Addl. Commissioner of Income Tax,Range-6, Nagpur V. Utkarsha Nagpur Zilla Parishad Primary Teachers, Nagpur

ITA 178/NAG/2010

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3066 (ITAT-NAGPUR)
• Duration Of Justice: 8 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 03-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAJARAM
• Assessee Lawyers: L S DEWANI
• Keywords: Bonafide belief; Reasonable cause; Tax effect; Ignorance of law
• Section: 273B; 271D; 271E

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR , BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI D.KARUNA KAR RAO , A M ITA NO. 1 7 8 & 179 / N AG / 20 10 ( ASSESSMENT YEAR S : 200 3 - 04 & 2005 - 06 ) ACIT, RANGE - 6, ROOM NO. 404, 3 RD FLOOR, AAYAKAR BHAVAN, TELANKHEDI ROAD, CIVIL LINES, NAGPUR. VS. UTKARSHA NAGPUR ZILLA PARISHAD PRIMARY TEACHERS COOPERATIVE SOCIETY LIMITED, GAJANAN CHOWK, JUNI SUKRAWARI, SAKARDARA ROAD, NAGPUR (MAHARASHTRA) PAN/GIR NO. : A AATU 1837 B ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. B. RAJARAM /ASSESSEE BY : MR. L.S.DEWANI DATE OF HEARING : 1 3 TH DEC ., 2012 DATE OF PRONOUNCEMENT : 9 TH JAN . ,201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH E DEPARTMENT HAS PREFERRE D THESE TWO APPEALS BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAINST THE ORDER DATED 17 - 9 - 2010 OF LEANED CIT(A) - II , NAGPUR (MAHARASHTRA) , WHO CANCELLED THE LEVY OF PENALTY UNDER SECTION 271 ( E ) RELA TING TO THE ASSESSMENT YEAR S 200 3 - 04 & ITA NO. 17 8&179 /20 10 2 200 5 - 0 6 RESPECTIVELY, W HICH HA VE BEEN HEARD THROUGH E - COURT, MUMBAI. 2 . SINCE, THE FACTS IN BOTH THE APPEALS ARE SIMILAR, THEREFORE, BOTH THE APPEALS OF THE DEPARTMENT ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 3 . THE DEPARTMENT IS OBJECTING THE CANCELLATION OF PENALTY LEVIED UNDER SECTION 271(E) FOR BOTH OF THE YEARS RESPECTIVELY. LEARNED DR HAS PLACED RELIANCE ON THE ORDER OF THE AO. ON THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE ON THE ORDER OF LEARNED CIT(A) . 4 . BRIEF FACTS OF THE CASE ARE DISCUSS ED IN THE ORDER OF THE LEARNED CIT(A) IN PA RA 4 & 5 , WHICH ARE AS UNDER : - 4.0 THE ASSESSEE IS A PRIMARY CREDIT CO - OPERATIVE SOCIETY CONSTITUTED BY ITS MEMBERS FOR THEIR MUTUAL BENEFIT FORMED AND REGISTERED UNDER THE PROVISIONS OF THE MAHARASHTRA STATE CO - OPERATIVE SOCIETIES ACT, 1960. THE MEMBERS OF THE SOCIETY ARE PRIMARY SCHOOL TEACHERS AND OTHER CLASS IV STAFF OF ZP SCHOOLS IN NAGPUR DISTRICT. THE PRINCIPAL BUSINESS ACTIVITY OF THE ASSESSEE IS TO CATER TO THE FINANCIAL NEEDS OF THE MEMBERS BY WAY OF AC CEPTING DEPOSITS AND GRANTING OF LOANS TO ITS MEMBERS FOR THEIR MUTUAL BENEFIT THROUGH ITS 13 MOFUSSIL BRANCHES AND HEAD OFFICE AT NAGPUR. THE AREA OF OPERATION IS RESTRICTED TO NAGPUR DISTRICT. THE REGULAR ASSESSMENT WAS FRAMED ACCEPTING THE RETURNED IN COME AT RUPEES NIL. THE AUDIT REPORT AS REQUIRED UNDER THE PROVISIONS OF THE MAHARASHTRA STATE CO - OPERATIVE SOCIETIES ACT, 1960 ALONG - WITH TAX AUDIT REPORT U/S 44AB OBTAINED FROM THE AUDITOR, WAS FURNISHED ALONG WITH RETURN OF INCOME. THE REGULAR BOOKS OF ACCOUNTS WERE EXAMINED DURING THE COURSE OF THE ASSESSMENT PROCEEDING AND THE BOOKS WERE ACCEPTED. ITA NO. 17 8&179 /20 10 3 THE ASSESSEE WAS SERVED A NOTICE UNDER SECT ION 271E R.W.S.269T ON 25 - 09 - 2008, REQUIRING THE ASSESSEE TO EXPLAIN WITH REASONS AS TO WHY PENALTY U/S 271E SH OULD NOT BE LEVIED. THE NOTICE WAS ISSUE DON THE BASIS OF TAX AUDIT REPORT, WHICH MENTIONED CERTAIN INSTANCES OF REPAYMENT OF LOANS/DEPOSITS IN CASH IN EXCESS OF RS. 20,000/ - . 5.0 DURING PENALTY PROCEEDINGS, ASSESSEES SUBMISSION THAT EMPLOYEES ARE NOT WEL L CONVERSANT OF THE PROVISION OF INCOME TAX ACT AND THAT THE TRANSACTIONS ARE GENUINE TRANSACTION, WAS NOT ACCEPTED BY THE AO AS A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273 B. THE A.O. IN HIS ORDER, HAS STATED THAT THE MERE CLAIM THAT THE TRANSACT IONS ARE GENUINE DOES NOT COME TO THE HELP OF THE SOCIETY. ACCORDING TO THE A.O. BY MAKING CASH REPAYMENT ABOVE THE LIMIT SPECIFIED IN THE LAW, THE ASSESSEE CAN HELP PROLIFERATION OF BLACK MONEY. THE SECTION 269T WAS INTRODUCED IN THE STATUTE VIDE INCOME T AX (2 ND AMENDMENT) ACT, 1961 TO ARREST PROLIFERATION OF BLACK MONEY DEPOSITED BY THE TAX EVADERS WITH BANK, CO - OPERATIVE SOCIETY, PARTNERSHIP FIRM EITHER IN OWN NAME OR BENAMI. THE AO RELIED ON THE DECISION OF ALLAHABAD HIGH COURT IN THE C ASE OF CHAUBE OVE RSEAS CORPORATION VS CIT, 303 ITR 9 , WHEREIN IT HAS BEEN HELD THAT THE APPLICABILITY OF SECTION 269T IS NOT DEPENDENT ON FACTS AS TO WHETHER THE TRANSACTION IS GENUINE OR OF DOUBTFUL CHARACTER EVEN THE GENUINE DEPOSITS ARE COVERED UNDER SECTION 269T. THE SOURCE OF DEPOSIT, CAPACITY OF DEPOSITOR ETC. ARE WHOLLY IRRELEVANT SO FAR THE APPLICABILITY OF SECTION 269T IS CONCERNED. 5 . DETAIL SUBMISSIONS WERE FILED BEFORE THE CIT(A) BY WHICH IT WAS STATED THAT TRANSACTIONS ARE MADE ONLY WITH MEMBERS, IDENTITY O F MEMBERS ARE VERIFIABLE AND TRANSACTIONS ARE GENUINE, PAYEES ARE IN RURAL AREAS WHERE BANKING FACILITIES ARE NOT AVAILABLE, PAYMENTS ARE REQUIRED TO BE MADE ON SATURDAYS AND SUNDAYS . IT WAS ALSO SUBMITTED THAT THE PAYMENTS HAVE BEEN MADE IN CASH BONAFIDEL Y AS THERE WAS A REASONABLE CAUSE. RELIANCE WAS PLACED ON VARIOUS CASE LAWS REPORTED IN 96 ITD 83, 304 ITR 172 (RAJASTHAN), 19 DTR 276 (BANG) , 303 ITR 99 AND 115 ITD 115 . THE REMAND REPORT WAS ALSO SOUGHT FROM THE AO. THEREAFTER THE LEARNED CIT(A) AFTER CO NSIDERING THE REMAND REPORT AND ITA NO. 17 8&179 /20 10 4 PERUSING THE MATERIAL ON RECORD AND ALSO TAKING INTO CONSIDERING VARIOUS CASE LAWS, RELIED UPON BY THE ASSESSEE, FOUND THAT PENALTY LEVIED BY THE AO WAS NOT JUSTIFIED. ACCORDINGLY, HE CANCELLED THE LEVY OF PENALTY FOR BOTH O F THE YEARS. FINDING OF THE LEARNED CIT(A) HAVE BEEN RECORDED IN PARA 8 AT PAGES 5 TO 8, WHICH ARE AS UNDER : - 8.0 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE REMAND REPORT OF THE JCIT AND THE VARIOUS CASE LAWS RELIED UPON. IN THE REMAND REPORT THE JCIT HAS GIVEN A HYPOTHETICAL SOLUTION TO A PRACTICAL PROBLEM WHICH IS LACK OF BANKING FACILITIES BY SUGGESTING THAT BANKING FACILITIES IN THE VICINITY CAN BE AVAILED OF BY THEM. THE JCIT HAS NOT ADDRESSED THE ISSUE WHETHER THERE WAS A REASONABLE CAU SE NECESSITATING CASH TRANSACTIONS. FURTHER IN THE REMAND REPORT IT HAS BEEN STATED THAT THE GENUINENESS OF TRANSACTIONS ARE NOT BEING CERTIFIED AS WHAT WAS DONE WAS MERELY EXAMINING TRANSACTIONS DONE ON SATURDAY AND SUNDAY. HOWEVER, NO SPECIFIC INSTANCE O F ANY NON GENUINE TRANSACTION IS BROUGHT ON RECORD. FURTHER WHILE IT IS POINTED OUT THAT IRREGULARITIES COMMITTED BY THE MANAGEMENT HAVE LED TO THEIR DISMISSAL IT IS NOT CLARIFIED WHETHER THIS IS CAUSATIVELY LINKED TO THE DEFAULT U/S 269 T WHICH HAS LED OR DER OF PENALTY ULS.271E. 8.1 A PERUSAL OF THE ORDER OF PENALTY U/S 271 E SHOWS THAT THE JCLT HAS MAINLY RELIED ON THE LEGISLATIVE INTENT BEHIND THE ENACTMENT OF SECTION 269T STATING THAT THE ASSESSEE BY VIOLATING SECTION 269T CAN HELP PROLIFERATION OF BLA CK MONEY. IT IS ALSO SEEN THAT FROM THE ORDER THAT THE APPELLANT HAS GIVEN SPECIFIC REASONS FOR VIOLATION OF SECTION 269T FOR THE FOLLOWING AMOUNTS : RS.1,75,895/ - REPAYMENT MADE ON SATURDAY RS.1,60,000I - REPAYMENT MADE ON SUNDAY RS.9,14,236/ - WITHDRAWALS FROM SAVINGS ACCOUNTS AND R EPAYMENTS TRANSFERRED FROM SAVINGS ACCOUNT RS.2,09,000I - WITHDRAWALS FROM SAVINGS ACCOUNT. IT IS SEEN FROM THE ORDER THAT THE JCIT HAS NOT CONSIDERED THE FACT THAT CERTAIN TRANSACTIONS WERE MADE ON SATURDAYS AND SUNDAYS OUTSID E THE PURVIEW OF SECTION 269T ON THE GROUND THAT REPAYMENT OF FIXED DEPOSITS CAN BE POSTPONED BY A DAY OR TWO. IT IS NOT CLEAR WHETHER THIS VIEW HAS ANY REGULATORY SANCTION. THE JCIT HAS ALSO QUOTED THE PROVISIONS OF SECTION 269T THAT CREDITING THE LOAN OR DEPOSIT TO THE SAVINGS BANK ACCOUNT WILL BE OUTSIDE THE SCOPE OF SECTION 269T ONLY IN THE CASE OF BANKING COMPANY. THE JCLT WHILE REITERATING THE NATURE AND EXTENT OF DEFAULT HAS FAILED TO CONSIDER THAT THE PROCEEDINGS BEFORE HIM ARE THAT OF PENALTY UNDER SECTION 271E AND ALTHOUGH THERE HAS BEEN A DEFAULT AS ADMITTED BY THE ASSESSEE, WHICH IS APPARENT FROM THE AUDIT REPORT OF THE ITA NO. 17 8&179 /20 10 5 ASSESSEE ITSELF, THE PRIMARY ISSUE IN A PENALTY PROCEEDINGS IS WHETHER THERE WAS A REASONABLE CAUSE OR NOT FOR COMMITTING A DEFA ULT. 9.0 I FIND THAT THE JCIT HAS NOT CONSIDERED CIRCUMSTANCES AND THE CONTEXT IN WHICH THE DEFAULTS TOOK PLACE. LEVY OF PENALTY IS NOT AUTOMATIC AND IT HAS TO BE ESTABLISHED THAT THERE WAS AN ABSENCE OF A REASONABLE CAUSE. IT IS AN INCONTROVERTIBLE FACT THAT THE APPELLANT IS ONLY TRANSACTING BUSINESS WITH MEMBERS AND THEREFORE ACCEPTING DEPOSITS FROM AND REPAYING THE SAME TO MEMBERS & REGULARLY FILING ITS RETURN OF INCOME. THUS SOURCE OF PAYMENT AND IDENTITY OF THE RECIPIENT IS VERIFIABLE. THE APPELLANT H AS RELIED ON THE DECISION REPORTED IN MUSLIM URBAN CREDIT COOPERATIVE SOCIETY 96 LTD 83 (PUNE). I FIND THAT THIS IS RELEVANT TO THE ASSESSEES CASE. IN THE SAID DECISION, THE HONBLE TRIBUNAL HAS HELD THAT WHERE THE SOCIETY HAD ENTERTAINED BONAFIDE BELIEF THAT THE DEPOSITS REPAID BY IT TO ITS MEMBERS WERE NOT COVERED BY THE PROVISIONS OF SECTION 269T. THIS BONAFIDE BELIEF COUPLED WITH THE FACT THAT THE DEPOSITS WERE GENUINE AND WERE ALSO REPAID AND ACCEPTED IN THE REGULAR COURSE OF BUSINESS CONSTITUTES REAS ONABLE CAUSE FOR NOT COMPLYING WITH SECTION 269T. IN A RECENT DECISION OF THE MADRAS HIGH COURT IN CIT VS. LAXMI TRUST COMPANY 303 ITR 99, IT IS BEEN HELD THAT WHEN TRANSACTIONS OF CASH LOAN AND REPAYMENT WERE GENUINE AND THERE WAS NO INTENTION TO EVADE TA X, PENALTY ULS.271 E WILL NOT SURVIVE. 9.1 FURTHER THE APPELLANTS CONTENTION THAT THE IGNORANCE ON THE PART OF EMPLOYEES RESULTED IN CONTRAVENTION OF THE SECTION 269TSHOULD ALSO BE GIVEN DUE WEIGHTAGE AND CANNOT BE BRUSHED ASIDE. IT CAN BE VALIDLY ASSUME D THAT THE ASSESSEE WOULD NOT HAVE KNOWINGLY EXPOSED ITSELF TO THE PENALTY OF RS.28,78,6311 - & RS.22,61 ,0401 - FOR A.YR.2003 - 04 & 2005 - 06 (TOTAL RS.51 39,671/ - ), HAD IT BEEN AWARE OF THE RELEVANT PROVISIONS OF THE LAW, PARTICULARLY WHEN THE TOTAL INCOME OF THE ASSESSEE IS TOTALLY TAX DEDUCTIBLE. THIS VIEW HAS BEEN UPHELD BY THE AMRUTSAR BENCH IN THE CASE OF THE FARIDKOT BHATINDA KSHETRIYA GRAMIN BANK VS. JCIT 81 TTJ 705.THIS IS ALSO REITERATED IN A RECENT DECISION OF THE HONBLE THIRD MEMBER BENCH OF VISHAK APATANAM TRIBUNAL IN THE CASE OF ACIT VS. VINMAN FINANCE & LEASING LTD. 11 5 LTD 115. WHERE IT HAS BEEN HELD THAT IT CANNOT BE SAID THAT IGNORANCE OF LAW IS NOT A REASONABLE CAUSE. 9.2 I WOULD ALSO RELY ON A RECENT DECISION OF HONBLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF SUNIL KUMAR GOEL REPORTED IN 315 ITR 163. IT HAS BEEN HELD THAT WHERE DISCLOSURE IS CONTAINED IN THE ACCOUNTS AND WHERE THERE IS NO TAX EFFECT, REASONABLE CAUSE EXISTS. IT WAS HELD AS FOLLOWS TRIBUNAL WAS RIGHT IN RECORDING ITS CON CLUSION THAT A REASONABLE CAUSE HAD BEEN SHOWN BY THE ASSESSEE. THE TRIBUNAL RELIED ON THE FACT THAT THE ASSESSEE HAD PRODUCED HIS CASH BOOKS DEPICTING LOANS TAKEN BY HIM UNILATERALLY BEFORE THE REVENUE. ANOTHER FACT TAKEN INTO CONSIDERATION WAS THAT NO PR EJUDICE WAS CAUSED TO REVENUE IN ITA NO. 17 8&179 /20 10 6 THE INSTANT ACTION OF THE ASSESSEE IN AS MUCH AS THE ASSESSEE DID NOT ATTEMPT BY THE IMPUGNED ACT TO AVOID ANY TAX LIABILITY. 10.0 I FIND THAT THERE IS MERIT IN THE SUBMISSION OF THE APPELLANT THAT THERE WAS A REASONABLE CAUSE AS ENVISAGED U/S 273B WHICH NEEDS TO BE TAKEN INTO CONSIDERATION IN THE PENALTY PROCEEDINGS. WHILE THE JCIT HAS DWELT ON THE LEGISLATIVE INTENT TO JUSTIFY LEVY OF PENALTY HE HAS FAILED TO GIVE CREDENCE TO THE PECULIAR FACTS OF THE ASSESSEES CASE VIZ ABSENCE OF BANKING FACILITIES , BONAFIDE TRANSACTIONS WITH MEMBERS WHO ARE PRIMARY SCHOOL TEACHERS AND CLASS IV EMPLOYEES, IGNORANCE OF EMPLOYEES AND THE FACT THAT DUE DISCLOSURE WAS MADE IN THE AUDITED STATEMENTS ITSELF. THE MEMBERS OF THE APPELLANT SOCI ETY ARE LOWER INCOME SALARIED EMPLOYEES OF THE ZILLA PARISHAD, NAGPUR. MANY OF THEM ARE STATIONED AT MOFUSSIL PLACES WHERE, AS POINTED OUT BY THE APPELLANT, NO CLEARING HOUSE FACILITY EXISTS. WITHDRAWALS MADE BY SEVERAL OF THEM ON SATURDAYS AND SUNDAYS ONL Y PROVES THAT THERE WAS AN IMMEDIATE FINANCIAL NEED. A.O. HAS NOT BROUGHT ON RECORD THAT SUCH WITHDRAWALS ON WEEKENDS WAS CONTRARY TO ANY REGULATORY GUIDELINE. THIS CONSTITUTES A REASONABLE CAUSE. I FURTHER RELY ON THE JUDGEMENT OF HONBLE ITAT HYDERABAD B BENCH IN THE CASE OF CITIZEN CO - OPERATIVE SOCIETY LTD. VS. ADDL.CIT REPORTED IN [2010] 41 DTR (HYD)(TRIB) 305, WHICH HAS HELD AS FOLLOWS THE TRANSACTIONS CAN ALSO BE ATTRIBUTED TO VARIOUS EXIGENCIES OF BUSINESS CARRIED ON BY THE ASSESSEE WHICH CONSTIT UTE A REASONABLE CAUSE AS CONTEMPLATED BY SECTION 271B. THE EXPRESSION REASONABLE CAUSE HAS TO BE CONSIDERED PRAGMATICALLY AND AS TRANSACTIONS ARE OPENLY DONE TO MEET THE EXIGENCIES OF BUSINESS, IT CAN BE SAID TO CONSTITUTE REASONABLE CAUSE. THE BONA FIDE BUSINESS TRANSACTION CANNOT BE CONSIDERED FOR LEVYING THE PENALTY UNDER SECTION 271D OR SECTION 271E. CONSIDERING ALL THE RELEVANT FACTS AND THE TOTALITY OF THE CIRCUMSTANCES WHICH LED TO THE DEFAULT I DELETE THE PENALTY U/S.271E LEVIED AMOUNTING TO RS.28,78,631/ - & RS.22,61 ,0401 - FOR THE ABOVE TWO YEARS I.E. FOR A.YR. 2003 - 04 & 2005 - 06 RESPECTIVELY. THE FINDING OF THE LEARNED CIT(A) REMAINED UNCONTROVERTED AS LEARNED DR HAS PLACED RELIANCE ON THE ORDER OF AO ONLY. 6 . WITHOUT CONTROVERTING THE FI NDING OF THE LEARNED CIT(A) , IN OUR CONSIDERED VIEW, THERE IS NO REASON TO DISTURB THE SAME. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) FOR BOTH OF THE YEARS. ITA NO. 17 8&179 /20 10 7 7 . RESULTANTLY , APPEAL S OF THE DEPARTMENT ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF DEC. 2012. 2012 SD/ - SD/ - ( ) ( D.KARUNAKAR RAO ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 09 /12 / 2012 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI