The ACIT, Cenrl-Circle-2, Baroda V. M/S Western India Ceramics Pvt Ltd, Baroda

ITA 1883/AHD/1998

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8606 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-11-2009
• Assessment Year: 1993-1994
• Appeal Filed On: 18-09-1998
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKARIWAL SRDR
• Assessee Lawyers: K C PATEL
• Keywords: Opportunity of being heard; Reasonable cause; Ignorance of law
• Section: 273B; 143(3); 271D; 271E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1883/AHD/1998 ASSESSMENT YEAR:1993-94 DATE OF HEARING:12.2.10 DRAFTED:3.3.10 ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, BARODA V/S . WESTERN INDIA CERAMICS PVT. LTD., BARODA PADRA HIGHWAY ROAD, BASRODA PAN NO. NOT FOUND (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAMIR TEKARIWAL, SR-DR RESPONDENT BY:- SHRI K.C. PATEL, SR. ADVOCATE O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-IV, BARODA IN APPEAL NO.CAB/IV -220/96-97 DATED 22-06-1998. THE ASSESSMENT WAS FRAMED BY THE DCIT SPECIAL RANGE -3, BARODA U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 25-03- 1996. THE PENALTY UNDER DISPUTED WAS LEVIED BY THE DY. COMMISSIONER OF INCOME- TAX, CENTRAL RANGE, BARODA U/S.271D R.W.S 274 R.W.S 273 OF THE ACT VIDE HIS ORDER DATED 30-09-1996. 2. THE FACTS OF THE CASE ARE THAT IN THIS CASE DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED FROM THE AUDIT REPORT B Y THE ASSESSING OFFICER THAT CERTAIN DEPOSITS HAVE BEEN OBTAINED BY THE ASSESSEE COMPANY IN CASH DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CON SIDERATION, IN VIOLATION OF SECTION 269SS OF THE ACT. ACCORDINGLY, A SHOW CAUSE NOTICE U/S 274 READ WITH SECTION 271 D AND 273B OF THE ACT WAS ISSUED TO THE ASSESSEE COMPANY ON 25-03- 1996. AFTER THE CHANGE OF JURISDICTION FURTHER DETA ILED SHOW-CAUSE LETTERS WERE ISSUED TO THE ASSESSEE ON 17-09-1996 AND 24-09-1996 AND TH E ASSESSEE WAS REQUIRED TO ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 2 EXPLAIN AS TO WHY A PENALTY U/S 271D MAY NOT BE IMP OSED IN THEIR CASE AS THEY HAD CLEARLY VIOLATED THE PROVISIONS OF SECTION 269 SS O F THE ACT. THE AO OBSERVED THAT A PERUSAL OF THE AUDIT REPORT FILED ALONG WITH THE RE VISED RETURN OF INCOME FILED FOR THE AY 1993-94 ON 30-1994 SHOWS THAT A LARGE NUMBER OF LOANS / DEPOSITS HAVE BEEN ACCEPTED BY THE ASSESSEE IN CASH. IN THE FOLLOWING CASES THE AGGREGATE OF THE ARREAR BALANCE ALONG WITH THE FRESH LOAN OBTAINED DURING T HE YEAR IS EXCEEDING RS.20,000/-:- NAME OF THE PARTY OPENING BALANCE DEPOSITS / LOAN DURING THE YEAR CLOSING BALANCE 1 SURESHKUMAR C VANIA 22,500 18,000 40,500 2 KRISHNADAS VALLABHDAS 16,000 15,000 31,000 3 GIRDHARBHAI JAMNADAS 28,800 17,000 4 5,800 4 VALAMJIBHAI ARJANBHAI 33,900 15,000 48,900 5 CHHAGANLAL K VANIA 1,33,700 9,87,342.54 11,2 1,042.54 IN ADDITION TO ABOVE, IT WAS ALSO NOTICED FROM THE AUDIT REPORT THAT IN THE ACCOUNTS OF SHRI A B VACHHANI AND SHRI C K VANIA THE FOLLOWING AMOUNTS HAVE BEEN RECEIVED IN CASH AND RETURNED DURING THE YEAR. NAME OF THE PARTY OPENING BALANCE AMOUNTS SQUARED UP CLOSING BALANCE 1 A B VACHHANI 2,30,000 18,76,841 2,03,000 2 K V VANIA 1,33,700 25,19,463.14 1,33,700 THE ASSESSEE FILED A WRITTEN SUBMISSION DATED 25-4- 1996 CLAIMING THEREIN THAT THE ASSESSEE-COMPANY WAS FACING ACUTE FINANCIAL DIFFICU LTIES AND IN EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES, IT WAS FORCED TO ACCEPT CASH DEPOSITS. THE AO OBSERVED THAT SINCE THIS WAS A VERY VAGUE EXPLANATION AND NO EVIDENCE HAD BEEN PRODUCED TO SUBSTANTIATE THE CLAIM THE ASSESSEE WAS ASKED TO SU BSTANTIATE THE CLAIM MADE IN THE SAID LETTER. IN RESPONSE TO THE SHOW CAUSE NOTICES ISSUED, THE LD. COUNSEL FOR THE ASSESSEE ATTENDED ON 24-9-1996 AND FILED WRITTEN SU BMISSION DATED 23-9-96. HE CONTENDED THAT THEIR APPEAL IS PENDING BEFORE THE C IT(A). THE ASSESSING OFFICER HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE BY GIVI NG FOLLOWING FINDING IN HIS PENALTY ORDER:- 10. THE FIRST SUBMISSION IS REGARDING FINANCIAL PO SITION OF THE ASSESSEE COMPANY. IT HAS BEEN CONTENDED THAT THEY HAD BEEN G IVEN OVER DRAFT FACILITIES ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 3 BY THEIR BANKERS WHICH LOOKING TO THE GROWTH AND AC TIVITIES OF THE COMPANY WERE IN-ADEQUATE. UNDER THESE CIRCUMSTANCES THEY WE RE FORCED TO BORROW FUNDS AT THE LAST MINUTE IN CASH FOR MEETING THE UR GENT REQUIREMENTS LIKE PAYMENT OF STATUTORY DUES VIS--VIS SALES TAX, EXCI SE, ELECTRICITY DUTIES AND LABOUR PAYMENTS ETC. 11 AS REGARDS THIS CONTENTION OF THE ASSESSEE COMPA NY IT MAY BE SEEN THAT NO SUCH EVIDENCE HAS BEEN FILED WHICH MAY PROV E THAT THEIR DEPOSITS / LOANS RECEIVED HAVE ACTUALLY BEEN PAID TOWARDS SUCH LIABILITIES. MOREOVER, IT IS TO BE POINTED OUT THAT FOR SUCH STATUTORY PAYMENTS, THE ASSESSEE ARE ALWAYS INFORMED IN ADVANCE AS FOR EACH SUCH PAYMENT SOME T IME LIMIT IS ALWAYS ALLOWED FOR MAKING PAYMENTS. IT IS THEREFORE FELT T HAT THESE TYPES OF LIABILITIES ARE ALWAYS KNOWN TO THE ASSESSEE IN ADVANCE AND SUI TABLE ARRANGEMENTS CAN BE MADE IN ADVANCE FOR ARRANGING THE FUNDS. IN THIS CONNECTION IT IS ALSO INTERESTING TO NOTE THAT MOST OF THE PERSONS FROM W HOM THE ASSESSEE CLAIMS TO HAVE BORROWED FUNDS IN CASH AT THE LAST MOMENT ARE FROM OUTSIDE BARODA AND IT IS NOT KNOWN AS TO HOW THE ASSESSEE COMPANY WAS ABLE TO BORROW FUNDS FROM THESE PARTIES AT A VERY SHORT NOTICE. THUS THE ASSESSEES EXPLANATION DOES NOT APPEAR TO BE CONVINCING. FIRSTLY THE LIABI LITIES MENTIONED BY THE ASSESSEE ARE SUCH WHERE THE ASSESSEE IS ALWAYS ALLO WED REASONABLE TIME FOR MAKING PAYMENTS. SECONDLY THE PARTIES ARE MOSTLY OU T-SIDE PARTIES AND THE ASSESSEE MUST HAVE REQUIRED TIME TO CONTACT THESE P ARTIES FOR LOANS / DEPOSITS. ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THEREFORE IT IS EVIDENT THAT THE AMOUNTS WHICH HAVE BEEN BORROWED IN CASH C OULD HAVE BEEN BORROWED THROUGH BANKING CHANNELS ALSO, AS THE ENTI RE EXPENDITURE MUST HAVE BEEN KNOWN TO THE ASSESSEE IN ADVANCE. 12 THE SUBMISSION OF THE ASSESSEE IN THIS REGARD IS THEREFORE NO CONVINCING / ACCEPTABLE AT ALL. 13 THE LAST CONTENTION OF THE ASSESSEE IS THAT SINC E IN THEIR CASE THE DEPOSITS / DEPOSITS OBTAINED ARE GENUINE, THE PROVI SIONS OF SECTION 269 SS SHOULD NOT BE INVOKED. IT HAS BEEN ARGUED THAT THIS SECTION WAS INTRODUCED WITH A MOTIVE TO COUNTER THE INTRODUCTION OF UNACCO UNTED CASH IN THE BOOKS OF ACCOUNTS AS LOANS OR DEPOSITS AND SINCE IN THEIR CA SE THE SOURCE OF THESE DEPOSITS IS GENUINE THIS SECTION SHOULD NOT BE INVO KED. 13 THIS KIND OF ARGUMENTS IS NOT AT ALL ACCEPTABLE. 14. .......... 15 I AM THEREFORE OF THE CONSIDERED OPINION THAT SO FAR AS PROVISIONS OF SEC. 269 SS ARE CONCERNED, GENUINENESS OF A DEPOSIT OR LOAN IS NOT AT ALL RELEVANT. 16 IN VIEW OF THE AFORESAID DISCUSSION THE PLEA OF THE ASSESSEE THAT THEY HAD A REASONABLE CAUSE AND THERE WAS NO OPTION BUT TO RECEIVE DEPOSITS IN CASH IS NOT ACCEPTABLE. THE ASSESSEE HAS NOT BEEN A BLE TO MAKE OUT SUCH A CASE WHICH MAY BE TREATED AS A REASONABLE CAUSE FOR VIOLATION OF THE PROVISIONS OF SECTION 269 SS OF THE I.T. ACT. THE C IRCUMSTANCES AND THE FACTS ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 4 EXPLAINED BY THEM ARE NOT CONVINCING AT ALL. I AM T HEREFORE CONVINCED THAT THERE WAS NO REASONABLE CAUSE WHICH COULD JUSTIFY T HE ACCEPTANCE OF THE AMOUNTS MENTIONED IN PARA 2 OF THIS ORDER IN CASH. I THEREFORE HOLD THAT THE ASSESSEE HAS CLEARLY VIOLATED THE PROVISIONS OF SEC TION 269 SS OF THE I.T. ACT WITHOUT ANY REASONABLE CAUSE AND PENAL PROVISIONS O F SECTION 271D ARE CLEARLY ATTRACTED IN THIS CASE. THE AO ACCORDINGLY LEVIED THE PENALTY OF RS.54,48,6 48/- U/S 271 D OF THE ACT. 3. AGGRIEVED BY THE ABOVE ORDER OF THE AO, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND REITERATED THE SUBMISSIONS MA DE BEFORE THE AO AND CONTENDED THAT PROPER OPPORTUNITY OF BEING HEARD IS NOT GRANTED TO THE ASSESSEE. THE ASSESSEE ALSO CONTENDED THAT THE ORDER PASSED BY TH E AO IS VOID AB INITIO AS THE PROVISIONS OF SECTION 269 SS ARE NOT VIOLATED AS NO DEPOSIT IS ACCEPTED IN CASH. THE ALLEGED RECEIPTS IN CASH, IN FACT, ARE NOT IN CASH BUT BY WAY OF JOURNAL / HAWALA ENTRIES. THE CIT(A) AFTER CONSIDERING THE SUBMISSIO NS MADE BY THE ASSESSEE, DIRECTED THE AO TO DELETE THE PENALTY BY OBSERVING AS UNDER:- 2.6 I HAVE CONSIDERED THE SUBMISSIONS MADE ON B EHALF OF THE APPELLANT AND THE OBSERVATIONS OF THE DY. CIT, CENT RAL RANGE, BARODA ON THE ABOVE SUBMISSIONS. IN HIS ORAL ARGUMENTS, S HRI BAKSHI HAS DRAWN MY ATTENTION TO THE FOLLOWING DECISIONS TO CO NTEND THAT NO PENALTY CANNOT [ READ AS `CAN ] BE IMPOSED ON ANY ADDITIONAL ITEM WHICH DOES NOT FALL THE PART OF THE INITIAL SATISFA CTION RECORDED AT THE TIME OF INITIATION OF PENALTY. 1. CIT VS. LAKHAVIRLALJI, 85 ITR 77 (GUJ.) 2. CIT VS. NIHALCHAND BADRILAL, 135 ITR 519 (MP) 3. CIT VS. KEJARIWAL IRON STORES, 168 ITR 715 (RAJ .) REGARDING THE ARGUMENT OF THE REASONABLE CAUSE, IT IS OBSERVED THAT THE LOANS HAD BEEN BORROWED BY THE APPELLANT TO MAK E IMMEDIATE PAYMENTS TO ITS SUPPLIERS AND TO DISCHARGE ITS OTHE R STATUTORY OBLIGATIONS. THESE FACTS HAD NOT BEEN DISPUTED EIT HER BY THE ASSESSING OFFICER IMPOSING THE PENALTY OR BY THE SUCCESSOR IN HIS REPORT . REASONABLE CAUSE WILL HAVE TO BE APPRECIATED IN THE OVER ALL CONTEXT OF A PRUDENT BUSINESS MAN SITTING IN HIS CHAIR AND LOO KING AFTER HIS FINANCIAL AFFAIR. I DO NOT AGREE WITH THE OBSERVATI ON OF THE DY. CT, CENTRAL RANGE, BARODA THAT APPELLANT SHOULD HAVE IN STRUCTED ITS LENDERS TO MAKE THE PAYMENTS ON ITS BEHALF BY CROSS ED DEMAND DRAFTS. WHEN A SUPPLIER OR A PARTY IS PRESSING HARD FOR PAY MENT, THE IMMEDIATE CONCERN OF A BUSINESS MAN IS TO ARRANGE THE NECESSA RY FUNDS AND TO MAKE THE PAYMENT AND NOT TO BOTHER ABOUT THE MODE A ND MODALITY OF THE PAYMENT. THE REASONABLE CAUSE SHOULD BE VIEWED FROM THE ANGLE OF A BUSINESS MAN. ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 5 THERE IS SUFFICIENT MATERIAL ON RECORD TO INDICATE THAT THE BORROWINGS WERE MADE BY THE APPELLANT IN VERY DIFFICULT FINANC IAL SITUATIONS. THE REASONABLE CAUSE IS A MATTER OF FACT AND THESE FACT S SUPPORT THE CASE OF THE APPELLANT. IT IS NOT THE CASE OF THE ASSESS ING OFFICER THAT THESE LOANS ARE BOGUS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM SATISFIED THAT THERE WAS A REASONABLE CAUSE IN THE CASE OF THE APPELLANT FOR BORROWING TO BE MADE IN CASH. AS I AM ALLOWING THE APPEAL OF THE APPELLANT ON THE GROUND OF REASONABLE CAUSE, I AM N OT GOING INTO DETAILS OF THE OTHER ASPECTS OF THE CASE, WHERE IT HAS BEEN ARGUED THAT INITIAL SATISFACTION FOR THE AMOUNT TO BE CONSIDERE D FOR PENALTY IS MANDATORY AND PENALTY CANNOT BE IMPOSED BEYOND THE AMOUNT WHICH FORM THE BASIS OF INITIAL SATISFACTION, THOUGH THER E IS SOME DEFINITE MERIT IN THE ABOVE ARGUMENT. THE PENALTY, IMPOSED BY THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO BE DELETED. IN RESULT, THE APPEAL IS ALLOWED. AGGRIEVED AGAINST THE DELETION, THE REVENUE CAME IN SECOND APPEAL BEFORE US. 4. BEFORE US, THE LD. SR-D.R. SUBMITTED THAT THE CI T(A) HAS ALLOWED RELIEF TO THE ASSESSEE ON GROUND OF REASONABLE CAUSE, SO THAT OTH ER ARGUMENTS BY THE ASSESSEE COULD NOT BE CONSIDERED AS HAVING BEEN ACCEPTED BY HIM. AS REGARDS THE GROUND OF REASONABLE CAUSE, ON WHICH THE LEVY OF PENALTY STAN DS DELETED BY HIM, IT IS COMPLETELY INCORRECT TO SAY THAT THE PRIMARY FACTS HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER, AS STATED BY THE CIT(A) IN HIS O RDER. THE WHOLE ORDER BY THE A.O. SPEAKS OF SUFFICIENT OPPORTUNITIES BEING ALLOWED TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIMS. THE ASSESSEE IN TURN, UNABLE TO DO SO, ON A CCOUNT OF THE RELEVANT MATERIAL, I.E. BOOKS OF ACCOUNT, BEING NOT AVAILABLE WITH IT. 5. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE, SHRI K.C.PATEL, SR. ADVOCATE STATED FACTS OF THE ASSESSEES CASE AND ARGUED THAT THE TRANSACTIONS IN RESPECT OF WHICH SUCH PENALTY IS LEVIED, GOES TO PROVE THE ASS ESSEES POINT THAT THE NATURE OF TRANSACTIONS IN THE ACCOUNT OF SHRI CHHAGON VANIA A S PER THE COPY OF ACCOUNT SUBMITTED VIDE PAGE NOS. 53 TO 60 OF THE ASSESSEES PAPER BOOK SHOW THAT ALL CREDIT ENTRIES REFLECTED IN THE SAID ACCOUNT ARE BY WAY OF JOURNAL ENTRIES WHICH ARE MADE IN THE ACCOUNT OF THE ASSESSEE AS ACKNOWLEDGEMENT OF D EBT DUE TO THE DEPOSITOR BY PASSING THE JOURNAL ENTRIES GIVING CREDIT OF THE DE POSIT FOR THE PAYMENTS MADE BY THE SAID DEPOSITOR ON BEHALF OF THE ASSESSEE. TO FURTH ER ELABORATE, THE ASSESSEES COUNSEL SUBMITTED THAT THE NATURE OF TRANSACTIONS A RE SUCH THAT CONSIDERING THE ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 6 EXIGENCIES OF THE BUSINESS AND THE URGENCY OF PAYME NTS THE ASSESSEE USED TO REQUEST AND INSTRUCT THE LENDER TO MAKE THE PAYMENT S TO THE SUPPLIERS/PARTIES FOR AND ON BEHALF OF THE ASSESSEE. THE DEPOSITOR IN TURN US ED TO NORMALLY OBTAIN THE DEMAND DRAFT IN FAVOUR OF THE SUPPLIERS/CREDITORS, WHICH T HE ASSESSEE USED TO ACKNOWLEDGE THE DEBT BY PASSING JOURNAL ENTRIES DEBITING THE PA RTY/EXPENDITURE AND BY CREDITING THE DEPOSITOR. ACCORDING TO THE LD. COUNSEL, IN EFF ECT THE ASSESSEE HAS NEVER RECEIVED ANY MONIES AND WHAT HAS BEEN CREDITED IN T HE BOOKS OF ACCOUNTS ARE BY WAY OF ACKNOWLEDGEMENT OF DEBTS AND THEREFORE IN CA SES WHERE THE ASSESSEE MERELY ACKNOWLEDGERS THE DEBT INCURRED AND THEREFOR E IN THE HUMBLE OPINION OF THE ASSESSEE WHERE THERE IS NO TRANSFER OF MONEY FROM O NE PERSON TO ANOTHER THE PROVISIONS OF SECTION 269SS CANNOT BE APPLIED. THIS VIEW IS ALSO SUPPORTED BY THE ORDER OF TRIBUNAL IN THE CASE OF BOMBAY CONDUCTORS AND ELECTRICALS LTD. ITA NO.1609/AHD/1994 DATED 30-11-1995 AND ALSO BY THE P UNE TRIBUNAL IN THE CASE OF SUNFLOUR BUILDERS (P) LTD. V. DCIT 61 ITD 227 (PUN) . THE LD. COUNSEL FOR THE ASSESSEE, ALSO STATED AND SUBMITTED A FILE CONTAINI NG THE COPY OF JOURNAL VOUCHERS RECORDING THE ABOVE TRANSACTIONS. HE FURTHER SUBMIT TED THAT IN THE ASSESSEES CASE BORROWING FOR THE BANK WERE FOR IN EXCESS OF LIMITS SANCTIONED AND IT WAS NOT POSSIBLE FOR THE ASSESSEE TO MAKE ANY FURTHER BORROWINGS FRO M THE BANKERS AND TO MEET THE EXIGENCIES/URGENCIES OF BUSINESS THE ASSESSEE USED TO REQUEST THE LENDER TO MEET THE BUSINESS REQUIREMENTS BY ISSUING THE DEMAND DRA FT DIRECTLY IN FAVOUR OF CREDITORS ONLY HIGHLIGHTING THE BUSINESS EXIGENCY AND THE FAC T THAT THE ASSESSEES LIQUIDITY WAS VERY BAD AND IN ABSENCE OF ASSESSEES MEETING WITH BUSINESS EXIGENCIES THE PRODUCTION COULD HAVE STOPPED RESULTING INTO SUBSTA NTIAL LOSSES AND THUS THE BORROWINGS IN THE MANNER ABOVE DESCRIBED AND FOR TH E PURPOSES WOULD IN THE HUMBLE OPINION OF THE ASSESSEE WOULD CONSTITUTE A REASONAB LE CAUSE, FOR NON LEVY OF PENALTY AS PROVIDED U/S.273B R.W.S. 271D OF THE ACT AS HELD BY AHMEDABAD IN THE CASE OF SHREENATHJI CORPORATION V. ACIT 58 TTJ 611 (AHD) AND IN THE CASE OF VIR SALES CORPORATION 50 TTJ 139 (AHD). HE FURTHER SUBMITTED THAT THE G ENUINENESS OF THE LOAN/DEPOSIT IS NOT DOUBTED BY THE DCIT AND THE ONL Y OBJECTION IS IN RESPECT OF MODE OF ACCEPTANCE AND IN THE HUMBLE OPINION OF THE ASSE SSEE, THE SAME THUS, WOULD AMOUNT TO DEFAULT IN THE NATURE OF TECHNICAL OR VEN IAL INFRACTION OF LAW WHICH DOS NOT PREJUDICE THE INTEREST OF THE REVENUE AS NO TAX AVO IDANCE OR TAX EVASION IS INVOLVED AND IF AT ALL THERE IS A BREACH THE SAME CANNOT BE VISITED WITH SUCH SEVERE PENALTY. ON CUMULATIVE SUMMATIONS, THE LD. COUNSEL STATED, IT CAN BE SAID THAT IN THE ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 7 ASSESSEES CASE THE LOANS ARE GENUINE AND ARE NOT A CCEPTED AS LOAN OR DEPOSIT OF MONIES WHICH IS NOT COVERED BY THE PROVISIONS OF SE CTION 269SS OF THE ACT PRIMARILY AND EVEN IF THEY ARE CONSIDERED AS COVERED THE SAME IS DONE TO MEET WITH THE BUSINESS EXIGENCIES AND NOT PREJUDICIALLY AFFECTING THE INTEREST OF THE REVENUE AND CONSIDERING THE LAW EXISTING IN THIS REGARD SUPPORT ED BY THE CASES CITED THE PENALTY DESERVES TO BE CANCELLED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED TH E CASE RECORDS INCLUDING THE ASSESSMENT ORDER, ORDER OF CIT(A), PENALTY ORDER AN D ASSESSEES PAPER BOOK CONTAINING PAGES 1 TO 314. THE FIRST PARTY, I.E. C HHAGANLAL KESHVJI VANJA IN RESPECT OF WHOM PENALTY WAS LEVIED AT RS.35,06,806/- ON THE BASIS OF AUDIT REPORT. BEFORE US, THE ASSESSEE HAS PLACED COMPLETE LEDGER ACCOUNT S AT ASSESSEES PAPER BOOK PAGES 67 TO 84 AND WE FIND THAT MOST OF THE RECEIPTS CREDITED TO THE ACCOUNT OF THE ABOVE PARTY IN COMPILATION ARE ON ACCOUNT OF GENERA L VOUCHER ENTRY. THE PAYMENTS TO SUPPLIERS AND TOWARDS TELEPHONE BILLS INCLUDING STATUTORY DUES ARE NOT IN THE AMBIT OF SECTION 269SS OF THE ACT. THE ENTRY IN RESPECT OF THIS PARTY IS AS REGARDS TO TRADE ENTRIES OR GENERAL VOUCHER ENTRY FOR SQUARING OF AC COUNTS OF TRADE AND NOT A LOAN OR DEPOSIT. 