Srico Projects Private Limited, Hyderabad V. Addl. Commissioner of Income Tax , Range-3, Hyderabad

ITA 162/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5800 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B SAI PRASAD
• Keywords: Income from undisclosed sources; Source of fund; Question of law; Reasonable cause; Condonation of delay
• Section: 273B; 143(3); 271D; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 162/HYD/2018 AY 2012 - 13 M/S. SRICO PROJECTS PVT LTD., HYDERABAD. PAN: AAGCS 7109 F VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 3, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI B. SAI PRASAD REVENUE BY: SHRI SUNIL KUMAR PANDEY, DR DATE OF HEARING: 16/02/2021 DATE OF PRONOUNCEMENT: 27 /04/2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A) - 3, HYDERABAD IN APPEAL NO. 0294/CIT() - 3/15 - 16, DATED 3/08/3016 PASSED U/S. 271D R.W.S 250(6) OF THE ACT FOR THE AY 2012 - 13. 2. THE ASSESSEE HAS RAISED SIX GROUNDS IN ITS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT: - THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. AO WHO HAD LEVIED PENALTY OF RS. 15,77,500/ - INVOKING THE PROVISIONS OF SECTION 271D OF THE ACT INSTEAD OF 2 APPRECIATING THE REASONABLE CAUSE FOR HAVING RECEIVED CASH LOANS FROM ITS MANAGING DIRECTOR AND GRANTING RELIEF TO THE ASSESSEE AS PER PROVISION 273B OF THE ACT . 3 . AT THE OUTSET, LD. AR SUBMITTED BEFORE US THAT THERE IS A DELAY OF 435 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, THE ASSESSEE HAD FILED AN AFFIDAVIT SEEKING CONDONATION OF DELAY WHEREIN THE REASONS FOR NOT FILING THE APPEAL WITHIN THE PRESCRIBED TIME LIMIT WAS EXPLAINED. FOR REFERENCE, THE RELEVANT PORTION FROM THE AFFIDAVI T IS EXTRACTED HEREIN BELOW: - .. 3. THE RELEVANT APPELLATE ORDER WAS NOT RECEIVED IN THE OFFICE BY PROPER PERSON AND WAS NOT BROUGHT TO THE NOTICE OF THE MANAGING DIRECTOR OR ANY OTHER RESPONSIBLE OFFICIAL DEALING WITH THE MATTER. THE PERSON WHO ACTUALLY RECEIVED THE SAID ORDER LEFT THE EMPLOYMENT OF THE COMPANY WITHOUT BRINGING THE SAID ORDER TO THE NOTICE OF ANY RESPONSIBLE AUTHORITY. THE ORDER COP WAS ULTIMATELY DISCOVERED WHILE PERUSING ALL THE CONTENTS / PAPERS LYING IN HIS DESK AFTER HIS QUITTING EMPLOYMENT. AS SUCH, I COULD NOT INFORM THE POSITION TO THE ADVOCATE / LEGAL REPRESENTATIVE APPOINTED BY US TO INITIATE FURTHER ACTION. .. 4 . ON PERUSAL OF THE AFFIDAVIT FILED BY THE MANAGING DIRECTOR OF THE ASSESSEE - COMPANY , WE ARE OF THE VIEW THAT THE REASON FOR THE DELAY WAS BECAUSE OF THE ASSESSEE - COMPANYS EMPLOYEE WHO RECEIVED THE CIT (A)S ORDER AND WITHOUT BRINGING THE SAME TO THE NOTICE OF THE RESPONSIBLE OFFICIAL IN THE ASSESSEE - COMPANY LEFT THE EMPLOYMENT AND THEREFORE, THE ASSESSEE COULD NOT FILE THE APPEAL WITHIN THE STIPULATED TIME. CONSIDERING THE SUBMISSION OF THE ASSESSEE WE FIND THAT THE ASSESSEE WAS PREVENTED BY A REASONABLE CAUSE IN FILING THE APPEAL BEYOND THE STIPULATED TIME AND THEREFORE, IN THE INTEREST OF JUSTICE, WE HEREBY 3 CONDONE THE DELAY OF 4 35 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL AND PROCEED TO ADJUDICATE THE APPEAL ON MERITS. 5 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACT WORKS FILED ITS RETURN ON 30/09/2012 AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 16/3/2015. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LD. AO THAT THE ASSESSEE COMPANY HAS RECEIVED CASH LOANS EXCEEDING RS. 20,000/ - FROM SHRI M. SRINIVASA RAO, MANAGING DIRECTOR OF THE COMPANY . ON QUERY, THE ASSESSEE HAD EXPLAINED THAT THE TRANSACTION BETWEEN THE ASSESSEE AND ITS MANAGING DIRECTOR CANNOT BE TREATED AS LOAN TRANSACTION BECAUSE IT IS IN THE NATURE OF CURRENT ACCOUNT . THE ASSESSEE HAD FURTHER RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF M/S. IDHAYAM PUBLICATIONS PRIVATE LIMITED REPORTED IN 285 ITR 221 WHEREIN THE HIGH COURT OBSERVED AS UNDER: 4. WE HEARD THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE REVENUE. WE HAVE PERUSED THE MATERIALS AVAILABLE IN RECORD. ADMITTEDLY MR.S.V. S.MANIAN WAS ONE OF THE DIRECTORS. THEREFORE THE ORDER OF THE LOWER AUTHORITY CLEARLY SHOWS THAT THERE WAS A RUNNING CURRENT ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NAME OF MR.S.V.S.MANIAN. MR.S.V.S.MANIAN USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND USED TO WITHDRAW THE MONEY ALSO FROM THE CURRENT ACCOUNT. THE REVENUE SHOULD ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS . THE DEPOSIT AND THE WITHDRAWAL OF THE MONEY FROM THE CURRENT ACCOUNT COULD NOT BE CONSIDERED AS A LOAN OR ADVANCE. FURTHER IT WAS ALSO FOUND THAT THE ASSESSEE FILED A LETTER DATED 29.09.97 AND IN THAT LETTER HE EXPLAINED THAT THE AMOUNT RECEIVED FROM MR.S.V.S.MANIAN HAD BEEN SHOWN AS 'UNSECURED LOAN FROM DIRECTORS' IN THE BALANCE SHEET. AS PER THE COMPANIES ACT , UNDER COMPANIES (ACCEPTANCE O F DEPOSIT) RULES 1975, UNDER RULE 2(B)(IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A SHARE HOLDER OF A PRIVATE LIMITED COMPANY. THEREFORE THE TRANSACTION BETWEEN THE APPELLANT AND THE DIRECTOR CUM SHARE HOLDER 4 IS NOT A LOAN OR DEPO SIT AND IT IS ONLY CURRENT ACCOUNT IN NATURE AND NO INTEREST BEING CHARGED FOR THE ABOVE TRANSACTION. 5. IN THE FOREGOING CONCLUSIONS, WE ARE OF THE VIEW THAT, SINCE THE SAID TRANSACTION DOES NOT FALL WITHIN THE MEANING OF LOAN OR ADVANCE, THERE IS NO VIOL ATION OF SECTION 269SS OF THE INCOME TAX ACT. WE FIND NO ERROR IN THE ORDER OF THE TRIB THE SAME REQUIRES NO INTERFERENCE. HENCE, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION OF THIS COURT 6. HOWEVER, THE LD. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 3, HYDERABAD WAS OF THE VIEW THAT THE ASSESSEES CASE IS A FIT CASE FOR LEVY OF PENALTY U/S. 271D OF THE ACT. ON APPEAL, THE LD. CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - DURING THE APPEAL PROCEEDINGS THE APPELLANT WAS ALSO ASKE D TO SUBMIT BANK ACCOUNT OF SRI M. SRINIVASA RAO, MD OF THE COMPANY. IN RESPONSE, THE APPELLANT SUBMITTED MDS BANK ACCOUNT WITH STATE BANK OF INDIA AND WITH PUNJAB NATIONAL BANK FOR AY 2011 - 12. BOTH THE BANK ACCOUNTS DID NOT CONTAIN ANY CREDIT ENTRIES RE FLECTING INCOME OF SRI M. SRINIVASA RAO. IT WAS FURTHER EXPLAINED THAT THE ENTIRE SALARY OF SRI M. SRINIVASA RAO WAS DIRECTLY PAID BY THE APPELLANT COMPANY TOWARDS HOUSING LOANS AVAILED BY SRI M. SRINIVASA RAO, THEREFORE NO SALARY CREDITS ARE FOUND IN THE BANK ACCOUNTS. THERE ARE NO CREDITS IN THE BANK ACCOUNT OF RENTAL INCOME / INCOME FROM CONSULTANCY BUSINESS. FURTHER, THE AMOUNT RECEIVED BY SRI M. SRINIVASA RAO BY SELLING WIRE MESH TO M/S. MURUGAN ENTERPRISES IS NOT REFLECTED ANYWHERE IN THE COMPUTATI ON OF INCOME OF SRI M. SRINIVASA RAO. THEREFORE, OBVIOUS CONCLUSION IS THAT SRI M. SRINIVASA RAO DID NOT OFFER TO TAX THE AMOUNTS RECEIVED FROM M/S. MURUGAN ENTERPRISES. THIS UNACCOUNTED INCOME IS GIVEN AS CASH LOAN TO THE APPELLANT COMPANY . SECTION 269 SS IS BROUGHT INTO STATUTE TO BLOCK THE INTRODUCTION OF BL ACK MONEY IN THE FORM OF CASH RECEIPTS, MORE PARTICULARLY IN THE CASES WHERE SOURCES ARE UNACCOUNTED / UNEXPLAINED. THEREFORE, THE FACTS OF THE CASE CLEARLY ATTRACT PROVISIONS OF SECTION 271D AND E XPLANATION GIVEN BY THE APPELLANT DOES NOT CONSTITUTE REASONABLE CAUSE U/S. 273B, THEREFORE THE APPEAL IS DISMISSED. 7 . BEFORE US, THE LD. AR ARGUED BY STATING THAT THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY HAD EXTENDED CASH TO THE COMPANY FOR MEETING ITS DAY - TO - DAY EXPENSES, SUCH AS PAYMENT FOR DAILY LABOURERS ETC., ON - SITE S WHICH WAS REMOTELY LOCATED. IT WAS FURTHER 5 EXPLAINED THAT CERTAIN CASH PAYMENTS WERE ALS O MADE FOR ATTENDING TO THE MEDICAL EMERGENCIES OF CERTAIN LABOURERS WHO MET WITH ACCIDENTS ON THE WORK SITE. IT WAS FURTHER SUBMITTED THAT THE AMOUNT PAID BY THE MANAGING DIRECTOR WAS OUT OF THE AMOUNT RECEIVED BY HIM FROM THE SALE OF SCRAP OF THE ASSESSE E - COMPANY. IT WAS THEREFORE ARGUED THAT THE TRANSACTION CANNOT BE CONSIDERED AS LOAN RECEIVED FROM THE ASSESSEE COMPANIES MANAGING DIRECTOR. THE LD. AR FURTHER RELIED ON THE FOLLOWING DECISIONS: (I) CIT VS. SUNIL KUMAR GOEL [2009] 315 ITR 163/183 TAXMANN 53 (PUNJ. HAR.) (II) CIT VS. MAHESWARI NIRMAN UDYOG [2008] 302 ITR 201/170 TAXMAN 502 (RAJ.) (III) CIT VS. LAKSHMI TRUST CO [2008] 303 ITR 99 (MAD.) 8 . THE LD. DR ON THE OTHER VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE LD. REVENUE AUTHORIT IES. 9 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT APP EARS THAT THE ASSESSEE COMPANY HAS RECEIVED CASH FROM ITS MANAGING DIRECTOR FOR MEETING ITS DAY - TO - DAY EMERGENCY EXPENSES . IN THIS SITUATION, THE DECISION RELIED BY THE ASSESSEE WILL BE RELEVANT AND THE ASSESSEE COMPANY SHALL BE ENTITLED TO RELIEF AS PER THE PROVISIONS OF SECTION 273B OF THE ACT. HOWEVER, FROM THE ORDER OF THE LD. CIT (A) IT APPEARS THAT THE ASSESSEE WAS NO T ABLE TO EXPLAIN THE GENUINENESS OF THE SOURCE OF FUNDS OBTAINED FROM ITS MANAGING DIRECTOR. THEREFORE, IN THE INTEREST 6 OF JUSTICE, WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LD. AO TO EXAMINE THAT NO UNEXPLAINED FUNDS ARE INTROD UCED IN THE BUSINE SS OF THE ASSESSEE COMPANY AS LOAN FROM THE MANAGING DIRECTOR AND IF IT FOUND THAT THE SOURCE OF FUND OBTAINED FROM THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY IS EXPLAINED THEN DELETE THE PENALTY LEVIED INVOKING THE PROVISIONS OF SECTION 271D OF THE ACT . IF FOUND OTHERWISE, THE LD. AO SHALL PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW AND MERIT. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. PRONOUNCED IN THE OPEN COURT ON THE 27 TH APRIL, 2021. SD/ - S D/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 27 TH APRIL, 2021. OKK COPY TO: - 1) M/S. SRICO PROJECTS PVT LTD., 8 - 2 - 686/C/ES, BURHAN MANZIL, ROAD NO.12, BANJARA HILLS, HYDERABAD. 2) ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE - 3, HYDERABAD. 3) THE CIT(A) - 3, HYDERABAD. 4) THE PRINCIPAL COMMISSIONER OF INCOME TAX - 3, HYDERABAD. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE