M/s Amar Nath & Sons, New Delhi V. ITO, New Delhi

ITA 147/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3808 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 09-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURJANI MOHANTY
• Assessee Lawyers: AJIT KUMAR KALIA
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.147 & 148/DEL./2011 (ASSESSMENT YEAR : 2005-06) M/S. AMAR NATH & SONS, VS. ITO, WARD 28 (4), 112, SHAM SHANTI MARKET, NEW DELHI. AJMERI GATE, DELHI 110 006. (PAN NO.AAAFA5844Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJIT KUMAR KALIA, ADVOCATE REVENUE BY : SMT. SURJANI MOHANTY , DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : FIRST WE TAKE UP ITA NO.147/DEL/2011. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (APPEALS)-XXV, NEW DELHI DATED 08. 11.2010 FOR THE ASSESSMENT YEAR 2005-06 FOR SUSTAINING THE PENALTY LEVIED UNDER SEC TION 271D OF THE INCOME-TAX ACT, 1961 FOR THE VIOLATION OF SECTION 269SS. 2. THE ASSESSEE IS A PARTNERSHIP FIRM WITH TWO PART NERS, SHRI RAJESH MEHRA AND SMT. NEELAM MEHRA SHARING THE PROFIT/LOSS IN THE RATIO O F 50%. THE RETURN OF INCOME FILED ON 29.10.2005. THE CASE WAS SELECTED FOR SCRUTINY THR OUGH CASS AS PER THE BOARDS GUIDELINES. THE GROUNDS OF APPEAL READ AS UNDER : - 1. THAT THE PENALTY ORDER IS AGAINST THE LAW AND F ACTS OF THE CASE. ITA NOS.147 & 148/DEL./2011 2 2. THAT THE LD. ADDITIONAL COMMISSIONER OF INCOME T AX, RANGE-28, NEW DELHI HAS ERRED IN IMPOSING PENALTY U/S 271D OF THE INCOME TAX ACT 1961. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (A) XXV HAS ERRED IN CONFIRMING THE PENALTY IMPOSED BY LD. ADDL. CIT, RA NGE 28. 4. THAT THE CIT (APPEALS) HAS GROSSLY ERRED IN IGNO RING THE WRITTEN SUBMISSIONS OF THE APPELLANT, CIRCUMSTANCES AND JUD GMENTS CITED. 5. THAT THE CIT (APPEALS) HAS FAILED TO APPLY HIS M IND JUDICIOUSLY WHILE DECIDING THE APPEAL. HE HAS ALSO FAILED TO AP PLY HIS MIND ON THE COMBINED READING OF SECTION 271D READ WITH SECTION 273B OF THE INCOME TAX ACT. 6. THAT LD. CIT (APPEALS) HAS FAILED IN APPRECIATIN G THE FACTS AND CIRCUMSTANCES UNDER WHICH THE APPELLANT HAD TO TAKE LOANS (CHART TO THIS EFFECT WAS FILED). IN FACT THE APPELLANT TOOK AND REPAY LOANS EXCEEDING RS.20,000/- IN CASH IN VERY SPECIAL AND UNDER COMPE LLING CIRCUMSTANCES TO MEET THE DEFICIENCY OF FUNDS AND THUS THERE WAS A R EASONABLE CAUSE FOR THE APPELLANT TO TAKE AND REPAY CASH LOANS. 7. THAT LD. CIT (A) XXV HAS ERRONEOUSLY MENTIONED T HAT THE APPELLANT COULD NOT PRODUCE ANY EVIDENCE EXPLAINING THE FACTS AND CIRCUMSTANCES. 8. THAT THE LD. ADDL.CIT RANGE-28 AND CIT (APPEALS) XXV FAILED TO APPRECIATE THAT THERE WAS NO ILL WILL, MALAFIDE INT ENTION OR DELIBERATE DEFIANCE OF LAW ON THE PART OF ASSESSEE TO EVADE TA X AND THERE WAS NO REVENUE LOSS. BOTH THE LD. AUTHORITIES HAVE FAILED TO ACT LEGALLY AND JUDICIOUSLY. 9. THAT APPELLANT RESERVES RIGHTS TO AMEND AND ADD GROUNDS OF APPEAL. 3. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS CHALL ENGED THE CONFIRMATION OF PENALTY LEVIED UNDER SECTION 271D OF THE INCOME-TAX ACT, 19 61 AND HAS PRAYED THAT THERE WAS NO ILL WILL, MALAFIDE INTENTION OR DELIBERATE DEFIANCE OF LAW ON THE PART OF ASSESSEE TO EVADE TAX AND THERE IS NO REVENUE LOSS. THEREFORE, THE ASSES SEE SHOULD NOT HAVE BEEN PENALIZED BY THE LEVY OF PENALTY UNDER SECTION 271D. 3. LEARNED AR SUBMITTED THAT BY COMBINED READING OF SECTION 271D WITH SECTION 273B OF INCOME-TAX ACT, THE PENALTY IS NOT LEVIABLE . THERE WAS URGENCY FOR WHICH THE ASSESSEE TOOK THE CASH LOAN. THE CHEQUES ISSUED TO M/S. BAJAJ VENTURE LIMITED WERE ITA NOS.147 & 148/DEL./2011 3 CLEARED BY DEPOSITING CASH RECEIVED AS LOAN. HE AL SO RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SAINI MEDICAL STORE REPORTED IN 276 ITR 70 (P&H) WHERE THE PENALTY HAS BEEN DELETED ON THE BASIS THAT VIOLATION OF THE PROVISIONS OF THE ACT WAS UNDER A BONAFIDE BELIEF O F THE ASSESSEE AND THE SAME WAS NOT WITH THE INTENTION TO AVOID OR EVADE THE TAX. HE A LSO RELIED ON THE DECISION OF HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. M/S. RATNA A GENCIES DATED 10.11.2005 WHEREIN THE HON'BLE HIGH COURT HAS SUSTAINED THE DELETION OF TH E PENALTY BY THE TRIBUNAL ON THE BASIS THAT THE CONTRAVENTION ALLEGED AGAINST THE ASSESSEE DID NOT RESULT IN ANY UNACCOUNTED TRANSACTION SUCH AS LENDING AND REPAYMENT AND BOTH THE TRANSACTIONS WERE ENTERED IN THE BOOKS OF THE ASSESSEE AND THE FIGURE INVOLVED WAS A LSO MEAGER AND THAT THE SAME WAS INCURRED ONLY FOR MEETING THE SUDDEN DEMAND OF OVER DRAFT ACCOUNT. HE ALSO RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SAINI MEDICAL STORE, 277 ITR 420 (P&H) WHEREIN THE PENALTY HAS BE EN DELETED BY RELYING ON THE SECTION 273B OF THE ACT WHICH PROVIDES THAT NO PENALTY IS I MPOSABLE FOR FAILURE REFERRED TO IN THE SAID PROVISIONS, IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. HE PLEADED THAT COMBINED READING OF SECTION 271D WI TH SECTION 273B MAKES IT CLEAR THAT IN ASSESSEES CASE, NO PENALTY CAN BE LEVIED. 4. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE AUTHORITIES BELOW. SHE ALSO PLEADED THAT THE ASSESSEE IS NOT HAVING AN Y REASONABLE EXPLANATION FOR ACCEPTING THE LOAN OTHERWISE THAN THE ACCOUNT PAYEE CHEQUES/D RAFT. THE CASH DEPOSITS HAVE BEEN ACCEPTED CONTRARY TO THE PROVISIONS OF SECTION 269S S OF INCOME-TAX ACT, THEREFORE, THE ASSESSEE IS LIABLE TO BE VISITED BY PENALTY U/S 271 D OF INCOME-TAX ACT. THE PROVISIONS OF SECTION 273B PROVIDE THAT IF THE ASSESSEE PROVES TH AT THERE WAS A REASONABLE CAUSE FOR THE FAILURE THEN PENALTY WILL NOT BE IMPOSED. IN THIS CASE, IT IS ADMITTED FACT THAT ASSESSEE HAS ACCEPTED THE CASH LOAN BEYOND THE PRESCRIBED LIMIT FROM THE THREE PERSONS. THE ASSESSEES ITA NOS.147 & 148/DEL./2011 4 PLEADING THAT HE WAS IGNORANT OF THE LAW IS ALSO NO T TRUE. THE ASSESSEE WAS AN OLD CONCERN RUNNING THE BUSINESS SINCE LONG. FACTS REGARDING C ASH LOAN/DEPOSITS OF MORE THAN RS.20,000/- HAS BEEN CONCEALED IN THE TAX AUDIT RE PORT. NOTHING HAD BEEN STATED IN THE CONCERNED COLUMN OF TAX AUDIT REPORT. IT HAS BEEN ALSO NOTICED THAT IN THE PAST YEARS THE ACCOUNTS HAVE BEEN SHOWN AS A LOAN ACCOUNT AND DURI NG THE YEAR, THESE ACCOUNTS HAVE BEEN SHOWN AS ADVANCES RECEIVED. THESE FACTS ESTABLISH THAT ASSESSEE WAS WELL AWARE ABOUT THE PROVISIONS OF SECTION 269SS AND INTENTIONALLY TRIED TO CONCEAL THE FACTS TO AVOID THE PENAL PROVISIONS. SHE ALSO SUBMITTED THAT THE ASSESSEE W AS HAVING THE AGENCY OF M/S. BAJAJ VENTURES LIMITED SINCE LONG. THE CASH LOAN CLAIMED TO BE TAKEN TO CLEAR THE CHEQUES WHICH HAVE BEEN GIVEN IN ADVANCE. THUS, THE ASSESSEE WAS WELL AWARE IN ADVANCE ABOUT THE FACT THAT HE HAS TO CLEAR THE CHEQUES. THEREFORE, THERE WAS NO URGENCY AS STATED BY THE ASSESSEE FOR GETTING THE CASH LOANS. SHE ALSO PLEADED THAT ASSESSEE HAS FAILED TO DEMONSTRATE THE URGENCY FOR WHICH THE CASH LOAN CLAIMED TO HAVE BEE N ACCEPTED, THEREFORE, PROVISIONS OF SECTION 273B ARE NOT APPLICABLE. SHE PLEADED TO DI SMISS ASSESSEES APPEAL. 5. AFTER HEARING BOTH THE SIDES ON ALL THE ISSUES R AISED IN THE GROUNDS OF APPEAL, WE HOLD THAT ASSESSEE HAS FILED THE RETURN OF INCOME A LONG WITH AUDITED ACCOUNTS AND THE FACT REGARDING VIOLATION OF SECTION 269SS HAS NOT BEEN D ISCLOSED IN THE TAX AUDIT REPORT. THE CASE WAS SELECTED FOR SCRUTINY BY CASS. HAD THERE NOT BEEN SELECTION OF CASE FOR SCRUTINY, THIS VIOLATION OF PROVISIONS OF SECTION 269SS COULD NOT HAVE COME TO THE NOTICE OF REVENUE AUTHORITIES. FURTHER THE ASSESSEE HAS TRIED TO GIV E THE COLOUR TO THESE DEPOSITS AND ADVANCES RECEIVED FROM CUSTOMERS WHILE THESE WERE THE DEPOSI TS/LOANS. THERE WAS A VIOLATION OF SECTION 269SS. FURTHER THE ASSESSEE HAS TRIED TO E XPLAIN THAT THE CASH LOAN WAS TAKEN TO CLEAR THE CHEQUES WHICH WERE ISSUED TO M/S. BAJAJ V ENTURES LIMITED IN ADVANCE. SINCE THE ASSESSEE WAS DEALING WITH M/S. BAJAJ VENTURES LIMIT ED SINCE LONG AND AS ADMITTED THE CHEQUES WERE ISSUED IN ADVANCE, THEREFORE, THIS EXP LANATION OF THE ASSESSEE DOES NOT SEEMS ITA NOS.147 & 148/DEL./2011 5 TO BE SATISFACTORY TO ESTABLISH THE URGENCY FOR ACC EPTING THE CASH LOAN. SINCE THERE IS CLEAR VIOLATION IN TERMS OF SECTION 269SS AND ASSESSEE IS FAILED TO DEMONSTRATE REASONABLE CAUSE FOR THE VIOLATION, THEREFORE, WE UPHOLD THE PENALTY LEVIED U/S 271D OF THE INCOME-TAX ACT. 6. NOW WE TAKE UP ITA NO.148/DEL/2011. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (APPEALS)-XXV, NEW DELHI DATED 08. 11.2010 FOR THE ASSESSMENT YEAR 2005-06 FOR SUSTAINING THE PENALTY LEVIED UNDER SEC TION 271E OF THE INCOME-TAX ACT, 1961 FOR THE VIOLATION OF SECTION 269SS. 7. THE GROUNDS OF APPEAL IN THE APPEAL ARE AS UNDER :- 1. THAT THE PENALTY ORDER IS AGAINST THE LAW AND F ACTS OF THE CASE. 2. THAT THE LD. ADDITIONAL COMMISSIONER OF INCOME T AX, RANGE-28, NEW DELHI HAS ERRED IN IMPOSING PENALTY U/S 271E OF THE INCOME TAX ACT 1961. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (A) XXV HAS ERRED IN CONFIRMING THE PENALTY IMPOSED BY LD. ADDL. CIT, RA NGE 28. 4. THAT THE CIT (APPEALS) HAS GROSSLY ERRED IN IGNO RING THE WRITTEN SUBMISSIONS OF THE APPELLANT, CIRCUMSTANCES AND JUD GMENTS CITED. 5. THAT THE CIT (APPEALS) HAS FAILED TO APPLY HIS M IND JUDICIOUSLY WHILE DECIDING THE APPEAL. HE HAS ALSO FAILED TO APPLY HI S MIND ON THE COMBINED READING OF SECTION 271E READ WITH SECTION 273B OF T HE INCOME TAX ACT. 6. THAT LD. CIT (APPEALS) HAS FAILED IN APPRECIATIN G THE FACTS AND CIRCUMSTANCES UNDER WHICH THE APPELLANT HAD TO REPA Y CASH LOANS. 7. THAT LD. CIT (A) XXV HAS ERRONEOUSLY MENTIONED T HAT THE APPELLANT COULD NOT PRODUCE ANY EVIDENCE EXPLAINING THE FACTS AND CIRCUMSTANCES. 8. THAT THE LD. ADDL.CIT RANGE-28 AND CIT (APPEALS) XXV FAILED TO APPRECIATE THAT THERE WAS NO ILL WILL, MALAFIDE INT ENTION OR DELIBERATE DEFIANCE OF LAW ON THE PART OF ASSESSEE TO EVADE TAX AND THE RE WAS NO REVENUE LOSS. BOTH THE LD. AUTHORITIES HAVE FAILED TO ACT LEGALLY AND JUDICIOUSLY. 9. THAT APPELLANT RESERVES RIGHTS TO AMEND AND ADD GROUNDS OF APPEAL. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS CHALLENG ED THE CONFIRMATION OF PENALTY LEVIED UNDER SECTION 271E OF THE INCOME-TAX ACT, 1961 AND HAS PRAYED THAT THERE WAS NO ILL WILL, ITA NOS.147 & 148/DEL./2011 6 MALAFIDE INTENTION OR DELIBERATE DEFIANCE OF LAW ON THE PART OF ASSESSEE TO EVADE TAX AND THERE IS NO REVENUE LOSS. THEREFORE, THE ASSESSEE SHOULD NOT HAVE BEEN PENALIZED BY THE LEVY OF PENALTY UNDER SECTION 271E. 8. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER H AD NOTED THAT THE ASSESSEE FIRM HAD MADE THE REPAYMENT OF LOAN OF RS.70,000/- IN CASH T O THREE PERSONS, NAMELY, RS.20,000/- TO SHRI MANOJ KUMAR, RS.20,000/- TO MS. SHASHI CHOPRA AND RS.30,000/- TO SHRI SHARAD CHOPRA. THIS FACT WAS NOT DISCLOSED IN THE TAX AUDI T REPORT. THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269T AND THE ASSESSEE WAS LIA BLE FOR PENALTY U/S 271 E. THE ASSESSEE TRIED TO EXPLAIN THAT THE CREDITORS WERE PRESSING F OR THE REPAYMENT OF THE LOANS AND ACCORDINGLY, THE REPAYMENTS WERE MADE IN CASH. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND ACCORDINGL Y, LEVIED THE PENALTY U/S 271 E. THE AO WAS ALSO OF THE VIEW THAT THE ASSESSEE WAS IN THE K NOWLEDGE THAT THERE WAS VIOLATION OF SECTION 269T AS THE LOANS WERE EARLIER SHOWN AS UNS ECURED LOANS WHICH WERE LATER ON CATEGORIZED AND CLAIMED AS ADVANCE. 9. BEFORE THE CIT (A), THE AR OF THE ASSESSEE HAS E XPLAINED THAT THE REPAYMENT OF LOANS WERE MADE IN CASH AS THE PARTIES WERE IN NEED OF MONEY AND WERE PRESSING HARD FOR REPAYMENT AND THE PENALTY IS NOT LEVIABLE IN THIS C ASE AND THE ASSESSEE ALSO RELIED ON VARIOUS CASE LAWS. 10. THE CIT (A) CONFIRMED THE PENALTY BY OBSERVING AS UNDER :- 3.3 I HAVE CONSIDERED THE PENALTY ORDER OF THE AO AND SUBMISSIONS OF THE ASSESSEE. IT IS NOT DISPUTED THAT THE ASSESSEE MADE REPAYMENT OF LOANS IN CASH AND THERE IS A CLEAR VIOLATION OF SECTION 2 69T. THE PENAL PROVISIONS U/S 271 E READS AS UNDER:- 'IF A PERSON REPAYS ANY LOAN OR DEPOSIT REFERRED TO IN SECTION 269T OTHERWISE THAN IN ACCORDANCE WITH THE PROVISIONS OF THE SECTION, HE SHALL BE LIABLE TO PA Y, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE LOAN OR THE DEPOSIT SO REPAID.' 3.4. IN THE PRESENT CASE, THERE IS NO DOUBT THAT TH E ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269T. THE ONLY EXPLANATIO N OF THE ASSESSEE IS THAT THE ASSESSEE HAD TO MAKE REPAYMENT OF LOANS IN CASH AS THE PARTIES ITA NOS.147 & 148/DEL./2011 7 WERE PRESSING HARD FOR REPAYMENT. SINCE THE ASSESS EE IS A DEALER, IT IS A NORMAL BUSINESS ACTIVITY TO TAKE LOANS AND TO MAKE REPAYMENT AND I DO NOT FIND ANY EXTRAORDINARY SITUATION FOR THE ASSESS EE TO MAKE REPAYMENTS OF LOAN IN CASH IN VIOLATION OF SECTION 269T. THE A O HAS GIVEN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE CASE BUT THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. DUR ING THE COURSE OF APPELLATE PROCEEDINGS ALSO THE ASSESSEE COULD NOT C ONTROVERT THE FINDING OF THE AO AND ALSO COULD NOT PRODUCE ANY EVIDENCE R EGARDING ANY REASONABLE CAUSE FOR THE VIOLATION OF SECTION 269T AND ACCORDINGLY, THE ORDER OF THE AO LEVYING THE PENALTY IS CONFIRMED. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT ASSESSEE HAS FILED THE RETURN OF INCOM E ALONG WITH AUDITED ACCOUNTS. THE ASSESSEE HAS NOT DISCLOSED THE FACT REGARDING VIOLA TION OF SECTION 269T IN THE TAX AUDIT REPORT. THE CASE WAS SELECTED FOR SCRUTINY BY CASS . HAD THERE NOT BEEN SELECTION OF CASE FOR SCRUTINY, THIS VIOLATION OF PROVISIONS OF SECTI ON 269T COULD NOT HAVE COME TO THE NOTICE OF ASSESSING OFFICER. THE ASSESSEE HAS FAILED TO D EMONSTRATE ANY REASONABLE CAUSE FOR NOT FOLLOWING THE PROVISIONS OF SECTION 269T. THE ASSE SSEE HAS COMPLETELY FAILED TO EXPLAIN THAT THERE WAS URGENCY FOR REPAYING THE LOAN IN CAS H. THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY. SINCE THERE IS CLEAR VIOLATION IN TE RMS OF SECTION 269T AND ASSESSEE IS FAILED TO DEMONSTRATE ANY REASONABLE CAUSE FOR THE VIOLATION, THEREFORE, WE UPHOLD THE PENALTY LEVIED U/S 271E OF THE INCOME-TAX ACT.. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 17 TH DAY OF JUNE, 2011. SD/- SD/- (DIVA SINGH) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 17 TH DAY OF JUNE, 2011/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT ITA NOS.147 & 148/DEL./2011 8 3.CIT 4.CIT (A)-XXV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.