7. AS REGARDS TO THE DEPOSIT OF SECOND PARTY, SHRI A.B. VACHHANI, THE PENALTY WAS LEVIED AT RS.18,76,841/-. WE FIND FROM THE ORDE RS OF THE LOWER AUTHORITIES THAT THERE IS NONE FINDING BY ANY OF THE LOWER AUTHORITI ES THAT THE ASSESSEE HAVE ACCEPTED THE ABOVE AMOUNTS OTHER THAN BY ACCOUNT PAYEE CHEQU E OR ACCOUNT PAYEE BANK DRAFT IN CONTRAVENTION OF SECTION 269SS OF THE ACT AND ONLY BASIS OF LEVY OF PENALTY IS ONLY THE INFERENCE DRAWN FROM THE AUDIT REPORT. IN THIS CONTEXT, IT IS TO BE STATED THAT WE HAVE NOTED FROM THE ACCOUNTS OF THE ASSESSEE THA T THESE AMOUNTS ARE IN THE NATURE OF OPENING AND CLOSING BALANCE FOR THE PURPO SE OF TRADE ENTRIES BY WAY OF JOURNAL VOUCHERS. 8. AS REGARDS TO ANOTHER ENTRIES FOR AN AGGREGATE A MOUNT OF RS.65,000/- RECEIVED FROM SURESHKUMAR C VAHINA, KRISHANDAS VALL ABHADAS, GIRDHARILAL JAMANADAS, VALAMJIBHAI ARJANBHAI, WHICH ARE BELOW O F RS.20,000/- IN EACH OF THE CASE AND ACCORDINGLY THE PENALTY CANNOT BE LEVIED. ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 8 9. WE FIND FROM THE CASE LAW OF THIS TRIBUNAL IN TH E CASE OF VIR SALES CORPORATION V. ACIT (1994) 50 TTJ 130 (AHD), WHEREIN IT IS HELD AS UND ER:- IT IS AN UNDISPUTED FACT THAT THE GENUINENESS OF A LL THE TRANSACTIONS HAVE BEEN ACCEPTED BY THE DEPARTMENT. BOTH THE SISTER CONCERN S OF ASSESSEE ARE EXISTING ASSESSEES. IT IS ALSO NOT IN DISPUTE THAT WHENEVER THE ASSESSEE NEEDED FUNDS FOR SENDING DRAFT TO THEIR SUPPLIERS, IT RECEIVED FUNDS FROM THESE TWO SISTER CONCERNS AND WHENEVER THESE TWO SISTER C ONCERNS NEEDED FUNDS FOR SIMILAR PURPOSE, THE ASSESSEE ALSO SAVE FUNDS TO TH EM FOR ENABLING THEM TO SEND DRAFT TO THEIR SUPPLIERS OF GOODS. THE BONE FI DE OF THE TRANSACTIONS IN QUESTION HAS NOT BEEN DISPUTED AT ANY STAGE OF THE PROCEEDINGS, THERE IS NO MATERIAL WHATSOEVER ON RECORDS GIVING ANY INKLING O F THE TRANSACTIONS BEING OF A DUBIOUS NATURE. THERE IS NO ALLEGATION AGAINST TH E ASSESSEE THAT ANY ATTEMPT HAS BEEN MADE FOR INTRODUCING THE UNACCOUNT ED INCOME IN THE FORM OF SUCH LOANS OR DEPOSITS. ORDINARILY A PLEA AS TO IGNORANCE OF LAW CANNOT SUP PORT THE BREACH OF A STATUTORY PROVISION. BUT THE FACT OF SUCH AN INNOCE NT MISTAKE DUE TO IGNORANCE OF THE RELEVANT PROVISIONS OF LAW, COUPLED WITH THE FACT THAT THE TRANSACTIONS IN QUESTION ARE GENUINE AND BONA FIDE TRANSACTIONS AND HAD TO BE MADE FOR MEETING THE URGENT BUSINESS NECESSITY WILL CONSTITU TE A REASONABLE CAUSE. IN THE LIGHT OF AFORESAID FACTS AND THE LEGAL POSITION , THE TRANSACTIONS INTER SE BETWEEN THE SISTER CONCERNS MADE WITH A VIEW TO MEE T THE URGENT BUSINESS NECESSITY AND MADE UNDER THE BONA FIDE BELIEF AND U NDER IGNORANCE OF THE RELEVANT PROVISIONS OF LAW (SS.269SS AND 269T) IS A VALID EXCUSE AND CONSTITUTE A REASONABLE CAUSE WITHIN THE MEANING OF S.273B. THE PENAL PROVISIONS OF SS.271D AND 271E R.W.S. 273 B CONFER A DISCRETION ON THE AUTHORITIES TO LEVY OR NOT TO LEVY PENALTY. SUC H DISCRETION NEEDS TO BE EXERCISED WITH WISDOM AND IN A FAIR AND JUST MANNER . EVEN IF THE RELEVANT PROVISIONS OF LAW PRESCRIBED LEVY OF A MINIMUM PENA LTY, IT DOES NOT MEAN THAT PENALTY MUST NECESSARILY BE IMPOSED IN EVERY CASE F ALLING WITHIN SS.269SS OR 269T. EVEN IF THE MINIMUM PENALTY IS PRESCRIBED THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS A TECHNICAL BREACH OR VENIAL VIOLATION OF THE PROVI SIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE AND GENUINE TRANSACTI ONS AND WERE MADE ON ACCOUNT OF URGENT BUSINESS NECESSITY AND THERE WAS NO GUILTY INTENTION OR GUILTY MIND ON THE PART OF THE ASSESSEE AT THE TIME WHEN THE TRANSACTIONS WERE MADE, THE PENALTIES LEVIED ON THE ASSESSEE ALSO DES ERVES TO BE CANCELLED. HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC) FOLLOWED. FURTHER IN THE CASE OF BOMBAY CONDUCTORS & ELECTRICALS LTD. V. DCIT (1996) 56 TTJ 580 (AHD), WHEREIN IT IS HELD:- PENALTY UNDER S. 271D LEVIABILITY ASSESSEE SUB SIDIARY PURCHASING GOODS FROM ITS PRESENT COMPANY WORTH RS.9,24,908/- AND RS .14,08,165/- - NOT BEING IN A POSITION TO MAKE PAYMENT OF GOODS IMMEDIATELY, ASSESSEE MAKING PAYMENT OF RS.24,908/- OUT OF THE FIRST ITEM AND RS .8,165 OUT OF THE SECOND BY ITA NO.1883/AHD/1998 A.Y. 1993-94 ACIT CC-2 BRD V. WESTERN INDIA CERAMICS P. LTD. PAGE 9 A/C. PAYEE CHEQUES AND THE BALANCE RS.9 LAKHS + RS. 14 LAKH = 23 LAKH TRANSFERRED TO CREDITORS SARAFI ACCOUNT FROM GOOD S PURCHASE ACCOUNT REVENUE HOLDING IT A BREACH OF THE PROVISIONS OF S. 269SS AND LEVYING PENALTY IN THE AMOUNT OF RS.23 LAKHS NOT JUSTIFIED NO T AX PLANNING OR COLOURABLE DEVICE ON RECORD THIS IS A MERE SHIFTING OF LIABI LITY FROM ONE ACCOUNT TO ANOTHER THERE IS NOTHING TO SHOW THAT ANY DEPOSIT OR LOAN IS BEING CREATED BY BOOK ADJUSTMENT CONSTRUCTIVE DEPOSITS OR LOAN CANNOT COME WITHIN THE MISCHIEF OF S.269SS THE EXPLANATION TO S.269SS SA YS THAT THERE MUST BE A TRANSFER OF MONEY WHICH WAS ABSENT IN THE PRESENT C ASE FURTHER, THE REVENUE ITSELF WAS NOT SURE WHETHER IT WAS LOAN OR DEPOSIT AS THE TWO ARE NOT SYNONYMOUS THERE IS NOTHING TO SHOW THAT THERE WA S STARK INFRACTION OF LAW BUT THERE WAS MERE BONA FIDE BOOK ADJUSTMENT EVEN IF IT WAS A VIOLATION, IT WAS MERE VENIAL OR TECHNICAL. IN VIEW OF THE ABOVE FACTS AND THE DECISIONS OF CO- ORDINATE BENCH CITED (SUPRA), WE FIND THAT IN ALL THE CREDIT ENTRIES PERTAINS TO JOU RNAL VOUCHER ENTRIES PERTAINING TO TRADE AND DOES NOT FALL IN THE AMBIT OF THE DEFINITION OF LOANS OR DEPOSITS. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND CON FIRM THE SAME. 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 12/03/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 12/03/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD