ITO, Bangalore V. M/s Prospero Realty Ltd., Bangalore

ITA 1533/BANG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89953 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR
• Keywords: Search and seizure

Judgement Text

ITA.1533/BANG/2013 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.1533/BANG/2013 (ASSESSMENT YEAR : 2006-07) INCOME-TAX OFFICER, WARD -12(1), BANGALORE ..APPELLANT V. M/S. PROSPERO REALTY LTD, NO.845, 5 TH CROSS, 10 TH MAIN, 2 ND STAGE, INDIRANAGAR, BANGALORE 560 038 ..RESPONDENT PAN :AADCP0310N REVENUE BY : SHRI. P. DHIVAHAR, JCIT ASSESSEE BY : SHRI. SRINIVASAN, CA HEARD ON : 03.06.2015 PRONOUNCED ON : 11.06.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE, IT IS AGGRIEVED T HAT PENALTY U/S.271D OF THE INCOME-TAX ACT, 1961 (THE ACTIN SHORT), LEVIE D ON THE ASSESSEE WAS CANCELLED BY THE CIT (A)-III, BANGALORE, VIDE HIS O RDER DT 30.08.2013, FOR THE A. Y. 2006-07. ITA.1533/BANG/2013 PAGE - 2 02. FACTS APROPOS ARE THAT DURING THE SEARCH OF A P ERSON BY NAME, B. S. MANJUNATH, IT CAME TO THE KNOWLEDGE OF THE DEPARTME NT THAT MONEY IN CASH WAS LENT BY HIM TO VARIOUS PERSONS. IN THE BALANCE SHE ET FILED BY THE SAID SHRI. B. S. MANJUNATH ALONG WITH HIS RETURN OF INCOME FOR A. Y. 2007-08, THE NAMES OF VARIOUS PEOPLE TO WHOM HE HAD LENT THE MONEY WERE A PPEARING. THE ASSESSEE HERE, M/S. PROSPERO REALTY LTD, WAS ONE AMONG SUCH PEOPLE AND THE AMOUNT SHOWN WAS RS.25 LAKHS AS LOANED ON 19.09.2005. AS PER THE AO, BLANK CHEQUES ISSUED BY PROSPERO REALTY LTD WERE ALSO SEIZED DURI NG THE SEARCH. AO ON THE STRENGTH OF THE ABOVE, ISSUED A SHOW CAUSE NOTICE T O THE ASSESSEE AS TO WHY PENALTY U/S.271D SHOULD NOT BE LEVIED FOR VIOLATION OF SECTION 269SS OF THE ACT. SUBMISSIONS WERE MADE BEFORE THE AO, WHEREIN IT WAS STATED THAT THERE WERE NO SUCH BORROWING BY THE ASSESSEE COMPANY FROM B. S. M ANJUNATH. AS PER THE ASSESSEE, ONE OF ITS GROUP COMPANY CALLED, M/S. CLE AN FOODS LTD, WAS PURCHASING FRUITS FROM FARMERS AND LOANS FOR SUCH F ARMERS WERE ARRANGED BY B. S. MANJUNATH. AS A SECURITY FOR SUCH LOANS, CHEQUE S WERE GIVEN TO B. S. MANJUNATH. HOWEVER, AO WAS NOT IMPRESSED BY THE AB OVE REPLY. ACCORDING TO HIM, IN THE DIARY MAINTAINED BY B. S. MANJUNATH, TH E NAME OF MURALIKRISHNA, MANAGING DIRECTOR (MD IN SHORT) OF THE ASSESSEE C OMPANY WAS MENTIONED AND THE BALANCE SHEET OF B. S. MANJUNATH MENTIONED THE LOAN TO MURALIKRISHNA. AS PER THE AO, THE EXPLANATION THAT THE CHEQUES WERE G IVEN BY THE ASSESSEE TO B. S. MANJUNATH, AS SECURITY FOR LOANS GIVEN BY HIM TO FA RMERS WAS SELF-SERVING IN NATURE. FURTHER AS PER THE AO, JUST BECAUSE THE LO AN DID NOT APPEAR IN THE BOOKS ITA.1533/BANG/2013 PAGE - 3 OF THE ASSESSEE, WOULD NOT SHOW THAT THERE WAS NO B ORROWING BY IT. BELIEVING THE DIARY OF B. S. MANJUNATH AND BLANK CHEQUE OF T HE ASSESSEE COMPANY FOUND IN THE PREMISES OF B. S. MANJUNATH, AO CAME TO A CO NCLUSION THAT ASSESSEE HAD RECEIVED A CASH LOAN OF RS.25 LAKHS FROM B. S. MANJ UNATH. HE IMPOSED PENALTY OF RS.25,00,000/- FOR VIOLATION OF SECTION 269SS OF THE ACT. 03. IN ITS APPEAL BEFORE THE CIT (A), ARGUMENT OF T HE ASSESSEE WAS THAT IT HAD NEVER TAKEN ANY LOAN FROM B. S. MANJUNATH. AS PER THE ASSESSEE, BLANK CHEQUE GIVEN BY MURSLIKRISHNA, MD OF THE ASSESSEE COMPANY WAS NOT AGAINST ANY LOAN RAISED BY THE ASSESSEE COMPANY. ASSESSEE POINTED O UT THAT THERE WAS NO PROMISSORY NOTE ISSUED BY IT TO B. S. MANJUNATH. A SSESSEE ALSO POINTED OUT THAT MURALIKRISHNA, MD OF THE ASSESSEE COMPANY WHEN EXAM INED ON OATH ON 28.03.2007, HAD CATEGORICALLY STATED THAT HE WAS ON LY A GUARANTOR AND NOT A PRINCIPAL DEBTOR. IN OTHER WORDS, JUST BECAUSE A C HEQUE WAS FOUND IN THE PREMISES OF B. S. MANJUNATH WOULD NOT SHOW THAT IT HAD LOANED ANY AMOUNT FROM B. S MANJUNATH. CIT (A) WAS IMPRESSED BY THE ABOVE ARGUMENTS OF THE ASSESSEE. ACCORDING TO HIM, ASSESSEE WAS NEVER CON FRONTED WITH ANY STATEMENT RECORDED FROM B. S. MANJUNATH. CIT (A) ALSO NOTED THAT NOTHING WAS BROUGHT ON RECORD TO DEMONSTRATE THE CONTENTION OF THE AO T HAT PROSPERO REALITY HAD BORROWED ANY MONEY FROM B. S MANJUNATH. ACCORDING TO HIM, WHEN THE FACTUM OF LOAN WAS NOT UNEQUIVOCALLY ESTABLISHED THERE COU LD BE NO VIOLATION OF SECTION 269SS OF THE ACT. HE DELETED THE LEVY OF PENALTY. ITA.1533/BANG/2013 PAGE - 4 04. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE OR DER OF CIT (A) SUBMITTED THAT CHEQUE FOUND AT THE PREMISES OF B. S. MANJUNAT H WAS THAT OF PROSPERO REALITY LTD, SIGNED BY ITS MD, MURALIKRISHNA. IT W OULD CLEARLY IMPLY THAT PROSPERO REALITY LTD HAD BORROWED MONEY IN CASH FRO M B. S. MANJUNATH. THE AMOUNT WAS ALSO REFLECTED IN THE BALANCE-SHEET FILE D BY B. S. MANJUNATH. B. S. MANJUNATH HAD ALSO STATED AT THE TIME OF SEARCH THA T HE WAS GIVING LOANS IN CASH TO VARIOUS PERSONS AT THE RATE OF 2% PER MONTH, INC LUDING MURALIKRISHNA. THUS ACCORDING TO HIM, THE FACTUM OF ASSESSEE HAVING REC EIVED CASH LOAN FROM B. S. MANJUNATH STOOD PROVED AND THERE WAS A CLEAR VIOLAT ION OF SECTION 269 SS OF THE ACT. THEREFORE, ACCORDING TO HIM, PENALTY U/S.271D OF THE ACT WAS RIGHTLY LEVIED. 05. PER CONTRA, LD. AR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 06. WE HAVE PERUSED THE MATERIALS ON RECORD AND HEA RD THE RIVAL SUBMISSIONS. WHAT WE FIND IS THAT WHEN MURALIKRISHNA WAS EXAMINE D, HE NEVER STATED THAT ANY CASH WAS RECEIVED BY HIM FROM B. S. MANJUNATH O N BEHALF OF THE ASSESSEE, AT ANY POINT OF TIME. THE SEIZED MATERIALS FROM B. S.MANJUNATH MIGHT HAVE SHOWN MURALIKRISHNA AS ONE OF THE DEBTORS, BUT NOTH ING HAS BEEN BROUGHT ON RECORD TO SHOW THAT NAME OF THE ASSESSEE COMPANY AP PEARED ANY WHERE IN THE DIARY OF B. S. MANJUNATH OR IN THE STATEMENT GIVEN BY HIM. THERE WAS NO PROMISSORY NOTE ISSUED BY THE ASSESSEE COMPANY FOR ANY LOAN TAKEN BY IT FROM B. S. MANUNATH. IN OUR OPINION, THE PRESENCE OF A BLANK CHEQUE BY ITSELF CANNOT ITA.1533/BANG/2013 PAGE - 5 ESTABLISH A CASH LOAN HAVING BEEN TAKEN. A CHEQUE OF THE ASSESSEE COMPANY COULD HAVE BEEN FOUND IN THE PREMISES OF B. S. MANJ UNATH FOR MYRAID REASONS. TO INVOKE SECTION 271D OF THE ACT, IT IS NECESSARY THAT THERE SHOULD BE A VIOLATION OF SECTION 269SS OF THE ACT. FOR VIOLATI ON OF SECTION 269SS OF THE ACT, THE PRIMARY FACT TO BE ESTABLISHED IS THAT A L OAN WAS RECEIVED IN CASH. WHEN THE FACTUM OF THE LOAN ITSELF WAS NOT PROVED, NO PR ESUMPTION CAN BE DRAWN REGARDING ACCEPTANCE OF MONEY IN CASH. MURALIKRISH NA HAD IN HIS STATEMENT DT.27.3.2007, CLEARLY SPECIFIED THAT ASSESSEE COMPA NY HAD NOT BORROWED ANY MONEY FROM B. S. MANJUNATH. EVEN IF THE VERSION OF MURALIKRISHNA THAT CHEQUE WAS GIVEN TO B. S. MANJUNATH FOR LOAN GIVEN BY HIM BU B. S. MANJUNATH TO FARMERS IS UNBELIEVABLE, STILL IT WILLL NOT GO TO S HOW THAT ASSESSEE HAD BORROWED ANY MONEY FROM B. S. MANJUNATH. IN OUR OPINION, CI T (A) HAS TAKEN A RIGHT VIEW THAT THE BORROWING WAS NOT ESTABLISHED AND THE REFORE VIOLATION OF SECTION 269SS OF THE ACT COULD NOT BE FASTENED ON THE ASSES SEE. PENALTY WAS RIGHTLY DELETED. 07. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH DAY OF J UNE, 2015. SD/- SD/- (N. V. VASUDEVAN) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER