M/s. Karnataka Kshatriya Maratha Parishath, Hassan V. ACT, Hassan

ITA 139/BANG/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51302 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: C RAMESH
• Keywords: Charitable institution; Reasonable cause
• Section: 273B; 12A

Judgement Text

PAGE 1 OF 6 ITA NO.139/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.139/BANG/2011 (ASSESSMENT YEAR 2005-06) M/S KARNATAKA KSHATRIYA MARATHA PARISHATH, AMBABHAVANI KALYANA MANDIRA, AGRAHARA, HASSAN. - APPELLANT PA NO.AABTP 1583 E VS THE ADDITIONAL COMMISSIONER OF INCOME-TAX, HASSAN RANGE, HASSAN. - RESPONDENT DATE OF HEARING : 13/10/2011 DATE OF PRONOUNCEMENT : 14 /10/2011 APPELLANT BY : SHRI C RAMESH, C .A. RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JCI T ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSE E IS DIRECTED AGAINST THE ORDER OF CIT(A), MYSORE DATED 30.11.2010. THE RELE VANT ASST. YEAR IS 2005-06. THE ORDER OF THE CIT(A) EMANATES FROM THE ORDER OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX LEVYING PENALT Y U/S 271D OF THE ACT AMOUNTING TO RS.13,40,500/-. 2. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A CHARITABLE INSTITUTION REGISTER ED UNDER KARNATAKA SOCIETIES REGISTRATION ACT. THE SOC IETY IS REGISTERED U/S 12A OF THE INCOME TAX ACT W.E.F. 26.3 .2008. DURING THE PREVIOUS YEAR RELEVANT TO AY 2005-06, THE ASSES SEE HAS RECEIVED LOAN/ADVANCES FROM 33 PERSONS EXCEEDING RS. 20,000/- IN EACH CASE AND TOTALING TO RS.13,40,500/-. THE AO HE LD THAT THE PAGE 2 OF 6 ITA NO.139/BANG/2011 2 ADVANCES HAVE BEEN RECEIVED IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THE ASSESSEE WAS SERVED WITH A SHOW CAUSE NOTICE BY THE AO, DIRECTING AS TO WHY PENALTY AS CONTEMPLATED U/S 271D OF THE ACT SHOULD NOT BE LEVI ED. IT WAS EXPLAINED BY THE ASSESSEE THAT THE PERSONS WHO HAVE ADVANCED ARE MEMBERS OF THE SOCIETY AND THEY HAVE MADE ADVANCES ONLY FOR THE PURPOSE OF PURSUING THE CHARITABLE ACTIVITY OF THE ASSESSEE. IT WAS STATED THAT DURING THE PREVIOUS YEAR THE ASSESSEE H AS STARTED CONSTRUCTION OF A KALYANA MANTAP/COMMUNITY HALL. IT WAS FURTHER EXPLAINED THAT THERE IS NO INTEREST PAYABLE ON THESE LOANS AND THE TRANSACTION CANNOT BE CONSIDERED AS EITHER LOAN OR DEPOSIT AND COVERED UNDER THE PROVISIONS OF SECTION 269SS OF TH E ACT. DISAGREEING WITH THE EXPLANATION OFFERED, THE AO HAS LEVIED A PENALTY OF RS.13,40,500/- U/S 271D OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY, WH O DISMISSED THE APPEAL VIDE ORDER DATED 30.11.2010. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR SUBMITTED THAT DURING THE PREVIO US YEAR RELEVANT TO THE AY THE ASSESSEE HAS STARTED CONSTRU CTION OF A KALYANA MANTAP/COMMUNITY HALL AND FOR THIS PURPOSE, HE HAS MADE ADVANCES TO THE CONTRACTOR, FOR WHICH THE ASSESSEE DID NOT HAVE ENOUGH FUNDS. IT WAS STATED THAT IN VIEW OF THIS, THE ASSESSEE HAS RAISED FUNDS FROM THE MEMBERS OF THE SOCIETY, WHO H AVE ADVANCED MONEY FOR THE PURPOSE OF THE ACTIVITY OF THE ASSESS EE. THE LEARNED AR CONTENDED THAT THE MONEY SO RECEIVED ARE NEITHER IN THE NATURE OF LOAN NOR DEPOSIT AS CONTEMPLATED UNDER THE PROVI SIONS OF SECTION 269SS OF THE ACT. IT WAS STATED THAT THERE IS NO INTEREST PAYABLE AND PAGE 3 OF 6 ITA NO.139/BANG/2011 3 AT THE SAME TIME THE PERSON ADVANCING THE MONEY CAN NOT ENFORCE RECOVERY. CONSEQUENTLY, AMOUNTS RECEIVED CANNOT B E TERMED AS A LOAN/DEPOSIT FALLING WITHIN THE AMBIT OF SEC.269SS OF THE ACT. 5.1 THE LEARNED AR SUBMITTED THAT THE PROVISIONS O F SECTION 273B OF THE ACT PROVIDE THAT NO PENALTY CAN BE LEVI ED FOR THE FAILURE AS CONTEMPLATED U/S 271D OF THE ACT, IF IT IS PROVE D THAT THERE IS A REASONABLE CAUSE FOR SUCH FAILURE. IT WAS SUBMITTE D THAT THE ASSESSEE IS A CHARITABLE INSTITUTION AND WAS IN NEE D OF FUNDS FOR CONSTRUCTION AND SINCE THE ASSESSEE WAS NOT IN A PO SITION TO RAISE FUNDS IN THE FORM OF DONATIONS, IT WAS UNDER THE CO NSTRAINT OF RAISING FUNDS FROM PUBLIC. THE LEARNED AR SUBMITTED THAT U NDER THESE CIRCUMSTANCES, THE ASSESSEE WAS FORCED TO RECEIVE T HE ADVANCES IN CASH FROM THE MEMBERS AND SINCE THE TRANSACTIONS AR E GENUINE, THE PENALTY LEVIED U/S 271D OF THE ACT MAY BE DELETED. 5.2 THE ASSESSEE RELIED ON THE DECISION OF DELHI H IGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTIONS) V ALL INDIA DEAF AND DUMB SOCIETY (2006) 283 ITR 113 WHEREIN IT HAS BEEN HELD THAT WHEN THERE ARE NO MALAFIDES AND THERE IS NO INTENT OF VIOLATING LAW, PENALTIES U/S 271D AND 271E OF THE ACT CANNOT BE LE VIED. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF ASSISTANT DIRECTOR OF INSPECTION (INVESTIGA TION) V A B SHANTHI AND CHAMUNDI GRANITES (P) LTD. V DEPUTY COM MISSIONER OF INCOME TAX & ANOTHER (2002) 255 ITR 258 WHEREIN IT W AS HELD THE MAIN OBJECT OF SECTION 269SS WAS TO CURB THIS MENAC E OF MAKING FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIVING AN EXPLANATION FOR THE SAME . IT WAS CONTENDED THAT IN THIS CASE, THE TRANSAC TIONS ARE PROVED TO BE GENUINE AND THERE WAS NO MALAFIDE INTENTION. THE ASSESSEE RELYING ON THE FOLLOWING DECISIONS :- PAGE 4 OF 6 ITA NO.139/BANG/2011 4 1) CIT V SPEEDWAY RUBBER (P) LTD. (2010) 326 ITR 31 (P&H); 2) ANDHRA BOMBAY CARRIERS V ADDL. CIT (2011) 12 TAXMAN 43 (HYD. ITAT). ARGUED THAT THERE WAS SUFFICIENT REASONABLE CAUSE F OR ACCEPTING THE LOAN IN CASH AND NO PENALTY COULD BE LEVIED U/S 271 D OF THE ACT. 6. THE LEARNED DR ON THE OTHER HAND RELIED ON THE FINDINGS OF THE INCOME TAX AUTHORITIES AND ALSO RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT REPORTED IN 311 ITR 4 19. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SECTION 269SS OF THE INCOME TA X ACT, 1961 CONTEMPLATES THAT NO PERSON SHALL, AFTER JUNE 30, 1 984 TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT, O THERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DR AFT IF THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMO UNT OF SUCH LOAN AND DEPOSIT EXCEEDS THE PRESCRIBED LIMIT. IN C ASE ANY DEPOSIT IS ACCEPTED CONTRARY TO THE ABOVE PROVISIONS IN TER MS OF SECTION 271D, SUCH PERSON SHALL BE LIABLE TO PAY BY WAY OF PENALTY A SUM EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. IN THE INSTANT CASE, THERE IS A CLEAR VIOLATION OF PRO VISIONS OF SECTION 269SS OF THE ACT. THOUGH THE LEARNED AR IN THE COU RSE OF HIS ARGUMENT HAD CLAIMED THE AMOUNT RECEIVED IS NOT A L OAN/DEPOSIT, BUT DONATION FOR THE PURPOSE OF CONSTRUCTION OF KAL YANA MANTAP/COMMUNITY HALL, WE ARE OF THE VIEW THAT THIS SUBMISSION IS WITHOUT MUCH SUBSTANCE. THE CONTENTION THAT AMOUNT S RECEIVED IS NOTHING BUT DONATION HAS NOT BEEN RAISED BEFORE T HE AUTHORITIES BELOW. MOREOVER, AS ON DATE, THE AMOUNT SO RECEIVE D HAS NOT BEEN TAKEN INTO THE CORPUS OF THE TRUST. HAD IT BEEN R ECEIVED AS A DONATION, THE AMOUNT SHOULD HAVE BEEN ACCOUNTED AS A VOLUNTARY CONTRIBUTION AND SHOULD NOT HAVE BEEN SHOWN AS A LI ABILITY IN THE PAGE 5 OF 6 ITA NO.139/BANG/2011 5 ASSESSEES BALANCE SHEET. THEREFORE, THE ASSESSEE HAS RECEIVED LOAN/ADVANCE IN EXCESS OF RS.20,000/- IN CASH AND H AS CLEARLY VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT . 7.1 WHEN THE PROVISIONS OF SECTION 269SS OF THE AC T IS VIOLATED, THE ASSESSEE CAN BE ABSOLVED FROM THE LIA BILITY OF PENALTY U/S 271D, IF THE ASSESSEE HAS BEEN ABLE TO PROVE TH AT THERE IS REASONABLE CAUSE FOR THE FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269SS OF THE ACT (REFER SEC.273B). IT WAS CONTENDED BY THE ASSESSEE THAT SINCE IT WAS IN URGENT REQUIREMENT O F FUNDS TO MEET DAY-TO-DAY EXPENSES OF CONSTRUCTION OF KALYANA MANTA P/COMMUNITY HALL, THE AMOUNT WAS BORROWED. THE LOANS/DEPOSITS TAKEN WERE DURING THE PERIOD APRIL TO OCTOBER, 2004. THE ASSE SSEE HAS NOT BEEN ABLE TO PROVE THAT THE AMOUNT RECEIVED DURING THE PERIOD WAS UTILIZED IMMEDIATELY. ON THE CONTRARY, THE CONSTRU CTION OF THE KALYANA MANTAP/COMMUNITY HALL ITSELF HAD COMMENCED MUCH SUBSEQUENT TO THE RECEIPT OF THE LOANS/DEPOSITS. I N OTHER WORDS, THE ASSESSEE HAD FAILED TO ESTABLISH THAT THERE WAS URG ENT REQUIREMENT OF MONEY FOR THE CONSTRUCTION ACTIVITY. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAD FAILED TO PROVE THAT THERE IS A REASONABLE CAUSE ON THE PART OF THE ASSESSEE IN NOT COMPLYING WITH THE PROVISIONS OF SECTION 269SS OF THE ACT. HENCE, WE FIND THERE IS NO INFIRMITY IN LEVYING OF PENALTY U/S 271D OF THE ACT AND WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PAGE 6 OF 6 ITA NO.139/BANG/2011 6 THE ORDER PRONOUNCED ON THE 14 TH DAY OF OCTOBER, 2011 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.