Shri Babu Krishnan Kutty, Raigad V. Addl. C.I.T, Raigad

ITA 1246/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8458 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: Y P PANDITH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1246/PN/2012 (ASSESSMENT YEAR: 2006-07) SHRI BABU KRISHNAN KUTTY 203/204, SHUBHAM COMPLEX, SECTOR 11, NEW PANVEL, DIST: RAIGAD 410206 PAN: AJOPK7443E . APPELLANT VS. THE ADDL. COMMISSIONER OF INCOME TAX, PANVEL RANGE, PANVEL . RESPONDENT APPELLANT BY : SHRI Y.P. PANDITH RESPONDENT BY : SHRI P.S. NAIK DATE OF HEARING : 28-10-2014 DATE OF PRONOUNCEMENT : 31-10-2014 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CI T(A)-I, THANE DATED 22-03-2012 RELATING TO ASSESSMENT YEAR 20 06-07 IS AGAINST ORDER PASSED U/S.271D OF THE INCOME-TAX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRM ING THE PENALTY OF RS.21,38,000/- UNDER SECTION 271D OF THE IN COME TAX ACT, 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THE GENUINE REASONS AS DETAILED IN THE STAT EMENT OF FACTS BEFORE LEVYING THE PENALTY. SECTION 269SS OF TH E ACT CAN BE APPLIED ONLY WHERE THE MONEY PASSES FROM ONE PER SON TO ITA NO.1246/PN/2012 SHRI BABU KRISHNAN KUTTY 2 ANOTHER BY WAY OF LOAN OR DEPOSIT, BUT IN THE INSTANT CASE, NO SUCH TRANSFER OF MONEY HAS TAKEN PLACE IN THE NATUR E OF LOAN FROM THE LENDER'S ACCOUNT TO THE APPELLANT'S ACCOUNT BUT THE DEBT IS ACKNOWLEDGED BY PASSING ENTRY IN THE BOOKS O F ACCOUNT, DEPENDING UPON THE FACTS OF THE CASE. THE FA CTS OF THE CASE WAS THAT THERE WAS NO FACTUAL TRANSFER OF CASH BETWEEN THE PARTIES TO THE TRANSACTION AND MERE BOOK ENTRIE S WERE RECORDED WHICH DOES NOT ATTRACT PENALTY U/S.271D OF THE INCOME-TAX ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THE CIRCUMSTANCES OF THE TYPOGRAPHICAL ERRO R OCCURRED IN THE ANNEXURE TO FORM NO.3CD AND THE SUBMISSIONS M ADE INCLUDING LEDGER ACCOUNT IN CONNECTION THEREWITH AT TH E TIME OF ASSESSMENT. 4. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, ADD OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT, THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED RETURN OF INCOME D ECLARING TOTAL INCOME OF RS.14,58,120/-. THE ASSESSEE WAS CARRYIN G ON THE BUSINESS OF MECHANICAL CONTRACTOR. THE ASSESSING OFFICER NO TED THAT THE ASSESSEE HAD CLAIMED 50% OF THE CONTRACT RECEIPTS AS EXPENDITURE INCURRED ON LABOUR CHARGES. SINCE THE ASSESSEE FAILED TO PRODUCE PART OF THE VOUCHERS IN SUPPORT OF THE SAID EXPENSES, THE ASS ESSING OFFICER DISALLOWED A SUM OF RS.1,00,000/- AND THE BALANCE EXPENDIT URE WAS ALLOWED BY THE ASSESSING OFFICER. FURTHER, FOR PERSONAL USE OF CAR AND TELEPHONE AND MOBILE, DISALLOWANCE WAS MADE AND THE INCOME WAS COMPUTED AT RS.15,87,957/- VIDE ORDER PASSED UNDER SEC TION 143(3) OF THE ACT DATED 30.12.2008. THEREAFTER, THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE UNDER SECTION 271D OF THE ACT ON 16.12.2010 . ALONG WITH ITA NO.1246/PN/2012 SHRI BABU KRISHNAN KUTTY 3 AUDIT REPORT, ANNEXURE-A WAS ANNEXED BY THE AUDITOR GIV ING PARTICULARS OF LOAN OR DEPOSIT ACCEPTED AND PAID IN THE AM OUNT EXCEEDING THE LIMIT SPECIFIED IN SECTION 269SS AND 269T OF TH E ACT. AS PER THE SAID ANNEXURE-A, THE ASSESSEE WAS FOUND TO HAV E RECEIVED LOAN OF RS.26,38,000/- IN CASH FROM ONE SHRI C. RAJENDRAN. THE EXPLANATION OF THE ASSESSEE WAS THAT THE AMOUNT WAS PA YABLE TO SHRI C. RAJENDRAN BY PASSING JOURNAL ENTRIES, HOWEVER, THE SA ME WAS MENTIONED BY MISTAKE AS CASH LOAN BY THE AUDITOR IN THE ANNEXURE TO FORM NO.3CD TO AUDIT REPORT. THE ASSESSEE FURTHER STAT ED THAT CONFIRMATION FROM SHRI C. RAJENDRAN REGARDING THE AMOUNT PAID WAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AND THE AS SESSING OFFICER HAD ACCEPTED THE SAME AFTER DUE VERIFICATION AND PA SSED THE ASSESSMENT ORDER ACCORDINGLY. IT WAS FURTHER CLAIMED BY THE ASSESSEE THAT ACKNOWLEDGEMENT OF THE DEBT BY THE ASSESSEE BY PASSING A JO URNAL ENTRY IN ITS BOOKS OF ACCOUNT WOULD NOT COME WITHIN AMBIT OF THE LOAN OR DEPOSIT AS MENTIONED IN SECTION 269SS OF THE ACT, AS T HERE WAS NO TRANSFER OF MONEY FROM ONE PERSON TO ANOTHER PERSON. T HE SUBMISSIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE A DDL.CIT IN VIEW OF THE FACT THAT THE CA, WHO HAD SIGNED THE AUDIT REPORT WAS ALSO REPRESENTING THE ASSESSEE IN ASSESSMENT PROCEEDINGS AN D FURTHER, SHRI C. RAJENDRAN HAD NOT BEEN FILED ANY RETURN OF INCOME NOR WAS PRODUCED BEFORE THE ASSESSING OFFICER. IN VIEW THEREOF, THE ADDL.CIT LEVIED PENALTY OF RS.26,38,000/- UNDER SECTION 271D OF THE ACT. 5. THE CIT(A) ACKNOWLEDGED THAT DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER HAD VERIFIED VARIOUS EXPENSES AND LABOUR CHARGES, BUT OBSERVED THAT THE ASSESSEE HAD BO RROWED CASH ITA NO.1246/PN/2012 SHRI BABU KRISHNAN KUTTY 4 LOANS FROM SHRI C. RAJENDRAN AT THE WORK SITE AND MADE P AYMENTS FOR VARIOUS EXPENSES AGAINST WHICH THE AUDITOR HAD HIMSELF REP ORTED THE RECEIPT OF CASH LOAN FROM SHRI C. RAJENDRAN. THE CIT(A) UPH ELD THE LEVY OF PENALTY UNDER SECTION 271D OF THE ACT EXCEPT FOR A LOAN OF RS.5,00,000/- WHICH WAS RECEIVED BY ACCOUNT PAYEE CHEQUE. 6. THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF TH E PENALTY UNDER SECTION 271D OF THE ACT AT RS.21,38,000/-. THE LEA RNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ANNEXURE-A TO THE AUDIT REPORT REFERS TO CASH LOAN OF R S.26,38,000/- BUT THIS NOTE IS NOT CORRECT AS THE SAID SUM ALSO INCLUDE S A SUM OF RS.5,00,000/- RECEIVED THROUGH CHEQUE. IT WAS FURTHER PO INTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT PERUSAL OF COPY OF ACCOUNT PLACED AT PAGE 36 OF THE PAPER BOOK WO ULD REFLECT THAT THE ASSESSEE HAD NOT RECEIVED ANY CASH, BUT THE ENTRIE S WERE MADE THROUGH JOURNAL ENTRIES ON ACCOUNT OF EXPENDITURE INCURR ED BY THE SAID SHRI C. RAJENDRAN FOR CARRYING OUT THE JOB WORK AT KERA LA. OUR ATTENTION WAS FURTHER DRAWN TO THE LETTER OF SHRI C. RAJE NDRAN DATED 11.12.2008 PLACED AT PAGE 22 OF THE PAPER BOOK IN WHICH, H E CONFIRMED THE BUSINESS ARRANGEMENT AND THE JOBS EXECUT ED AT KERALA. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DREW OUR ATTENTION TO THE QUERY LETTER ISSUED BY THE ASSESSING O FFICER DURING THE ASSESSMENT PROCEEDINGS, WHICH WERE PLACED AT 31 AND 32 OF THE PAPER BOOK, IN WHICH THE ASSESSEE WAS QUERIED ABOUT THE FRESH UNSECURED LOAN OF RS.26,38,000/- RAISED. THE LEARNED AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE POINTED OUT THAT NECESSARY REPLIES WE RE FILED AND NO ADDITION WAS MADE BY THE ASSESSING OFFICER WHILE COMPLETING THE ITA NO.1246/PN/2012 SHRI BABU KRISHNAN KUTTY 5 ASSESSMENT IN THE HANDS OF THE ASSESSEE. OUR ATTENTION WAS ALSO DRAWN TO THE ORDER OF CIT(A), WHO IN TURN HAD ACCEPTED T HE PLEA OF THE ASSESSEE THAT THE SAID SHRI C. RAJENDRAN HAD SOURCED T HE CASH PAYMENT AT SITE AND IN THE ABSENCE OF ANY CASH LOAN REC EIVED, THERE IS NO MERIT IN LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE PLACING RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW, POIN TED OUT THAT THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE OF THE SU B-CONTRACT AND NO RELIANCE COULD BE PLACED ON THE LETTER OF SHRI C. RAJENDRAN. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MECHANICAL CONTRACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS A WARDED A CONTRACT FOR FABRICATION JOB INCLUDING PIPING AT THE PATALGAN GA WORKS OF M/S. BOMBAY DYEING & MANUFACTURING COMPANY LTD. AND THE SAID JOB WAS SUB-CONTRACTED BY THE ASSESSEE TO SHRI C. RAJENDR AN. THE ASSESSING OFFICER HAD VIDE PARA 4 OF THE ASSESSMENT ORDER CONSIDERED THE EXPENDITURE OF RS.1,10,37,179/- DEBITED UNDER THE H EAD LABOUR CHARGES. AFTER CONSIDERING THE REPLY OF THE ASSESSEE A ND PERUSING THE VOUCHERS, THE ASSESSING OFFICER DISALLOWED A SUM OF RS.1,00,000 /- OUT OF THE SAID EXPENDITURE. THE ASSESSEE ON THE OTHER HAN D, CLAIMS THAT IN RESPECT OF THE PIPING JOB WORK WHICH WAS SUB-CONTRACT ED TO SHRI C. RAJENDRAN, CERTAIN EXPENSES AND LABOUR CHARGES WERE PA ID BY THE SAID PERSON AT THE SITE OF THE PROJECT ITSELF. THE SAID EXPEN DITURE WAS NOT REIMBURSED BY THE ASSESSEE BECAUSE OF SHORTAGE OF FUND S. THE ASSESSEE HAS PLACED ON RECORD THE CONFIRMATION RECEIVED FROM SHRI C. ITA NO.1246/PN/2012 SHRI BABU KRISHNAN KUTTY 6 RAJENDRAN AT PAGE 22 OF THE PAPER BOOK. PERUSAL OF WH ICH REFLECTS THE UNDERSTANDING BETWEEN THE ASSESSEE AND THE SAID PERSO N AND ALSO THE AMOUNT OF RS.26,38,000/- HAVING BEEN INCURRED BY SHRI C. RA JENDRAN. THE SAID LETTER DATED 11.12.2008 IS FURTHER WITNESSED BY T HE MANAGER OF INDIAN BANK, KAITHAKODE BRANCH. THE SAID LETTER ADMITT EDLY, WAS FILED DURING THE ASSESSMENT PROCEEDINGS AS IS APPARENT FRO M THE ORDER PASSED BY THE ADDL.CIT UNDER SECTION 271D OF THE ACT, W HO UNDER PARA 1 PAGE 2 OF THE ORDER IMPOSING PENALTY UNDER SECTION 271 D OF THE ACT HAS REPRODUCED THE LETTER DATED 29.12.2008 FILED BY THE A SSESSEE. THE RELEVANT EXTRACT OF THE LETTER IS AS UNDER:- . I AM IN RECEIPT OF YOUR ABOVE REFERRED NOTICE NO TED THE CONTENTS OF IT. IN THIS CONNECTION I WOULD LIKE TO ST ATE THAT MR. C. RAJENDRAN HAD NO PAN CARD SINCE HE WAS A NON-RESIDEN T INDIAN UPTO F.Y. 2007-08. THE AMOUNT PAID BY HIM IN MEETING T HE LABOUR AND OTHER COSTS OF THE PROJECT WAS FROM HIS FOREIGN INCOME WHICH WAS NOT TAXABLE IN HIS HANDS IN INDIA. A PHOTOCOPY OF THE CONFIRMATION GIVEN BY THE C. RAJENDRAN AT THE TIME OF ASSESSMENT FOR THE AMOUNT SPENT BY HIM IS ENCLOSED HEREWITH FOR Y OUR REFERENCE. SIR, PRESENTLY I AM IN KERALA FOR MEDICAL TREATMENT AND IS EXPECTED TO COMPLETE THE TREATMENT COURSE BY THE FIRST WEEK OF JANUARY, 2011 AND RETURN TO PANVEL. ANY FURTHER INFOR MATION AS MAY BE REQUIRED BY YOU CAN BE FURNISHED ON MY RETURN. 9. THE POINT TO BE NOTED IN THIS CASE IS THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD ISSUED A QUERY LETTE R WHICH IS PLACED AT PAGES 31 AND 32 OF THE PAPER BOOK AND VIDE Q UESTION NO.2, THE ASSESSEE WAS REQUISITIONED TO EXPLAIN THE NATURE OF FR ESH UNSECURED LOAN OF RS.27,38,000/-. IN REPLY TO THE SAID Q UESTIONNAIRE, ASSESSEE CLAIMS TO HAVE GIVEN THE EXPLANATION AND FILED CON FIRMATION RECEIVED FROM SHRI C. RAJENDRAN IN RESPECT OF THE BUSINES S ARRANGEMENT BETWEEN TWO PARTIES. THE SAID BUSINESS ARR ANGEMENT AND THE PAYMENT TO BE MADE ON ACCOUNT OF THE SAID ARR ANGEMENT HAD BEEN ACCEPTED BY THE ASSESSING OFFICER DURING THE ASSES SMENT ITA NO.1246/PN/2012 SHRI BABU KRISHNAN KUTTY 7 PROCEEDINGS AND NO ADDITION HAS BEEN MADE ON THIS ACCOU NT. HOWEVER, THE AUDITOR IN THE ANNEXURE TO THE AUDIT REPOR T HAD REPORTED THE ASSESSEE TO HAVE RECEIVED THE LOAN / DEPOSIT IN CA SH OF RS.26,38,000/- IN VIOLATION OF THE PROVISIONS OF SECTION 269S S OF THE ACT. CONSEQUENT TO WHICH, THE ADDL.CIT HAD ISSUED SHOW C AUSE NOTICE TO THE ASSESSEE AS TO WHY PENALTY UNDER SECTION 271D OF THE ACT SHOULD NOT BE LEVIED UPON THE ASSESSEE. 10. THE PROVISIONS OF SECTION 271D OF THE ACT WERE ATTRA CTED IN ALL SUCH CASES WHERE, THE ASSESSEE HAD ACCEPTED A LOAN OR DEPOSIT IN CASH OVER AND ABOVE RS.20,000/- IN WHICH CASES, THE ASSESSEE IS HELD EXIGIBLE TO LEVY THE PENALTY UNDER SECTION 271D OF THE ACT . HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE BEFORE US, THE ISSUE ARISING IS WHETHER THE TRANSACTION BETWEEN THE ASSESSEE AND SHRI C. RAJENDRAN IS ON ACCOUNT OF LOAN OR ADVANCES AS REPORTE D BY THE AUDITOR OR BUSINESS ARRANGEMENT UNDER WHICH, SHRI C. RAJE NDRAN HAD MADE CERTAIN PAYMENTS WHICH HAD BEEN RECOGNIZED BY THE ASSESSEE BY WAY OF PASSING JOURNAL ENTRIES IN THE BOOKS OF ACCOUNT AN D WAS NOT IN NATURE OF LOAN AND ADVANCES. WE ARE OF THE VIEW THAT TH E BUSINESS ARRANGEMENT MADE BY THE ASSESSEE SHRI C. RAJENDRAN IS ESTABLISHED UNDER WHICH, CERTAIN EXPENDITURE WAS INCURRED BY SHRI C . RAJENDRAN IN CASH AT KERALA, IN VIEW OF THE SUB-CONTRACT AWARDED TO HIM BY THE ASSESSEE AND THE ASSESSEE ACKNOWLEDGED THAT THE SAID EXPENDITURE WAS TO BE REIMBURSED TO SHRI C. RAJENDRAN. NECESSARY JOURNAL ENTRIES IN THIS REGARD WERE PASSED IN THE BOOKS OF ACCOUNT OF TH E ASSESSEE AND SUCH ENTRIES DO NOT ESTABLISH THE CASE OF THE REVENUE THAT THE ASS ESSEE HAD RECEIVED LOAN / ADVANCES FROM SHRI C. RAJENDRAN IN C ASH. WE FIND ITA NO.1246/PN/2012 SHRI BABU KRISHNAN KUTTY 8 NO MERIT IN THE ORDER OF ADDL.CIT IN THIS REGARD. IN VIEW O F THE TOTALITY OF ABOVE FACTS AND CIRCUMSTANCES, WE HOLD THAT THERE IS N O MERIT IN THE LEVY OF PENALTY UNDER SECTION 271D OF THE ACT AND WE DIRE CT THE ASSESSING OFFICER TO DELETE THE SAME. THE GROUNDS OF APPE AL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2014. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST OCTOBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, THANE; 4) THE CIT-I, THANE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE