Kishan Motors, Bhubaneswar V. ITO, Ward-4(3), Bhubaneswar

ITA 169/CTK/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7860 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 11-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J K LENKA
• Assessee Lawyers: S K AGARWAL
• Keywords: Retrospective amendment; Reasonable cause; TDS; Set aside
• Section: 43B; 273B; 143(3); 40(a)(ia); 205; 271D; 201; 191; 73; 13; 68

Judgement Text

P A G E 1 | 14 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO S . 169 & 371 /CTK/201 8 ASSESSMENT YEAR : 201 4 - 2015 KISHAN MOTORS, PLOT NO.56/A, SAHARA COMPLEX, RASULGARH, BHUBANESWAR. VS. ITO, WARD 4(3), BHUBANESWAR. PAN/GIR NO. AAGFK 7438 J (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI S.K.AGARWAL , AR REVENUE BY : SHRI J.K.LENKA , DR DATE OF HEARING : 06 / 12 / 20 19 DATE OF PRONOUNCEMENT : 28 / 01 /20 20 O R D E R PER C.M.GARG,JM ITA NO.169/CTK/2018 IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), 2 , BHUBANESWAR DATED 31.01.2018 FOR THE ASSESSMENT YEAR 2014 - 15 IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT. 2 . IN ITA NO.169/CTK/2018, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS WRONG IN HOLDING THAT THE APPELLANT HAD NOT SUBMITTED THE CONFIRMATIONS OF THE SUNDRY CREDITOR S WHEREAS ALL THE CONFIRMATIONS WERE ENCLOSED IN THE PAPER BOOK FILED AT THE TIME OF APPEAL HEARING AND THEREFORE THE CONFIRMATIONS OF ADDITIONS OF RS. 21,85,448 IS WRONG AND LIABLE TO BE DELETED. 2. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT CORRECT IN HOLDING THAT THE APPELLANT FAILED TO PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS NAMELY NARAYAN SAHOO & PERVEZJAMAL AS ALL THE DOCUMENTS WERE FILED IN THE PAPER BOOK AT THE TIME OF HEARING AND WRONG IN CONFIRMING THE ADDITIONS OF RS. 8,00,000 WHICH IS LIABLE TO BE DELETED. ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 2 | 14 3. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS WRONG IN CONFIRMING THE ADDITIONS OF RS. 4,28,100 WITH REGARD TO THE RENT PAID FOR SHOW ROOM U/S 40(A)(IA) OF THE ACT IN VIEW OF THE FACT THAT THE RECIPIENTS OF THE RENT HAD DISCLOSED THE RENTAL INCOME IN THEIR RETURN OF INCOME AND DULY DISCHARGED THE TAX LIABILITIES. THEREFORE , THE ADDITIONS OF RS. 4,28,100 IS LIABLE TO BE DELETED. 4. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACTS IN CIRCUMSTANCES IN CONFIRMING THE DISALLOWANCE OF AU DIT FEES PAID TO ANIL MEHER ASSOCIATES AMOUNTING TO RS. 47,753 U/S 40(A)(IA) OF THE ACT IN VIEW OF THE FACT THAT THE AUDITOR HAD SHOWN THE RECEIPTS OF THAT AUDIT FEES IN THEIR RETURN OF INCOME AND DISCHARGE THE TAX LIABILITY AND THEREFORE THE ADDITIONS OF RS. 47,753 IS LIABLE TO BE DELETED. 5. THAT, THE LD. AUTHORITIES BELOW ARE NOT CORRECT IN DISALLOWING THE AD HOC DISALLOWANCE OF RS. 4,73,611 (I.E. RS. 58,787 UNDER THE HEAD STAFF TIFFIN, RS. 50,804 UNDER THE HEAD FUEL EXPENSES, RS. 1,98,467 UNDER THE HEAD DIRECT LABOUR AND RS.1 ,65,553 UNDER THE HEAD DIRECT EXPENSES) WHICH IS LIABLE TO BE DELETED. 6. THAT, THE LD. FORUMS BELOW COMMITTED AN ERROR OF LAW IN DISALLOWING THE EXPENSES OF 23,545 U / S 4 3B OF THE ACT IN VIEW OF THE FACT THAT THE APPELLANT IS FOLLOWING THE EXCLUSIVE METHOD OF ACCOUNTING AND THE INDIRECT TAXES ARE NEITHER THE INCOME NOR THE EXPENSES OF THE APPELLANT AND, THEREFORE, NO INDIRECT TAXES CAN BE DISALLOWED. 7. THAT THE LD AO IS NOT CORRECT IN DISALLOWING OF RTO EXPENSES OF RS.62,250 / - AND THE LD CIT(A) IS NOT CORRECT IN CONFIRMING THE ADDITION AS THE EXPENSES HAD BEEN INCURRED FOR REGISTRATION OF TRACTORS SOLD TO THE CUSTOMERS AND, THEREFORE, THE ADDITIONS OF RS.62,250/ - IS LIABLE TO BE DELETED. 3. APROPOS GROUND NO.1 OF APPEAL, THE FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS TO THE TUNE OF RS.1,08,95,040/ - . THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF NAME AND ADDRESS OF THE SUNDRY CREDITORS WITH OPENING CLOSING BALANCE AS ON 31.3.2013 AND AS ON 31.3.2014 WITH CONFIRMATIONS THEREFROM. IN RESPONSE THERETO, THE ASSESSEE FURNISHED THE LEDGER CONFIRMATION COPIES OF RS.86,87,746/ - AS AGAINST TOTAL SUNDRY CREDITO RS OF RS.1,08,95, 040/ - FROM THE FOLLOWING CONCERNS/PERSONS: ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 3 | 14 SL. NO. NAME OF THE SUNDRY CREDITOR CLOSING BALANCE AS ON 31.3.2014 1. JOHN DEER INDIA LTD. 54,24,419.00 2. BAGHESWARI TRACTORS 5,36,732.00 3. MAA SANTOSHI AGRO CO. 5,44,595.70 4. LAXMIPRIYA SUBUDHI 8,75,000.00 5. DINABADNHU BEHURA 8,76,000.00 6. BABAJI SAMAL 4,31,000.00 TOTAL : RS.86,87,746 4. AS REGARDS REMAINING AMOUNT OF SUNDRY CREDITORS OF RS.22,07,294/ - (RS.12,08,95,040/ - - RS.86,87,746/ - ), THE ASSESSEE FAILED TO PRODUCE THE CONFIRMATION S . THEREFORE, THE AO TREATED THE SAID AMOUNT OF RS.22,07,294/ - AS INCOME OF THE ASSESSEE. 5. ON APPEAL, BEFORE THE LD CIT(A), THE ASSESSEE COULD FURNISH CONFIRMATION FROM THREE PARTIES PERTAI NING TO CREDIT BALANCE AGGREGATING TO RS.21,846/ - . THEREFORE, THE LD CIT(A) RESTRICTED THE DISALLOWANCE TO RS.21,85,448/ - . 6. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED LEDGER ACCOUNT AND THE CONFIRMATIONS FR OM 13 SUNDRY CREDITORS AMOUNTING TO RS.21,42,479.05 IN THE PAPER BOOK AT PAGES 11 TO 45 AT THE TIME OF APPEAL HEARING AS UNDER: SL. NO. NAME OF THE SUNDRY CREDITOR CLOSING BALANCE AS ON 31.3.2014 1. HINDUSTAN TRADING CO. 19,807.00 2. K. S.AGROTECH 700.00 3. MADANI NUT & BOLD CENTRE 1,339.00 4. MINI ENGINEERING 84,408.05 5. PANESWAR AGRICULTURE INDUSTRIES 15,000.00 6. PANJU MACHINERY STORE 26,572.00 7. SARBESWAR JENA 18,000.00 8. S.JK.RAHMAN & S.F.RAHMAN 18,441.00 9. VIRAT ENTERPRISES 49,743.00 10. GIRIJANANDINI PARIDA 870,000.00 11. GIRIDHARI SENAPATI 852,000.00 ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 4 | 14 12. SACHIDANANDA SAHOO 110,000.00 13. DHARITRI AGRO ENGINEERING 76,468.00 TOTAL: 21,42,479.05 6.1 LD A.R. SUBMITTED THAT ONCE THE SUNDRY CREDITORS HAVE GIVEN THEIR CONFIRMATIONS IN THE LEDGER ACCOUNT AND THE PURCHASES ARE ACCEPTED BY THE AO , THE ADDITION OF RS.21,42,479.05 BE DELETED. LD A.R. REFERRED TO THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. PANCHAN DASS JAIN, 205 CTR 444 (ALL) FOR THIS PROPOSITION. 7. REPLYING TO ABOVE, LD D.R. SUPPORTED THE ORDER OF THE LD CIT(A). 8. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, FIRST OF ALL, WE MAY POINT OUT THAT THE LD CIT(A) DID NOT ACCEPT THE EVIDENCE FILED BY THE ASSESSEE. BUT, ON PERUSAL OF CONFIRMATIONS OF THE CREDITORS PLACED IN THE PAPER BOOK, WE OBSERVE THAT THE CREDITOR S HAVE GIVEN CONFIRMATION OF RS.21,42,479.00 . LD D.R. COULD NOT DISPROVE THE PURCHASES AND PAYMENT MADE BY THE ASSESSEE AND IN THE ABSENCE OF PURCHASE, SALES COULD NOT HAVE BEEN EFFECTED. IN VIEW OF ABOVE, WE DIRECT THE AO TO DELETE THE ADDITION OF RS.21 ,42,479/ - CONSIDERING THE CONFIRMATIONS FILED BY THE SUNDRY CREDITORS AS NOTED ABOVE OUT OF ADDITION OF RS.21,85,448/ - CONFIRMED BY THE LD CIT(A). WE FIND THAT HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PANCHAN DASS JAIN (SUPRA) HELD THAT WHEN THE PURCHAS ES AND SALES AS ALSO THE TRADING RESULT DISCLOSED BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE DEPARTMENT, NO ADDITION CAN BE MADE. HENCE, ADDITION OF RS. 42,969 / - (RS.21,85,448 RS.21,42,479) IS CONFIRMED. GROUND NO.1 OF APPEAL IS PARTLY ALLOWED. 9. APROPO S GROUND NO.2 OF APPEAL, LD COUNSEL FOR THE ASSESSEE SUBMITTED TH A T THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS NAMELY; NARAYAN SAHOO OF RS.5,00,000/ - AND PERVEZ J AMAL OF RS.3,00,000/ - AND ALL THE DOCUMENTS WERE FILED IN THE PAPER BOOK AT PAGES 46 TO 56 OF P B, VIZ; FORM NO.16, ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 5 | 14 CONFIRMATION AND ADHAR CARD IN RESPECT OF ASHRAF JAMAL AND BANK STATEMENT OF STATE BANK OF INDIA,PAN NO. ETC. IN THE CASE OF THE ASSESSEE. FROM THE ABOVE, IT IS CLEARLY DISCERNIBLE THAT THE IDENTITY, GENUINE NESS AND CREDITWORTHINESS OF THE LOAN CREDITORS HAVE BEEN ESTABLISHED. HENCE, THE ADDITION MADE BY THE AUTHORITIES BELOW ON THE ABOVE GROUND DESERVES TO BE DELETED. 10. LD D.R. SUBMITTED THAT THESE DETAILS WERE NOT FILED BEFORE THE AUTHORITIES BELOW, THER EFORE, THE ADDITIONS WERE RIGHTLY MADE. 11. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, WE OBSERVE THAT THE ADDITION OF RS.5,00,000/ - IN RESPECT OF NARAYAN SAHOO AND RS.3,00,000/ - IN RESPECT OF PERVEZJAMAL WAS MADE AND CONFIRMED ON THE GROUND THAT THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE LOAN CREDITORS WERE NOT ESTABLISHED BY THE ASSESSEE. ON PERUSAL OF THE DETAILS FILED IN THE PAPER BOOK BY THE ASSESSEE, WE OBSERVE THAT THE ASSESSEE HAS FURNISHED THE FORM NO.16, ADHAR NO. IN RESPECT OF PERVEZ JAMAL WHICH COU LD PROVE THE IDENTITY , GENUINENESS OF THE TRANSACTION . HENCE, THE ADDITION OF RS.3,00,000/ - IS DIRECTED TO BE DELETED. AS REGARDS TO LOAN CREDITOR OF SHRI NARAYAN SAHOO, WE FIND THAT THE ASSESSEE HAS FILED ONLY BANK STATEMENT OF THE ASSESSEE IN WHICH CA SH AMOUNT OF RS.5,00,000/ - HAS BEEN RECEIVED FROM SHRI NARAYAN SAHOO. NOTHING IS PLACED ON RECORD TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITOR SHRI NARAYAN SAHOO. IN VIEW OF ABOVE, WE CONFIRM THE ADDITION OF RS.5,00,000/ - AND PARTLY AL LOW GROUND NO.2 OF APPEAL. 12. GROUND NOS.3 & 4 OF APPEAL, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMENDMENT TO SECTION 40 (A)( IA ) MADE BY FINANCE ACT, 2014 W.E.F. 01.04.2015 PROVIDES THAT 30% OF ANY PAYABLE TO A RESIDENT SHALL BE DISALLOWED IF TAX IS NOT ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 6 | 14 DEDUCTED AT SOURCE UNDER CHAPTER XVIIB AS AGAINST THE 100% PRESENTLY MADE. THE PURPOSE OF THIS AMENDMENT WAS EXPLAINED IN THE MEMO RANDUM AS UNDER: - 'THE DISALLOWANCE OF WHOLE OF THE AMOUNT OF EXPENDITURE RESULTS INTO UNDUE HARDSHIP AND THEREFORE, IN ORDER TO REDUCE THE HARDSHIP, IT IS PROPOSED THAT IN CASE OF NON - DEDUCTION OR NON - PAYMENT OF TDS ON PAYMENTS MADE TO RESIDENTS AS SPECI FIED IN SECTION 40 (A)( IA ) OF THE ACT, THE DISALLOWANCE SHALL BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAIMED.' HE SUBMITTED THAT THE AMENDMENT MADE BY FINANCE ACT (NO. 2) ACT, 2014 W.E.F. 01.0 4.2015 IS TO REMOVE UNINTENDED AND UNDUE HARDSHIP AND THEREFORE THIS AMENDMENT SHOULD BE GIVEN RETROSPECTIVE EFFECT. FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF ITAT, CUTTACK IN THE CASE OF OM SRI NILAMADHAB BUILDERS PVT LTD. VS ITO IN ITA NO.296/ CTK/2018 FOR A.Y. 2014 - 15. 13. LD D.R. AGREED TO THE SUBMISSION OF LD A.R. OF THE ASSESSEE. 14. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED RS.4,28,100/ - & RS.47,753/ - FOR NON - DEDUCTION OF TAX UNDER SECTION 40(A)(IA) OF THE ACT. AS PER THE AMENDED PROVISION TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2015 W.E.F. 1.4.2015, THE DISALLOWANCE IS RESTRICTED TO 30% AS AGAINST 100% MADE BY THE ASSESSING OFFICER. WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONS IDERATION IN THE CASE OF OM SRI NILAMADHAB BUILDERS PVT LTD (SUPRA) BY THIS BENCH OF THE TRIBUNAL, WHEREIN, IT IS HELD AS UNDER: 9. ON CAREFUL PERUSAL OF THE AMENDMENT BROUGHT TO THE SECTION 40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2014 W.E.F. 01.04.2015 , IT IS CLEAR THAT THE INTENT OF LEGISLATURE TO REDUCE THE HARDSHIP, IT IS PROPOSED THAT IN CASE OF NON - DEDUCTION OR NON - PAYMENT OF TDS ON PAYMENTS MADE TO RESIDENTS AS SPECIFIED IN SECTION 40(A)(IA) OF THE ACT, THE DISALLOWANCE SHALL BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAIMED. THE HONBLE SUPREME COURT IN THE CASE OF ALLIED MOTORS (P) LTD. [1997] 224 ITR 677 (SC) HAS HELD THAT AMENDMENT WAS REMEDIAL IN NATURE, DESIGNED TO ELIMINATE UNINTENDED ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 7 | 14 CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO TH E ASSESSEE AND WHICH MADE THE PROVISION UNWORKABLE OR UNJUST IN A SPECIFIC SITUATION. FINALLY, AFTER CONSIDERING VARIOUS CASE LAWS, THE HONBLE SUPREME COURT HELD THAT THE PURPOSE OF AMENDMENT WOULD NOT SERVE ITS OBJECT IN SUCH A SITUATION UNLESS, IT IS CO NSTRUED AS RETROSPECTIVE AFTER OBSERVING AS UNDER : - 10. THEREFORE, IN THE WELL - KNOWN WORDS OF JUDGE LEARNED HAND, ONE CANNOT MAKE A FORTRESS OUT OF THE DICTIONARY; AND SHOULD REMEMBER THAT STATUTES HAVE SOME PURPOSE AND OBJECT TO ACCOMPLISH WHOSE SYMPATH ETIC AND IMAGINATIVE DISCOVERY IS THE SUREST GUIDE TO THEIR MEANING. IN THE CASE OF R.B. JODHA MAL KUTHIALA V. CIT [1971] 82 ITR 570 , THIS COURT SAID THAT ONE SHOULD APPLY THE RULE OF REASONABLE INTERPRETATION. A PROVISO WHICH IS INSERTED TO REMEDY UNINTE NDED CONSEQUENCES AND TO MAKE THE PROVISION WORKABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETATION, REQUIRES TO BE TREATED AS RETROSPECTIVE IN OPERAT ION SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTION AS A WHOLE. 11. THIS VIEW HAS BEEN ACCEPTED BY A NUMBER OF HIGH COURTS. IN THE CASE OF CIT V. CHANDULAL VENICHAND [1994] 209 ITR 7/ 73 TAXMAN 349 , THE GUJARAT HIGH COURT HAS HELD THAT TH E FIRST PROVISO TO SECTION 43B IS RETROSPECTIVE AND SALES - TAX FOR THE LAST QUARTER PAID BEFORE THE FILING OF THE RETURN FOR THE ASSESSMENT YEAR IS DEDUCTIBLE. THIS DECISION DEALS WITH THE ASSESSMENT YEAR 1984 - 85. THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SRI JAGANNATH STEEL CORPN. [1991] 191 ITR 676 , HAS TAKEN A SIMILAR VIEW HOLDING THAT THE STATUTORY LIABILITY FOR SALES - TAX ACTUALLY DISCHARGED AFTER THE EXPIRY OF THE ACCOUNTING YEAR IN COMPLIANCE WITH THE RELEVANT STATUTE IS ENTITLED TO DEDUCTION UNDE R SECTION 43B. THE HIGH COURT HAS HELD THE AMENDMENT TO BE CLARIFICATORY AND, THEREFORE, RETROSPECTIVE. THE GUJARAT HIGH COURT IN THE ABOVE CASE HELD THE AMENDMENT TO BE CURATIVE AND EXPLANATORY AND HENCE RETROSPECTIVE. THE PATNA HIGH COURT HAS ALSO HELD T HE AMENDMENT INSERTING THE FIRST PROVISO TO BE EXPLANATORY IN THE CASE OF JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF INDIA [1991] 189 ITR 70/ 54 TAXMAN 521. IT HAS HELD THE AMENDMENT INSERTING FIRST PROVISO TO BE RETROSPECTIVE. THE SPECIAL LEAVE PETIT ION FROM THIS DECISION OF THE PATNA HIGH COURT WAS DISMISSED. THE VIEW OF THE DELHI HIGH COURT, THEREFORE, THAT THE FIRST PROVISO TO SECTION 43B WILL BE AVAILABLE ONLY PROSPECTIVELY DOES NOT APPEAR TO BE CORRECT. AS OBSERVED BY G.P. SINGH IN HIS PRINCIPLES OF STATUTORY INTERPRETATION, FOURTH EDN., PAGE 291, 'IT IS WELL - SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERALLY INTENDED'. IN FACT THE AMENDMENT WOULD NOT SERVE ITS OBJECT IN SUCH A SIT UATION UNLESS IT IS CONSTRUED AS RETROSPECTIVE. THE VIEW, THEREFORE, TAKEN BY THE DELHI HIGH COURT CANNOT BE SUSTAINED. ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 8 | 14 10. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE TRIBUNAL AS WELL AS HONBLE SUPREME COURT, WE DIRECT THE AO TO RESTRICT THE 100% D ISALLOWANCE CONFIRMED BY THE CIT(A) TO THE EXTENT OF 30% ONLY TAKING INTO ACCOUNT THE ACTUAL CLAIM OF THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. WE ORDER ACCORDINGLY. THUS, THE SOLE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. FOLLOWING THE PRECEDENT, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 30% AS AGAINST 100% MADE UNDER SECTION 40(A)(IA) OF THE ACT. HENCE, GROUND NOS,.3 & 4 ARE PARTLY ALLOWED. 16 . APROPOS GROUND NO.5 OF THE APPEAL, LD COUNSEL FOR THE ASSESSEE SUBMITTE D THAT WHEN THE ASSESSMENT HAS BEEN FRAMED U/S.143(3) OF THE ACT AND THE BOOKS OF ACCOUNT HAS BEEN REJECTED, THE ADHOC DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD CIT(A) IS NOT JUSTIFIED. 17. LD D.R. SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED A NY EVIDENCE IN SUPPORT OF THE CLAIM OF EXPENSES. SINCE, THE ASSESSEE HAS FAILED TO PROVIDE THE PRIMARY EVIDENCE, THE AO HAS MADE ONLY 10% ADHOC DISALLOWANCE , WHICH IS JUSTIFIED CONSIDERING THE NATURE OF EXPENSES INCURRED BY THE ASSESSEE. 18. ON CAREFUL CO NSIDERATION OF THE RIVAL SUBMISSIONS, WE OBSERVE THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE EXPENSES INCURRED IN CONNECTION WITH STAFF TIFFIN, FUEL, DIRECT LABOUR AND DIRECT EXPENSES. HOWEVER, SINCE NO EVIDENCE WAS FILED, HE MADE ADHOC DISALLOWANCE. WE FIND THAT IN THIS CASE, THE ASSESSMENT HAS BEEN COMPLETED U/S.143(3) OF THE ACT AND THE BOOKS OF ACCOUNT ARE NOT REJECTED. WE FIND THAT THE NATURE OF EXPENSES HAVE NOT BEEN DOUBTED OR DISBELIEVED BY THE ASSESSING OFFICER. WE OBSERVE THAT THE ADHOC DISA LLOWANCE HAS BEEN MADE ON THE BASIS OF SUSPICION ALONE AND NO BASIS HAS BEEN GIVEN BY THE AO. HENCE, WE DIRECT ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 9 | 14 THE AO TO DELETE THE ADDITION MADE ON ADHOC BASIS. GROUND NO.5 OF APPEAL IS ALLOWED. 19. APROPOS GROUND NO.6 OF APPEAL, WE FIND THAT SINCE THE A SSESSEE FAILED TO FURNISH EVIDENCE OF THE PAYMENT OF SALES TAX OF RS.7,575/ - AND PAYMENT OF ENTRY TAX OF RS.15,970/ - WITHIN THE DUE DATE OF FILING OF RETURN U/S.139(1) OF THE ACT, THE ADDITION WAS MADE BY THE AO AND CONFIRMED BY THE LD CIT(A). BEFORE US A LSO, NO DETAILS WERE FURNISHED BY THE ASSESSEE. HENCE, WE CONFIRM THE ADDITION OF RS.23,545/ - U/S.43B OF THE ACT. GROUND NO.6 IS DISMISSED. 20. APROPOS GROUND NO.7 OF APPEAL, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE TRACT OR BUSINESS AND SPARE PARTS. THE AMOUNT INCURRED IN CONNECTION WITH RTO EXPENSES HAVE BEEN ACCOUNTED FOR IN THE GROSS RECEIPTS. THEREFORE, THE ADDITION MADE ON THIS COUNT BE DELETED. 21. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THE LD CIT(A) HAS CONFIRMED THE ADDITION OF RS.62,250/ - BEING RTO EXPENSES ON THE GROUND THAT THE ASSESSEE HAS NOT FILED THE LEDGER COPY OF THE ABOVE EXPENSES AND NO OTHER EVIDENCE HAS BEEN FURNISHED TO SUPPORT THE CLAIM. THE CONTENTION OF LD COUNSEL FOR THE ASSESSEE IS THAT RTO EXPENSES HAVE BEEN ACCOUNTED IN THE GROSS RECEIPTS OF THE ASSESSEE , WHICH HAS NOT BEEN DISPUTED BY LD DR. HENCE, WE DELETE THE SAME AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 22. IN THE RESULT, APPEAL IN ITA NO.169/CTK/2018 IS PARTLY ALL OWED. 23 . ITA NO.371/CTK/2018 IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.8.2018 OF THE LD CIT(A) - 2, BHUBANESWAR FOR THE ASSESSMENT YEAR 2014 - 15 IN THE MATTER OF PENALTY LEVIED UNDER SECTION 271D OF THE INCOME TAX, ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 10 | 14 2 4 . IN THIS APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE PENALTY U/S.271D OF THE ACT OF RS.6,18,840/ - . 2 5 . BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS OBTAINED CASH OF RS.3,18,840/ - FROM SAMSUL RAHAMAN, RS.3,00,000/ - FROM ASRAF JAMAL AND RS.3,00,000/ - FROM PARVEZ JAMAL. THE AO NOTED THAT THERE WAS VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT BY THE ASSESSEE . THE AO AFTER GETTING PERMISSION FROM JCIT, RANGE - 4, BHUBANESWA R INITIATED PENALTY PROCEEDINGS U/S.271D OF THE ACT AND ISSUED SHOW CAUSE NOTICE U/S.274 READ WITH 271D TO THE ASSESSEE. THE ASSESSEE MADE DETAILED SUBMISSION, WHICH WERE CONSIDERED BY THE AO, BUT SOMEHOW THE AO DID NOT CONVINCE WITH THE CONTENTION OF THE ASSESSEE AND IMPOSED PENALTY OF RS.9,18,840/ - UNDER SECTION 271D OF THE ACT. 2 6 . ON APPEAL, THE LD CIT(A) DELETED THE PENALTY OF RS.3,00,000/ - IN RESPECT OF THE ADDITION OF RS.3,00,000/ - MADE UNDER SECTION 68 OF THE ACT CONSIDERING THE SAME AS INCOME OF THE ASSESSEE. HOWEVER, THE LD CIT(A) CONFIRMED THE PENALTY OF BALANCE AMOUNT OF RS.6,18,840/ - . 2 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE CASH LOAN OF RS.3,18,840/ - FROM SAMSUL RAHAMAN AND RS.3,00,000/ - FROM PARVEZ JAMAL . LD COUNSEL SUBMITTED THA T THE GENUINENESS OF LOANS RECEIVED IN CASH FROM BOTH THE PERSONS IS NOT IN DOUBT AND AS THERE WAS BUSINESS EXIGENCY, THE ASSESSEE HAD ACCEPTED THE CASH LOANS. HE SUBMITTED THAT THE LOAN IS GENUINE AND THERE WAS NO INTENTION OF TAX EVASION AND VIOLATION O F PROVISIONS OF SECTION 269SS OF THE ACT AND, ACCORDINGLY, PRAYED FOR DELETION OF PENALTY. LD COUNSEL FOR THE ASSESSEE RELIED ON ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 11 | 14 THE DECISION OF CUTTACK BENCH OF ITAT IN THE CASE OF MAMATA PATRA VS JCIT IN ITA NO.136/CTK/2017 FOR ASSESSMENT YEAR 2015 - 16 ORDER DATED 11.4.2018 AND SUBMITTED IN SIMILAR SITUATION, THE PENALTY LEVIED UNDER SECTION 271D HAS BEEN DELETED. 2 8 . REPLYING TO ABOVE, LD D.R. SUBMITTED THAT AS PER SECTION 269SS OF THE ACT, WHENEVER A PERSON TAKES OR ACCEPTS A LOAN OF RS.20,000/ - OR MOR E OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR DRAFT OR BY USE OF ELECTRONIC CLEARING SYSTEM, THE PENALTY PROVISIONS UNDER SECTION 271D OF THE ACT ARE ATTRACTED. IN THIS CASE, THE ASSESSEE HAS TAKEN LOAN IN CASH OF RS.6,18,840/ - AND, THEREFORE, PENALTY PROV ISIONS U/S.271D ARE VISITED. HE SUBMITTED THAT IN THIS CASE, THE ASSESSEE HAS NOT SHOWN REASONABLE CAUSE FOR ACCEPTING THE LOAN IN CASH. HENCE, HE PRAYED THAT THE ORDER OF THE LD CIT(A) BE CONFIRMED. 2 9 . WE FIND THAT THE PERSONS WHO HAVE GIVEN CASH LOAN , ARE THE RELATIVES OF THE ASSESSEE AND DUE TO BUSINESS EXIGENCY , AT THE REQUEST OF THE ASSESSEE, THE AMOUNT WAS GIVEN BY THE LOAN CREDITOR IN CASH. THE MONEY DEPOSITED IN CASH WAS DULY REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, WHICH SHOWS THE B ONAFIDES OF THE ASSESSEE. AS IS EVIDENT FROM THE ASSESSMENT ORDER, IT REVEALS THAT THE PERSONS WHO HAVE GIVEN MONEY GIVEN TO THE ASSESSEE ARE THE BROTHER AND NEPHEW OF THE MANAGING DIRECTOR OF THE ASSESSEE. THE ASSESSEE HAS ALSO FILED ADHAR CARD OF SHA IKH SAMSUR RAHMAN AND AYESHA AHMAD, MOTHER OF ASRAF JAMAL, WHO IS NEPHEW OF THE MANAGING PARTNER OF THE ASSESSEE. THE ASSESSEE HAS ALSO FILED PASSPORT COPY OF RAHMAN SHIAK HIFZUR, WHO IS THE FATHER OF SAMSUL RAJHAMAN AND AYESHA AHMAD. THE CONTENTION OF THE LD COUNSEL FOR THE ASSESSEE IS THAT SINCE THE ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 12 | 14 ASSESSEE HAS TAKEN CASH LOAN FROM THE RELATIVES, THEREFORE, THE PENALTY U/S.271D IS NOT EXIGIBLE. 30. SECTION 271D OF INCOME TAX ACT 1961 PROVIDES THAT IF A LOAN OR DEPOSIT IS ACCEPTED IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS THEN A PENALTY EQUIVALENT TO THE AMOUNT OF SUCH LOAN OR DEPOSIT MAY BE LEVIED BY THE JOINT COMMISSIONER. A BARE READING OF SECTION 269SS WOULD INDICATE THAT IT WAS INTRODUCED BY THE FINANCE ACT , 1984 W.E.F. 1 - 4 - 1984. IT PROVIDES THAT AFTER 30.6.1984 NO PERSON SHALL ACCEPT A NY LOANS OR DEPOSITS FROM ANY OTHER PERSON OF RS.10,000/ - OR MORE (WHICH HAS BEEN ENHANCED TO RS.20,000/ - W.E.F. 1 - 4 - 1989) EXCEPT BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. THUS, IT PROHIBITS ACCEPTANCE OF ANY LOAN OR DEPOSITS FROM ANY OTHER PERS ON OF MORE THAN RS.20,000/ - EXCEPT BY ACCOUNT PAYEE CHEQUE OR DRAFT. HOWEVER, WHILE MAKING AMENDMENT IN SECTION 269SS BY FINANCE ACT , 1987 SECTION 276DD WAS OMITTED AND NEW SECTION 271D WAS BROUGHT INTO THE STATUTE BOOK WHICH PROVIDES FOR VISITING ASSESSEE WITH PENALTY BY EQUAL AMOUNT. THE CONTRAV ENTION TO SECTION 269SS WOULD NOT AUTOMATICALLY AUTHORISE THE AO TO VISIT THE ASSESSEE WITH PENALTY UNDER SECTION 271D BECAUSE SECTIONS 273B PROVIDED THAT IN CASE ASSESSEE DEMONSTRATE 'REASONABLE CAUSE' FOR VIOLATING THIS PROVISION, THEN HE COULD BE ABSOLVED FROM VISITING WITH PENALTY. 3 1 . BEFORE WE EMBARK UPON AN INQUIRY ON THE FACTS OF THE PRESENT CASE, IN ORDER TO ASCERTAIN THAT WHETHER THE ASSESSEE HAS DEMONSTRATED 'REASONABLE CAUSE' FOR ABSOLVING ITSELF FROM LEVY OF PENALTY UNDER SECTION 271D , WE DEEM IT APPROPRIATE TO APPRAISE OURSELVES WITH PROPOSITION LAID DOWN IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE IN ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 13 | 14 ANALYZING VARIOUS FACT SITUATION, WHEREIN REASONABLE CAUSE DEMONSTRATED BY THE ASSESSEE WERE ACCEPTED. THE ITAT CUTTAC K BENCH IN THE CASE OF MAMATA PATRA (SUPRA), IN SIMILAR SITUATION, HAS DELETED THE PENALTY IN RESPECT OF CASH LOAN RECEIVED. LD A.R. ALSO RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS BEFORE US TO CONTEND THAT THE PRESENT CASE IS COVERED BY THE SAID DECISIONS AS FOLLOWS: I) CIT VS. SAINI MEDICAL STORE, 276 ITR 79 (P&H) II) CHAMUNDI GRANITES (P) LTD VS DCIT, 239 ITR 694 (KAR) III) CIT VS SMT DIMPAL YADVA, 379 ITR 177(ALL) IV) CIT VS M YESODA, 351 ITR 265 (MAD) 32. TAKING INTO CONSIDERATION THE ENTIRE CONSPECTUS OF THE CASE , FIRST OF ALL, WE MAY POINT OUT THAT FROM THE COPIES OF DOCUMENTS AVAILABLE AT PAGES 18 TO 25 OF PAPER BOOK, WE NOTE THAT BOTH THE PERSONS WHO HAVE GIVEN CASH LOAN TO THE ASSESSEE ARE RELATIVES I.E. ONE BROTHER AND OTHER IS NEPHEW. THEREFORE, THE DECISIONS RELIED UPON BY LD COUNSEL FOR THE ASSESSEE SUPPORT THE CASE OF THE ASSESSEE. WE, THEREFORE, ARE OF THE OPINION THAT THERE EXISTED A REASONABLE CAUSE FOR ACCEPTING THE CASH LOANS. AS SUCH, TH E ASSESSEE MAY BE EXONERATED FROM THE RIGOUR OF SECTION 271D OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD CIT(A) AND DELETE THE PENALTY IMPOSED UNDER SECTION 271D OF THE ACT. 33. IN THE RES ULT, APPEAL IN ITA NO.371/CTK/2018 IS ALLOWED. ORDER PRONOUNCED ON 28 / 01 /20 20 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 28 / 01 /20 20 ITA NO S .169 & 371 /CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 14 | 14 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTAC K 1. THE APPELLANT : KISHAN MOTORS, PLOT NO.56/A, SAHARA COMPLEX, RASULGARH, BHUBANESWAR. 2. THE RESPONDENT. ITO, WARD 4(3), BHUBANESWAR 3. THE CIT(A) - 2 , BHUBANESWAR 4. PR.CIT - 2 , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//