Geojit BNP Paribas Financial Services Ltd, Cochin V. The ADCIT, Cochin

ITA 185/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81341 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 09-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-04-2014
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: K GOPI
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NOS. 184 &185/COCH/2014 ASSESSMENT YEAR : 2008-09 GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD., 34/659-P, CIVIL LINE ROAD, PADIVATTOM, KOCHI-682 024. [PAN: AABCG 1935E] VS. THE ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-1, ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) I.T.A. NOS. 216&217/COCH/2014 ASSESSMENT YEAR : 2008-09 THE ADDITIONAL COMMISSIONER OF INCOME-TAX,RANGE-1, ERNAKULAM. VS. GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD., 34/659-P, CIVIL LINE ROAD, PADIVATTOM, KOCHI-682 024. [PAN: AABCG 1935E] (REVENUE -APPELLANT) (ASSESSEE-RESPONDEN T) ASSESSEE BY SHRI K. GOPI, REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 09/10/2014 DATE OF PRONOUNCEMENT 17/10/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE ARE TWO SET OF CROSS APPEALS, ONE IS RELATIN G TO LEVY OF PENALTY U/S. 271D OF THE I.T. ACT AND THE OTHER IS RELATING TO LEVY OF PENALTY U/S. I.T.A. NOS.184,185, 216&217COCH/2014 2 271E OF THE I.T. ACT. BOTH THE ASSESSEE APPEALS AN D THE REVENUE APPEALS ARE DIRECTED AGAINST THE DIFFERENT ORDERS PASSED BY THE CIT(A)-II, KOCHI FOR THE ASSESSMENT YEAR 2008-09. 2. FIRST WE WILL TAKE UP THE APPEALS RELATING TO LE VY OF PENALTY U/S. 271D OF THE I.T. ACT IN I.T.A. NOS. 184&216/COCH/2014. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER IMPOSED PENALTY OF RS.2,17,002/- ON ACCOUNT OF AMOUNTS ACCEPTED AS COMMISSION BY WAY OF BOOK ENTRIES AND PENALTY OF RS. 5,10,00,000/- ON ACCOUNT OF LOANS RE CEIVED FROM GEOJIT CREDITS PVT. LTD. BY BOOK ENTRIES AND RS.3,70,000/- ON ACCOUNT OF VARIOUS DEPOSITS RECEIVED ALLEGEDLY BY WAY OF BOOK ENTRIES. FROM THE FOLLOWING TRANSACTIONS IT WAS SEEN THAT THEY WERE NOT MADE BY ACCOUNT PAYEE CHEQUES/BANK DRAFTS BUT WERE MADE BY WAY OF BOOK EN TRIES: SL. NO. NAME OF THE PARTY FROM WHOM LOAN/DEPOSIT ACCEPTED AMOUNT ACCEPTED AS COMMISSION (RS.) 1. M/S. AMIANT STOCK MANAGEMENT CONSULTANTS P. LTD. 75,010 2. M/S. MADURA CAPITAL SERVICES P. LTD. 6,00 ,000 3. M/S. FRESH CAPITAL MARKET SERVICES 1,60,0 00 4. MR. LINESH 1,00,000 5. MR. BALASUBRAMANIAN J. 1,50,000 TOTAL 10,85,010 SL. NO. LEDGER CHEQUE DATE AMOUNT I.T.A. NOS.184,185, 216&217COCH/2014 3 FOLIO NO. NO. 1. 57 191212 22.10.2007 7,00,00,000 2. 61 191106 07.11.2007 7,50,00,000 3. 64 191121 22.11.2007 6,00,00,000 4. 71 191181 18.12.2007 5,00,00,000 TOTAL 25,50,00,000 SL.NO. NAME OF THE PARTY AMOUNT 1. M/S. MADURA CAPITAL MARKET SERVICES PVT. LTD. 13,00,000 2. ZMR. AMIT KUMAR VINI BHAI PATEL 1,50,000 3. M/S. SHRI SIDDHI VINAYAK WEALTH MANAGEMENT P. LTD. 1,50,000 4. M/S. YES 2 GAINS ADVISORY SERVICES 1,50,000 5. M/S. LOGICAL FINANCIAL SERVICES 1,85,000 6. M/S. PADINJARATHALA SECURITIES LTD. 3,11,793 7. M/S. CAPITAL TRADE LINKS 1,63,793 8. M/S. AHM TRADE SERVICES 2,00,000 9. MR. VISHAL M.KAPADIA 4,00,000 TOTAL 30,10,586 3.1 ACCORDINGLY PENALTY OF RS.5,15,87,002/- WAS LEV IED ON THE ASSESSEE AT THE RATE OF 20% OF TOTAL TRANSACTIONS MADE. AGGR IEVED AGAINST THIS, THE ASSESSEE CHALLENGED BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT V ARIOUS PAYMENTS OF COMMISSION, LOANS AND DEPOSITS RECEIVED BY IT WERE BY WAY OF CHEQUES/ACCOUNT PAYEE DRAFTS. IN THIS CONNECTION, THE ASSESSEE FURNISHED COPIES OF VARIOUS BANK ACCOUNTS WHEREIN THE PARTICU LARS OF VARIOUS TRANSACTIONS HAVE BEEN SHOWN. THE ASSESSEE HAS ALS O FURNISHED THE LEDGER COPY OF ALL ITS ACCOUNTS AND THE BANK ACCOUNTS TO P ROVE THAT THESE I.T.A. NOS.184,185, 216&217COCH/2014 4 TRANSACTIONS WERE MADE THROUGH BANKING CHANNELS. TH E ASSESSEE HAS ALSO FURNISHED THE COPIES OF BANK ACCOUNTS OF ITS SISTER CONCERNS SHOWING CORRESPONDING TRANSACTIONS IN THEIR BANK ACCOUNT FO R THE LOANS RECEIVED. BANK CERTIFICATES CONFIRMING THAT THE TRANSACTIONS WERE MADE BY ACCOUNT PAYEE CHEQUES WERE ALSO FURNISHED. THE ASSESSEE SUB MITTED THAT THESE TRANSACTIONS WERE IN THE NATURE OF COMMISSION PAYME NTS AND NOT LOANS OR DEPOSITS AND HENCE PROVISIONS OF SEC. 269SS WERE NO T ATTRACTED. 5. THE CIT(A) OBSERVED WITH REGARD TO FIRST SET OF DEPOSITS THAT ALL THE PAYMENTS OF COMMISSION WERE ACCEPTED BY WAY OF BOOK ENTRIES. THE CIT(A) OBSERVED THAT THE PARTIES INVOLVED ARE FRANC HISEES OF THE ASSESSEE WHO ARE SUPPOSED TO MAINTAIN CERTAIN MINIMUM SECURI TY DEPOSIT WITH THE ASSESSEE HAVING REGARD TO THE TOTAL VOLUME OF BUSIN ESS UNDERTAKEN BY THEM AND AS PER THE FRANCHISEE AGREEMENT, THE ASSESSEE H AS TO PAY COMMISSION TO THESE AGENTS. ACCORDING TO THE CIT(A), THIS COMM ISSION IS TRANSFERRED BY WAY OF BOOK ENTRIES BY DEBITING THE COMMISSION PAYA BLE ACCOUNT AND CREDITING SECURITY DEPOSIT ACCOUNTS CONCERNED, AFTE R DEDUCTION OF APPLICABLE TAX AT SOURCE. THE CIT(A) FURTHER OBSERVED THAT SI NCE THESE TRANSACTIONS ARE GOING IN THE SECURITY DEPOSIT ACCOUNT, THEY CAN NOT BE TREATED AS COMMISSION PAYMENTS EXCLUSIVELY AND THEY ARE IN THE NATURE OF DEPOSITS TO BE MAINTAINED BY THE FRANCHISEES. BEING SO, THE CI T(A) CONFIRMED THE LEVY I.T.A. NOS.184,185, 216&217COCH/2014 5 OF PENALTY U/S. 271D OF THE ACT OF RS. 2,17,002/- B EING 20% OF RS.10,85,010/- MADE BY THE ASSESSING OFFICER. 6. REGARDING THE DEPOSITS RECEIVED THROUGH OTHER T HAN ACCOUNT PAYEE CHEQUES/BANK DRAFTS AT RS.18,50,000/-, AFTER EXAMIN ING THE BANK CERTIFICATES FURNISHED BEFORE THE ASSESSING OFFICER , THE CIT(A) NOTICED THAT TRANSACTIONS OF M/S. MADURA CAPITAL MARKET SERVICES PVT. LTD. AND MR. VISHAL M. KAPADIA AT RS.4,00,00/- WERE NOT BY ACCOUNT PAYE E CHEQUES. ALSO FOR M/S. PADINJARATHALA SECURITIES LTD. ONLY PART OF TH E TRANSACTION AMOUNTING TO RS.1,61,793/- WAS BY ACCOUNT PAYEE CHEQUE OUT OF RS .3,11,793/-. ACCORDING TO THE CIT(A), DEPOSITS OF RS.13 LAKHS FR OM M/S. MADURA CAPITAL SERVICES PVT. LTD., RS.4 LAKHS FROM MR. VISHAL M. K APADIA AND RS.1,50,000/- FROM M/S. PADINJRATHALA SECURITIES LTD. WHEREBY PAY MENTS OTHER THAN ACCOUNT PAYEE CHEQUES. HENCE, HE CONFIRMED THE LEV Y OF PENALTY @20% ON RS. 18,50,000/-, 1.E., RS.3,70,000/-. AGAINST THIS , THE ASSESSEE IS IN APPEAL BEFORE US. 7. REGARDING SECOND SET OF DEPOSITS RELATED TO LOAN REPAYMENT FROM M/S. GEOJIT CREDITS PVT. LTD. AMOUNTING TO RS.25,50 ,00,000/-, IT WAS SUBMITTED BEFORE THE CIT(A) THAT ONCE THE CHEQUES A RE PRESENTED TO THE BANK, IT WAS DIFFICULT TO OBTAIN THE COPIES OF THES E CHEQUES FOR ANY VERIFICATION EITHER BY THE AUDITOR OR BY THE ASSESS ING OFFICER AND THEREFORE, IT I.T.A. NOS.184,185, 216&217COCH/2014 6 WAS UNDER THESE CIRCUMSTANCES THAT IN THE TAX AUDIT REPORT IT WAS MENTIONED THAT IN ABSENCE OF EVIDENCE AVAILABLE WITH THE ASS ESSEE, WE ARE UNABLE TO COMMENT WHETHER PAYMENTS RECEIVED BY CHEQUE/DEMAND DRAFTS HAVE BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES/BANK DRAFT S. HOWEVER, THE CIT(A) FOUND THAT EVEN THOUGH FOR THE TRANSACTIONS OF LOANS RECEIVED ON DIFFERENT DATES, THE CHEQUE UMBERS WERE ALSO MENTIO NED AND EVEN THE LEDGER FOLIO NO. WITH DATE AND AMOUNTS WERE AVAILAB LE WITH THE ASSESSING OFFICER, THE ASSESSING OFFICER COULD NOT MAKE PROPE R VERIFICATION WHETHER THESE ENTRIES WERE THROUGH ACCOUNT PAYEE CHEQUES OR NOT. THE CIT(A) OBSERVED THAT AS PER THE DETAILS AVAILABLE IN THE B ANK STATEMENT, AGAINST THE TRANSACTION OF RS.7 CRORES THE NAME OF GEOJIT WAS M ENTIONED AND FOR THE AMOUNT OF RS.7,50,00,000/- THE ENTRY WAS SHOWN AS C LEARING THROUGH CHEQUE NO. 191106. SIMILARLY, ENTRIES OF RS.6 CROR ES AND RS.5 CRORES WERE ALSO REFLECTED IN THE BANK STATEMENT OF THE ASSESSE E. ACCORDING TO THE CIT(A), THE ASSESSEE HAS ALSO FURNISHED THE CORRESP ONDING BANK ACCOUNT OF M/S. GEOJIT CREDITS PVT. LTD. WHERE THESE ENTRIES O N THE CORRESPONDING DATES WERE ALSO REFLECTED. THE CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION FROM THE AXIS BANK, THROUGH WHICH THESE TRANSACTIONS WERE EFFECTED AND THESE TRANSACTIONS W ERE MADE THROUGH ACCOUNT PAYEE CHEQUES. ACCORDING TO THE CIT(A), FR OM THE BANK ACCOUNT OF BOTH THE PARTIES AND THE BANK CERTIFICATES, IT WAS CLEAR THAT THESE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND HE WAS OF TH E OPINION THAT THE I.T.A. NOS.184,185, 216&217COCH/2014 7 ASSESSING OFFICER WAS NOT CORRECT IN TREATING THEM AS BOOK ENTRIES DISREGARDING THE ENTRIES IN THE BANK STATEMENT/LEDG ER ACCOUNTS SHOWING THESE TRANSACTIONS. ACCORDINGLY, THE CIT(A) DELETED THE PENALTY OF RS.5,10,00,000/- LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF LOANS RECEIVED FROM M/S. GEOJIT CREDITS PVT. LTD. AGAINS T THIS, THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FIRST ISSUE TO BE DECIDED IN THE FIRS T SET OF APPEALS IS WHETHER THE ASSESSEE HAS ACCEPTED CASH LOANS FROM VARIOUS P ARTIES IN CONTRAVENTION OF THE PROVISIONS OF SEC. 269SS OF THE I.T. ACT, SO AS TO INVITE THE RIGOUR OF THE PENAL PROVISION OF S.271D OF THE ACT. IT IS THE CASE OF THE DEPARTMENT THAT THE ASSESSEE HAS ACCEPTED CASH LOAN IN CONTRAV ENTION OF THE PROVISIONS UNDER S.269SS. IT WAS ALSO SUBMITTED THAT THE CIT( A) ADMITTED ADDITIONAL EVIDENCE AND ADJUDICATED THE ISSUE WITHOUT CALLING FOR REMAND REPORT FROM THE ASSESSING OFFICER WHICH IS VIOLATION OF RULE 46 A OF THE I.T. RULES. WHEREAS THE ASSESSEES CONSISTENT STAND HAS BEEN TH AT THERE WAS NO CASH LOAN, AND WHATEVER HAS HAPPENED WAS ONLY BY WAY OF JOURNAL ENTRIES IN THE BOOKS OF THE ASSESSEE IN RESPECT OF VARIOUS TRANSAC TIONS RELATING TO THE ASSESSEE AND THE VARIOUS PARTIES. FURTHER IT WAS S UBMITTED THAT THE CERTIFICATE COLLECTED FROM AXIS BANK SHOWS THAT SUB STANTIAL PAYMENTS WERE MADE BY WAY OF ACCOUNT PAYEE CHEQUE, BEING SO, THE PROVISIONS OF SEC. I.T.A. NOS.184,185, 216&217COCH/2014 8 271D CANNOT BE APPLIED. THE CLAIM OF THE ASSESSEE THAT THERE WAS NO CASH FLOW BETWEEN THE ASSESSEE AND VARIOUS PARTIES AND W HATEVER HAPPENED WAS ONLY BY WAY OF PASSING OF JOURNAL ENTRIES IN THE BO OKS OF THE ASSESSEE NEEDS TO BE VERIFIED FROM THE RECORDS OF THE ASSESSEE-FIR M. HOWEVER, FROM THE RECORDS AVAILABLE BEFORE US, WE ARE NOT ABLE TO DEC IDE THE ISSUE AS TO WHETHER THE ASSESSEE HAS TAKEN CASH LOAN AS STATED BY THE DEPARTMENT, OR THERE ARE ONLY JOURNAL ENTRIES AS CLAIMED BY THE AS SESSEE, SINCE MATERIAL TO THAT EFFECT HAVE NOT BEEN FURNISHED BEFORE US. WE T HEREFORE, DEEM IT JUST AND PROPER TO REMIT THE MATTER TO THE FILE OF THE A SSESSING OFFICER, TO VERIFY THE FACT AS TO WHETHER THE ASSESSEE HAS ACTUALLY RE CEIVED CASH LOAN OF RS. 10,85,010/- FROM FIVE PARTIES OR THERE WERE MERE JO URNAL ENTRIES TO THAT EFFECT. IF ULTIMATELY, IT IS FOUND THAT NO CASH LOA N WAS ACTUALLY RECEIVED BY THE ASSESSEE IN THE COURSE OF THE TRANSACTIONS FROM FIVE PARTIES TO THE TUNE OF RS. 10,85,010/- AND THERE WERE ONLY JOURNAL ENTR IES TO THAT EFFECT, THEN NO PENALTY CAN BE LEVIED UNDER SEC.271D OF THE ACT. THE ASSESSING OFFICER SHALL ACCORDINGLY REDECIDE THE ISSUE OF APPLICABILI TY OF THE PENAL PROVISIONS OF SEC.271D OF THE ACT TO THE FACTS OF THE PRESENT CAS E, IN ACCORDANCE WITH LAW, KEEPING IN VIEW OUR AFORESAID DIRECTION, AND A FTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. REGARDING LEVY OF PENALTY OF RS. 3,70,000/-, CIT(A) HAS GIVEN CATEGORICAL FINDING AFTER EXAMINING THE BANK CERTIF ICATES FURNISHED BEFORE I.T.A. NOS.184,185, 216&217COCH/2014 9 THE ASSESSING OFFICER, THAT TRANSACTIONS OF M/S. MA DURA CAPITAL MARKET SERVICES PVT. LTD. AND MR. VISHAL M. KAPADIA WERE N OT BE ACCOUNT PAYEE CHEQUES. ALSO FOR M/S. PADINJARATHALA SECURITIES L TD. ONLY PART OF THE TRANSACTION AMOUNTING TO RS.1,61,793/- WAS BY ACCOU NT PAYEE CHEQUE. ACCORDING TO THE CIT(A), DEPOSITS OF RS.13 LAKHS FR OM M/S. MADURA CAPITAL SERVICES PVT. LTD., RS. 4 LAKHS FROM MR. VISHAL M. KAPADIA AND RS. 1,50,000/- FROM M/S. PADINJARATHALA SECURITIES LTD. WHEREBY PAYMENTS OTHER THAN ACCOUNT PAYEE CHEQUES. BEING SO, THE CIT(A) J USTIFIED THE LEVY OF PENALTY OF 20% OF THE AMOUNT OF RS.18,50,000/- AND CONFIRMED THE LEVY OF PENALTY OF RS.3,70,000/-. 10. REGARDING THE DEPOSITS RELATING TO TRANSACTIO NS AMOUNTING TO RS. 25.50 CRORES, THE CIT(A) DELETED THE PENALTY IN RES PECT OF TRANSACTIONS TO THE TUNE OF RS. 5,10,00,000/-., THE CIT(A) ADMITTE D ADDITIONAL EVIDENCE IN THE FORM OF BANK CERTIFICATE AND ON THAT BASIS, HE DELETED THE PENALTY. ADMITTEDLY, THE CIT(A) HAS NOT CALLED FOR REMAND RE PORT FROM THE ASSESSING OFFICER IN ORDER TO VERIFY THE CORRECTNESS OF THE B ANK CERTIFICATE. THE CIT(A) SHOULD HAVE CALLED FOR REMAND REPORT FROM THE ASSES SING OFFICER SO AS TO PHYSICALLY EXAMINE THE COPIES OF CHEQUE NOS. 191212 , 191106, 191121 AND 191181. WITHOUT EXAMINING THE COPY OF CHEQUES PHY SICALLY, SHE DELETED THE PENALTY WHICH IS NOT PROPER. IN OUR OPINION, IT IS JUST AND PROPER TO REMIT THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO CONDUCT I.T.A. NOS.184,185, 216&217COCH/2014 10 NECESSARY ENQUIRY AND THE ASSESSEE HAS TO PRODUCE N ECESSARY EVIDENCE IN SUPPORT OF ITS CLAIM AND IF THE ASSESSEE FAILS TO P RODUCE THE NECESSARY EVIDENCE, THE ASSESSING OFFICER IS AT LIBERTY TO TA KE ADVERSE INFERENCE AND DECIDE ACCORDINGLY. 11. IN THE RESULT, BOTH THE ASSESSEE AND THE REVENU E APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. COMING TO THE LEVY OF PENALTY U/S. 271E OF THE ACT IN I.T.A. NO. 185/COCH/2014 AND IN I.T.A. NO. 217/COCH/2014, THE BRIEF FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER IMPOSED PENALTY OF RS.2,29,531/- ON ACCOUNT OF AMOUNTS PAID AS COMMISSION BY WAY OF BOOK ENTRIES AND PENALTY OF RS.5,10,00,000/- ON ACCOUNT OF REPAYMENT OF LOAN TO GEOJIT CREDITS PVT. LTD. BY BOOK ENTRIES AN D RS. 2,36,165/- ON ACCOUNT OF VARIOUS PAYMENTS MADE TO PARTIES BY WAY OF BOOK ENTRIES. THE ASSESSING OFFICER MADE THESE ADDITIONS AS IN THE FO LLOWING TRANSACTIONS IT WAS SEEN THAT THEY WERE NOT MADE BY ACCOUNT PAYEE C HEQUES/BANK DRAFTS BUT WERE MADE BY WAY OF BOOK ENTRIES: SL. NO. NAME OF THE PARTY FROM WHOM LOAN/DEPOSIT ACCEPTED AMOUNT ACCEPTED AS COMMISSION 1. MR. K.R. RAJENDRAN 2,79,430 2. M/S. NAYONIKAA SECURITIES FINANCIAL SERVICES 1,50,000 3. A.ANIL KUMAR 23,490 I.T.A. NOS.184,185, 216&217COCH/2014 11 4. M/S. CBS FINANCIAL SERVICES 1,55 ,890 5. M/S. SANKALP SECURITIES 1,54,990 6. M/S. P.M. MATHEW 23,665 7. M/S. SREE SADGURU FINANCIAL SERVICES 2,60,200 8. MRS. B.SARALA 1,00,000 TOTAL 11,47,665 SL. NO. LEDGER FOLIO NO. CHEQUE NO. DATE AMOUNT 1. 58 710027 22.10.2007 7,00,00,000 2. 63 711330 10.11.2007 7,50,00,000 3. 64 71138 23.11.2007 6,00,00,000 4. 72 715669 19.12.2007 5,00,00,000 TOTAL 25,50,00,000 SL.NO. NAME OF THE PARTY AMOUNT 1. MR. THOMAS GEORGE 2,50,000 2. NORTECH INFONET PVT. LTD. 56,000 3. R.K. NAVANEETH 1,50,000 4. M/S. MADURA CAPITAL MARKET SERVICES P. LTD. 6,00,000 5. MISS N. SUCHITRA 1,24,828 TOTAL 11,80,828 12.1 ACCORDINGLY, PENALTY OF RS.5,14,65,697/- U/S. 271E WAS LEVIED ON THE ASSESSEE AT THE RATE OF 20% OF TOTAL TRANSACTIONS M ADE. AGGRIEVED AGAINST THIS, THE ASSESSEE CHALLENGED BEFORE THE CIT(A). 13. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT VARIOUS PAYMENTS OF COMMISSION, LOANS AND DEPOSITS RECEIVED BY IT WERE BY WAY OF CHEQUES/ACCOUNT PAYEE DRAFTS. IN THIS CONNECTION, THE ASSESSEE FURNISHED COPIES OF VARIOUS BANK ACCOUNTS WHEREIN THE PARTICU LARS OF VARIOUS I.T.A. NOS.184,185, 216&217COCH/2014 12 TRANSACTIONS HAVE BEEN SHOWN. THE ASSESSEE HAS ALS O FURNISHED THE LEDGER COPY OF ALL ITS ACCOUNTS AND THE BANK ACCOUNTS TO P ROVE THAT THESE TRANSACTIONS WERE MADE THROUGH BANKING CHANNELS. TH E ASSESSEE HAS ALSO FURNISHED THE COPIES OF BANK ACCOUNTS OF ITS SISTER CONCERNS SHOWING CORRESPONDING TRANSACTIONS IN THEIR BANK ACCOUNT FO R THE LOANS RECEIVED. BANK CERTIFICATES CONFIRMING THAT THE TRANSACTIONS WERE MADE BY ACCOUNT PAYEE CHEQUES WERE ALSO FURNISHED. THE ASSESSEE SUB MITTED THAT THESE TRANSACTIONS WERE IN THE NATURE OF COMMISSION PAYME NTS AND NOT LOANS OR DEPOSITS AND HENCE PROVISIONS OF SEC. 269T WERE NOT ATTRACTED. 14. THE CIT(A) OBSERVED WITH REGARD TO FIRST SET OF DEPOSITS WHERE PAYMENTS WERE MADE TO ADJUST SECURITY DEPOSIT AGAIN ST COMMISSION FROM VARIOUS COMPANIES THAT ALL THE PAYMENTS OF COMMISSI ON WERE ACCEPTED BY WAY OF BOOK ENTRIES. THE CIT(A) OBSERVED THAT THE PARTIES INVOLVED ARE FRANCHISEES OF THE ASSESSEE WHO ARE SUPPOSED TO MAI NTAIN CERTAIN MINIMUM SECURITY DEPOSIT WITH THE ASSESSEE HAVING REGARD TO THE TOTAL VOLUME OF BUSINESS UNDERTAKEN BY THEM AND AS PER THE FRANCHIS EE AGREEMENT, THE ASSESSEE HAS TO PAY COMMISSION TO THESE AGENTS. ACC ORDING TO THE CIT(A), THIS COMMISSION IS TRANSFERRED BY WAY OF BOOK ENTRI ES BY DEBITING THE COMMISSION PAYABLE ACCOUNT AND CREDITING SECURITY D EPOSIT ACCOUNTS CONCERNED, AFTER DEDUCTION OF APPLICABLE TAX AT SOU RCE. THE CIT(A) FURTHER OBSERVED THAT SINCE THESE TRANSACTIONS ARE GOING IN THE SECURITY DEPOSIT I.T.A. NOS.184,185, 216&217COCH/2014 13 ACCOUNT, THEY CANNOT BE TREATED AS COMMISSION PAYME NTS EXCLUSIVELY AND THEY ARE IN THE NATURE OF DEPOSITS TO BE MAINTAINED BY THE FRANCHISEES. BEING SO, THE CIT(A) CONFIRMED THE LEVY OF PENALTY U/S. 271E OF THE ACT OF RS. 2,29,531/- BEING 20% OF RS.11,47,665/- MADE BY THE ASSESSING OFFICER. 15. REGARDING SECOND SET OF DEPOSITS RELATED TO LOA N REPAYMENT FROM M/S. GEOJIT CREDITS PVT. LTD. AMOUNTING TO RS.25,50 ,00,000/-, IT WAS SUBMITTED BEFORE THE CIT(A) THAT ONCE THE CHEQUES A RE PRESENTED TO THE BANK, IT WAS DIFFICULT TO OBTAIN THE COPIES OF THES E CHEQUES FOR ANY VERIFICATION EITHER BY THE AUDITOR OR BY THE ASSESS ING OFFICER AND THEREFORE, IT WAS UNDER THESE CIRCUMSTANCES THAT IN THE TAX AUDIT REPORT IT WAS MENTIONED THAT IN ABSENCE OF EVIDENCE AVAILABLE WITH THE ASS ESSEE, WE ARE UNABLE TO COMMENT WHETHER PAYMENTS RECEIVED BY CHEQUE/DEMAND DRAFTS HAVE BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES/BANK DRAFT S. HOWEVER, THE CIT(A) FOUND THAT EVEN THOUGH FOR THE TRANSACTIONS OF LOANS RECEIVED ON DIFFERENT DATES, THE CHEQUE NUMBERS WERE ALSO MENTI ONED AND EVEN THE LEDGER FOLIO NO. WITH DATE AND AMOUNTS WERE AVAILAB LE WITH THE ASSESSING OFFICER, THE ASSESSING OFFICER COULD NOT MAKE PROPE R VERIFICATION WHETHER THESE ENTRIES WERE THROUGH ACCOUNT PAYEE CHEQUES OR NOT. THE CIT(A) OBSERVED THAT AS PER THE DETAILS AVAILABLE IN THE B ANK STATEMENT, AGAINST THE TRANSACTION OF RS.7 CRORES THE NAME OF GEOJIT WAS M ENTIONED AND FOR THE AMOUNT OF RS.7,50,00,000/- THE ENTRY WAS SHOWN AS C LEARING THROUGH I.T.A. NOS.184,185, 216&217COCH/2014 14 CHEQUE NO. 191106. SIMILARLY, ENTRIES OF RS.6 CROR ES AND RS.5 CRORES WERE ALSO REFLECTED IN THE BANK STATEMENT OF THE ASSESSE E. ACCORDING TO THE CIT(A), THE ASSESSEE HAS ALSO FURNISHED THE CORRESP ONDING BANK ACCOUNT OF M/S. GEOJIT CREDITS PVT. LTD. WHERE THESE ENTRIES O N THE CORRESPONDING DATES WERE ALSO REFLECTED. THE CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION FROM THE AXIS BANK, THROUGH WHICH THESE TRANSACTIONS WERE EFFECTED AND THESE TRANSACTIONS W ERE MADE THROUGH ACCOUNT PAYEE CHEQUES. ACCORDING TO THE CIT(A), FR OM THE BANK ACCOUNT OF BOTH THE PARTIES AND THE BANK CERTIFICATES, IT WAS CLEAR THAT THESE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. THEREFORE, ACCO RDING TO THE CIT(A), THE ASSESSING OFFICER WAS NOT CORRECT IN TREATING T HEM AS BOOK ENTRIES DISREGARDING THE ENTRIES IN THE BANK STATEMENT/LEDG ER ACCOUNTS SHOWING THESE TRANSACTIONS. ACCORDINGLY, THE CIT(A) DELETED THE PENALTY OF RS.5,10,00,000/- LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF LOANS RECEIVED FROM M/S. GEOJIT CREDITS PVT. LTD. 16. REGARDING THE AMOUNTS RELATED TO THE AMOUNTS PA ID TO VARIOUS PARTIES BY WAY OF OTHER THAN ACCOUNT PAYEE CHEQUES/ BANK DRAFTS, THE CIT(A) NOTICED THAT THESE TRANSACTIONS WERE MADE T HROUGH THE BANK ACCOUNT BY WAY OF ACCOUNT PAYEE CHEQUES, WHICH WERE ALSO MENTIONED IN THE RESPECTIVE LEDGER ACCOUNTS. ACCORDING TO THE C IT(A) , SINCE ALL THESE REPAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES, THE ASSESSING OFFICER I.T.A. NOS.184,185, 216&217COCH/2014 15 WAS NOT CORRECT IN LEVYING PENALTY U/S. 271E. ACCOR DINGLY, THE CIT(A) DELETED THE PENALTY OF RS.2,36,165/- LEVIED BY THE ASSESSING OFFICER U/S. 271E OF THE ACT ON ACCOUNT OF LOANS/DEPOSITS REPAYME NTS. THUS OUT OF THE TOTAL ADDITION OF RS.5,14,65,697-, ONLY ADDITION OF RS.2,29,531/- WAS SUSTAINED. AGAINST THE DELETION OF LEVY OF PENALTY U/S. 271E OF THE ACT, THE REVENUE IS IN APPEAL BEFORE US AND AGAINST SUSTAINI NG THE LEVY OF PENALTY, THE ASSESSEE IS IN APPEAL BEFORE US. 17. SINCE THE ISSUE IS SIMILAR TO THE ISSUE CONSI DERED BY US IN I.T.A. NOS. 184 AND 216/COCH/2014, THEREFORE, ON SIMILAR LINES, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONS IDERATION IN THE LIGHT OF THE ABOVE OBSERVATIONS. 18. IN THE RESULT BOTH THE ASSESSEE APPEALS AND THE REVENUE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 17-10-2014. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 17TH OCTOBER, 2014 GJ COPY TO: 1. GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD., 34/6 59-P, CIVIL LINE ROAD, PADIVATTOM, KOCHI-682 024. 2. THE ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE -1, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(APEALS)-II, KOCHI . I.T.A. NOS.184,185, 216&217COCH/2014 16 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT, COCHIN