ITO 13(3)(4), MUMBAI V. SHAH TARACHAND FOJMAL & CO., MUMBAI

ITA 1323/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0880 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: R S CHOKSHI
• Keywords: Business income; Reasonable cause
• Section: 273B; 271D; 271E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1323/MUM/2009 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER - 13(3)(2) M/S. SHAH TARACHAND FOJMAL & CO. ROOM NO. 429, 4TH FLOOR 17/19, LAKSHMI DAYAL BUILDI NG AAYAKAR BHAVAN, M.K. ROAD VS. KHADAK STREET, MUMBAI 400009 MUMBAI 400020 PAN - AANFS 1045 C APPELLANT RESPONDENT APPELLANT BY: SHRI A.K. NAYAK RESPONDENT BY: SHRI R.S. CHOKSHI O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) DELETING PENALTY LEVIED UNDER SECTION 271E R.W.S. 269T AMOUN TING TO RS.12,30,525/-. 2. THE FACTS AND CIRCUMSTANCES LEADING TO LEVYING OF P ENALTY WERE THAT THE ASSESSEE TILL LAST YEAR WAS DERIVING ONLY COMMI SSION INCOME. HOWEVER, FROM THE YEAR UNDER CONSIDERATION, THE ASSESSEE STA RTED TRADING BUSINESS THEREBY EARNING BUSINESS INCOME. THE RETURN WAS FIL ED ON 20.10.2005 DECLARING TOTAL INCOME AT RS.5,66,501/-. THE ASSESS EE RECEIVED ADVANCES OF RS.22.10 LACS IN THE YEAR 1982 ONWARDS FROM VARIOUS PARTIES MOSTLY FROM AHORE AREA OF RAJASTHAN. DURING THE ASSESSMENT PROC EEDINGS, THE A.O. NOTICED THAT DURING THE YEAR THE ASSESSEE REPAID C ERTAIN LOANS TOTALLING TO RS.12,34,706/- TO 24 PARTIES IN TWO OR THREE INSTAL MENTS IN SUCH A WAY THAT EACH INSTALMENT OF PAYMENT WAS OF RS.20,000/- OR BE LOW. OUT OF TOTAL 68 INSTALMENTS ONLY 5 INSTALMENTS PAYMENTS WERE OF RS. 22,000/- OR RS.24,653/-. THE A.O. HAD GIVEN LIST OF SUCH PARTIE S AND PAYMENT DETAILS ON PAGE 2 AND 3 OF ASSESSMENT ORDER. THE ASSESSEE EXPL AINED TO THE A.O. THAT THESE CASH PAYMENTS WERE MADE BY WITHDRAWING THE CA SH FROM BANK AND DETAILS OF BANK STATEMENTS WERE ALSO FILED. IT WAS SUBMITTED BEFORE THE A.O. THAT: - ITA NO.1323/MUM/2009 M/S. SHAH TARACHAND FOJMAL & CO. 2 A) THESE LOANS WERE TAKEN FROM VARIOUS PARTIES IN THE YEAR 1980 TO 1982 WHICH WAS AN UNDISPUTED FACT ACCEPTED BY THE A .O. B) IT WAS ALSO A FACT ADMITTED BY THE A.O. THAT THESE LOANS WERE PAID IN CASH AFTER WITHDRAWING THE AMOUNT FROM BANK ACCO UNT. LOAN CONFIRMATION OF ALL 24 PARTIES WERE FILED BEFORE A. O. C) THESE PARTIES WERE RESIDING IN REMOTE PARTS OF VILL AGES WHERE IT WAS DIFFICULT TO ENFORCE THE REPAYMENT BY CHEQUE. D) SOME OF THE PARTIES DIES AND THEREFORE THE CHEQUE C OULD NOT HAVE BEEN DRAWN IN THE NAME OF DECEASED PERSONS. E) CBDTS CIRCULAR NO. 345 DATED 28.06.1982 SAYS THAT THE PURPOSE OF INSERTING SECTION 269T WAS TO CURB PROLIFERATION OF BLACK MONEY AND IN THE PRESENT CASE THERE HAD NOT BEEN CASE OF INTR ODUCING BLACK MONEY. 3. THE A.O. WAS NOT CONVINCED WITH THE EXPLANA TION FURNISHED BY THE ASSESSEE. THE A.O. MENTIONED IN THE PENALTY ORDER T HAT THE CASES CITED BY THE ASSESSEE WERE DIFFERENT ON FACTS AND THEREFO RE WERE NOT APPLICABLE. THE A.O. FURTHER HELD THAT MOST OF THE REPAYMENT OF LOANS HAD BEEN MADE TO THE PARTIES STATIONED AT AHORE A ND PALI IN RAJASTHAN WHICH WERE NOT SMALL VILLAGES BUT WERE TO WNS HAVING ALL THE BANKING AND OTHER MUNICIPAL FACILITIES. IN SOME OF THE ADDRESS GIVEN THE LAND MARK WAS NEAR STATE BANK OF JAIPUR, WHICH IT SELF SHOWED THAT BANKING FACILITIES WERE AVAILABLE IN THOSE PLACES. THE A.O. ALSO NOTICED THAT PARTIES AT SL.NO. 20 & 21 WERE THE RESIDENTS O F THANE CITY AND BHULESHWAR, MUMBAI TO WHOM ASSESSEE PAID CASH OF RS .65,449/- AND RS.87,077/- AND THEREFORE THE ASSESSEES ARGUMENT W AS NOT CORRECT THAT PARTIES WERE RESIDING IN SMALL VILLAGES. THE A.O. F URTHER HELD THAT THE REASONABLE CAUSE OF SUCH PAYMENT WAS TOTALLY ABSENT IN THE CASE OF ASSESSEE. THE A.O. ALSO DOUBTED THE EXISTENCE OF SU CH PARTIES AS THE LOANS WERE OUTSTANDING FOR A PERIOD OF MORE THAN 25 YEARS AND THERE WAS NO SUCH URGENCY FOR REPAYMENT IN CASH. EVEN IN CASE WHERE PARTY DIED, NO EVIDENCE WAS FILED THAT HEIRS WERE NOT HAV ING BANK ACCOUNTS. ITA NO.1323/MUM/2009 M/S. SHAH TARACHAND FOJMAL & CO. 3 IN THESE FACTS AND CIRCUMSTANCES, THE A.O. LEVIED P ENALTY OF RS.12,30,528/- UNDER SECTION 271E OF THE ACT. 3. THE CIT(A), AFTER CONSIDERING ASSESSEES STATEMENT, DELETED THE PENALTY STATING AS UNDER: - 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND CI RCUMSTANCES CONSIDERED BY A.O. FOR LEVYING PENALTY U/S. 271E OF THE ACT. IN THIS CASE, (A) THE LOANS TAKEN WERE ACCEPTED BY THE DEPARTMENT AS GENUINE AS THE SAME WERE APPEARING IN THE BALANCE SHEET OF LAST MA NY YEARS AND NO ADVERSE INFERENCE WAS DRAWN BY A.O. IN ANY OF SUCH PAST ASSESSMENT YEARS. THEREFORE, THE A.O. WAS NOT JUSTIFIED AT THE STAGE OF LEVYING PENALTY IN DOUBTING THE EXISTENCE OF SUCH PARTIES O R GENUINENESS THEREOF. THE REPAYMENT OF SUCH LOAN OR DEPOSIT IN CASH IN EX CESS OF RS.20,000/- IS PROHIBITED BY SECTION 269T READ WITH SECTION 271 E OF THE ACT. HOWEVER, PENALTY LEVIABLE U/S 271E IS SUBJECT TO PR OVISIONS OF SECTION 273B ACCORDINGLY TO WHICH PROVISIONS PENALTY IS NOT TO BE LEVIED WHERE ASSESSEE PROVES THAT THE FAILURE WAS ON ACCOUNT OF REASONABLE CAUSE. (B) THE APPELLANT HAS ARGUED THAT THE FIRM WAS FORCED T O MAKE PAYMENT IN CASH AS THE PARTIES WERE IN REMOTE AREA AND WERE AL SO NOT HAVING BANK ACCOUNTS. THERE APPEARS SOME FORCE IN APPELLANTS A RGUMENT. IT IS A FACT ADMITTED EVEN BY THE A.O. THAT FOR PAYMENT OF SUCH PARTIES, EQUIVALENT AMOUNT WAS WITHDRAWN FROM THE FIRMS BANK ACCOUNT. HAD, THE PARTIES WERE HAVING BANK ACCOUNTS, THE APPELLANT COULD HAVE EASILY MAKE PAYMENT BY CHEQUE AND IT COULD HAVE SAVED THE APPEL LANT FROM WITHDRAWING AND DEALING IN CASH AND TAKING RISK OF CARRYING CASH TO THAT AREA FOR MAKING CASH PAYMENT. DURING APPELLATE PROC EEDINGS, THE APPELLANT HAS FILED CONFIRMATION OF THOSE PARTIES. THESE WERE ALSO FILED BEFORE A.O. THE SIGNATURES AND THUMB IMPRESSION AFF IXED THEREON ALSO SUGGEST THAT THOSE PARTIES MAY NOT BE HAVING BANK A CCOUNTS. THE PARTY HAVING ADDRESS OF BHULESHWAR MUMBAI HAD ALSO AFFI XED THUMB IMPRESSION AND THEREFORE, PAYMENT IN CASH WAS JUSTI FIED TO THAT PARTY. THE APPELLANT HAS ALSO FILED DEATH CERTIFICATES IN RESPECT OF SOME PARTIES IN SUPPORT OF CLAIM THAT PAYMENT WAS THEREFORE MADE TO THEIR HEIRS WHO WERE ALSO NOT HAVING BANK ACCOUNTS. THE APPELLANT H AS ALSO BEEN AN ARGUMENT THAT THE ACTIVE PARTNER SHRI FUTERMAL MEHT A IS VERY OLD AND STUDIED UPTO VI STANDARD ONLY AND WAS NOT HAVING AN Y KNOWLEDGE OF RELEVANT PROVISIONS OF SECTION AND THEREFORE, THERE WAS NO INTENTION TO DO ANYTHING WRONG. THE APPELLANTS ARGUMENT APPEARS TO HAVE SOME FORCE BECAUSE IN THESE TRANSACTIONS, THE LOANS WERE GENUI NE AND THE CASH WAS DULY WITHDRAWN FROM THE BANK. THE APPELLANT WAS HAV ING BONAFIDE AND REASONABLE CAUSE AS SUPPORTED BY VARIOUS CASE LAWS: (2008) 4 DTR 36 (GUJ) 288 ITR 310 (P&H) 277 ITR 420 (P&H) THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT APPELLANTS EXPLANATION/ARGUMENT WAS FALSE. IN CASE OF 284 ITR 609 (MAD) THE COURT UPHELD THE FINDING OF TRIBUNAL AND CIT(A) THAT ALLEGED ITA NO.1323/MUM/2009 M/S. SHAH TARACHAND FOJMAL & CO. 4 CONTRAVENTION DID NOT RESULT IN ANY UNACCOUNTED TRA NSACTION. SIMILARLY, IN CASE OF APPELLANT THERE WERE NO UNACCOUNTED TRANSAC TIONS. IN 280 ITR 129, THE MADRAS HIGH COURT UPHELD THE REASONABLE CA USE FOR CASH PAYMENT WHERE THE LADY WAS NOT HAVING BANK ACCOUNT. THEREFORE, TAKING OVER ALL VIEW OF THE MATTER AND LOOKING INTO THE FA CTS AND CIRCUMSTANCES OF THE CASE, GENUINENESS OF THE LOANS, WITHDRAWALS OF CASH FROM BANK, ABSENCE OF BANK ACCOUNTS AND OTHER CIRCUMSTANCES, T HE A.O. WAS NOT JUSTIFIED IN LEVYING PENALTY U/S. 271E OF THE ACT. THE PENALTY LEVIED BY A.O. IS THEREFORE, DELETED. 4. THE LEARNED D.R. SUPPORTED THE ORDER OF THE ADDL. C OMMISSIONER OF INCOME TAX WHEREAS THE LEARNED COUNSEL RELIED ON TH E ORDER OF THE CIT(A). IN ADDITION LD.AR ALSO RELIED ON THE PRINCIPLES ESTABL ISHED BY THE ITAT ORDER IN DCIT VS. VIGNESH FLAT HOUSING PROMOTERS 303 ITR (AT ) 453 AND JITU BUILDERS (P) LTD. VS. ACIT 125 TTJ (AHD) (TM) 721. 5. WE HAVE CONSIDERED THE ISSUE AND LEGAL PROPOSITIONS ON THIS ISSUE. WE AGREE WITH THE FINDINGS OF THE CIT(A) THAT THERE IS REASONABLE CAUSE IN PAYING THE AMOUNTS IN CASH CONSIDERING THE FACT THAT THESE AMOUNTS WERE RECEIVED FROM PEOPLE IN RAJASTHAN WAY BACK IN 1981-82 AND TH OSE PEOPLE DOES NOT HAVE ANY BANKING FACILITIES. THESE FACTS WERE EXAMI NED BY THE CIT(A) AND HAS COME TO CORRECT CONCLUSION THAT THERE IS A REAS ONABLE CAUSE. THE LEGAL PRINCIPLES ALSO ARE CLEARLY ESTABLISHED BY THE ABOV E TWO JUDGEMENTS RELIED UPON BY THE LEARNED COUNSEL. IN THE CASE OF DCIT VS . VIGNESH FLAT HOUSING PROMOTERS 303 ITR (AT) 453 IT WAS HELD AS UNDER: - THAT UNDER SECTION 273B A JUDICIAL DISCRETION IS L EFT WITH THE ASSESSING AUTHORITY NOT TO LEVY A PENALTY UNDER SECTION 271D IF THE AUTHORITY IS SATISFIED THAT THERE WAS REASONABLE CAUSE FOR NOT C OMPLYING WITH THE PROVISIONS OF SECTION 269SS. IN THE INSTANT CASE TH E UNDISCLOSED INCOME AS DECLARED IN THE BLOCK RETURN REMAINED THE ASSESS ED INCOME. THE REVENUE DID NOT DOUBT THE VERACITY OF THE CREDITORS . THE ASSESSING OFFICER DID ACCEPT THE CREDITS AS GENUINE. MOST OF THE CREDITORS WERE AGRICULTURISTS, RESIDING IN REMOTE VILLAGES AND MAN Y OF THEM DID NOT HAVE ANY BANK ACCOUNT. THE ASSESSEE WAS NOT PROFESSIONAL LY MANAGED. FROM THIS IT COULD BE CONCLUDED THAT THE BREACH FLOWED F ROM THE BONA FIDE BELIEF. EX FACIE IT WAS A VENIAL BREACH. CASH WAS A CCEPTED BECAUSE OF BUSINESS EXIGENCIES. AS SUCH THERE EXISTED REASONAB LE CAUSE FOR ACCEPTING CASH LOANS. PENALTY COULD NOT BE LEVIED. IN THE CASE OF JITU BUILDERS (P) LTD. 124 TTJ (AH D.) (TM) 721 IT WAS HELD AS UNDER: - ITA NO.1323/MUM/2009 M/S. SHAH TARACHAND FOJMAL & CO. 5 PENALTY UNDER S. 271D CONTRAVENTION OF S. 269SS REASONABLE CAUSE ASSESSEE COMPANY IS A BUILDER AND DEVELOPER OF LA NDS IT WANTED TO SEIZE THE OPPORTUNITY TO PURCHASE THE LAND OWNED BY ONE M THOUGH THE ASSESSEE HAD A CASH BALANCE OF MORE THAN RS.12,00,0 00 THE MARKET PRICE OF THE LAND WAS BETWEEN RS.15 AND 20 LAKHS AN D, THEREFORE, IT RESORTED TO BORROWING A SUM OF RS.15 LAKHS FROM NK IN CASH AS THERE IS AN ADVANTAGE OF READY CASH BACKING IN NEGOTIATING F OR PURCHASE OF AGRICULTURAL LANDS HOWEVER, THE NEGOTIATIONS DID NOT FRUCTIFY AND THE DEAL FELL THROUGH THIS IS SUPPORTED BY THE AVERME NTS IN THE AFFIDAVIT FILED BY M SAID AVERMENTS HAVE NOT BEEN IMPEACHED OR FOUND FALSE SINCE THE DEAL DID NOT MATERIALIZE, ASSESSEE DEPOSI TED THE CASH IN THE BANK AND ISSUED A CHEQUE IN FAVOUR OF NK THERE IS NOTHING TO SUGGEST THAT THE ASSESSEES EXPLANATION IS IN ANY MANNER IM PROBABLE OR IMPOSSIBLE THEREFORE, THERE WAS REASONABLE CAUSE FOR VIOLATION OF S. 269SS AND PENALTY UNDER S. 271D IS NOT LEVIABLE. 6. IN VIEW OF THE FACTS AS BROUGHT OUT BY THE CIT(A) A ND THE LEGAL PRINCIPLES ALREADY CONSIDERED BY THE COORDINATE BEN CHES, WE ARE OF THE VIEW THAT THERE IS NO CASE FOR LEVY OF PENALTY UNDER SEC TION 271E FOR VIOLATION OF PROVISIONS OF SECTION 269T. ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY 2010. SD/- SD/- (N.V. VASUDEVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH JULY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIII, MUMBAI 4. THE CIT XIII, MUMBAI CITY 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.