQUE OF HDFC BANK LTD, NOIDA BRANCH. THE CONFIRMATION AND THE REPLY OF TFLCPL I N RESPONSE TO SUMMONS U/S 131 WAS BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT (A). THOUGH THE ASSESSEE HAS GIVEN EXPLANATION AS TO WHY IT HAS TAKEN RS. 4 LACS IN CASH TO THE ASSESSING OFFICER AS WELL AS TO THE CIT (A), TH E SAME IS NOT PLAUSIBLE AS THE CASH WAS FOR THE PURPOSE OF PURCHASING SHARES AND M OU GOVERNS THE CONDITION THAT IN CASE THE TRANSACTION DOES NOT MEET THEN THE CASH SHOULD BE RETURNED BACK TO THE TFLCPL. THUS, THE CASH GIVEN TO THE ASS ESSEE HAS A COLOUR OF DEPOSIT AS GIVEN IN THE PROVISIONS OF SECTION 269SS . THE ASSESSING OFFICER WHILE PASSING THE ORDER OF PENALTY U/S 271D RIGHTLY HELD THAT THE ASSESSEE FAILED TO DISCHARGE ONUS AND, THEREFORE, THE ASSESS EE CANNOT TAKE BENEFIT OF THE PROVISIONS OF SECTION 273B OF THE INCOME TAX ACT. T HE FACT REMAINS THAT THE ASSESSEE GOT DEPOSIT FROM THE TFLCPL. THUS, THE AS SESSING OFFICER HAS RIGHTLY PROJECTED IT AS CASH LOAN, THE SAME WAS TAKEN FOR P URCHASE OF SHARES FOR 6 ITA NO. 1234/DEL/2015 MAKING INVESTMENT IN SPECIFICALLY SHARES OF PARTICU LAR COMPANY. THE CIT (A) RIGHTLY HELD THAT THE EXPLANATION FURNISHED BY THE ASSESSEE LACKS HONESTY OR TRUTHFULNESS AND THE ENTIRE TRANSACTION IS NOT A GE NUINE TRANSACTION. SECTION 269SS IS ATTRACTED WHEN ANY LOAN OR DEPOSIT OR ANY SPECIFIED SUM IN CASH IS ACCEPTED. THE AMOUNT WHICH WAS TAKEN FROM TFLCPL W AS A CAPITAL CONTRIBUTION IN PURSUANCE TO A MOU AND COMES UNDER THE PURVIEW OF LOAN OR DEPOSIT OR ANY SPECIFIED SUM. THE ESSENCE OF A LOA N/DEPOSIT IS THAT THERE MUST BE A LIABILITY TO RETURN IT TO THE PARTY BY WHOM OR ON WHOSE BEHALF IT HAS BEEN MADE ON FULFILLMENT OF CERTAIN CONDITIONS. IF THESE TESTS ARE APPLIED TO THE FACTS OF THE CASE BEFORE US, IT MAY BE SEEN THAT THE MONE Y RECEIVED FROM THE TFLCPL FOR PURCHASING SHARES/INVESTMENT CAN BE TREATED AS RECEIPT OF LOAN/DEPOSIT. THIS FACT IS FURTHER SUPPORTED BY THE STATEMENT OF THE LD. AR THAT THE AMOUNT HAS BEEN CREDITED TO THE ASSESSEES CAPITAL ACCOUNT AND IT IS LYING IN THE ACCOUNT OF THE ASSESSEE WHICH IS GOVERNED BY THE TE RMS OF MOU AND, THEREFORE, THE SAID CASH HAS TO BE TREATED AS LOAN/DEPOSIT U/S 269SS. THE DECISION RELIED BY THE LD. AR ALSO REITERATES THE ESSENCE OF LOAN/D EPOSIT U/S 269SS AND THUS, THE FACTS IN THOSE CASES AND IN THE PRESENT CASES A RE DIFFERENT ALTOGETHER. HENCE, THE CASE LAWS CITED BEFORE US BY THE ASSESSE E WILL NOT BE APPLICABLE IN THE PRESENT CASE. THE CIT(A) HELD AS UNDER: 4. THE PENALTY ORDER PASSED BY THE JURISDICTIONAL ASSESSING OFFICER WAS CONSIDERED AGAINST THE BACKGROUND FACTS NARRATED BY THE APPELLANT AT THE APPELLATE STAGE. UPON A COMPREHENSIVE CONSIDERATION OF THE PREVAILING FACTS I AM OF THE CONSIDERED VIEW THAT THE AO WAS F ULLY JUSTIFIED IN IMPOSING PENALTY U/S 271D AS THE APPELLANT MISERABL Y FAILED TO ESTABLISH THE GENUINENESS OF THE CONTENTS OF THE MEMORANDUM O F UNDERSTANDING ALLEGEDLY SIGNED BETWEEN HIM AND THE TFLCPL. THE EX PLANATION FURNISHED BY THE APPELLANT LACKED HONESTY AND TRUTHFULNESS. T HE ARGUMENTS WERE LABORED AND FLEW FROM AN AFTERTHOUGHT TO GIVE ENTIR E TRANSACTION A SEMBLANCE OF GENUINENESS. THE SIGNING OF MOU AND SU BSEQUENT BREACH THEREOF ETC CULMINATING IN THE REFUND OF RS. 4 LACS TO TFLCPL IS ONLY CONSIDERED TO BE A STORY WOVEN TO LEND CREDENCE TO THE SO CALLED LOAN TRANSACTION. THE REASONS CITED BY THE AO AND AS QUO TED SUPRA ON PAGES 3.4, & 5 ARE CONSIDERED TO BE APT AND WEIGHTY REQUI RING NO INTERFERENCE 7 ITA NO. 1234/DEL/2015 WITH THEM. IN SUCH CIRCUMSTANCES THE PENALTY ORDER U/S 271D IS CONFIRMED AND THE GROUNDS 1, 2, 3 & 4 ARE DISMISSED. GROUND N O. 5 BEING OF GENERAL NATURE IS NOT ADJUDICATED UPON. THEREFORE, THERE IS NO NEED TO INTERFERE WITH THE O RDER OF THE CIT(A). THE APPEAL OF THE ASSESSEE IS DISMISSED. 10. IN RESULT, THE APPEAL OF THE ASSESSSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 13/03/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 1234/DEL/2015 DATE 1. DRAFT DICTATED ON 28/12/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 28/12/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 14.03.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 14.03.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.