Sri.Yarabolu Seshadri Reddy, Bangalore V. Joint Commissioner of Income-Tax, Bangalore

ITA 1525/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5424 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 22-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V NARENDRA SHARMA
• Keywords: Reasonable cause; Avoidance of tax
• Section: 273B; 68; 144; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC B BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 1525 & 1526 /BANG/201 6 (ASSESSMENT YEAR S : 20 05 - 06 & 2006 - 07 ) SRI YARABOLU SESHADRI REDDY, NO.A - 4, ;PUJITHA MEADOWS, 8 TH A MAIN, LB SA STRI NAGAR, BANGALORE - 560 017 PAN AFSPR 6809K VS. JOINT COMMISSIONER OF INCOME TAX, RANGE 7, BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI V. NARENDRA SHARMA, ADVOCATE. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 23.03.2017. DATE OF P RONOUNCEMENT : 28 .04. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) - 4, BANGALORE BOTH DT.15.7.2016 ARISING FROM PENALTY ORDER PASSED UNDER SECTIONS 271D & 271E OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') RESPECTIVELY FOR THE ASSESSMENT YEAR 2005 - 06. 2. THE ASSESSEE HAS RAISED GROUNDS IN THE APPEAL S AS UNDER : 2 ITA NO S . 1525 & 1526 /BANG/ 2016 ASSESSMENT YEAR : 2005 - 06 ASSESSMENT YEAR : 2006 - 07 3 ITA NO S . 1525 & 1526 /BANG/ 2016 3 . THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 2 5.8.2006 DECLARING A TOTAL INCOME OF RS.1,00,890. THE 4 ITA NO S . 1525 & 1526 /BANG/ 2016 ASSESSMENT WAS COMPLETED UNDER SECTION 144 OF THE ACT ON 23.12.2008 WHEREBY THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.11,00,000 ON ACCOUNT OF UNSECURED LOAN OUTSTANDING BY TREATING THE SAME AS UNEXPLAINED IN TERMS OF SECTION 68 OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATING THE PROCEEDINGS UNDER SECTION 271D BY ISSUING A NOTICE UNDER SECTION 274 OF THE ACT ON 25.9.2014 IN RESPECT OF ACCEPTING THE LOAN AMOUNT OF RS.2,00,500 CASH FRO M MR. Y. VENKATARAMI REDDY , FATHER OF ASSESSEE. THE ASSESSEE VIDE HIS REPLY DT.13.10.2014 CONTENDED THAT PROVISIONS OF SECTION 269 SS AND 269T HAVE BEEN ENACTED TO COUNTER TAX EVASION AND TO ENSURE THAT LARGE S UMS OF MONEY FOUND IN CASE OF SEARCH ARE NO T EXPLAINED AS LOAN OR DEPOSIT. THE ASSESSEE HAS ALSO SUBMITTED THAT HE WAS PREVENTED BY REASONABLE CAUSE FROM COMPLYING WITH THE PROVISIONS OF THE ACT AND SUBSEQUENTLY NO PENALTY IS LEVIA B LE. THE ASSESSEE ALSO RELIED UPON VARIOUS DECISIONS ON THIS POINT HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND IMPOSED THE PENALTY OF RS.2,00,500 UNDER SECTION 271D VIDE ORDER DT.13.11.2014. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. BEFORE THE CIT(APPEALS) BUT COULD NOT SUCCEED. 4 . BEFORE THE TRIBUNAL, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE SAID AMOUNT OF RS.2,00,500 RECEIVED IN CASH BY 5 ITA NO S . 1525 & 1526 /BANG/ 2016 THE ASSESSEE FROM HIS FATHER WAS NOT TO BE CONSIDERED AS LOAN OR DEPOSIT SINCE THE SAME WAS RECEIVED FR OM CLOSE FAMILY MEMBER. THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT IN VIEW OF THE VARIOUS DECISIONS THE PENALTY UNDER SECTION 271D OR 271E IS NOT ATTRACTED. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE ACCEPTED THE ORDER OF THE CIT (APPE ALS) IN QUANTUM PROCEEDINGS AND HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF CIT (APPEALS) AS THE ASSESSEE DID NOT WANT TO LINGER ON THE LITIGATION WITH THE DEPARTMENT. THE ASSESSEE PAID ALL THE TAXES ON ULTIMATE INCOME ASSESSED. HE HAS FURTHER SUBMIT TED THAT THE PENALTY UNDER SECTION 271D AS WELL AS 271E WERE NOT INITIATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER BUT IT WAS ONLY AFTER THE ORDER PASSED BY THE CIT (APPEALS) IN THE QUANTUM PROCEEDINGS. HE HAS RELIED UPON THE DECISION DT.22.6.200 7 OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SRI R. GOPALA IYER VS. ACIT IN ITA NO.334/BANG/2007 AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT THE LOAN TAKEN IN CASH FROM THE CLOSE RELATIVE FOR THE SAKE OF CONVENIENCE AND EASY AVAILABILITY AN D THE URGENT REQUIREMENT AT THAT POINT OF TIME DOES NOT ATTRACT PENALTY UNDER SECTION 271D OF THE ACT. HE HAS ALSO RELIED UPON THE DECISION IN THE CASE OF NARAYAN RAM CHHABA VS. ITO 96 ITD 163 (THIRD MEMBER). THE LEARNED AUTHORISED REPRESENTATIVE HAS AL SO RELIED UPON THE FOLLOWING DECISIONS : 6 ITA NO S . 1525 & 1526 /BANG/ 2016 THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE PENALTY LEVIED IN THIS CASE IS NOT WARRANTED AND THE SAME MAY BE CANCELLED. 5 . ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HA S SUBMITTED THAT THE ASSESSEE HAS TAKEN LOAN IN CASH IN CLEAR VIOLATION OF PROVISIONS OF SECTION 269 SS R.W.S. 271D THEREFORE ACCEPTANCE OF LOAN IN CONTRAVENTION OF PROVISION OF SECTION 269 SS ATTRACTS THE PENALTY UNDER SECTION 271D. THE ASSESSEE HAS FAIL ED TO SHOW ANY URGENCY TO AVAIL THE LOAN IN CASH. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF NANDI D H AL L MILL S VS. CIT 373 ITR 510. HE HAS ALSO RELIED UPON THE DECISION OF HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CHA MUNDI GRANITES (P) LTD. VS. DCIT 239 ITR 694 AND SUBMITTED THAT THE ASSESSING OFFICER IS JUSTIFIED IN LEVY OF PENALTY IN THIS CASE. 7 ITA NO S . 1525 & 1526 /BANG/ 2016 6 . I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. TH E ASSESSING OFFICER HAS LEVIED PENALTY UNDER SECTION 271D OF THE ACT IN RESPECT OF AN AMOUNT OF RS.2,00,500 RECEIVED BY THE ASSESSEE FROM HIS FATHER AND HALF OF THE SAME WAS REPAID. THE ASSESSEE HAS EXPLAINED THAT SINCE THIS AMOUNT WAS TAKEN FROM THE FATH ER AND IT WAS CONVENIENT AND EASY FOR THE ASSESSEE TO RECEIVE THIS AMOUNT FROM THE FATHER FOR THE URGENT REQUIREMENT AT THAT POINT OF TIME. THEREFORE THIS IS NOT A CASE OF AVOIDANCE OF TAX BY INDULTING TRANSACTION IN CASH. IT IS PERTINENT TO NOTE THAT THE ASSESSEE WAS IN A URGENT NEED OF MONEY AND THEREFORE ACCEPTED THE AMOUNT FROM FATHER IN CASH OF RS.2,00,500, PART OF WHICH HAS BEEN REPAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION . T HEREFORE THE REASONS EXPLAINED BY THE ASSESSEE ARE NOT FOUND TO BE FALSE BY THE AUTHORITIES BELOW BUT THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION THAT THE ASSESSEE WAS PREVENTED BY ANY REASON FOR TAKING THE AMOUNT OTHER THAN CASH. T HE CONVENIENCE OF TAKING THE MONEY FROM THE CLOSE RELATIVE MAY N OT BE A N ACCEPTABLE EXPLANATION OR CAUSE HOWEVER , IF THE ASSESSEE HAS SHOWN THAT THERE WAS A REASONABLE CAUSE FOR NOT ADHERING TO THE PROVISIONS OF SECTION 269 SS THEN IN VIEW OF THE PROVISIONS OF SECTION 273B NO PENALTY SHALL BE LEVIED. THE CO - ORDINATE B ENCH OF THIS TRIBUNAL 8 ITA NO S . 1525 & 1526 /BANG/ 2016 IN THE CASE OF R. GOPAL A IYER VS. ACIT (SUPRA) WHILE DEALING WITH AN IDENTICAL ISSUE HAS DELETED THE PENALTY AS UNDER : 9 ITA NO S . 1525 & 1526 /BANG/ 2016 SIMILARLY IN THE CASE OF NARAYAN RAM CHHABA VS. ITO (SUPRA) (TM), A MAJORITY VIEW OF THE TRIBUNAL AS HELD TH AT WHEN THE ASSESSEE HAS EXPLAINED THE CAUSE IN ACCEPTING THE LOAN IN CASH FROM HIS WIFE AND HIS HUF THEN THE PENALTY UNDER SECTION 271D WAS NOT JUSTIFIED. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THIS LOAN OF RS.2,00,500 WAS TAKEN BY THE ASSESSEE FROM HIS FATHER FOR URGENT NEED IS A REASONABLE CAUSE FOR NOT ADHERING TO THE PROVISIONS OF SECTION 269 SS OF THE ACT AND THEREFORE IN VIEW OF THE PROVISIONS OF SECTION 273B, NO PENALTY CAN BE LEVIED UNDER SECTION 271D OF THE ACT. ACCORDING LY, THE PENALTY IS DELETED. 7 . AS REGARDS THE LEVY OF PENALTY UNDER SECTION 271E, SINCE THE ASSESSEE HAS REPAID THE LOAN OF RS.1 LAKH DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HAS LEVIED PENALTY OF RS.1 LAKH UNDER SECTION 271E OF THE ACT. 8 . I HAVE HEARD THE RIVAL SUBMISSIONS AS WELL AS PERUSED THE MATERIAL ON RECORD. THE FACTS ARE IDENTICAL AS TAKING THE LOAN AS WELL AS REPAYMENT OF LOAN BETWEEN THE FATHER AND SON IS A TRANSACTION BETWEEN THE CLOSE FAMILY MEMBER AND THEREFORE THE REASON FOUND TO BE REASONABLE FOR THE PURPOSE OF SECTION 271D ARE ALSO APPLICABLE FOR THE PURPOSE OF PENALTY LEVIED UNDER SECTION 271E 10 ITA NO S . 1525 & 1526 /BANG/ 2016 OF THE ACT. IN VIEW OF THE FINDING ON THE PENALTY UNDER SECTION 271D, THE PENALTY LEVIED UNDER SECTION 271E IS NO T SUSTAINABLE AND IS DELETED. 9 . IN THE RESULT, THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH APRIL, 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 28 .04 .2017. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.