M/s J.J. Exports, Chandigarh V. Addl. CIT, Chandigarh

ITA 177/CHANDI/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2354 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Reasonable cause; Bonafide mistake
• Section: 273B; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 176 & 177/CHD/2013 ASSESSMENT YEAR : 2005-06 M/S J.J.EXPORTS, V ADDL.CIT, SCF 18-19, RANGE-III, SECTOR 22-D, CHANDIGARH. CHANDIGARH. PAN: AADFJ-5435D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PARIKSHIT AGGARWAL RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 10.04.2013 DATE OF PRONOUNCEMENT : 17.04.2013 ORDER PER HARI OM MARATHA,JM THESE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 ARE DIRECTED AGAINST ORDERS OF LD. CIT(APPE ALS) DATED 17.12.2012, WHICH EMANATED FROM ORDERS OF PENALTIES PASSED U/SS 271D READ WITH SECTION 269SS & SECTION 271E R EAD WITH SECTION 269T OF THE ACT. FOR THE SAKE OF CONVENIEN CE AND BREVITY, WE PROCEED TO DECIDE BOTH THESE APPEALS BY THIS COMMON ORDER. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SSESSMENT U/S 143(3) WAS PASSED IN THIS ASSESSEE'S CASE ON 03 .10.2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE, DURING THE YEAR, HAD ACCE PTED CASH 2 LOAN AMOUNTING TO RS.8,00,000/- FROM ONE SHRI NEERA J JAIN AND SIMILARLY, THE ASSESSEE HAD REPAID UNSECURED LO AN OF RS.8,00,000/- TO M/S JAWAHAR LAL JAIN, HUF, PROPRIE TOR, NIKKA MAL BABU RAM ON 31.03.2005. AS A RESULT, PEN ALTY PROCEEDINGS U/SS 271D AND U/S 271E OF THE ACT WERE INITIATED. THE ASSESSEE MADE A SUBMISSION VIDE LETTER DATED 05 .11.2012 THAT THE INCREASE IN THE UNSECURED LOANS WAS BY PAS SING A JOURNAL ENTRY IN THE BOOKS AND THIS DOES NOT AMOUNT TO VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. IT WAS EXPLAINED THAT THE ACCEPTANCE OF LOAN BY WAY OF PAS SING OF JOURNAL ENTRIES IN THE BOOKS IS NOT A VIOLATION OF THIS PROVISION IN VIEW OF THE VARIOUS DECISIONS ENUMERATED AS BELO W : (I) CIT VS. NOIDA TOLL BRIDGE CO. LTD. 262 ITR 260 (DEL.) (II) CIT VS. TRIUMPH INTERNATIONAL FINANCE (I ) LTD ITA NO. 5745/2010 (BOM.) DATED 1 7.O8.2012. (III) CIT VS. INTEGRATED TECHNOLOGIES LTD. IT A 522/20 12 (IV) DCIT VS. FORGING LTD. ITA 5689/DEL. /201 0 DT. 1 6. 03. 12 (V) N. KRISHNAMOORTHY ITA 1909/MDS/ 2010 DT. 0 5.05.2011 (VI) PHOENIX ENTERTAINMENT P. LTD. ITA 2048/M DS/ 2008 (VII) S. DURAIRAJ ITA 2009/MDS/2006 (VIII) AMARNATH SHIVRAJ (HUF) ITA 1844/2010 (AGRA ) FIX) SUNFLOWER BUILDERS P. LTD. 61 ITD 227 (PUNE) 3. THE ASSESSEE ALSO MADE OTHER HOST OF EXPLANATION S, WHICH ARE AS UNDER : B) WHEN A LENDER MAKES CERTAIN PAYMENT ON BEHALF O F BORROWER DIRECTLY TO A THIRD PARTY AND THIS PAYMENT IS THROUGH AN ACCOUNT PAYEE CHEQUE/BANK DRAFT, THE SAME DOES N OT AMOUNT TO VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT. C) THE TRANSACTION OF ACCEPTANCE OF LOAN WAS CA RRIED OUT THROUGH ACCOUNT PAYEE CHEQUE. THE ONLY DEVIATION FROM NORMA L TRANSACTION WAS THAT THE SAID PAYMENT WAS MADE DIRECTLY TO A THIRD PARTY ON BEHALF OF APPELLANT. IN THIS SITUATION, THE TRANSACTION DOES NOT AMOUNT TO VIOLATION OF PROVISIONS OF SECTION 269SS OF THE INCOME TAX AC T. 3 D) THE ACCOUNTING ERROR DONE BY ACCOUNTANT OF APP ELLANT GROUP WAS RECTIFIED BY WAY OF TRANSACTION IN QUESTION. THE OR IGINAL TRANSACTION WAS CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUE. THEREFORE , THE ERROR DONE BY ACCOUNTANT IN USING THE NAME OF ONE OF THE PARTY, WHICH WAS RECTIFIED BY WAY OF A JOURNAL ENTRY LATER ON SHOULD NOT HAVE BEEN EXPLOITED TO THE EXTENT OF LEVY OF IMPUGNED PENALTY OF RS. 8,00,OOO/- U/S 27ID OF THE ACT ON ALLEGED VIOLATION OF SECTION 269 SS OF THE ACT E) THE IMPUGNED TRANSACTION FINDS RECORDED IN THE BOOKS OF THE LENDER, BORROWER AND ALSO OF THE THIRD PARTY. THERE IS NO FINDING THAT THE INTENT OF THE APPELLANT OR THE OTHER PARTY WAS TO C ONCEAL THE INCOME OR THE IMPUGNED TRANSACTION. HENCE THE SAME DOES NOT AMOUNT TO VIOLATION OF PROVISIONS OF SECTION 269SS AND THEREON PENALTY U/S 271 D. FOR THIS, WE RELY UPON RATIO OF FOLLOWIN G JUDGEMENTS : (I) CIT VS. SUNIL KUMAR GOEL 315ITR 163 (P& H) F) THE APPELLANT WAS OF A BONAFIDE BELIEF THAT INCREASE IN LEVEL OF UNSECURED LOAN BY PASSING JOURNAL ENTRY IN THE BOOK S, WHEN THE LENDER MAKES DIRECT PAYMENT TO A THIRD PARTY THROUGH ACCOU NT PAYEE CHEQUE ON BEHALF OF THE BORROWER, DOES NOT AMOUNT TO VIOLATIO N OF PROVISIONS OF SEC 269SS OF THE ACT. THE SAID BELIEF WAS A REASONABLE ONE. IN THIS SITUATION, THE SAME WAS A REASONABLE CAUSE AND THEREFORE KEEPI NG IN MIND THE PROVISIONS OF SECTION 273B OF THE ACT, THE RESPONDE NT WAS UNJUSTIFIED IN LEVYING THE IMPUGNED PENALTY. FOR THIS, WE RELY UPO N RATIO OF FOLLOWING JUDGEMENTS : (I) CIT VS, SAINI MEDICAL STORE 277ITR 420 (P&H) (II)CIT VS. NATVARLAL PURSHOTTAMDAS PAREKH 303 I TR 5 (GUJ) G) THE TRANSACTION WAS WITHIN THE FAMILY MEMBERS AND GROUP CONCERNS AND WAS CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUE(S) . ON THIS PENALTY U/S 27ID WAS NOT LEVIABLE. FOR THIS, WE RELY UPON RATIO OF FOLLOWING JUDGEMENTS : I) CIT VS. SHREE AMBICA FLO UR MILLS CORPORATION 6 DTR 169 (GUJ) II) CIT VS. SUNIL KUMAR GO EL 315 ITR 163 (P&H) IT IS FURTHER SUBMITTED THAT AN OBJECTION WAS RAISE D BY LD. AO THAT THE LENDER SH. NEERAJ JAIN HAS DEPOSITED RS. 7.90 LACS IN CASH IN HIS SAVING BANK ACCOUNT IMMEDIATELY BEFORE THE ISSUANCE OF THE CHEQUES IN QUESTION. IN THIS REGARD, IT IS SUBMITTED THAT THE SAID QUEST ION IS A MATTER OF QUANTUM ASSESSMENT AND CANNOT BE RAISED IN PENALTY PROCEEDI NGS AND THAT TOO A PENALTY U/S 27ID OF THE ACT. FURTHER THE DEPOSIT OF CASH IN THE BANK ACCOUNT OF MR.NEERAJ JAIN MAY HAVE IMPLICATION S ON HIS ASSESSMENT BUT NOT THAT OF THE APPELLANT. IT IS FUR THER SUBMITTED THAT THE ASSESSMENT OF MR.NEERAJ JAIN & M/S NIKKA M AL BABU RAM FOR THE YEAR UNDER REFERENCE, WERE COMPLETED U/ S 143(3) OF THE ACT WHEREIN NO ADDITION ON THE ISSUE IN QUESTIO N WAS MADE AND THE DEPOSIT OF CASH AND THE TRANSACTION IN QUES TION WAS DULY ACCEPTED AS SUCH. COPIES OF ASSESSMENT ORDERS OF TH ESE PARTIES ARE ENCLOSED. HENCE NO ADVERSE INFERENCE WAS REQUI RED TO BE DRAWN IN THE CASE OF THE APPELLANT. THEREFORE, THE LD. AO HAS ERRED IN LEVYING THE IMPUGNED PENALTIES. BUT ACCORDING TO AO, SINCE THE ASSESSEE DID NOT FUR NISH THE BOOKS OF ACCOUNT, PARTICULARLY CASH-BOOK AND LEDGE R TO 4 ASCERTAIN THE GENUINENESS OF THE TRANSACTION, THIS EXPLANATION WAS NOT ACCEPTABLE. 4. BEFORE CIT(APPEALS), THE ASSESSEE REITERATED HIS EARLIER STAND AND ALSO FILED WRITTEN SUBMISSIONS, ON WHICH THE LD. CIT(APPEALS) SOUGHT A REMAND REPORT FROM THE AO. I N THE REMAND REPORT, IT WAS MENTIONED THAT INFORMATION HA D BEEN SOUGHT FROM THE BANK U/S 133(6) OF THE ACT AND THE BANK DENIED HAVING COMMITTED ANY MISTAKE AT THE TIME OF MAKING ENTRIES FOR TWO CHEQUES ISSUED BY SHRI NEERAJ JAIN IN FAVOUR OF M/S NIKKA MAL BABU RAM AND BY ALLOWING CREDIT TO M/ S J.J.EXPORTS INSTEAD OF M/S NIKKA MAL BABU RAM, WHIC H WAS LATER ON RECTIFIED BY THE BANK AUTHORITIES ON POINT ING OUT ABOUT THIS MISTAKE BY THE ASSESSEE. THE BANKER VIJ AYA BANK VIDE ITS LETTER DATED 29.03.2010 INTIMATED TO THE A O THAT THE STATEMENT ABOUT THE BANK COMMITTING THE MISTAKE DID NOT SEEM CORRECT AS THERE WERE NO RECTIFICATION SLIPS N OR THE ACCOUNT OF M/S J.J.EXPORTS AVAILABLE IN THEIR RECOR DS. AFTER CONSIDERING THE REMAND REPORT AND TAKING ASSESSEE'S REJOINDER ON THE SAME, LD. CIT(APPEALS) HAS CONCLUDED THAT TH E ASSESSEE HAS TAKEN UNSECURED LOAN FROM SHRI NEERAJ JAIN IN A SSESSEE'S ACCOUNT AND CASH AMOUNTING TO RS.7.90 LACS WAS DEPO SITED BEFORE ISSUANCE OF TWO CHEQUES, TOTALING TO RS.8,00 ,000/- TO M/S NIKKA MAL BABU RAM, WHICH WERE ROUTED THROUGH M /S J.J.EXPORTS. HE HAS FOUND THAT THERE IS NO MERIT I N THE CONTENTION THAT THERE WAS NO EXCHANGE OF CASH AS TH E ENTIRE TRANSACTION WAS DONE TO CIRCUMVENT THE PROVISIONS O F SECTION 269SS. ACCORDINGLY, HE HAS ALSO CONFIRMED THIS PEN ALTY OF RS.8,00,000/-. 5 5. REGARDING REPAYMENT OF RS.8,00,000/-, THE SIMILA R REASONINGS HAVE BEEN GIVEN TO CONFIRM PENALTY OF RS.8,00,000/- IMPOSED U/S 271E OF THE ACT FOR THE V IOLATION OF THE PROVISIONS OF SECTION 269D. 6. BEFORE US, SIMILAR ARGUMENTS HAVE BEEN REITERATE D BY BOTH THE PARTIES. THE LD. AR HAS CLAMOURED THAT TH E ASSESSEE HAS NEITHER FLOUTED PROVISIONS OF SECTION 269SS AND SECTION 269T AND THEREFORE, PENALTIES U/S 271D AND 271E ARE NOT EXIGIBLE ON THE ASSESSEE AND ARE LIABLE TO BE DELET ED. IT WAS ARGUED THAT THE PROVISIONS OF SECTIONS 269SS AND 26 9T ARE VIOLATED WHEN THE ASSESSEE, EITHER RECEIVES OR REPA YS ANY LOAN OR DEPOSIT OTHERWISE THAN BY WAY OF AN ACCOUNT PAYE E CHEQUE OR ACCOUNT PAYEE DRAFT AND IN CASH. HE ARGUED THAT THE RECEIPT OF THE LOAN WAS THROUGH PASSING JOURNAL ENTRIES AND NO CASH AMOUNT PASSED HANDS. LIKEWISE, HE HAS CLARIFIED IN RESPECT OF THE PAYMENT OF LOAN. 7. PER CONTRA, LD. DR HAS STATED THAT FROM THE FACT S AVAILABLE ON RECORD, IT CLEARLY EMERGES THAT THE AS SESSEE HAS USED THE BANKING CHANNEL TO PASS CASH AMOUNTS, BOTH AT THE TIME OF RECEIVING OF LOAN/DEPOSIT AND AT THE TIME O F REPAYMENT OF THE SAME. THUS, ACCORDING TO HIM, THESE PENALTI ES HAVE BEEN CORRECTLY LEVIED AND HAVING BEEN RIGHTLY CONFI RMED. 8. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE RI VAL STANDS AND HAVE CAREFULLY PERUSED THE ENTIRE AVAILA BLE RECORD BEFORE US. WE HAVE FOUND THAT SHRI NEERAJ JAIN S/O MR.JAWAHAR LAL JAIN, PARTNER OF THE APPELLANT FIRM HAD ISSUED TWO CHEQUES OF EQUAL AMOUNTS OF RS.4,00,000/- ON 31 .05.2005 6 IN FAVOUR OF M/S NIKKA MAL BABU RAM & SONS, WHEREIN SHRI JAWAHAR LAL JAIN IS THE PROPRIETOR IN THE CAPACITY OF KARTA OF HUF. WHILE ACCOUNTING THE ABOVE CHEQUES IN THE BOO KS OF M/S NIKKA MAL BABU RAM & SONS, THE CREDIT OF THESE CHEQ UES WERE INADVERTENTLY MADE TO M/S J.J.EXPORTS AND THE RETUR N OF THAT FIRM WAS FILED AS SUCH. WHEN THE ACCOUNTS OF SHRI NEERAJ JAIN, M/S NIKKA MAL BABU RAM & SONS AND M/S J.J.EXP ORTS WERE RECONCILED, THIS MISTAKE WAS FOUND AND AS A RE SULT, THE ASSESSEE FIRM HAD TO DEBIT THE ACCOUNT OF M/S NIKKA MAL BABU RAM & SONS WITH THE SIMILAR AMOUNT, BY CREDITING IN THE ACCOUNT OF SHRI NEERAJ JAIN IN THE BOOKS OF THE FIR M. IN FACT, THIS IS A MISTAKE WHICH HAS RAISED A SUSPICION IN T HE MIND OF THE AO THAT BY ALLOWING CREDIT OF RS.8 LACS TO SHRI NEERAJ JAIN THROUGH JOURNAL ENTRY IN THE BOOKS OF THE ASSESSEE FIRM WHICH AMOUNTED TO ACCEPTANCE OF UNSECURED LOAN OTHERWISE THAN THROUGH ACCOUNT PAYEE CHEQUE IN VIOLATION OF THE PR OVISIONS OF SECTION 269SS OF THE ACT. LIKEWISE, MAKING DEBIT O F RS.8 LACS IN THE ACCOUNT OF M/S NIKKA MAL BABU RAM & SONS, IN WHOSE BOOKS OF ACCOUNT HAS BEEN TREATED AS REPAYMENT OF L OAN OTHERWISE THAN THROUGH ACCOUNT PAYEE CHEQUE, IN VIO LATION OF THE PROVISIONS OF SECTION 269T OF THE ACT. 9. HAVING FOUND THE ABOVE FACTS, WE ARE OF THE OPIN ION THAT INCREASE IN THE LEVEL OF UNSECURED LOAN, BY PASSING JOURNAL ENTRY IN THE BOOKS AND DEBITING THE ACCOUNT OF THE FIRM TO RECONCILE THE JOURNAL ENTRIES, DOES NOT TANTAMOUNT TO VIOLATION OF THE PROVISIONS OF SECTION 269SS AND SECTION 269T OF THE ACT. THE COURTS HAVE CLEARLY TAKEN A VIEW IN THE CIRCUMS TANCES BY HOLDING THAT BY PASSING JOURNAL ENTRIES, IT CANNOT BE SAID THAT 7 THERE HAS BEEN ANY VIOLATION OF THESE PROVISIONS. IN THIS REGARD, THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V SUNIL KUMAR GOYAL REPORTED IN 315 ITR 163 (P&H) AND CIT V SAINI MEDICAL STORE REPORTED IN 277 ITR 420 (P&H) SUPPORT OUR ABOVE VIEW. IN OUR CONSIDERED OPI NION, THIS IS BONAFIDE MISTAKE WHICH CAN BE TREATED AS A REASO NABLE CAUSE IN THE TERMS OF THE PROVISIONS OF SECTION 273 B OF THE ACT AND, THEREFORE, THE ASSESSEE IS EXONERATED FROM THE RIGOURS OF PENALTY PROCEEDINGS IN QUESTION. ACCORDINGLY, WE O RDER TO DELETE BOTH PENALTIES I.E. LEVIED U/S 271D AS WELL AS U/S 271E OF THE ACT ON THIS ASSESSEE AND ALLOW BOTH THE APPE ALS. 10. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH APRIL,2013. SD/- SD/- (N.K.SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH APRIL,2013. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH