Amarshiv Construction Pvt. Ltd., Baroda V. The ACIT., Circle-1(1), Baroda

ITA 1796/AHD/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2385 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-11-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 13-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PRAJNA PARAMITA
• Assessee Lawyers: M K PATEL
• Keywords: Gift; Question of law; Reasonable cause

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1796/AHD/2011 / ASSESSMENT YEAR: 2004-05 AMARSHIV CONSTRUCTION PVT LTD 14, ATUL PARK SOCIETY, KARELIBAUG, BARODA-390018 PAN : AACCA 3235 E VS. ADDL CIT, RANGE-1, BARODA / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M K PATEL, AR REVENUE BY : MRS. PRAJNA PARAMITA, SR DR. !'# / DATE OF HEARING : 19/11/2015 / DATE OF PRONOUNCEMENT: 09/02/2016 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, BARODA, DAT ED 11.05.2011 PASSED FOR ASSESSMENT YEAR 2004-05. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.3,73,620/- WH ICH WAS IMPOSED U/S. 271E OF THE INCOME-TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT M/S. AMARSH IV CONSTRUCTION PVT LTD HAD BORROWED A SUM OF RS.3,93,618/- FROM SHRI H ASMUKHBHAI MANIBHAI PATEL. SHRI HASMUKHBHAI MANIBHAI PATEL HAD BORROWE D THE MONEY FROM DAKOR NAGARIK SAHAKARI BANK WHICH WAS GIVEN AS A LO AN TO THE COMPANY. THE LOAN TAKEN FROM THE BANK WAS TO BE REPAID WITHI N A FIXED PERIOD AND THE DIRECTOR, SHRI HASMUKHBHAI MANIBHAI PATEL FAILED TO REPAY THE AMOUNT. THE ITA NO. 1796/AHD/2011 AMARSHIV CONSTRUCTION PVT LTD VS. ACIT FOR AY: 2004-05 2 COMPANY HAS DIRECTLY REPAID THE LOAN TAKEN FROM SHR I HASMUKHBHAI MANIBHAI PATEL TO DAKOR NAGARIK SAHAKARI BANK . IN THIS WAY, ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS VIOLATED SE CTION 269T OF THE ACT BY MAKING REPAYMENT OF ALLEGED LOAN IN CASH. ACCORDIN GLY, THE LD. ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271E OF T HE INCOME-TAX ACT. HE IMPOSED A PENALTY OF RS.3,93,618/-. 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITTED THAT LOAN WAS TAKEN BY THE ASSESSEE FROM A DIRECTOR UNDER COM PELLING CIRCUMSTANCES. IT WAS CREDITED IN THE ACCOUNT OF THE DIRECTOR, MAI NTAINED WITH A CO- OPERATIVE BANK. STRICTLY IT WAS NOT PAID IN CASH; R ATHER IT WAS DEPOSITED IN THE ACCOUNT OF THE DIRECTOR. LD. COUNSEL FOR THE A SSESSEE FURTHER APPRISED US THE SCHEME OF ACT UNDER WHICH SECTION 269SS AND 269 T WERE BROUGHT ON THE STATUTE BOOK. ACCORDING TO THE LD. COUNSEL FOR TH E ASSESSEE, THERE IS NO MALA FIDE INTENTION AT THE END OF THE ASSESSEE. ENTRIES HAVE DULY MADE IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE-COMPANY. HE FURTHE R RELIED UPON THE ORDER OF THE ITAT, KOLKATA BENCH IN THE CASE OF MAHMOOD A SSOCIATES (P) LTD. VS. JOINT COMMISSIONER OF INCOME-TAX IN ITA NO.1112/KOL/ 2012. IN THIS CASE, THE ASSESSEE-COMPANY TOOK LOAN FROM THE DIRECTOR IN CASH, AMOUNTING TO RS.3,98,719/-. THE ASSESSING OFFICER HAS IMPOSED A PENALTY EQUIVAL ENT TO THIS AMOUNT U/S 271D OF THE ACT. THE TRIBUNAL, AFTER REFERRING TO THE DECISION OF HONBLE MADRAS HIGH COURT, HELD THAT TH E LOAN TAKEN FROM A DIRECTOR DOES NOT FALL WITHIN THE AMBIT OF EXPRESSI ON DEPOSIT AND THEREFORE, IF SOME LOAN WAS TAKEN FROM THE DIRECTOR , THEN IT CANNOT CONSTITUTED THAT THE ASSESSEE HAS VIOLATED SECTION 269SS OF THE ACT. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE SAME ANALOGY IS APPLICABLE IN THE PRESENT CASE BECAUSE IN THIS CASE ALSO THE A MOUNTS HAVE BEEN TAKEN FROM THE DIRECTOR. THE ASSESSING OFFICER HAS NOT I NITIATED THE PENALTY ITA NO. 1796/AHD/2011 AMARSHIV CONSTRUCTION PVT LTD VS. ACIT FOR AY: 2004-05 3 PROCEEDINGS ON RECEIPT OF MONEY, BUT SUCH PENALTY W AS INITIATED ON REPAYMENT OF THE MONEY. IF THE RECEIPT OF MONEY WA S NOT BEING TREATED AS DEPOSIT AS PER THE ORDER OF ITAT, KOLKATA BENCH, THEN ITS REPAYMENT WOULD ALSO NOT COME WITHIN THE AMBIT OF SECTION 269T AND THEREFORE, NO PENALTY IS IMPOSABLE. ON THE OTHER HAND, LD. DEPARTMENTAL REP RESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. SIMILAR ISSUE WAS CONSIDERED BY THE ITAT, KOLKATA BENCH (SUPRA). THE OBSERVATIONS, INCLUDING TAKING COGNIZ ANCE OF THE FACTS BY THE ITAT, KOLKATA BENCH, ARE WORTH TO REFER. THEY READ AS UNDER:- 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SHRI SUBHAS AGARWAL CONTENDED THAT THE ADMITTED FACTS ARE THAT THE UNSE CURED LOAN OF CASH IS TAKEN FROM THE DIRECTOR BY THE ASSESSEE COMPANY. HE STATE D THAT THE ASSESSEE COMPANY M/S. MAHMOOD ASSOCIATES PVT. LTD. RECEIVED A SUM OF RS.3,98,719/- IN CASH FROM SHRI MD. MAHMOOD, WHO IS DIRECTOR OF THE ASSESSEE COMPANY. HE STATED THAT THE ISSUE OF RECEI PT OF CASH LOAN BY ASSESSEE COMPANY FROM ITS DIRECTOR IS NOW SETTLED ISSUE BY V ARIOUS HIGH COURTS. FIRST, HE RELIED ON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. INDORE PLASTICS P. LTD. (2003) 262 ITR 16 3 (MP), WHERE HONBLE HIGH COURT HAS OBSERVED THAT (FROM HEAD NOTES) THE ASSESSEE WAS A PRIVATE LIMITED COMPANY. ONE RCK WAS ITS PROMOTER AND DIREC TOR DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 1990-91. DURING THAT YE AR, THE ASSESSEE- COMPANY ACCEPTED DEPOSITS IN CASH FROM THE PROMOTER FROM TIME TO TIME AGGREGATING IN ALL RS. 2,31,320. ACCORDING TO THE AS SESSING OFFICER AS ALSO THE COMMISSIONER (APPEALS), THE SAID PAYMENT WAS IN CON TRAVENTION OF SECTION 269SS OF THE INCOME-TAX ACT, 1961, AND THE ASSESSEE WAS LIABLE TO PAY PENALTY UNDER SECTION 271D. HOWEVER, THE TRIBUNAL V ACATED THE PENALTY SO IMPOSED ON THE FINDING THAT THE SAID PAYMENT WAS NO T BY WAY OF DEPOSIT OR LOAN, BUT TOWARDS ADJUSTMENTS OF THE AMOUNT DRAWN B Y THE PROMOTER FROM THE COMPANY'S ACCOUNT. ON AN APPLICATION PRAYING FO R AN ORDER CALLING FOR A REFERENCE FROM THE ORDER OF THE TRIBUNAL: HELD, THAT THE FINDING ARRIVED AT BY THE TRIBUNAL W AS A FINDING OF FACT AND, THEREFORE, DID NOT GIVE RISE TO ANY QUESTION OF LAW TO BE ANSWERED BY THE COURT. ITA NO. 1796/AHD/2011 AMARSHIV CONSTRUCTION PVT LTD VS. ACIT FOR AY: 2004-05 4 6. HE ALSO REFERRED TO THE DECISION OF HONBLE MADR AS HIGH COURT IN THE CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD. (2006) 285 ITR 221 (MAD), WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER: WE HEARD THE ARGUMENTS OF LEARNED COUNSEL FOR THE REVENUE. WE HAVE PERUSED THE MATERIALS AVAILABLE IN RECORD. ADMITTED LY MR. S. V. S. MANIAN WAS ONE OF THE DIRECTORS. THEREFORE THE ORDE R OF THE LOWER AUTHORITY CLEARLY SHOWS THAT THERE WAS A RUNNING CU RRENT ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NAME OF MR. S. V. S. MANIAN. MR. S. V. S. MANIAN USED TO PAY THE MONEY I N THE CURRENT ACCOUNT AND USED TO WITHDRAW THE MONEY ALSO FROM TH E CURRENT ACCOUNT. THE REVENUE SHOULD ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS. THE DEPOSIT AND THE WITHDRAWAL OF THE MONEY FROM THE CU RRENT ACCOUNT COULD NOT BE CONSIDERED AS A LOAN OR ADVANCE. FURTH ER IT WAS ALSO FOUND THAT THE ASSESSEE FILED A LETTER DATED SEPTEM BER 29, 1997, AND IN THAT LETTER HE EXPLAINED THAT THE AMOUNT RECEIVED F ROM MR. S. V. S. MANIAN HAD BEEN SHOWN AS SECURED LOAN FROM DIRECTO RS' IN THE BALANCE-SHEET. AS PER THE COMPANIES ACT, UNDER THE CO MPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975, UNDER RULE 2 (B ) (IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTO R OR A SHAREHOLDER OF A PRIVATE LIMITED COMPANY. THEREFORE, THE TRANSA CTION BETWEEN THE APPELLANT AND THE DIRECTOR CUM SHAREHOLDER IS NOT A LOAN OR DEPOSIT AND IT IS ONLY A CURRENT ACCOUNT IN NATURE AND NO INTER EST IS BEING CHARGED FOR THE ABOVE TRANSACTION. IN THE FOREGOING CONCLUSIONS, WE ARE OF THE VIEW TH AT SINCE THE SAID TRANSACTION DOES NOT FALL WITHIN THE MEANING OF LO AN OR ADVANCE, THERE IS NO VIOLATION OF SECTION 269SS OF THE INCOME-TAX ACT. WE FIND NO ERROR IN THE ORDER OF THE TRIBUNAL AND THE SAME REQ UIRES NO INTERFERENCE. HENCE, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION OF THE COURT. ACCORDINGLY, WE DISMISS THE ABOVE TAX CASE. 7. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO TH E DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NATVARLAL PURSHOTTAMDAS PAREEKH (2008)303 ITR 5 (GUJ), WHEREIN HONBLE HIGH COURT HA S REPRODUCED PARA 18 OF TRIBUNALS ORDER AND CONFIRMED THE ISSUE AS UNDE R: 18. AS DISCUSSED ABOVE, THE ANNEXURE ATTACHED TO TH E PENALTY ORDER GOES TO SHOW THAT EACH OF THE FAMILY MEMBERS OF THE ASSESSEE AND EACH ONE OF THEM WAS HAVING SUFFICIENT OPENING BALANCE A S ON APRIL 1, 1990. AFTER THAT WE HAVE TO LOOK INTO SOURCES OF TH E AMOUNTS RECEIVED BY THE ASSESSEE ON BEHALF OF HIS FAMILY MEMBERS AS THE SAME IS AN ITA NO. 1796/AHD/2011 AMARSHIV CONSTRUCTION PVT LTD VS. ACIT FOR AY: 2004-05 5 IMPORTANT FACTOR. HANDSOME AMOUNT HAS BEEN RECEIVED ON ACCOUNT OF MATURITY OF NSCS AND THEN MOST OF THE AMOUNTS HAVE BEEN CREDITED ON ACCOUNT OF GIFTS RECEIVED FROM ONE FAMILY MEMBER TO OTHER AND THAT WAS THROUGH JOURNAL ENTRY EXCEPT RS. 32,000 WHICH W AS GIFT BY ONE FAMILY MEMBER TO OTHER. THESE AMOUNTS WERE NOT RECE IVED BY THE ASSESSEE IN CASH AS THESE WERE MERE BOOK ENTRIES. T HESE AMOUNTS CANNOT BE EQUATED WITH ANY OF THE AMOUNTS INVOLVED IN THE CASES RELIED ON BY BOTH THE PARTIES AS IN THOSE CASES, THE AMOUN TS WERE RECEIVED BY THE ASSESSEE AS DEPOSITS IN CASH AND THAT IS NOT TH E POSITION HERE BECAUSE THESE WERE BOOK ENTRIES EXCEPT THE AMOUNTS OF NSCS AND OTHER CASH LOAN OF RS. 11,910. IN THE SAME BREATH, THE AM OUNT OF RS.1,920 CREDITED ON ACCOUNT OF RENT AND RS.24,360 CREDIT IN THE ACCOUNT OF HARENDRAKUMAR AND HITESHKUMAR CANNOT BE TREATED AS DEPOSITS OR LOAN BECAUSE THESE WERE CREDIT ENTRIES ON ACCOUNT O F SALARY AND BONUS. ACCORDINGLY, THE CRUX OF THE MATTER IS THAT MOST OF THE AMOUNTS AS REFERRED TO ABOVE WAS BASED ON MERE BOOK ENTRIES AN D NOT RECEIVED IN CASH BY THE ASSESSEE FROM FAMILY MEMBERS EXCEPT THE AMOUNT OF NSCS AND OTHER CASH LOAN AND THAT CANNOT BE TREATED AS L OAN OR DEPOSITS FOR THE PURPOSE OF SECTION 269SS. 8. LD. SR. DR SHRI KANHIYA LAL KANAK WAS SPECIFICAL LY ASKED WHETHER THE FACTUM OF RECEIPT OF UNSECURED LOAN IN CASH BY ASSE SSEE COMPANY FROM ITS DIRECTOR IS IN DISPUTE OR NOT. HE CATEGORICALLY ADM ITTED THE FACT AND STATED THAT YES, THE UNSECURED LOAN IN CASH IS RECEIVED BY ASSESSEE COMPANY FROM ITS DIRECTOR. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE FACTS A RE THAT THE ASSESSEE COMPANY MAHMOOD ASSOCIATES (P) LTD. RECEIVED CASH LO AN FROM ITS DIRECTOR MD. MAHMOOD. IN VIEW OF THE ABOVE PROPOSITION OF LA W LAID DOWN BY VARIOUS HIGH COURTS I.E. HONBLE M.P. HIGH COURT IN THE CAS E OF INDORE PLASTICS P. LTD., SUPRA, HONBLE MADRAS HIGH COURT IN THE CASE OF IDHAYAM PUBLICATIONS LTD., SUPRA AND HONBLE GUJARAT HIGH COURT IN THE C ASE OF NATVARLAL PURSHOTTAMDAS PAREEKH, SUPRA, WE FIND THAT THE PENA LTY LEVIED BY JCIT, RANGE-12, KOLKATA AND CONFIRMED BY CIT(A) NEEDS TO B E QUASHED. NO CONTRARY DECISION WAS POINTED OUT BY LD. SR. DR DES PITE WE SPECIFICALLY ASKED HIM WHETHER ANY HIGH COURT DECISION IS AVAILABLE AG AINST THE ASSESSEE OR NOT. IN TERM OF THE ABOVE, WE DELETE THE PENALTY LEVIED BY JCIT AND CONFIRMED BY CIT(A). 10. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 7. APART FROM THE ABOVE, THE ASSESSEE HAS DEMONSTRA TED THAT UNDER THE COMPULSION THE PAYMENT WAS DIRECTLY CREDITED IN THE BANK ACCOUNT OF THE ITA NO. 1796/AHD/2011 AMARSHIV CONSTRUCTION PVT LTD VS. ACIT FOR AY: 2004-05 6 DIRECTOR. STRICTLY IT WAS NOT PAID IN CASH. ON DU E CONSIDERATION OF THESE FACTS IN THE LIGHT OF ITAT, KOLKATA DECISION (SUPRA ), WE ARE OF THE VIEW THAT THE ASSESSEE HAS DEMONSTRATED A REASONABLE CAUSE FO R NOT VISITING IT WITH PENALTY. THEREFORE, WE ALLOW THE APPEAL OF THE ASS ESSEE AND DELETE THE PENALTY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 9 TH FEBRUARY, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 09/02/2016 BIJU T., PS !&''()(*' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' # / CONCERNED CIT 4. ' # ( ) / THE CIT(A) 5. &'( ! , ! , / DR, ITAT, AHMEDABAD 6. (- ./ / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD