Girish appa Reddy, Bangalore V. Income tax Officer, Ward-2(2), Bangalore

ITA 1637/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0432 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Capital asset; Depreciation; Reasonable cause; Deemed dividend; Non compliance
• Section: 115JB; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NOS. A.Y. APPELLANTS VS. RESPONDENT 1637/BANG/2014 1638/BANG/2014 1639/BANG/2014 1640/BANG/2014 2008-09 2009-10 2010-11 2010-11 SHRI GIRISH APPAREDDY PAN: ADBPA 7977Q THE INCOME TAX OFFICER, WARD 12(2), BANGALORE. 1641/BANG/2014 2010-11 SMT. VEENA GIRISH, PAN: ADZPG 5085G NO.442, 8 TH MAIN ROAD 11 TH CROSS, SADASHIVANAGAR, BANGALORE 560 080. APPELLANT BY : NONE RESPONDENT BY : DR. P.K. SRIHARI, ADDL. CIT(DR) DATE OF HEARING : 05.05.2016 DATE OF PRONOUNCEMENT : 11.05.2016 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE ASSESSEES AG AINST THE ORDER OF CIT(APPEALS)-III, BANGALORE. THESE APPEALS CAME UP FOR HEARING ON 5.5.2016, BUT NONE APPEARED ON BEHALF OF THE ASSESS EE. THE ASSESSEES, HOWEVER, MOVED AN APPLICATION FOR ADJOURNMENT STATI NG THEREIN THAT DUE TO UNAVOIDABLE CIRCUMSTANCES, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT ITA NOS.1637 TO 1641/BANG/2014 PAGE 2 OF 20 APPEAR ON THE DESIGNATED DAY. SINCE NO REASONS HA VE BEEN EXPLAINED FOR THE ABSENCE OF THE ASSESSEES OR THEIR COUNSEL, THE REQUEST FOR ADJOURNMENT CANNOT BE ENTERTAINED, FOR THE SIMPLE REASON THAT O N ACCOUNT OF UNAVOIDABLE CIRCUMSTANCES THE COUNSEL FOR THE ASSES SEE COULD NOT APPEAR. MOREOVER, NONE APPEARED ON BEHALF OF THE ASSESSEES, BUT ONLY AN APPLICATION FOR ADJOURNMENT WAS SENT THROUGH POST. 2. AS PER OFFICE MANUAL OF THE TRIBUNAL, THE ASSESS EE IS REQUIRED TO MOVE AN APPLICATION FOR ADJOURNMENT IN ADVANCE AND IF HE DOES NOT RECEIVE ANY COMMUNICATION WITH REGARD TO DISPOSAL OF HIS AP PLICATION, THE APPLICATION THAT HE MADE IS DEEMED TO HAVE BEEN REJ ECTED AND ASSESSEE SHOULD APPEAR IN PERSON ON THE DATE FIXED. 3. IN THE INSTANT CASE, BY FILING AN APPLICATION FO R ADJOURNMENT, THE ASSES TOOK IT FOR GRANTED THAT THE HEARING OF THESE APPEALS WOULD BE ADJOURNED. WE CANNOT APPRECIATE THIS TYPE OF APPRO ACH BY THE ASSESSEES. MOREOVER, WE FIND THAT NO JUSTIFIABLE REASONS IN TH E ADJOURNMENT APPLICATION AND ACCORDINGLY REJECT THE SAME AND HEARD THE APPEA LS OF THE ASSESSEE. 4. THE LD. DR PLACED RELIANCE ON THE ORDER OF CIT(A PPEALS) IN ALL THESE APPEALS. ITA NOS.1637 TO 1641/BANG/2014 PAGE 3 OF 20 5. COMMON GROUNDS OF APPEAL ARE RAISED IN ITA NOS. 1637 TO 1639 & 1641/BANG/2014 AND FOR THE SAKE OF REFERENCE, WE EX TRACT THE GROUNDS RAISED IN ITA NO.1637/BANG/2014 AS UNDER:- VINTAGE BIO FUELS PRIVATE LIMITED (HEREINAFTER REFE RRED TO AS VINTAGE) OF MR . GIRISH APPAREDDY IS ONE OF THE DIRECTORS; BOUGHT ON E COMMERCIAL BUILDING BEARING NO 93/ A , 5 TH BLOCK , KORAMANGALA, BANGALORE - 560095 IN FY 2005-06 THE TOTAL VALUE OF WHICH IS RS 8 , L1,30 , 690/-(RUPEES EIGHT CRORE ELEVEN LAKHS THIRTY THOUSA ND SIX HUNDRED AND NINETY ONLY) . VINTAGE BOUGHT ONE MORE COMMERCIAL BUILDING AT JAKKASANDRA IN FY 2007-0B TOTAL VALUES OF WHICH IS RS 11,53,20,780/-(RUPEES ELEVEN CRORE FIFTY THREE LAKH S TWENTY THOUSAND SEVEN HUNDRED AND EIGHTY ONLY) . THE CONSIDERATION MENTIONED HEREIN IS COMPOSITE CONSIDERATION FOR THE LAND , BUILDING & FURNITURE AND INTERIORS . THESE BUILDINGS BEING SOFTWARE BUILDINGS CONTAIN LOT OF INFRASTRUCTURE FACILITIES . HOWEVER , IN THE BALANCE SHEET SINCE THE COMPOSITE VALUE WAS G I VEN NO DEPRECIATION WAS CHARGED EACH YEAR. ALSO DEPRECIATION AS PER IT RULE S WAS NOT CLAIMED AS THE INCOME THERE FROM WAS OFFERED TO TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY ' . DURING THE ASSESSMENT BASED ON THE VALUATION CERTIF ICATES THE LAND, BUILDING & FURNITURE AND INTERIORS WAS BIFURCATED A ND DEPRECIATION SCHEDULE WAS REWORKED AND PRESENTED TO THE ASSESSIN G OFFICER FOR HIS PERUSAL. REWORKED DEPRECIATION SCHEDULE AND RESULTA NT ACCUMULATED PROFIT BOTH AS PER INCOME TAX ACT/ RULES AND COMPAN IES ACT WERE PRESENTED . THE DETAILS HAVE BEEN PRESENTED IN ANNEXURE 3 THE ASSESSING OFFICER HAS CONTENTED THAT ACCOUNTS H AVE BEEN PREPARED AS PER SCHEDULE VI OF THE COMPANIES ACT , 1956 AND THAT HE CAN NOT DISTURB IN THE COURSE OF ASSESSMENT OF ONE OF ITS D IRECTORS. THE ASSESSEE HEREBY WISHES TO ESTABLISH/MAINTAIN IN A SEQUENTIAL MANNER AS FOLLOWS : 1. ELIGIBILITY FOR CLAIMING DEPRECIATION WHEN NOT O RIGINALLY CLAIMED: EXPLANATION 5 TO SECTION 32 OF THE INCOME TAX ACT, 1961 INTER ALIA STATES THAT ' FOR THE REMOVAL OF DOUBTS. IT IS HEREBY DECLARED TH AT THE ITA NOS.1637 TO 1641/BANG/2014 PAGE 4 OF 20 PROVISIONS OF THIS SUB SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATIO N IN COMPUTING HIS TOTAL INCOME' (EMPHASIS SUPPLIED) (REFER ANNEXURE 4) ACCORDINGLY, THE ACT ITSELF STIPULATES THAT BENEFIT OF DEPRECIATION SHALL BE PROVIDED WHETHER THE ASSESSEE CLAIMS THE SAME OR NOT. RELIANCE IS ALSO PLACED ON THE FOLLOWING: INCOME TAX DEPARTMENT CIRCULAR NO 14 (XI-35) OF 195 5 DATED APRIL 11, 1955. THE SAID CIRCULAR READS AS FOLLOWS: '3. OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANT AGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ON E OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEF AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDI NGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND O R RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE D EPARTMENT, FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH , THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEF REST WITH THE ASSESSEE ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD: (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEF T O WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED F OR CLAIMING REFUNDS AND RELIEFS ITAT BANGALORE BENCH 'B' IN THE CASE OF RAKESH SING H V/S ASSISTANT COMMISSIONER OF INCOME TAX IT APPEAL NO 1027 (BANG) OF 2011 DATED AUGUST 24, 2012 (REFER ANNEXURE 5) THE ABOVE CIRCULAR AND RULING SUBSTANTIATES THE FAC T THAT JUST BECAUSE THE ASSESSEE HAS NOT CLAIMED THE BENEFIT AVAILABLE TO H IM IN THE FORM OF ITA NOS.1637 TO 1641/BANG/2014 PAGE 5 OF 20 DEPRECIATION DOESN'T DISENTITLE HIM FROM CLAMING TH E BENEFIT FOR THOSE YEARS. AGAIN, IF ALLOWANCE FOR DEPRECIATION IS NOT MADE AT THE END OF THE USEFUL LIFE OF THE ASSET THERE WILL NOT BE ANY FUND/PROVIS ION LEFT TO REPLACE THE SAME. HENCE, AS PER THE BALANCE SHEET OF VINTAGE AS ON 31.03.2010 THE ACCUMULATED PROFIT CONTAINS 'CAPITAL ELEMENT' TO TH E TUNE OF ACCUMULATED DEPRECIATION THEREON. HENCE THE CAPITA L ELEMENT IN THE FORM OF DEPRECIATION HAS TO BE REMOVED TO ARRIVE AT THE ACTUAL 'REVENUE ELEMENT'. IT IS OUR HUMBLE OPINION THAT IT IS ON TH IS REVENUE ELEMENT THAT WE SHOULD APPLY THE PROVISIONS OF SECTION 2(22 ) (E) OF THE INCOME TAX ACT, 1961 TO TEST THE APPLICABILITY OF D EEMED DIVIDEND PROVISIONS. REFERENCE IS ALSO MADE TO P.K. BADIANI V/S CIT (197 6) 105 ITR 642 (SC) WE WISH TO REPRODUCE THE RELEVANT PORTION OF THE CI TATION IN P K BADIANI CASE WHERE IT IS STATED THAT . WHEN ARRIVING AT THE PROFITS FOR THAT PERIOD THE AM OUNT OF DEPRECIATION HAS TO BE DEDUCTED, BECAUSE THE AMOUNT OF THE VALUE LOST BY DEPRECIATION IS A CAPITAL LOSS WHICH MUST B E REPLACED FIRST AS OTHERWISE THE INITIAL CAPITAL WOULD, TO THAT EXTENT , INCORRECTLY AND FALSELY BE CONVERTED INTO AND TREATED AS PROFITS ' (REFER ANNEXURE 6) 'WE ALSO WISH TO STATE THAT INCASE IF THE DEPRECIAT ION ALLOWANCE IS NOT PROVIDED THE ACCUMULATED PROFIT WOULD PARTAKE THE C HARACTER OF 'CAPITAL' EITHER IN PART OR IN FULL DEPENDING UPON THE QUANTUM OF DEPRECIATION ALLOWANCE. IF NO ALLOWANCE TO DEPRECIA TION IS MADE AT THE END OF THE USEFUL LIFE OF THE ASSET CAN NOT BE REPL ACED BY THE NEW ASSET AND THUS IT WOULD IMPAIR THE REVENUE EARNING CAPACI TY OF THE COMPANY. WE WISH TO STATE THAT DEPRECIATION IS A CHARGE AGAI NST THE PROFITS AND SHALL BE CHARGED AGAINST THE PROFIT AS 'IT IS TO PR OVIDE FOR REPLACEMENT OF THE CAPITAL ASSETS SO LOST BY REASON OF NORMAL WEAR AND TEAR THAT DEPRECIATION IS ALLOWED, SO THAT AT THE END OF THE USEFUL LIFE OF THOSE ASSETS A FUND IS AVAILABLE TO REPLACE THOSE ASSETS' . WE ALSO WISH TO STATE THAT AS PER SECTION 205 OF TH E COMPANIES ACT, 1956 DIVIDEND SHALL BE DECLARED ONLY AFTER CHARGING DEPRECIATION. THE SAID SECTION INTER ALIA READS AS FOLLOWS: ITA NOS.1637 TO 1641/BANG/2014 PAGE 6 OF 20 205. DIVIDEND TO BE PAID ONLY OUT OF PROFITS (1) NO DIVIDEND SHALL BE DECLARED OR PAID BY A COMPANY FOR ANY FINANCIAL YEAR EXCEPT OUT OF THE PROFITS OF THE COMPANY FOR THAT YEAR ARRIVED AT AFTER PROVIDING FOR DEPRECIATION IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (2) OR OUT OF THE PRO FITS OF THE COMPANY FOR ANY PREVIOUS FINANCIAL YEAR OR YEARS ARRIVED AT AFTER PROVIDING FOR DEPRECIATION IN ACCORDANCE WITH THOSE PROVISIONS AN D REMAINING UNDISTRIBUTED OR OUT OF BOTH OR OUT OF MONEYS PROVI DED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR THE PAYMENT OF DIVIDEND~ IN PURSUANCE OF A GUARANTEE GIVEN BY THAT GOVERNMENT: (EMPHASIS SUPPLIED) (REFER ANNEXURE 7) AFTER MAINTAINING THAT DEPRECIATION IS ALLOWABLE NE XT POINT FOR CONSIDERATION IS WHETHER IT IS DEPRECIATION AS PER COMPANIES ACT OR AS PER IT RULES. 2. WHETHER DEPRECIATION AS PER IT RULES OR AS PER COMP ANIES ACT? FOR THE PURPOSE OF DETERMINING THE ACCUMULATED PROF IT U/S 2(22) (E) DEPRECIATION AS PER IT RULES SHALL BE CONSIDERED AS ENVISAGED IN THE FOLLOWING CITATIONS. COMMISSIONER OF INCOME TAX V/S JAMNADAS KHIMJI KOTH ARI (1973) 92 ITR 105 (BOM) WHERE IT HAS BEEN INTER ALTO HELD THAT 'THE PHRASE 'ACCUMULATED PROFITS' DOES NOT MEAN PRO FITS AS DISCLOSED BY THE COMPANY'S BALANCE SHEET. THE PROFITS DISCLOS ED WOULD BE SUBJECT TO ADJUSTMENT AND THE DEPRECIATION AS GRANTED IN AC CORDANCE WITH THE RATES PRESCRIBED BY THE INCOME TAX ACT WOULD HAVE T O BE DEDUCTED FOR ASCERTAINING THE ACCUMULATED PROFITS' (REFER ANNEXURE 8) NAVNITLAL C JHAVERI V. COMMISSIONER OF INCOME TAX ( 1971) 80 ITR 582 (BOM) ALSO STATES THAT DEPRECIATION AS PER IT RULES SHAL L BE CONSIDERED FOR THE PURPOSE OF ARRIVING AT ACCUMULAT ED PROFITS FOR THE PURPOSE OF SECTION 2(22)(E) (REFER ANNEXURE 10) REFERENCE IS ALSO MADE TO P.K. BADIANI V/S CIT (1976) 105 ITR 642 (SC) WHERE IT HAS BEEN HELD THAT THE EXPRESSION ACCUMUL ATED PROFITS OCCURRING IN SUB CLAUSE (E) OF SECTION 2(6A) OF THE 1922 ACT ITA NOS.1637 TO 1641/BANG/2014 PAGE 7 OF 20 (CORRESPONDING TO SECTION 2(22) (E) OF THE 1961 ACT ) OR FOR THE MATTER IN ANY OTHER CLAUSE MEANS PROFITS IN THE COMMERCIAL SENSE AND NOT ASSESSABLE OR TAXABLE PROFITS LIABLE TO TAX AS INCOME UNDER THE 1922 ACT. BASED ON THE ABOVE WE ARE OF THE OPINION THAT IT IS THE DEPRECIATION AS PER IT RULES WHICH SHALL BE ALLOWED FOR THE PURPOSE OF ARRIVING AT ACCUMULATED PROFIT AS PER SECTION 2(22)(E) OF THE I NCOME TAX. EXPLANATIONS TO THE OBSERVATIONS MADE BY THE COMMISSIONER OF INCOME TAX APPEALS III BANGALORE IN PARAGRAPH 5 OF THE ORDER THE LEARNED COMMISSIONE R OF INCOME TAX APPEALS INTER ALIA STATES THAT 'EVEN AS PER COMPANY LAW DECLARATION OF DIVIDEND IS WITH REFERENCE TO THE BOOKS OF ACCOUNT' SECTION 205(1) OF THE COMPANIES ACT (MATTER DISCUSS ED ELSEWHERE IN THE GROUNDS OF APPEAL AS WELL) STATES THAT 'NO DIVI DEND SHALL BE DECLARED OR PAID BY A COMPANY FOR ANY FINANCIAL YEAR EXCEPT OUT OF THE PROFITS OF THE COMPANY FOR THAT YEAR ARRIVED AT AFTER PROVIDIN G FOR DEPRECIATION IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (2) O R OUT OF THE PROFITS OF THE COMPANY FOR ANY PREVIOUS FINANCIAL YEAR OR YEAR S ARRIVED AT AFTER PROVIDING FOR DEPRECIATION IN ACCORDANCE WITH THOSE PROVISIONS AND REMAINING UNDISTRIBUTED OR OUT OF BOTH OR OUT OF MO NEYS PROVIDED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR THE PA YMENT OF DIVIDEND IN PURSUANCE OF A GUARANTEE GIVEN BY THAT GOVERNMEN T: (EMPHASIS SUPPLIED) (REFER ANNEXURE 8). HENCE IT WOULD BE MAN DATORY UNDER COMPANY LAW TO PROVIDE FOR THE DEPRECIATION FOR THE DECLARATION OF DIVIDEND. SIMILAR ANALOGY IS TO BE APPLIED FOR DEEMED DIVIDEN D U/S 2(22)(E) IS OUR HUMBLE SUBMISSION IN THIS REGARD. IN PARAGRAPH 6.1 OF THE ORDER THE LEARNED COMMISSIO NER OF INCOME TAX APPEALS INTER ALIA STATES THAT 'THE MANDATORY ALLOW ANCE OF DEPRECIATION WILL NOT BE REQUIRED TO BE ALLOWED WHEN THE ISSUE O F ASSESSING DEEMED DIVIDEND U/S 2(22)(E) IS BEING CONSIDERED' WE WISH TO STATE THAT DEPRECIATION ALLOWANCE SHALL BE PROVIDED TO ARRIVE AT 'ACCUMULATED PROFITS' BASED ON THE BELOW MENTION ED CITATIONS COMMISSIONER OF INCOME TAX V/S JAMNADAS KHIMJI KOTH ARI (1973) 92 ITR 105 (BOM.) WHERE IT HAS BEEN INTER ALIA HELD THAT ITA NOS.1637 TO 1641/BANG/2014 PAGE 8 OF 20 'THE PHRASE 'ACCUMULATED PROFITS' DOES NOT MEAN PRO FITS AS DISCLOSED BY THE COMPANY'S BALANCE SHEET. THE PROFITS DISCLOS ED WOULD BE SUBJECT TO ADJUSTMENT AND THE DEPRECIATION AS GRANTED IN AC CORDANCE WITH THE RATES PRESCRIBED BY THE INCOME TAX ACT WOULD HAVE T O BE DEDUCTED FOR ASCERTAINING THE ACCUMULATED PROFITS' (REFER ANNEXURE 8) NAVNITLAL C JHAVERI V. COMMISSIONER OF INCOME TAX ( 1971) 80 ITR 582 (BOM) ALSO STATES THAT DEPRECIATION AS PER IT RULES SHALL BE CONSIDERED FOR THE PURPOSE OF ARRIVING AT ACCUMULATED PROFITS FOR THE PURPOSE OF SECTION 2(22)(E) (REFER ANNEXURE 9) IN PARAGRAPH 8 OF THE ORDER THE LEARNED COMMISSIONE R OF INCOME TAX APPEALS ENUNCIATES THAT IT IS PROFIT IN COMMERCIAL SENSE AND NOT THE ASSESSABLE OR TAXABLE PROFITS THAT SHALL BE CONSIDE RED FOR SECTION 2(22)(E). WE TOO ARE ESTABLISHING THE SAME STAND IN OUR EARLI ER EXPLANATIONS ESPECIALLY IN THE LIGHT OF NAVNITLAL C JHAVERI V. C OMMISSIONER OF INCOME TAX (1971) 80 ITR 582 (BOM) CASE WHEREIN WE WISH TO STATE THAT IT IS THE PROFIT IN THE COMMERCIAL SENSE THAT HAS TO CONSIDERED BY PROVIDING FOR DEPRECIATION ALLOWANCE BECAUSE IF THA T IS NOT CONSIDERED COMPANY WILL NOT HAVE FUNDS TO REPLACE THE ASSETS A FTER THEIR USEFUL LIFE. THEN THE GOING CONCERN OF THE COMPANY WILL BE AT ST AKE. CERTAINLY THE INTENTION OF THE LAW MAKERS WILL ALWAYS BE TO SUPPO RT THE PRINCIPLE OF GOING CONCERN WHICH CAN BE ONLY MET AFTER PROVIDING FOR DEPRECIATION. THUS PROFIT IN COMMERCIAL SENSE IS ALSO AFTER PROVI DING FOR DEPRECIATION ITSELF. IN PARAGRAPH 8.1 OF THE ORDER THE LEARNED COMMISSIO NER OF INCOME TAX APPEALS INTER ALIA STATES THAT 'AS THE COMPANY HAS NOT MADE ANY PROVISION FOR DEPRECIATION OR CREATED A DEPRECIATIO N RESERVE IN ITS BOOKS THE ARGUMENT OF THE ASSESSEE THAT A NOTIONAL AMOUNT OF DEPRECIATION IS TO BE REDUCED AND BALANCE SHEET RECAST IS UNTANABLE' WE WISH TO STATE THAT SEC 2(22)(E) IS A DEEMING PRO VISION. WE ARE RELYING UPON NAVNITLAL C JHAVERI V. COMMISSIONER OF INCOME TAX (1971) 80 ITR 582 (BOM) WHICH STATES THAT DEPRECIAT ION AS PER IT RULES SHALL BE CONSIDERED FOR THE PURPOSE OF ARRIVING AT ACCUMULATED PROFITS FOR THE PURPOSE OF SECTION 2(22)(E). AS PER OUR UND ERSTANDING THE ITA NOS.1637 TO 1641/BANG/2014 PAGE 9 OF 20 'ACCUMULATED PROFIT' IS A SEPARATE CALCULATION THE STARTING POINT OF WHICH IS THE ACCUMULATED PROFITS AS PER BALANCE SHE ET. IT IS SOMEWHAT SIMILAR TO THE SEC 115JB OF THE IT ACT, 1961 CALCUL ATION. FROM THE ACCUMULATED PROFIT AS PER BALANCE SHEET PRUDENT AND ALLOWABLE DEDUCTIONS SHALL BE PERMITTED. WE BELIEVE THAT DEPR ECIATION ALLOWANCE IS ONE SUCH PRUDENT DEDUCTION AS PER OUR EXPLANATIO NS IN THIS GROUNDS OF APPEAL. IN PARAGRAPH 9 OF THE ORDER THE LEARNED COMMISSIONE R OF INCOME TAX APPEALS INTER ALIA CITES THAT LOSS OR DEPRECIATION OF FIXED CAPITAL DOES NOT AFFECT THE DIVISIBLE PROFITS OR RENDER IT NECESSARY TO MAKE GOOD THE SAME OUT OF INCOME' IN OUR OPINION HERE THE INFERENCE IS FOR A CASUAL L OSS AND NOT THE DEPRECIATION OF FIXED ASSETS (EMPHASIS SUPPLIED) IN PARAGRAPH 9.2 OF THE ORDER THE LEARNED COMMISSIO NER OF INCOME TAX APPEALS INTER ALIA CITES THAT 'THE EXPRESSION' 'ACC UMULATED PROFITS' SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE O F DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB CLAUSES' IN OUR OPINION AS WELL THE EXPRESSION 'ACCUMULATED PROFITS' SHALL INCLUDE ALL THE PROFITS OF THE COMPANY UP TO THE DA TE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB CLAUSES. HOWEVER P ROFIT SHALL BE ARRIVED AFTER PROVIDING FOR ALL THE EXPENSES OF WHI CH DEPRECIATION IS ONE. PRAYER BASED ON THE ABOVE SUBMISSIONS WE FEEL AGGRIEVED BY THE LEARNED COMMISSIONER OF INCOME TAX APPEAL ORDER AND ARE PRA YING YOUR GOOD SELVES TO CONSIDER THE FACTS OF LAW AND DECIDE THE CASE ON ITS MERIT. THE APPELLANT PRAYS THAT THE ADDITION OF RS 67,77,8 35/- (RUPEES SIXTY SEVEN LAKHS SEVENTY SEVEN THOUSAND EIGHT HUNDRED AN D THIRTY FIVE ONLY) MADE BE DELETED. 6. IN ITA NO.1640/BANG/2014, GROUNDS OF APPEAL RAIS ED ARE AS UNDER:- SECTION 269SS INTER ALIA STATES THAT ITA NOS.1637 TO 1641/BANG/2014 PAGE 10 OF 20 269SS. NO PERSON SHALL, AFTER THE 30TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SECTION RE FERRED TO AS THE DEPOSITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY A N ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF,- (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMOUNT OF SUCH LOAN AND DEPOSIT; OR (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEP OSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH P ERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMEN T HAS FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMO UNT REMAINING UNPAID; OR (C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN C LAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT RE FERRED TO IN CLAUSE (B), IS [TWENTY] THOUSAND RUPEES OR MORE : PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED FROM, OR ANY LOAN OR D EPOSIT TAKEN OR ACCEPTED BY,- (A) GOVERNMENT; (B) ANY BANKING COMPANY, POST OFFICE SAVINGS BANK O R CO- OPERATIVE BANK; (C) ANY CORPORATION ESTABLISHED BY A CENTRAL, STAT E OR PROVINCIAL ACT; (D) ANY GOVERNMENT COMPANY AS DEFINED IN SECTION 61 7 OF THE COMPANIES ACT, 1956 (1 OF 1956) ; (E) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENT RAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITI NG, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE: [PROVIDED FURTHER THAT THE PROVISIONS OF THIS SECTI ON SHALL NOT APPLY TO ANY LOAN OR DEPOSIT WHERE THE PERSON FROM WHOM THE LOAN OR DEPOSIT IS TAKEN OR ACCEPTED AND THE PERSON BY WHOM THE LOAN O R DEPOSIT IS TAKEN ITA NOS.1637 TO 1641/BANG/2014 PAGE 11 OF 20 OR ACCEPTED ARE BOTH HAVING AGRICULTURAL INCOME AND NE I THER OF THEM HAS ANY INCOME CHARGEABLE TO TAX UNDER TH I S ACT.] EXPLANATION . -FOR THE PURPOSES OF THIS SECTION,- [(I) 'BANKING COMPANY' MEANS A COMPANY TO WHICH THE BANK ING REGULATION ACT , 1949 (10 OF 1949), APPLIES AND INCLUDES ANY BANK OR BANKING INSTITUTION REFERRED TO IN SECTION 51 OF THAT ACT ;] (II) ' CO - OPERATIVE BANK' SHALL HAVE THE MEANING ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1 949) ; (III) 'LOAN OR DEPOSIT' MEANS LOAN OR DEPOSIT OF MONEY . ] ACCORDINGLY SEC 26955 IS APPLICABLE FOR 'LOAN' OR ' DEPOSIT' AND THE SAME IS NOT APPLICABLE FOR ANY ADVANCE RECEIVED. IN THE INSTANT CASE; MR . UMESH WANTED TO BUY ONE OF THE PROPERTIES I . E. PROPERTY NO 1/1, SY NO 49/43A, KALYANA MANTAPA ROAD, JAKKASANDRA, KORAM ANGALA IST BLOCK, BANGALORE - 560034 (I,E PROPERTY UNDER QUEST ION) OWNED BY M/S VINTAGE BIO FUELS PRIVATE LIMITED (HEREINAFTER REFE RRED TO AS VINTAGE); A PRIVATE LIMITED COMPANY OF WHICH MR . GIRISH IS ONE OF THE DIRECTORS. AN AGREEMENT OF SALE (PLEASE REFER EXHIBIT 1) WAS E NTERED IN TO BY MR . UMESH WITH M/S VINTAGE REPRESENTED BY ITS DIRECTORS MR. GIRISH AND HIS WIFE MRS . VEENA GIRISH (HEREINAFTER REFERRED TO AS VEENA) ON 28 TH JANUARY 2010. THE PURCHASE CONSIDERATION AS PER THE AGREEMENT OF SALE WAS FIXED AT RS 13,00,00,000/- (RUPEES THIRTEE N CRORES ONLY). AN AMOUNT OF RS 3,00,00,000/- (THREE CRORES ONLY) WAS PAID AS ADVANCE AS FOLLOWS: (AS EVIDENCED BY THE AGREEMENT OF SALE MENTIONED SUPRA) 1) RS 90,00,000 (RUPEES NINETY LAKHS ONLY) IN CASH 2) RS 45,04,521/- (RUPEES FORTY FIVE LAKHS FOUR THOUSA ND FIVE HUNDRED AND TWENTY ONE ONLY) BY WAY OF DEMAND DRAFT BEARING NO 451893 DATED 28TH JANUARY 2010 DRAWN ON STATE BANK OF INDIA, SME JP NAGAR BRANCH, BANGALORE 3) RS 52,02,129/- (RUPEES FIFTY TWO LAKHS TWO THOUSAND ONE HUNDRED AND TWENTY NINE ONLY) BY WAY OF DEMAND DRAF T BEARING NO 451894 DATED 28TH JANUARY 2010 DRAWN ON STATE BANK OF INDIA, SME JP NAGAR BRANCH, BANGALORE ITA NOS.1637 TO 1641/BANG/2014 PAGE 12 OF 20 4) RS 51,80,335/- (RUPEES FIFTY ONE LAKHS EIGHTY THOUS AND THREE HUNDRED AND THIRTY FIVE ONLY) BY WAY OF DEMA ND DRAFT BEARING NO 451895 DATED 28TH JANUARY 2010 DRA WN ON STATE BANK OF INDIA, SME JP NAGAR BRANCH, BANGALORE 5) RS 51,80,235/- (RUPEES FIFTY ONE LAKHS EIGHTY THOUS AND TWO HUNDRED AND THIRTY FIVE ONLY) BY WAY OF DEMAND DRAFT 'BEARING NO 451896 DATED 28TH JANUARY 2010 DRAWN ON STATE BANK OF INDIA, SME JP NAGAR BRANCH, BANGALORE 6) RS 10,00,000/- (RUPEES TEN LAKHS ONLY) BY WAY OF CH EQUE BEARING NO 114144 DATED 28TH JANUARY 2010 DRAWN ON CORPORATION BANK, MYSORE ROAD BRANCH, BANGALORE HOWEVER , THERE APPEARS TO BE A DRAFTING ERROR IN THE AGREEME NT AS FAR AS ADVANCE MONEY IS CONCERNED, SL NO 1 TO SI NO 6 TOTA LLS TO RS 3,00,67,220/- (RUPEES THREE CRORES SIXTY SEVEN THOU SAND TWO HUNDRED AND TWENTY ONLY) WHERE AS IT SHOULD HAVE BE EN RS 3,00,00,000/- (RUPEES THREE CRORES ONLY) . HOWEVER, SL NO 6 CHEQUE NO 114144 IS APPEARING IN T HE BANK STATEMENT AS RS 9,43,000/- (RUPEES NINE LAKHS FORTY THREE THO USAND ONLY) INSTEAD OF RS 10,00,000/- (RUPEES TEN LAKHS ONLY) T HEREBY TOTALING ACTUAL ADVANCE AT RS 3,00,10,220/- (RUPEES THREE CR ORES TEN THOUSAND TWO HUNDRED AND TWENTY ONLY). THESE ARE SOME TYPOGRAPHIC ERRORS IN THE AGREEMENT AND THEY DO NOT DIMINISH THE VALUE OF THE AGREEMENT BY NO MEANS . SL NO 1 I,E RS 90,00,0001- WAS PAID TO M/S VINTAGE AS ADVANCE MONEY FOR THE PURCHASE OF PROPERTY. SL NO 2 TO 6 HAVE BEE N INADVERTENTLY PAID TO MR . GIRISH , DIRECTOR OF M/S VINTAGE . MR. GIRISH WAS IN THE PROCESS OF TRANSFERRING THE SAID AMOUNT TO THE ACCOUNT OF V INTAGE. HOWEVER, IN THE INTERIM, BOTH MR. UMESH AND M/S VINATGE MUTUALLY DECIDED TO CANCEL THE DEAL AND CONSEQUENTLY ENTERED IN TO AN A GREEMENT OF REFUND OF ADVANCE MONEY DATED 20 TH FEBRUARY 2010. MR. UMESH DECIDED TO TAKE REFUND OF RS 1,00,00,000/ - (RUPEES ONE CRORE ONLY) FROM M/S VINTAGE AND THE SAME WAS PAID TO MR. UMESH FROM M/S VINTAGE. AS FAR AS THE BALANCE AMOUNT OF RS 2,00,67,320/- (RUPEES T WO CRORE SIXTY SEVEN LAKHS THREE HUNDRED AND TWENTY ONLY) IS CONCE RNED MR. GIRISH REQUESTED MR. UMESH TO CONVERT THE SAME IN TO AN IN TEREST FREE UNSECURED LOAN TO WHICH MR. UMESH OUT OF 'NATURAL L OVE AND AFFECTION' TOWARDS HIS BROTHER AGREED. AS THE DECISION TO PAY THE AMOUNT TO MR. ITA NOS.1637 TO 1641/BANG/2014 PAGE 13 OF 20 GIRISH WAS MADE BY MR. UMESH; MR. GIRISH FELT THAT THERE IS NO NEED TO PHYSICALLY TRANSFER THE SAID AMOUNT TO M/S VINTAGE AND THEN AGAIN TRANSFER IT BACK TO HIM. THERE MAY BE A LAPSE ON THE PART OF MR. GIRISH OF PHYSICALLY NOT TRANSFERRING THE AMOUNT TO THE ACCOUNT OF M/S VINTAGE. HOWEVER THIS WAS DUE TO THE FACT THAT THER E WAS HARDLY ANY SIGNIFICANT TIME LAG BETWEEN THE 'AGREEMENT TO SELL ' AND 'AGREEMENT OF REFUND OF ADVANCE MONEY'. SECTION 269SS & 269T OF THE INCOME TAX ACT, 1961 SP EAKS ABOUT THE 'LOAN OR DEPOSIT' . WE WISH TO CLARIFY THAT THE SAID AMOUNT DOESN'T FAL L WITHIN THE MEANING OF ' LOAN OR DEPOSIT' AS ENVISAGED IN SECTION 26955 AND 269T . ACCORDINGLY, WE ARE OF THE OPINION THAT SO FAR AS T HE AMOUNT OF RS 90,00,000/- (NINETY LAKHS ONLY) PAID IN CASH IS CONCERNED SINCE THE AMOUNT HAS BEEN PAID TO M/S VINTAGE & THEREAFTER REPAID PROVISIONS OF SECTION 269SS/269T AND CONSEQUENT PROVISIONS OF SECTION 271D ARE NOT APPLICABLE IN CASE OF MR . GIRISH . WE WISH TO ANSWER THE ORDER CLAUSE BY CLAUSE AS FOL LOWS: CLAUSE (A) - PAGE NO 2 OF THE ORDER ' THE AGREEMENT THAT THE ASSESSEE REFERRED TO FOR CLA IMING THE RECEIPT OF MONEY AS ADVANCE IS FOR A PROPERTY OWNED BY THE COM PANY M/S VINTAGE BIO FUELS P LTD , BUT NOT BY THE ASSESSEE MR . GIRISH APPAREDDY. HOWEVER AS EXAMINED FROM THE BANK STATEMENT OF MR. GIR I SH APPAREDDY AND AS ADMITTED BY HIM ALSO, THE AMOUNT O F RS.210 LACS HAS BEEN DEPOSITED INTO THE ACCOUNT OF THE ASSESSEE THR OUGH DEMAND DRAFTS/CHEQUE BUT NOT INTO THE ACCOUNT OF TH E COMPANY THAT ACTUALLY OWNS THE PROPERTY' THE ASSESSEE HAS ADMITTED THE SAME EVEN DURING ASSE SSMENT WITH THE INCOME TAX OFFICER AS WELL AS WITH THE ADDITION AL COMMISSIONER OF INCOME TAX. THERE HAS BEEN A HONEST MISTAKE BY THE ASSESSEE. THE ASSESSEE WAS IN THE PROCESS OF TR ANSFERRING THE AMOUNT TO THE ACCOUNT OF M/S VINTAGE . THERE MAY BE A LAPSE ON THE PART OF MR. GIRISH OF PHYSICALLY NOT TRANSFERRING T HE AMOUNT TO THE ACCOUNT OF M/S VINTAGE. HOWEVER THIS WAS DUE TO THE FACT THAT THERE WAS HARDLY ANY SIGNIFICANT TIME LAG BETW EEN THE 'AGREEMENT TO SELL' AND 'AGREEMENT OF REFUND OF ADV ANCE MONEY'. CLAUSE B - PAGE NO 2 ITA NOS.1637 TO 1641/BANG/2014 PAGE 14 OF 20 ' THE WHOLE ARGUMENT OF THE ASSESSEE RESTS ON THE PUR PORTED AGREEMENT ENTERED INTO BY M/S VINTAGE BIO FUELS P LTD AND MR. UMESH APPAREDDY FOR AN I NTENDED SALE OF A PROPERTY OWNED BY THE COMPANY TO THE LATTER . HOWEVER DESP I TE BEING ASKED TO SUBMIT , THE ASSESSEE COULD NOT SUBMIT THE ORIGINAL OF THE SAID AGREEMENT . THAT THE PHOTOCOPY SUBMITTED CARRIES NO EVIDENTIARY VALUE , IN THE ABSENCE OF THE ORIGINAL, NEEDS NO OVER EMPHASIS .' DURING THE COURSE OF THE ASSESSMENT WITH THE INCOME TAX OFFICER WARD 12(2) FOR THE AY 2010-11 THE ASSESSEE HAS SUO MOTO SUBMITTED MANY DETAILS OUT OF WHICH ONE IS 'AGREEMENT TO SELL ' DATED 28 TH JANUARY 2010. HAD THE INTENTION OF THE ASSESSEE WAS TO CONCEAL SOMETHING HE WOULD NOT HAVE SUO MOTO SUBMITTED THE 'AGREEMENT TO SELL'. ONLY THE BANK STATEMENTS WHERE THE DD'S M ENTIONED SUPRA COULD HAVE BEEN SUBMITTED AND SOURCE COULD HA VE BEEN EXPLAINED. THE SUO MOTO SUBMISSION OF THE AGREEMENT ITSELF PROVES THE FACT THAT THERE WAS NO 'MENS REA' IN THE MIND O F THE ASSESSEE . DURING THE COURSE OF THE HEARING WITH THE LEARNED A DDITIONAL COMMISSIONER OF INCOME TAX, THE AR HAS SUBMITTED TH E NOTARSIED COPY OF THE AGREEMENT TO SELL . THE NOTARISED COPY SHALL BE DEEMED TO BE ORIGINAL AND WE BEG TO STRONGLY DIFFER THE ST AND TAKEN BY THE LEARNED ADDITIONAL COMMISSIONER THAT IT HAS NO EVID ENTIARY VALUE IS BEYOND OUR COMPREHENSION . GOING BY THE SAME LOGIC IF THERE IS NO EVIDENTIARY VALUE THE NOTICE U/S 271D ITSELF BECOME S NULL AND VOID AS IT IS THE VERY BASIC DOCUMENT BASED ON WHICH THE NOTICE HAS BEEN SERVED AND PENALTY HAS BEEN LEVIED. CLAUSE (C) - PAGE NO 3 THE CLAIM THAT THE AMOUNT RECEIVED THROUGH DRAFT / CHEQUE WAS CREDITED INTO THE INDIVIDUAL ACCOUNT OF THE ASSESSEE AND THE CASH OF RS.90 LACS WAS RECEIVED BY THE COMPANY STANDS UNEXPLAINABLE WH EN THE PROPERTY IS OWNED BY THE COMPANY BUT NOT THE ASSESSEE AS AN IND IVIDUAL. THERE CANNOT BE A PART PAYMENT TO THE DIRECTOR AND PART P AYMENT TO THE COMPANY FOR SALE OF PROPERTY OWNED BY A COMPANY BUT NOT THE DIRECTOR. EVEN IF SUCH PAYMENT IS WARRANTED, THE CONSIDERATIO N PAID IN CASH THAT NORMALLY GOES OUTSIDE THE BOOKS OF ACCOUNTS GOES TO THE DIRECTOR WHILE THE CONSIDERATION PAID THROUGH THE DEMAND DRAFT/CHE QUE GOES TO THE ACCOUNT OF THE COMPANY THAT OWNS THE PR OPERTY, HOWEVER, THE CONTRARY CLAIM MADE IN THE INSTANT CASE BEYOND ANY PLAUSIBLE EXPLANATION. ITA NOS.1637 TO 1641/BANG/2014 PAGE 15 OF 20 AS FAR AS THE ASSESSEE FAILS TO COMPREHEND THE ABOV E PROPOSITION. AS FAR AS HE IS CONCERNED WISHES TO RE ITERATE THAT THE TRANSACTION WAS BETWEEN MR. UMESH AND M/S VINTAGE. HOWEVER, DUE TO A HONEST MISTAKE THE DD'S WERE TAKEN IN ASSESSES NAME AND THAT HE WAS IN THE PROCESS OF TRANSFERRING THE SAME TO M/S VINTAGE. THERE MAY BE A LAPSE ON THE PART OF MR. GIRISH OF PHYSICA LLY NOT TRANSFERRING THE AMOUNT TO THE ACCOUNT OF M/S VINTA GE. HOWEVER THIS WAS DUE TO THE FACT THAT THERE WAS HARDLY ANY SIGNIFICANT TIME LAG BETWEEN THE 'AGREEMENT TO SELL' AND 'AGREEMENT OF REFUND OF ADVANCE MONEY'. CLAUSE (D) - PAGE NO 3 IT NEEDS TO BE NOTED THAT THE PROPERTY REFERRED TO IN THE PURPORTED AGREEMENT STILL STANDS IN THE NAME OF THE COMPANY W ITHOUT BEING ANY SUBJECT TO ANY SALE INDICATING THE FACT THAT THERE WAS NEITHER AN INTENSION NOR A NECESSITY FOR THE COMPANY TO DISPOSE OF THE S AID PROPERTY AT ALL, THE REFERENCE TO THE SAID AGREEMENT BY THE ASSESSEE IS ONLY TO EXPLAIN AWAY THE RECEIPTS OF AMOUNT THE CONTRAVENED CERTAIN PROVISIONS OF THE INCOME TAX ACT, 1961. THE PROPERTY STILL IS IN THE NAME OF COMPANY DOESN' T ESTABLISH THE FACT THAT THERE WAS NOT INTENTION TO SELL THE PROPE RTY. MANY A TIMES PEOPLE TAKE CERTAIN DECISIONS AND SUBSEQUENTLY CHAN GE THEIR MIND. A CAREFUL EXAMINATION OF THE FACTS ARE AS FOLLOWS: MR. UMESH APPAREDDY (HEREINAFTER REFERRED TO AS UME SH), BROTHER OF MR. GIRISH APPAREDDY (HEREINAFTER REFERRED TO AS GI RISH) SOLD ONE PROPERTY DURING FY 2009-10 (2RH APRIL 2009). DURING THE SAME TIME M/S VENUS BIO FUELS PRIVATE LIMITED OF WHICH THE AS SESSEE IS A DIRECTOR WAS IN THE PROCESS OF BUYING A PROPERTY. A SSESSEE AND MR. UMESH MUTUALLY DECIDED THAT MR. UMESH WOULD BUY THE PROPERTY IN QUESTION (WHICH IS IN THE NAME OF M/S VINTAGE) AND OUT OF THE CONSIDERATION M/S VENUS WOULD INVEST IN THE PROPOSE D PROPERTY. M/S VENUS BOUGHT ONE COMMERCIAL PROPERTY ON 13TH FEBRUA RY 2010. HOWEVER, LATER ON MR. UMESH DECIDED NOT TO PROCEED WITH THE DEAL AND UPON REQUEST FROM MR. GIRISH OUT OF NATURAL LOVE AN D AFFECTION AGREED TO CONVERT THE AMOUNTS AS INTEREST FREE UNSECURED LOAN S. ACCORDINGLY AGREEMENT FOR REFUND OF MONEY WAS ENTERED UPON. NOT ARISED COPY OF AGREEMENT OF REFUND OF MONEY IS SHOWN IN EXHIBIT 2. AS MR. GIRISH WANTED THE PROPERTY TO BE WITH IN THE 'FAMILY' DECI DED NOT TO SELL THE VINTAGE BUILDING. ITA NOS.1637 TO 1641/BANG/2014 PAGE 16 OF 20 CLAUSE (E) - PAGE NO 3 THE CLAIM THAT UPON TERMINATION OF THE PURPORTED AG REEMENT, THE AMOUNT RECEIVED IN CASH WAS REFUNDED BY THE COMPANY IN CASH AND THE AMOUNT RECEIVED BY THE DIRECTOR THROUGH BANK INSTRU MENTS WAS RETAINED BY HIM AS INTEREST FREE LOAN, HAS NO EXPLANATION AS TO WHY THE COMPANY RECEIVED PART OF CONSIDERATION IN CASH AND WHY THE REPAYMENT WAS MADE IN CASH BY THE COMPANY AS CLAIMED. FURTHER IT NEEDS TO BE NOTED THAT WHILE THE ADVANCE RECEIVED IN CASH WAS RS.90 L ACS. THE REASON FOR THE EXCESS PAYMENT IN CASH IS SIMPLY UNAVAILABLE. THE AGREEMENT FOR REFUND OF ADVANCE MONEY DATED 20T H FEBRUARY 2010 CLEARLY EXPLAINS THE SAME. THE TOTAL ADVANCE FOR THE COMPANY WAS RS 3,00,00,000/- (THREE CRORES ONLY ). OUT OF THIS RS 2,00,67,320/- (RUPEES TWO CRORE SIXTY SEVEN LAKH S THREE HUNDRED AND TWENTY ONLY) WAS ALLOWED BY MR. UMESH T O BE CONVERTED AS INTEREST FREE UNSECURED LOAN. THIS AMO UNT IS THE CUMULATIVE TOTAL OF 4 DD'S WHICH WERE INADVERTENTLY CREDITED TO THE ASSESSEE'S ACCOUNT. BALANCE AMOUNT OF RS 1,00,00,00 0/- (RUPEES ONE CRORE ONLY) (ROUNDED OFF) WAS PAID BACK BY THE COMPANY TO MR. UMESH. THE ASSESSEE TRANSFERRED AN AMOUNT OF RS 10,00,000/- TO COMPANY AND WAS ACCOUNTED IN THE COMPANY BOOKS T HEREBY MAKING THE ADVANCE TO RS 1,00,00,000/- (RUPEES ONE CRORE ONLY). THE SAME WAS REPAID BY THE COMPANY. IF THE TRANSACT ION WAS NOT PERTAINING TO THE COMPANY THERE WAS NO NEED TO THE ASSESSEE TO PAY THE AMOUNT TO COMPANY AND REPAY THE ADVANCE FROM TH E COMPANY. THIS IS A DEFINITIVE INDICATOR THAT THE TRANSACTION PERTAINED TO COMPANY ONLY AND NOT TO THE ASSESSEE AS HAS BEEN DE TAILED OUT IN THE ORDER. THE NECESSARY PAPERS HAVE BEEN SUBMITTED DURING THE COURSE OF THE 271D HEARING. CLAUSE (F) - PAGE NO 3 'IT IS INTERESTING TO NOTE THAT IN THE COMPUTER PRI NTOUT OF THE LEDGER ACCOUNT IN THE BOOKS OF THE COMPANY M/S VINTAGE BIO FUELS P LTD, THAT THE ASSESSEE SUBMITTED NOW DURING THE PENALTY PROCE EDINGS, ONLY THE TRANSACTIONS OF RECEIPT OF CASH OF RS.90 LACS AS TH E PURPORTED ADVANCE AND REPAYMENT OF RS.100 LACS ARE RECORDED WHILE THE RECEIPT OF RS.210 LACS THROUGH BANK INSTRUMENTS IS CONSPICUOUS BY ITS ABSENCE. FURTHER IT NEEDS TO BE NOTED THAT THIS LED GER ACCOUNT COPY WAS ITA NOS.1637 TO 1641/BANG/2014 PAGE 17 OF 20 NOT PART OF THE DOCUMENTS SUBMITTED DURING THE COUR SE OF THE ASSESSMENT PROCEEDINGS' DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE SAME WAS NOT CALLED FOR AND HENCE NOT FURNISHED. NOW THE LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX CALLED FOR THE SAME FOR WHICH THE ASSESSEE HAS PROMPTLY SUBMITTED THE SAME CLAUSE (G) - PAGE NO 4 'IN THE ABOVE MENTIONED LEDGER COPY, TO EXPLAIN THE SOURCES FOR THE EXCESS PAYMENT OF CASH OF RS.10 LACS OVER AND ABOVE THE CLAIMED RECEIPT OF RS.90 LACS IN CASH A RECEIPT OF RS.10 LA CS FROM THE ASSESSEE MR. GIRISH APPAREDDY IS SHOWN. HOWEVER AS NOTED FRO M THE ACCOUNT OF THE ASSESSEE, HE HAS NO SOURCE FOR THAT CASH OF RS. 10 LACS CLAIMED TO HAVE BEEN PAID TO THE COMPANY FOR MAKING THE REPAYM ENT TO THE PURPORTED PURCHASER.' THE ASSESSEE OWNS AGRICULTURAL LAND TO THE TUNE OF AROUND 8 ACRES THE DETAILS OF WHICH HAVE BEEN FURNISHED EVEN DURIN G THE ASSESSMENT PROCEEDINGS. THE SAID AGRICULTURAL LAND IS OWNED BY HIM SINCE 1994 AND HE HAS CONSIDERABLE AGRICULTURAL INCOME THEREFROM. THE ASSESSEE HAS TRANSFERRED THE SAID AM OUNT OUT OF HIS AGRICULTURAL INCOME. CLAUSE (H) - PAGE NO 4 'IT IS ALSO TO BE NOTED THAT THE AMOUNTS MENTIONED TO HAVE BEEN PAID THROUGH DRAFTS / CHEQUE IN THE PURPORTED AGREEMENT ARE NOT EXACTLY TALLYING WITH THE AMOUNTS ACTUALLY DEPOSITED INTO T HE BANK ACCOUNT OF THE ASSESSEE THROUGH DRAFTS/CHEQUE, INDICATING THAT THE AGREEMENT WAS NOT DRAFTED OR PREPARED AT THE TIME OF THE ASSESSEE ACTUALLY RECEIVED THE AMOUNTS BUT AT SOME OTHER TIME WHEN A NECESSITY FOR EXISTENCE OF SUCH AN AGREEMENT AROSE.' THERE HAVE BEEN MANY INSTANCES IN THE ORDINARY COUR SE OF LIFE WHERE THERE ARE LOT OF TYPOGRAPHIC MISTAKES OCCUR I N THE AGREEMENTS, DEEDS AND DRAFTS. PRECISELY THAT IS THE REASON THERE ARE SO MANY RECTIFICATIONS DEEDS BEING PREPARED. THAT D OESN'T MEAN THAT AGREEMENT ITSELF IS INVALID. WE WISH TO RE ITE RATE THAT GOING BY THE SAME LOGIC IF THERE IS NO EVIDENTIARY VALUE THE NOTICE U/S 271D ITSELF BECOMES NULL AND VOID AS IT IS THE VERY BASI C DOCUMENT BASED ON WHICH THE NOTICE HAS BEEN SERVED AND PENALTY HAS BEEN LEVIED. ITA NOS.1637 TO 1641/BANG/2014 PAGE 18 OF 20 SINCE THEY WERE BROTHERS IT WAS NOT FELT NECESSARY TO ENTER IN TO ANY RECTIFICATION AGREEMENT. CLAUSE (J) - PAGE NO 4 'AS UNDERSTOOD FROM THE INFORMATION AVAILABLE ON RE CORD, THE PURPORTED PURCHASER MR. UMESH APPAREDDY, BROTHER OF THE ASSES SEE MR. GIRISH APPAREDDY WAS IN POSSESSION OF FUNDS HAVING SOLD A PROPERTY AND THE SAME FUNDS WERE MADE AVAILABLE TO THE ASSESSEE AS N EEDED BY HIM. IN THIS CONTEXT, IT NEEDS TO BE NOTED THAT, FROM THE B ALANCE SHEET ON RECORD, THE ASSESSEE MR. GIRIRSH APPAREDDY INVESTED RS.217. 78 LACS IN M/S VINTAGE BIO FUELS P LTD AND M/S VENUS BIO FUELS P L TD, AFTER RECEIPT OF THE FUNDS FROM HIS BROTHER. LATER TO AVO ID COMPLICATIONS FOR CONTRAVENING THE PROVISIONS OF THE INCOME TAX ACT, THE AGREEMENT FOR SALE OF A PROPERTY THAT WAS NOT ACTUALLY OWNED BY H IM IN HIS INDIVIDUAL CAPACITY WAS CONTRIVED.' WE WISH TO STATE THAT THE 'AGREEMENT TO SELL' AND ' AGREEMENT FOR REFUND OF MONEY' ARE GENUINE AND WISH TO STATE THAT WE HAVE ALSO SUBMITTED NOTARIZED COPY OF THE SAME WHICH IS AS GO OD AS ORIGINAL IN THE EYES OF LAW. THEY HAVE BEEN PRINTED ON STAMP PA PERS AND THE VERY POINT THAT IT HAS BEEN PRINTED ON STAMP PAPERS PROVES THE GENUINENESS OF THE AGREEMENT AND ALSO THE TRANSACTI ONS. IN PARA 6 THE LEARNED COMMISSIONER OF INCOME TAX AP PEALS HAS INTERALIA STATED THAT 'IN MY VIEW THE OBSERVATIONS OF THE ADDL.CIT APPEAR TO BE JUSTIFIED FOR THE FOLLOWING REASONS TH E AGREEMENT FOR SALE PURPORTEDLY SUBSISTED ONLY FOR A PERIOD OF 24 DAYS' . WE WISH TO STATE THAT THE PERIOD OF AGREEMENT DOES NOT AFFECT THE VALIDITY OF AGREEMENT IN ANY WAY. THE AGREEMENTS AR E ENTERED IN TO AS WHEN THE TRANSACTIONS HAPPEN AND IT HAS NO BEARI NG ON THE TIME LAG BETWEEN THE TRANSACTIONS. 'AGREEMENT TO SELL' AND 'AGREEMENT FOR REFUND OF MO NEY' ARE BETWEEN M/S VENUS BIO FUELS PRIVATE LIMITED AND MR. UMESH APPAREDDY. IN SUCH A SCENARIO WE ARE ALSO OF THE VI EW THAT HOW ONE CAN COME TO THE CONCLUSION THAT CASH HAS BEEN PAID TO MR. GIRISH APPAREDDY. ACCORDINGLY, WHETHER THE NOTICE & ORDER U/S 271D IN THE NAME OF MR. GIRISH APPAREDDY IS VALID ? WE RELY UPON THE FOLLOWING CASE LAWS IN FAVOUR OF D EFENSE ITA NOS.1637 TO 1641/BANG/2014 PAGE 19 OF 20 AZADI BACHAO ANDOLAN V IS UNION OF INDIA 2001 252 I TR 471 (DELHI) NO PENALTY U/S 26955 OR T IF THERE IS REASONABLE CA USE FOR NON COMPLIANCE. REASONABLE CAUSE AS APPLIED TO HUMAN AC TION IS THAT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AN D ORDINARY PRUDENCE. WE WISH TO PLACE ON RECORD THAT THERE IS NO NON COM PLIANCE AS FAR AS SECTION 26955 OR T IS CONCERNED. WE ARE RELYING ON THE ABOVE CASE LAW TO THE LIMITED EXTENT OF DEMONSTRATING THAT THE REA SONABLE CAUSE FOR NON TRANSFERRING OF THE FUNDS BY THE ASSESSEE TO THE CO MPANY IS THAT FACT THAT THERE WAS HARDLY ANY CONSIDERABLE TIME LAG BETWEEN THE DATES OF TWO AGREEMENTS. FURTHER CASE LAWS IN SUPPORT OF OUR DEFENSE WILL BE SUBMITTED EITHER DURING THE PERSONAL HEARING OR PRIOR TO THAT. PRAYER BASED ON THE ABOVE SUBMISSIONS WE FEEL AGGRIEVED BY THE LEARNED COMMISSIONER OF INCOME TAX III BANGALORE ORDER AND ARE PRAYING YOUR GOODSELVES TO CONSIDER THE FACTS OF LAW AND DECIDE THE CASE ON ITS MERIT. THE APPELLANT PRAYS THAT THE PENALTY OF RS 90,00,00 01- (RUPEES NINETY LAKHS) ONLY MADE U/S 271D OF THE INCOME TAX ACT, 19 61 BE DELETED. 7. WE HAVE CAREFULLY PERUSED THE GROUNDS OF APPEA L RAISED BEFORE US AND THE ORDERS OF LOWER AUTHORITIES AND WE FIND THA T ON ALL THESE ISSUES, THE LD. CIT(APPEALS) HAS ADJUDICATED THE ISSUES IN DETA IL AND SINCE NO INFIRMITY IN THE ORDER OF CIT(APPEALS) IS POINTED OUT BEFORE US, WE CONFIRM THE ORDER OF CIT(APPEALS). MOREOVER, THE GROUNDS OF APPEAL A RE NOT RAISED AS PER RULES. THEREFORE, IT ALSO BECOMES DIFFICULT FOR US TO ADJUDICATE THE GROUNDS OF APPEAL RAISED BEFORE US INDEPENDENTLY. ITA NOS.1637 TO 1641/BANG/2014 PAGE 20 OF 20 8. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF MAY, 2016. SD/- SD/- ( ABRAHAM P. GEORGE ) (SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMB ER BANGALORE, DATED, THE 11 TH MAY, 2016. DS/- COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.