M/s. Optitech Software (P) Ltd., Gurgaon V. ITO, New Delhi

ITA 1584/DEL/2013

• Counselvise Citation: 158420114 RSA 2013
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJHA
• Keywords: Question of law
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI) BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AN D SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1584 /DEL/2013 ASSESSMENT YEAR : 2006-07 M/S. OPTITECH SOFTWARE (P) LTD., VS. ITO, WARD 13 (4), T-23/22 DLF PHASE III, NEW DELHI GURGAON-122002 GIR / PAN:AAACO1762E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. C. YADAV, ADV. RESPONDENT BY : SHRI P DAM KANUNJHA, SR. DR DATE OF HEARING : 11.03.2015 DATE OF PRONOUNCEMENT : 25.03.2015 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LD. CIT(A) DATED 30.08.2012. THE ASSESSEE HAS RAISED FOLLOW ING GROUNDS OF APPEAL: I) ON THE FACTS AND IN THE CASE, THE LD. CIT(A) HA S ERRED IN CONFIRMING THE DISALLOWANCE OF RS.4,28,675/- FOR SA LARY PAID. II) ON THE FACTS AND IN THE CASE, THE LD. CIT(A) ER RED IN SUSTAINING AN ADDITION U/S 41(1) OF THE ACT, A SUM OF RS.1,60, 000/- BEING SALARY PAYABLE. III) ON THE FACTS OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING AN AMOUNT OF RS.1,19,928 RECEIVED FROM THE DIRECTOR AS A VIOLATION OF SECTION 269SS OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND DURING ASSESSMENT PROCEED INGS, THE A.O. OBSERVED ITA NO.1584/DEL/2013 2 THAT HE ASSESSEE HAD MADE CERTAIN PAYMENTS TO PROFE SSIONALS WITHOUT DEDUCTION OF TDS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194J AND, THEREFORE, HE DISALLOWED THE PAYMENT U/S 40(A)(IA) OF THE ACT AND HE DISALLOWED AN AMOUNT OF RS.4,28,675/-. THE A.O. FU RTHER OBSERVED THAT THE ASSESSEE IN ITS BALANCE SHEET HAD REFLECTED A PROVI SION OF RS.1.80 LACS ON ACCOUNT OF SALARY PAYABLE. HE FURTHER OBSERVED TH AT THE ASSESSEE HAD PAID ONLY RS.20,000/- OUT OF THE PROVISIONS MADE FOR RS. 1.80 LACS. THE A.O. OBSERVED THAT IT IS UNUSUAL THAT AN EMPLOYEE WOULD KEEP SALARY WITH HIS EMPLOYER AND, THEREFORE, HE TREATED THE SALARY PAYA BLE AS A CEASED LIABILITY AND THEREFORE, MADE ADDITION U/S 41(1) OF THE ACT. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAD MADE CASH PAYMENT OF RS.1,19,928/- TO M/S. HANS HUNDAI AS PART PAYMENT FOR PURCHASE OF A CAR. ON QUERY, THE ASSESSEE SUBMITTED THAT THE AMOUNT WAS PAID TO M/S. HANS HUN DAI AFTER OBTAINING LOAN OF RS.1,19,928/- FROM THE DIRECTOR MRS. POONAM WADH WA AND DILIP WADHWA. THE A.O. OBSERVED THAT SINCE THE ASSESSEE HAD TAKEN THE LOAN FROM DIRECT10ORS IN CASH WHICH WAS IN VIOLATION OF THE P ROVISIONS OF SECTION 269SS, THEREFORE, HE HELD THAT PENALTY PROCEEDINGS U/S 271D ARE BEING INITIATED SEPARATELY. AGGRIEVED, THE ASSESSEE FILE D APPEAL BEFORE LD. CIT(A). LD. CIT(A) DID NOT AGREE WITH THE CONTENTIONS OF TH E ASSESSEE AND UPHELD THE ACTION OF A.O. AGGRIEVED, THE ASSESSEE IS NOW IN A PPEAL BEFORE US. 3. AS REGARDS THE 1 ST ADDITION AND DISALLOWANCE U/S 40(A)(IA), LD. A.R. SUBMITTED THAT THE AMOUNT WAS PAID DURING THE YEAR ITSELF AND THERE NOT OUTSTANDING AS PAYABLES AND, THEREFORE, IN VIEW OF THE DECISIONS OF THE TRIBUNAL IN THE CASE OF SHRI ANOOP KHANDELWAL IN I .T.A.NO. 18/DEL/2013, DATED 17 TH OCT. 2014 THE ADDITION WAS NOT WARRANTED. IT WAS SUBMITTED THAT THE TRIBUNAL HAS DECIDED THE SIMILAR ISSUE RELYING ON THE CASE LAW OF CIT VS ITA NO.1584/DEL/2013 3 VECTOR SHIPPING SERVICES PVT. LTD. 355 ITR 642. R EGARDING THE 2 ND GROUND OF APPEAL, LD. A.R. SUBMITTED THAT THE PROVISIONS W ERE OUTSTANDING IN THE BOOKS OF ACCOUNT AND IT WAS NOT WRITTEN BACK BY THE ASSESSEE AND, THEREFORE, THE PROVISION OF SECTION 41(1) WERE NOT APPLICABLE. AS REGARDS THE 3 RD ADDITION FOR VIOLATION OF THE PROVISION OF SECTION 269SS, LD. A.R. SUBMITTED THAT THE ASSESSEE HAD NOT ACCEPTED THE LOAN IN CASH AND RATHER THE DIRECTOR HAD DIRECTLY PAID TO HUNDAI MOTORS AND ASSESSEE HAD JUS T PASSED A JOURNAL ENTRY BY CREDITING THE AMOUNT TO THE ACCOUNT OF DIRECTORS AND THEREFORE THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 269SS. R ELIANCE IN THIS RESPECT WAS PLACED ON THE CASE LAW OF CIT VS WORLDWIDE TOWNSHIP S PROJECTS LTD. DECIDED BY HON'BLE DELHI HIGH COURT IN I.T.A.NO. 23 2/2014 FOR THE PROPOSITION THAT PROVISIONS OF SECTION 269SS ARE NO T APPLICABLE IN A CASE WHERE LOAN WAS NOT ACCEPTED IN CASH. 4. LD. A.R. ON THE OTHER HAND HEAVILY RELIED UPON T HE ORDER OF AUTHORITIES BELOW. 5. WE HAVE HARD RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ISSUE OF ADDITION U/S 40(A)(IA) IS DULY COVERED IN FAVOUR OF ASSESSEE BECAUSE IT IS AN UNDISPUTED FACT THAT PAYMENTS WERE MADE DURING THE YEAR ITSELF AND THEREFORE, WERE NOT OUTS TANDING AS PAYABLE. THE SPECIAL BENCH IN THE CASE OF MERYLIN SHIPPING &TRAN SPORT CO. IN 136 ITD 23 HAS CLEARLY HELD THAT DISALLOWANCE U/S 40(A)(IA) , CAN BE MADE OF THE AMOUNTS WHICH ARE PAYABLE AND CANNOT BE MADE OF THE AMOUNTS WHICH HAVE ALREADY BEEN PAID. SIMILAR FINDINGS HAS ALSO BEEN MADE BY HON'BLE ALLAHABAD HIGH COURT IN CASE OF VECTOR SHIPPING SER VICE PVT. LTD. REPORTED AT 357 ITSR 642 AGAINST WHICH SLP FILED BY THE DEPA RTMENT HAS ALSO BEEN DISMISSED. THOUGH HON'BLE CALCUTTA HIGH COURT IN T HE CASE OF CITVS ITA NO.1584/DEL/2013 4 CRESENT EXPORT SYNDICATE 216 TAXMAN 250 AND HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIKANDER KHAN 357 ITR 312 ARE NOT IN FAVOUR OF ASSESSEE BUT KEEPING IN VIEW OF HON'BLE SUPREME CO URT DECISION IN THE CASE OF CIT VS VEGETABLE PRODUCTS 88 ITR 92, THE ASSESSE E IS ENTITLED TO APPLICATION OF JUDGEMENT BENEFITING TO IT AND, THER EFORE, APPLYING THE HON'BLE ALLAHABAD HIGH COURT JUDGEMENT, THE 1 ST GROUND OF APPEAL IS DECIDED IN FAVOUR OF ASSESSEE AND IS THEREFORE, ALLOWED. 6. REGARDING 2 ND GROUND OF APPEAL, WITH RESPECT TO ADDITION U/S 41( 1), WE FIND THAT VARIOUS COURTS HAVE DECIDED THAT ADDITION U/S 41(1) CAN ONLY BE MADE IF THE PROVISIONS OF LIABILITY ARE WRITTEN BAC K IN THE P & L ACCOUNT AND IN THE ABSENCE OF SUCH WRITE BACK, ADDITION U/S 41( 1) CANNOT BE MADE. IT IS UNDISPUTED FACT THAT PROVISIONS WERE NOT WRITTEN BA CK AND WERE OUTSTANDING IN THE BALANCE SHEET AND REFLECTION OF SUCH LIABILI TIES IN THE BALANCE SHEET ITSELF PROVES THAT LIABILITIES HAD NOT CEASED AND T HEREFORE, PROVISIONS OF SECTION 41(1) WERE NOT APPLICABLE. IN VIEW OF ABOV E, GROUND NO.2 OF THE APPEAL IS ALSO ALLOWED. 7. AS REGARDS 3 RD GRIEVANCE FOR VIOLATION OF THE PROVISIONS OF SECTI ON 269SS, WE FIND THAT THE PROVISIONS OF SECTION 269SS ARE APPLICABLE IN THE CASE OF ACCEPTANCE OF LOAN OR DEPOSIT IN CASH. HOW EVER, THESE PROVISIONS ARE NOT APPLICABLE IN A CASE WHERE THE ASSESSEE HAD REC EIVED LOANS OR DEPOSITS BY WAY OF PASSING OF A JOURNAL ENTRY. THE AUDITORS IN THE AUDITORS REPORT U/S 44AB VIDE ANNEXURE D PLACED AT PAPER BOOK PAGE 22 HAS STATED THAT NO CASH LOAN WAS ACCEPTED BY ASSESSEE FROM DILIP WADHW A AND POONAM WADHWA. LD. A.R. HAD SUBMITTED THAT A.O. WRONGLY N OTED THAT AMOUNT WAS RECEIVED IN CASH WHEREAS, THE FACT REMAINS THAT ASS ESSEE HAD PASSED JOURNAL ENTRY CREDITING THE ACCOUNT OF DEPOSITORS AND DEBIT ING THE ACCOUNT OF HUNDAI ITA NO.1584/DEL/2013 5 MOTORS. WE FIND THAT HON'BLE DELHI HIGH COURT IN T HE CASE OF WORLDWIDE TOWNSHIP PROJECTS LTD. VIDE PARA 8 HAS HELD THAT PR OVISIONS OF SECTION 269SS ARE ATTRACTED ONLY IF THE TRANSACTION IS MADE IN CASH AND THE FINDINGS AS CONTAINED IN PARA 8 ARE REPRODUCED BELOW: A PLAIN READING OF THE AFORESAID SECTION INDICATES THAT (THE IMPORT OF THE ABOVE PROVISION IS LIMITED) IT APPLIES TO A TRA NSACTION WHERE A DEPOSIT OR A LOAN IS ACCEPTED BY AN ASSESSEE, OTHER WISE THAN BY AN ACCOUNT PAYEE CHEQUE OR AN ACCOUNT PAYEE DRAFT. TH E AMBIT OF THE SECTION IS CLEARLY RESTRICTED TO TRANSACTION INVOLV ING ACCEPTANCE OF MONEY AND NOT INTENDED TO AFFECT CASES WHERE A DEBT OR A LIABILITY ARISES ON ACCOUNT OF BOOK ENTRIES. THE OBJECT OF T HE SECTION IS TO PREVENTS TRANSACTIONS IN CURRENCY. THIS IS ALSO CL EARLY EXPLICIT FROM CLAUSE (III) OF THE EXPLANATION OF SECTION 269SS OF THE ACT WHICH DEFINES LOAN OR DEPOSIT TO MEAN 'LOAN OR DEPOSIT OF MONEY'. THE LIABILITY RECORDED IN THE BOOKS OF ACCOUNTS BY WAY OF JOURNAL ENTRIES, I.E. CREDITING THE ACCOUNT OF A PARTY TO WHOM MONIE S ARE PAYABLE OR DEBITING THE ACCOUNT OF A PARTY FROM WHOM MONIES AR E RECEIVABLE IN THE BOOKS OF ACCOUNTS, IS CLEARLY OUTSIDE THE AMBIT OF THE PROVISION OF SECTION 269SS OF THE ACT, BECAUSE PASSING SUCH ENTR IES DOES NOT INVOLVE ACCEPTANCE OF ANY LOAN OR DEPOSIT OF MONEY. ' IN THE PRESENT CASE, ADMITTEDLY NO MONEY WAS TRANSACTED OTHER THAN ' THROUGH 'BANKING CHANNELS. M/S P ACL INDIA LTD. MADE CERTAI N PAYMENTS THROUGH BANKING CHANNELS TO LAND OWNERS. THIS PAYME NT MADE ON BEHALF OF THE ASSESSEE WAS RECORDED BY THE ASSESSEE IN ITS BOOKS BY CREDITING THE ACCOUNT OF M/S PACL INDIA LTD. IN VIE W OF THIS ADMITTED POSITION, NO INFRINGEMENT OF SECTION 269SS OF THE A CT IS MADE OUT. THIS COURT, IN THE CASE OF NOIDA TOLL BRIDGE CO. LTD. (S UPRA), CONSIDERED A SIMILAR CASE WHERE A COMPANY HAD PAID MONEY TO THE GOVERNMENT OF DELHI FOR ACQUISITION OF A LAND ON BEHALF OF THE AS SESSEE THEREIN. THE ASSESSING OFFICER LEVIED A PENALTY UNDER SECTION 27 1D OF THE ACT FOR ALLEGED VIOLATION OF THE PROVISION OF SECTION 269SS OF THE ACT SINCE THE BOOKS OF THE ASSESSEE REFLECTED THE LIABILITY ON AC COUNT OF THE LANDS ACQUIRED ON ITS BEHALF. ON APPEAL, THE CIT(A) AFFI RMED THE PENALTY. THE ORDER OF THE CIT WAS SUCCESSFULLY IMPUGNED BY T HE ASSESSEE BEFORE THE ITAT. ON APPEAL, THIS COURT HELD AS UNDE R: WHILE HOLDING THAT HT PROVISIONS OF SECTION 269SS O F THE ACT WERE NOT ATTRACTED, THE TRIBUNAL HAS NOTICED THAT (I) IN THE INSTANT CASE, THE ITA NO.1584/DEL/2013 6 TRANSACTION WAS BY AN ACCOUNT PAYEE CHEQUE, (II) NO PAYMENT ON ACCOUNT WAS MADE IN CASH EITHER BY THE ASSESSEE OR ON ITS BEHALF, (III) NO LOAN WAS ACCEPTED BY THE ASSESSEE IN CASH, AND ( IV) THE PAYMENT OF RS.4.85 CRORES MADE BY THE ASSESSEE THROUGH IL & FS , WHICH HOLDS MORE THAN 30 PER CENT OF THE PAID-UP CAPITAL OF THE ASSESSEE BY JOURNAL ENTRY IN THE BOOKS OF ACCOUNT OF THE ASSESSED BY CR EDITING THE ACCOUNT OF IL & FS. HAVING REGARD TO THE AFORENOTED FINDINGS, WHICH ARE ESSENTIALLY FINDINGS OF FACT, WE ARE IN COMPLETE AGREEMENT WITH THE TRIBUNAL THAT THE PROVISIONS OF SECTION 269SS WERE NOT ATTRACTED ON THE FACTS OF THE CASE. ADMITTEDLY, NEITHER THE ASSESSEE NOR IL & FS HAD MADE ANY PAYMENT IN CASH. THE ORDER OF THE TRIBUNAL DOES NOT GIVE RISE TO ANY QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION O F LAW. WE ACCORDINGLY DECLINE TO ENTERTAIN THE APPEAL. D ISMISSED. 8. IN VIEW OF THE ABOVE, WE HOLD THAT THERE WAS NO VIOLATION OF PROVISIONS OF SECTION 269SS AND THEREFORE, LD. CIT(A)S ACTION IN CONFIRMING THE ACTION OF A.O. IN INITIATING PENALTY U/S 271D IS NO T JUSTIFIED. IN VIEW OF ABOVE, GROUND NO.3 IS ALSO ALLOWED. 9. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2015. SD./- SD./- ( G. C. GUPTA) (T.S. KAPO OR) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 25 TH MARCH, 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.1584/DEL/2013 7 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 13/3 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 17,18,19 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 25/3 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 25/3 SR. PS/PS 7 FILE SENT TO BENCH CLERK 25/3 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER