ITO, Wd 1(1), Aurangabad, Aurangabad V. Wens Cargo Movers Pvt. Ltd., Aurangabad

ITA 1417/PUN/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59982 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 273B; 27; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 1417/PN/10 (ASSTT. YEAR: 2006-07) INCOME-TAX OFFICER, .. APPELLANT WARD 1(1), AURANGABAD VS. WENS CARGO MOVERS P. LTD. .. RESP ONDENT VARDHAMAN CHAMBERS, MONDHA ROAD, AURANGABAD APPELLANT BY: SMT NEERA MALHOTRA RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING: 03.02.2012 DATE OF PRONOUNCEMENT: 08.02.2012 ORDER PER G.S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), AURANGABAD DATED 23.9.2010 WHICH, IN TURN, HAS ARISEN FROM THE PENALTY ORDER OF THE ADD L. COMMISSIONER OF INCOME-TAX DATED 25.5.2009 PASSED UNDER SECTION 271D OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSM ENT YEAR 2006-07. 2. IN THIS APPEAL, THE ISSUE PERTAINS TO PENALTY LEVI ED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX, AURANGABAD UNDER SECTION 27 1D OF THE ACT FOR THE REASON THAT THE ASSESSEE COMPANY ACCEPTED LOANS AMOUNTIN G TO RS 27,30,000/- FROM TWO PROPRIETARY CONCERNS OF ITS DIRECTO R OTHERWISE THAN THE MODES PRESCRIBED UNDER SECTION 269SS OF THE ACT. THE COMM ISSIONER OF INCOME-TAX (APPEALS) HAS DELETED THE PENALTY AGAINST WH ICH REVENUE IS IN APPEAL BEFORE US. 3. BRIEFLY STATED THE FACTS ARE THAT THE RESPONDENT-ASSE SSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER ALIA, ENGAGED IN THE BUSINESS OF RUNNING A TRANSPORT AG ENCY. THE CAPTIONED YEAR IS THE FIRST YEAR OF THE BUSINESS OPERATIONS OF THE ASSESSEE. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD RECEIVED SUMS TOTALING TO RS 27,30,000/- IN CASH FROM TWO CONCERNS, M/S WENS ROADLINES AND M/S R.S TRADERS, WHICH WERE THE PROPR IETARY CONCERNS OF ONE OF ITS DIRECTOR SHRI RAJENDRA VIJAYVARGIYA. AS THE SAME WAS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT, THE ASSESSING OFFICER REFERRED THE MATTER TO THE ADDL. COMMISSIONER OF INCOME-TAX, AURANGABAD FOR INITIATION OF PROCEEDINGS UNDER SECTION 271D OF THE ACT. THE ADDL. COMMISSIONER OF INCOME-TAX THEREAFTER ISSUED THE REQUISITE NOTICE REQUIRING THE ASSESSEE TO SHOW-CAUSE AS TO WHY PENALTY UNDER SECTION 271D OF THE ACT BE NOT LEVIED FOR VIOLATION OF THE PROVISI ONS OF SECTION 269SS OF THE ACT. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE TRANSACTIO NS WERE BONA FIDE AND GENUINE AND THAT THE LOANS WERE REQUIRED TO BE R AISED IN CASH ON ACCOUNT OF BUSINESS EXIGENCIES, AND THUS NO PENALTY WAS LEVIABLE. THE ADDL. COMMISSIONER OF INCOME-TAX DID NOT ACCEPT THE PLEA OF TH E ASSESSEE AND ACCORDINGLY LEVIED PENALTY UNDER SECTION 271D AMOUNTING TO RS 27,30,000/-. 4. IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) FOUND THAT THERE WAS A REASONABLE CAUSE WITH THE ASSESSEE FOR ACCEPTING LOANS I N CASH FROM THE TWO PROPRIETARY CONCERNS OF DIRECTOR. FURTHER, THE COMMISSIONER OF INCOME-TAX (APPEALS) ALSO ACCEPTED THE PLEA OF THE ASSESSE E THAT IT WAS UNDER A BONA FIDE BELIEF THAT PROVISIONS OF SECTION 269SS WE RE NOT ATTRACTED IN CASE OF LOANS RECEIVED IN CASH FROM SISTER CONCERNS. MOREOVER, T HE COMMISSIONER OF INCOME-TAX (APPEALS) ALSO NOTICED THAT THE RIGORS OF SECTION 269SS READ WITH SECTION 271D WOULD BE MITIGATED IN TERMS OF SECTION 273B AS THERE WAS A REASONABLE CAUSE FOR THE ASSESSEE HAVING RECEIVED LOANS IN CASH ON ACCOUNT OF BUSINESS EXIGENCIES. FOR THE ABOVE REASONS, THE PENALT Y IMPOSED BY THE ADDL. COMMISSIONER OF INCOME-TAX HAS BEEN DELETED BY TH E COMMISSIONER OF INCOME-TAX (APPEALS). 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIV E, APPEARING FOR THE REVENUE, HAS CONTENDED THAT MERELY BECAUSE OF THE TRAN SACTION OF ACCEPTING LOANS WAS GENUINE CANNOT BE CONSTRUED AS A GROUND TO DE LETE THE PENALTY UNDER SECTION 271D OF THE ACT. IT IS SUBMITTED THAT EVEN TRANSACTIONS IN VIOLATION OF SECTION 269SS CARRIED OUT BETWEEN TWO SISTE R CONCERNS ATTRACT THE PENAL PROVISIONS OF SECTION 271D OF THE ACT. EVEN WITH R EGARD TO THE EXISTENCE OF REASONABLE CAUSE, IT WAS STATED THAT WHEN THE LOANS WERE RAISED IN CASH FROM THE SISTER CONCERNS, IT WAS EVIDENT THAT IN THE CASH BOOK OF THE ASSESSEE THERE WAS SUFFICIENT CASH AVAILABLE, WHICH COULD HAVE BEEN USED BY THE ASSESSEE TO MEET THE BUSINESS EXIGENCIES AND, THEREFORE, IT CANNOT BE SAID THAT THE LOANS HAVE BEEN RAISED FOR BUSINESS EXIGENCIES SO AS TO DEFEAT THE LEVY OF PENALTY UNDER SECTION 271D OF THE ACT., WHICH HA S BEEN RIGHTLY IMPOSED BY THE ADDL. COMMISSIONER OF INCOME-TAX. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE RE SPONDENT-ASSESSEE VEHEMENTLY SUBMITTED THAT THE COMMISSIONER OF INCOME-TA X (APPEALS) MADE NO MISTAKE IN DELETING THE PENALTY AS THERE EXISTED A R EASONABLE CAUSE FOR HAVING ACCEPTED THE LOANS IN CASH AS THE SAME WERE NECESSI TATED BECAUSE OF BUSINESS EXIGENCIES. TO BRING OUT THE FACTUAL ASPECTS, A RE FERENCE WAS MADE TO THE DETAILED STATEMENT OF FACTS FILED BEFORE THE C OMMISSIONER OF INCOME-TAX (APPEALS). ON THAT BASIS, IT IS SOUGHT TO BE POINTED OUT THAT THE PROPRIETARY CONCERNS OF THE DIRECTOR WERE IN THE BUSINESS OF TRANSPORT ATION MUCH BEFORE THE ASSESSEE COMPANY, WHICH BEGAN ITS OPERATIONS IN THE INSTANT YEAR. IT IS POINTED OUT THAT THE ASSESSEE COMPANY RECEIVED CONTRACTS F ROM PARTIES IN DIFFERENT CITIES LIKE HYDERABAD, MUMBAI ETC. WHILE ITS H EAD OFFICE WAS AT AURANGABAD. THE BANK ACCOUNT OF THE ASSESSEE WAS AT AURANG ABAD AND ASSESSEE DID NOT ENJOY THE CORE BANKING FACILITIES SO AS TO W ITHDRAW CASH FROM THE BANK BRANCHES LOCATED AT PLACES OTHER THAN AURANGABA D. HOWEVER, THE SISTER-CONCERNS ENJOYED CORE BANKING FACILITIES AND, THEREFO RE, COULD WITHDRAW CASH FROM THE BANK BRANCHES IN CITIES OTHER THAN THE CITY IN WHICH THE BANK ACCOUNT WAS MAINTAINED. IN ITS BRANCHES AT HYDERABAD, M UMBAI, ETC. THE ASSESSEE WAS REQUIRED TO MAKE SOME CASH PAYMENTS TO THE TRUCK DRIVERS, ETC., AND FOR THAT PURPOSE, CASH LOAN WAS RECEIVED FROM SISTER CO NCERNS BY MAKING WITHDRAWAL FROM THEIR BANK ACCOUNTS. THE ASSESSEE DID NOT OWN THE TRUCK ITSELF BUT WAS ENGAGING TRUCKS FROM OUTSIDE AS A TRANSPORTING AGE NT. IN ORDER TO MEET REQUIREMENTS OF CASH AT THE BRANCHES AND IN THE FACE OF ASSESSEE BEING NEW IN BUSINESS AND WAS NOT ENJOYING THE CORE BANKING FACILITY , THEREFORE, CASH LOANS WERE REQUIRED TO BE RAISED IN THIS MANNER. IT IS SUBMITTED THAT THE AFORESAID BUSINESS EXIGENCY HAS BEEN APPRECIATED BY THE CO MMISSIONER OF INCOME-TAX (APPEALS) AND IN THIS VIEW OF THE MATTER, T HE PROVISIONS OF SECTION 273B SUPPORT THE CASE OF THE ASSESSEE. APART THEREFROM , IT IS ALSO POINTED OUT THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RAJ EDRA SURYAVANSHI V. ACIT 141 TTJ 620 (PUNE) DEALT WITH TRANSACTIONS IN CASH BETWEEN AN INDIVIDUAL AND THE HUF OF THE SAID INDIVIDUAL AND IT HAS BEEN HELD THAT ASSESSEES BELIEF THAT SUCH TRANSACTIONS ARE OUTSIDE SECTION 26 9SS OF THE ACT CAN CONSTITUTE A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B READ WITH SECTION 271D OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SECT ION 271D OF THE ACT PRESCRIBES LEVY OF PENALTY IN A CASE WHERE A PERSO N TAKES OR ACCEPTS A LOAN OR DEPOSIT IN CONTRAVENTION OF PROVISIONS OF SECT ION 269SS OF THE ACT. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE COMPANY RECE IVED A SUM OF RS 27,31,000/- IN CASH AS LOANS FROM TWO SISTER CONCERNS WHICH W ERE THE PROPRIETARY CONCERNS OF ONE OF ITS DIRECTOR. THE ASSESSEE CLA IMS THAT PENALTY UNDER SECTION 271D OF THE ACT IS NOT IMPOSABLE IN VIEW O F SECTION 273B, WHERE IT IS PRESCRIBED THAT PENALTY IS NOT IMPOSABLE IN CASES WH ERE IT IS PROVED THAT THERE WAS REASONABLE CAUSE FOR THE VIOLATION ON THE PAR T OF THE ASSESSEE TO ADHERE TO THE CONDITIONS PRESCRIBED UNDER SECTION 269SS OF THE ACT. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS SINCE FOUND THAT THE ASSESSEE HAD A REASONABLE CAUSE FOR RECEIVING THE IMPUGNED AMOUNT O F LOAN IN A MODE IN CONTRAVENTION OF THE CONDITIONS PRESCRIBED UNDER SECTION 2 69SS OF THE ACT. THE RELEVANT DISCUSSION IN THIS REGARD IS CONTAINED IN PA RA 6 OF THE IMPUGNED ORDER WHICH READS AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. THE MAIN CONTENTIONS OF THE AO ARE THAT (I) THE GENUINE AND BONA FIDE TRANSACTIONS OF LOANS FROM SISTER CON CERNS ARE COVERED BY THE PROVISIONS OF SECTION 269SS OF THE ACT; (II) THERE EXISTED NO BUSINESS EXIGENCY FOR ACCEPTING THE CASH LOAN AND (III) THERE WAS NO REASONABLE CAUSE F OR ACCEPTING THE CASH LOANS. THE AO HAS STRESSED THAT THE CASH LOANS ACCEPTED BY THE APPELLANT FALL WITHIN THE AMBIT OF PROVISIONS OF SECTION 269SS OF THE ACT AND HENCE PE NALTY U/S 271D IS LEVIABLE. THE AO HAS HOWEVER NOT PROPERLY CONSIDERED AS TO WHETHE R THERE EXISTED REASONABLE CAUSE FOR ACCEPTING CASH LOAN AS ENVISAGED BY PROVI SIONS OF SECTION 273B OF THE ACT. 6.1 ON THE OTHER HAND, THE APPELLANT HAS REASONABLY POINTED OUT THAT THE PAYMENT IN CASH IS TO BE MADE TO TRUCK OPERATORS AT DIFFERE NT PLACES IN INDIA AND THE PROPRIETARY CONCERNS OF THE DIRECTOR OF THE APPELLANT COMPANY H AVE ACCOUNTS WITH THE BANKS HAVING CORE BANKING FACILITY AND ARE HAVING BRANCHE S AT VARIOUS PLACES IN INDIA. THEREFORE, THOUGH THE APPELLANT HAD SUFFICIENT CASH BALANCE AT IS HED OFFICE, IT HAD TO ACCEPT CASH WITHDRAWALS FROM BANKS OF SISTER CONCER NS LOCATED AT DIFFERENT PLACES IN INDIA FOR MAKING CASH PAYMENTS TO TRUCK OPERATORS. THEREFORE, THE ABOVE MENTIONED CAUSE APPEARS TO B REASONABLE CAUSE FOR ACCEPTING C ASH LOANS FROM THE SISTER CONCERNS. 8. AFTER HAVING CONSIDERED THE OBJECTIONS OF THE REVEN UE, WE DO NOT FIND THAT THE AFORESAID EXPLANATION IS FALSE OR BEREFT OF BONA FIDES. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE COMMISSIONER OF INCOME-TAX (APPEALS) MADE NO MISTAKE IN INVOKING THE PROVISIONS OF SECTION 273B OF THE ACT TO DELETE THE PENALTY LEVIED UNDER SECTION 271D OF THE ACT. OSTENSIBLY , THE ASSESSEE DID NOT ENJOY THE CORE BANKING FACILITY AND, THEREFORE, IN OR DER TO MEET CASH REQUIREMENTS AT ITS BRANCHES, IT BORROWED FROM THE TWO SISTER CONCERNS WHO COULD WITHDRAW CASH AND ADVANCE IT TO THE ASSESSEE FOR THE PURPOSES OF ITS BUSINESS OPERATIONS. IN OUR VIEW, MERELY BECAUSE THE ASSESSEE HAD SUFFICIENT CASH BALANCE IN ITS HEAD OFFICE BOOKS AT THE RELEVANT TIME , WOULD NOT DISTRACT FROM THE FACT THAT IT DID NOT HAVE REASONABLE CASH WIT HDRAWAL FACILITY AT ITS BRANCHES WHERE THE MONEY WAS REQUIRED AT THE GIVEN POI NT OF TIME FOR WHICH THE BANKING FACILITY ENJOYED BY THE SISTER CONCERNS WAS UTI LIZED. IN THIS VIEW OF THE MATTER, IN OUR VIEW, THE ASSESSEE HAS SUCCEEDED IN SAY ING THAT IT HAD A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ACT FOR HAVING RECEIVED IMPUGNED LOANS IN CASH FROM THE PROPRIETARY CO NCERNS OF THE DIRECTOR IN CONTRAVENTION OF SECTION 269SS OF THE ACT. THE COMM ISSIONER OF INCOME-TAX (APPEALS), IN OUR VIEW, RIGHTLY DELETED THE PENALTY, WHICH WE HEREBY CONFIRM. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF FEBRUARY, 2012. SD/- SD/- (I C SUDHIR) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 8 TH FEBRUARY, 2012 B COPY OF THE ORDER FORWARDED TO : 1. WENS CARGO MOVERS P. LTD. AURANGABAD 2. THE ITO WD 1(1) AURANGABAD 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. THE D.R, B BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT, PUNE BENCHES, PUNE