ACIT, CHENNAI V. Shri N.Krishnamoorthy, CHENNAI

ITA 1909/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5145 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 21-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: S SRIDHAR
• Keywords: Opportunity of being heard; Reasonable cause
• Section: 273B; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUN AL BENCH D, CHENN AI (BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER) .. I.T.A.NOS.1909 TO 1912(MDS)2010 ASSESSMENT YEARS : 2004-05 & 2005-06 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CLE.XV, CHENNAI. (APPELLANT) V. SH.N.KRISHNAMOORTHY 22, GILCHRIST AVENUE, CHETPET, CHENNAI-31. PAN AAHPM9437C. (RESPONDENT) AND I.T.A. NOS.1844 TO 1847( MDS)/2010 ASSESSMENT YEARS : 2004-05 & 2005-06 SHRI N.KRISHNAMOORTHY, THE ADDL. COMMR.OF 22, GILCHRIST AVENUE, V. INCOME-TAX, CHETPET, BUSINESS RANGE XV, CHENNAI. CHENNAI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI S.SRIDHAR DEPARTMENT BY: SHRI K.E.B .RENGARAJAN, JR.STANDING COUNSEL. O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THIS IS A BUNCH OF EIGHT APPEALS. THE RELEVANT ASSESSMENT YEARS ARE 2004-05 AND 2005-06. THESE CROSS APPEALS ARE DIRECTED ITA 1909 TO 1912/10 & 18 44 TO 1847/10 2 AGAINST THE ORDERS PASSED BY THE COMMISSIONER OF IN COME- TAX(APPEALS)-XII, CHENNAI ON 31-8-2010. THE CROSS APPEALS ARISE OUT OF THE ORDERS PASSED BY THE ASSESSING AUTHORITY IMP OSING PENALTIES UNDER SECTIONS 271D AND 271E OF THE INCOME-TAX ACT, 1961. 2. IN THE COURSE OF THE ASSESSMENT PR OCEEDINGS FOR THESE TWO ASSESSMENT YEARS UNDER APPEAL THE ASSESSING OFF ICER HAS COME TO KNOW FROM THE ACCOUNTS MAINTAINED BY THE ASSESSE E THAT THE ASSESSEE HAD ACCEPTED LOANS AND ADVANCES IN CASH IN EXCESS OF THE LIMIT PRESCRIBED UNDER THE PROVISIONS OF THE INCOME -TAX ACT, 1961 AND THUS VIOLATED THE PROVISIONS OF LAW CONTAINED IN SE CTION 269SS. LIKEWISE THE ASSESSING OFFICER ALSO OBSERVED THAT T HE ASSESSEE HAS REPAID SUCH LOANS AND ADVANCES AGAIN IN CASH IN EXC ESS OF THE LIMIT PRESCRIBED AND HAS THUS VIOLATED THE PROVISIONS OF SECTION 269T. THE EXPLANATIONS OFFERED BY THE ASSESSEE WERE NOT ACCEP TABLE TO THE ASSESSING AUTHORITY. PENALTIES WERE THUS LEVIED. 3. THE ARITHMETIC DETAILS OF THE TRANSA CTIONS ARE AS FOLLOWS :- (I) ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE HAD ACCEPTED CASH LOANS FOR AN AMOUNT OF ` .8,18,29,461/- FOR THE ASSESSMENT YEAR 2004-05. LIKEWISE FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSING AUTHORITY ITA 1909 TO 1912/10 & 18 44 TO 1847/10 3 COMPUTED SUCH CASH LOANS FOR A SUM OF ` .7,35,86,368/-. THIS IS A CASE OF ALLEGED VIOLATION OF SECTION 269S S, WHICH INVITED LEVY OF PENALTY UNDER SECTION 271D. THE ASSESSING OFFICER HAS LEVIED PENALTY FOR THE EQUAL AMOUNTS OF CASH LOANS ACCEPTED BY THE ASSESSEE BEIN G THE AMOUNT OF ` .8,18,29,461/- AND ` .7,35,86,368/- RESPECTIVELY FOR THE ASSESSMENT YEARS 2004-05 AND 2 005- 06. (II) IN RESPECT OF REPAYMENTS OF LOANS IN CASH, THE ASSESSING AUTHORITY HAS TARGETED AN AMOUNT OF ` .7,10,45,296/- FOR THE ASSESSMENT YEAR 2004-05 AND ` .4,89,91,032/- FOR THE ASSESSMENT YEAR 2005-06. TH IS SHOWS THE POSITION TOWARDS THE ALLEGED VIOLATION OF SECTION 269T. THEREFORE, PENALTIES UNDER SECTION 271E WERE LEVIED FOR THE AMOUNT EQUAL TO THE CASH REPAYMENTS WHICH AMOUNTED TO ` .7,10,45,296/- AND ` .4,89,91,032/- RESPECTIVELY FOR THE ASSESSMENT YEARS 2004-05 AND 2 005- 06. 4. THESE FOUR PENALTY ORDERS RELATING TO THE ASSESSMENT YEARS 2004-05 AND 2005-06 PASSED RESPECTIVELY UNDER SECTI ONS 271D AND ITA 1909 TO 1912/10 & 18 44 TO 1847/10 4 271E WERE TAKEN IN FIRST APPEALS BEFORE THE COMMISS IONER OF INCOME- TAX(APPEALS). WHEN THE COMMISSIONER OF INCOME-TAX( APPEALS) EXAMINED THE DETAILS OF THE TRANSACTIONS POINTED OU T BY THE ASSESSING AUTHORITY, HE FOUND THAT A PORTION OF THE LOANS ACC EPTED AS WELL AS A PORTION OF THE LOANS REPAID WERE NOT TRANSACTED IN CASH BUT WERE RECORDED IN THE BOOKS OF ACCOUNTS ONLY THROUGH JOUR NAL ENTRIES. THE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND THAT FOR THE PURPOSE OF MAKING A CASE AGAINST THE ASSESSEE UNDER SECTIONS 2 69SS AND 269T, IT IS NECESSARY THAT THE TRANSACTION OF ACCEP TING LOANS AS WELL AS REPAYMENTS OF THE LOANS SHOULD BE IN CASH AND WH AT IS TRANSFERRED AND ACKNOWLEDGED BY PASSING JOURNAL ENTRIES IN THE BOOKS OF ACCOUNTS CANNOT BE TREATED AS A CASE OF VIOLATION O F THE ABOVE TWO SECTIONS. 5. IN THE LIGHT OF THE ABOVE FINDING THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVED THAT FOR THE ASSESSMEN T YEAR 2004-05, LOANS AMOUNTING TO ` .7,30,59,461/- WERE ADJUSTED BY PASSING JOURNAL ENTRIES AND THE CASH LOANS WERE ONLY FOR A SUM OF ` .87,70,000/-. LIKEWISE FOR THE ASSESSMENT YEAR 2005-06 THE COMMIS SIONER OF INCOME-TAX(APPEALS) FOUND THAT AN AMOUNT OF ` .6,31,48,382/- RELATED ITA 1909 TO 1912/10 & 18 44 TO 1847/10 5 TO JOURNAL ENTRIES PASSED BY THE ASSESSEE IN HIS B OOKS OF ACCOUNTS AND CASH TRANSACTIONS AMOUNTED TO ` .1,04,37,986/- ONLY. 6. IN THE LIGHT OF THE ABOVE FACTUAL FINDING THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT THE CASH LOANS ACC EPTED BY THE ASSESSEE IN VIOLATION OF SECTION 269SS NEED TO BE B ROUGHT DOWN TO THE ACTUAL CASH LOANS AMOUNTING TO ` .87,70,000/- FOR THE ASSESSMENT YEAR 2004-05 AND ` .1,04,37,986/- FOR THE ASSESSMENT YEAR 2005-06. HE HELD THAT THE ABOVE TWO AMOUNTS ALONE ARE LIABLE FOR LEVYING PENALTY UNDER SECTION 271D. 7. ACCORDINGLY THE COMMISSIONER OF INCOM E-TAX(APPEALS) MODIFIED THE PENALTIES LEVIED UNDER SECTION 271D TO ` .87,70,000/- FOR THE ASSESSMENT YEAR 2004-05 AND ` .1,04,37,986/- FOR THE ASSESSMENT YEAR 2005-06 RESPECTIVELY AS AGAINST THE PENALTIES OF ` .8,18,29,461/- AND ` .7,35,86,368/-, LEVIED BY THE ASSESSING AUTHORITY. 8. LIKEWISE IN THE MATTER OF REPAYM ENT OF LOANS IN CASH, THE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND THAT CASH REPAYMENTS AMOUNTED TO ` .72,25,000/- AND ` .23,39,000/- FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY AS AGAINST T HE AMOUNTS CONSIDERED BY THE ASSESSING OFFICER AT ` .7,10,45,296/- AND ` .4,89,91,032/-. THE DIFFERENTIAL AMOUNTS OF ` .6,38,20,926/- AND ITA 1909 TO 1912/10 & 18 44 TO 1847/10 6 ` .4,66,52,032/- WERE ADJUSTED BY JOURNAL ENTRIES FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. ACCORDINGL Y HE MODIFIED THE PENALTY UNDER SECTION 271E FOR THE ASSESSMENT Y EAR 2004-05 TO ` .72,25,000/- AS AGAINST THE PENALTY OF ` .7,10,45,296/- LEVIED BY THE ASSESSING AUTHORITY. SIMILARLY FOR THE ASSESSMENT YEAR 2005-06 THE COMMISSIONER OF INCOME-TAX (APPEALS) MODIFIED THE P ENALTY UNDER SECTION 271E TO ` .23,39,000/- AS AGAINST THE PENALTY OF ` .4,89,91,032/- LEVIED BY THE ASSESSING AUTHORITY. THE FIRST APPEALS WERE THUS DISPOSED OF BY THE COMMISSIONER OF INCOME -TAX(APPEALS) LIMITING THE QUANTUM OF PENALTIES UNDER SECTIONS 27 1D AND 271E TO THE ACTUAL AMOUNT OF THE CASH TRANSACTIONS AND BY E XCLUDING THE AMOUNTS COVERED BY THE JOURNAL ENTRIES. 9. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) FOR THE REASON THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN EX CLUDING THE JOURNAL ENTRY TRANSACTIONS FROM THE COMPUTATION OF PENALTIES LEVIED UNDER SECTIONS 271D AND 271E. THE ASSESSEE IS ALSO EQUALLY AGGRIEVED FOR THE REASON THAT THE COMMISSIONER OF I NCOME- TAX(APPEALS) HAS CONFIRMED THE PENALTIES UNDER SECT IONS 271D AND 271E TO THE EXTENT OF THE CASH TRANSACTIONS WITHOUT GOING INTO THE ITA 1909 TO 1912/10 & 18 44 TO 1847/10 7 EXPLANATIONS OFFERED BY THE ASSESSEE AND WITHOUT EX AMINING THE RELEVANCE OF SECTION 273B PROVIDED IN THE INCOME-TA X ACT, 1961. IT IS IN THESE CIRCUMSTANCES THAT THE IMPUGNED CROSS APPE ALS HAVE BEEN FILED BEFORE THIS TRIBUNAL. 9. WE HEARD SHRI K.E.B.RENGARAJAN, THE LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE AND SHRI S.SRIDHA R, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE. 10. THE LEARNED STANDING COUNSEL APP EARING FOR THE REVENUE CONTENDED THAT THE LAW STATED IN SECTIONS 2 69SS AND 269T MENTIONS ONLY ABOUT ACCEPTANCE OF LOANS AND DEPOSIT S AND REPAYMENT OF CERTAIN LOANS AND DEPOSITS AND DOES NO T DISTINGUISH BETWEEN LOANS AND DEPOSITS TRANSACTED IN CASH OR TR ANSACTED THROUGH JOURNAL ENTRIES. THE LEARNED STANDING COUNSEL SUBM ITTED THAT EVEN THE JOURNAL ENTRIES PASSED BY THE ASSESSEE WERE NOT EMPTY ENTRIES BUT THEY WERE REPRESENTED MOVEMENT OF FUNDS FROM ON E ACCOUNT TO ANOTHER. HE SUBMITTED THAT WHEN THE VIOLATION OF S ECTIONS 269SS AND 269T ARE PROVED AND WRIT LARGE IN THE ACCOUNTS OF T HE ASSESSEE, THE ASSESSING AUTHORITY IS JUSTIFIED IN IMPOSING THE PE NALTY AS PRESCRIBED BY LAW AND, THEREFORE, THE COMMISSIONER OF INCOME-T AX(APPEALS) HAS ITA 1909 TO 1912/10 & 18 44 TO 1847/10 8 ERRED IN GRANTING PARTIAL RELIEF TO THE ASSESSEE ON THE GROUND THAT JOURNAL ENTRY IS NOT CONCEIVED IN LAW. 12. SHRI S.SRIDHAR, THE LEARNED COUN SEL APPEARING FOR THE ASSESSEE CONTENDED THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) IS JUSTIFIED TO THE EXTENT OF HIS ORDER EXCLUDING T HE TRANSACTIONS COVERED BY JOURNAL ENTRIES FROM THE AMBIT OF SECTIO NS 269SS AND 269T, IN VIEW OF A SERIES OF DECISIONS RENDERED BY DIFFERENT BENCHES OF THE TRIBUNAL ON THE SUBJECT. HE REFERRED TO THE ORDERS OF THE TRIBUNAL, NAMELY, DECISION OF THE CHENNAI C-BENCH I N THE CASE OF M/S.PHOENIX ENTERTAINMENT PVT. LTD. IN ITA NO.2048( MDS)/2008, IN THE CASE OF SHRI S.DURAIRAJ IN ITA NO.2009(MDS)/200 6, THE DECISION OF THE AGRA BENCH IN THE CASE OF ITO VS. AMAR NATH SHI VRAJ (HUF) AND THE DECISION OF THE PUNE BENCH IN THE CASE OF SUNFL OWER BUILDERS(P) LTD. VS. DCIT. HE EXPLAINED THAT IN ALL THE DECISI ONS MENTIONED ABOVE THE TRIBUNAL HAS TAKEN A UNANIMOUS VIEW THAT IN ORD ER TO ATTRACT THE PROVISIONS OF LAW CONTAINED IN SECTIONS 269SS AND 2 69T, IT IS NECESSARY THAT MONEY SHOULD PASS FROM ONE PERSON TO ANOTHER BY WAY OF LOAN OR DEPOSIT OR BY WAY OF REPAYMENT OF LO AN OR DEPOSIT. AS IN THE CASE OF JOURNAL ENTRIES, NO MONEY HAS BEEN T RANSFERRED FROM ITA 1909 TO 1912/10 & 18 44 TO 1847/10 9 PERSON TO PERSON, THERE CANNOT BE A CASE OF VIOLATI ON OF SECTIONS 269SS AND 269T. 13. REGARDING THE PORTION OF PENALTY CONFIRMED BY THE COMMISSIONER OF INCOME-TAX(APPEALS), THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS NOT CONSIDERED THE BASIC FACTS OF THE PRESENT A PPEALS EVEN THOUGH EXPLAINED TO HIM IN VERY MUCH DETAIL. HE EX PLAINED THAT ALL THESE LOANS AND DEPOSITS, STATED TO BE SO HAVE BEEN TRANSACTED BETWEEN THE ASSESSEE AS A DIRECTOR OF THE COMPANIES AND WITH ASSOCIATE PERSONS IN THE COURSE OF BUSINESS TO MEET THE EXIGENCIES AND FOR THE PURPOSE OF EARNING REVENUE AND IN SUCH CIRCUMSTANCES WHERE SUFFICIENT AND REASONABLE CAUSES ARE EXPLAINE D, THE COMMISSIONER OF INCOME-TAX(APPEALS) SHOULD NOT HAVE LEVIED ANY AMOUNT OF PENALTY IN THIS CASE. 14. HE REFERRED TO SECTION 273B WHER E IT IS STATED THAT NO PENALTY SHALL BE IMPOSABLE ON THE ASSESSEE UNDER SE CTIONS 271D AND 271E, AMONG OTHER SECTIONS, WHERE IT IS PROVED THAT THERE WAS REASONABLE CAUSE FOR THE ALLEGED FAILURE. THE COMM ISSIONER OF INCOME-TAX(APPEALS) HAS GROSSLY ERRED IN NOT APPLYI NG HIS MIND TO THE LAW AS STATED IN SECTION 273B IN THE LIGHT OF THE F ACTS OF THESE CASES. ITA 1909 TO 1912/10 & 18 44 TO 1847/10 10 15. THE LEARNED COUNSEL FOR THE ASSE SSEE FURTHER RELIED ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD., 285 ITR 221, WHEREIN THE COURT HAS HELD THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE D IRECTOR-CUM- SHAREHOLDER WAS NOT A LOAN OR DEPOSIT AND IT WAS ON LY A CURRENT ACCOUNT IN NATURE AND NO INTEREST WAS BEING CHARGED FOR ABOVE TRANSACTION, THE LEVY OF PENALTY WAS NOT JUSTIFIED. HE FURTHER RELIED ON ANOTHER JUDGMENT OF THE HONBLE MADRAS HIGH COURT I N THE CASE OF CIT VS. LAKSHMI TRUST CO., 303 ITR 99, WHERE THE CO URT HAS HELD THAT IF THERE WERE GENUINE AND BONA FIDE TRANSACTIONS AN D THE TAXPAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CH EQUE OR DEMAND DRAFT FOR SOME BONA FIDE REASON, THE AUTHORITY VEST ED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETION NOT TO LEVY PENA LTY. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE ABOVE D ECISION SQUARELY APPLIES TO THE PRESENT CASE AS THE TRANSACTIONS WER E MADE ONLY TO MEET THE EXIGENCIES OF BUSINESS. THE LEARNED COUNS EL ALSO RELIED ON ANOTHER JUDGMENT OF THE HONBLE MADRAS HIGH COURT R ENDERED IN THE CASE OF CIT VS. BALAJI TRADERS, 303 ITR 312, WHERE AGAIN THE HONBLE HIGH COURT HAS HELD THAT WHERE THE TRANSACTIONS ARE GENUINE AND BONA FIDE AND WERE MADE IN EXIGENCIES OF BUSINESS W HEN LOANS AND ITA 1909 TO 1912/10 & 18 44 TO 1847/10 11 DEPOSITS ARE NOT COMING THROUGH DRAFTS AND CHEQUES, LEVY OF PENALTY WOULD NOT BE JUSTIFIED. 16. THE LEARNED COUNSEL, THEREFORE, ARGUED THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS FAILED TO A PPRECIATE THE FACTS OF THE CASE AND TO FOLLOW THE JUDGMENTS OF TH E JURISDICTIONAL HIGH COURT ON THE ISSUES INVOLVED IN THESE APPEALS. HE EXPLAINED THAT THE TRANSACTIONS ALLEGED BY THE ASSESSING AUTHORITY WER E MADE BY THE ASSESSEE AS DIRECTOR WITH HIS COMPANIES AND ALSO WI TH HIS ASSOCIATES FOR THE PURPOSE OF MEETING URGENT FINANCIAL REQUIRE MENTS AND ESPECIALLY IN THE CIRCUMSTANCES WHERE FUNDS WERE NO T FORTHCOMING, PENALTY SHOULD NOT HAVE BEEN LEVIED NOT ONLY ON THE GROUND OF REASONABLENESS AND GENUINENESS BUT ALSO ON THE GROU ND THAT THESE TRANSACTIONS WERE MAINLY BETWEEN COMPANIES AND DIRE CTORS ON A CURRENT ACCOUNT BASIS. HE THEREFORE SUBMITTED THAT THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS) MAY BE SET ASID E AND THE ENTIRE PENALTIES BE DELETED. 17. WE HEARD BOTH THE SIDES IN VERY DETAIL AND EXAMINED THE FACTS OF THE CASE. REGARDING THE APPEALS FILED BY THE REVENUE, AS ALREADY STATED, THE ONLY ISSUE IS AS TO WHETHER THE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUSTIFIED IN EXCLUDING THE J OURNAL ENTRY ITA 1909 TO 1912/10 & 18 44 TO 1847/10 12 TRANSACTIONS FROM THE AMBIT OF SECTIONS 269SS AND 2 69T OR NOT. SECTION 269SS PROVIDES THAT NO PERSON SHALL TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF THE AGGREGATE OF SUCH LOANS OR DEPOSITS EXCEED THE PRESCRIBED LIMIT. SECTION 269T PROVIDES THAT LIKEWISE NO REPAYMENT OF ANY LOAN OR DEPOSIT SHALL BE MADE OTHERWISE THAN BY SUCH BANK INSTRUMENTS WHERE THE AMOUNT EXCE EDS THE LIMIT. IN BOTH THESE SECTIONS WHAT IS TO BE SEEN IS THAT L AW BECOMES OPERATIVE WHEN LOAN OR DEPOSIT IS ACCEPTED OR LOAN OR DEPOSIT IS REPAID. THE TERMS ACCEPTED AND REPAID CONNOTE S ACTUAL TRANSFER OF FUNDS FROM PERSON TO PERSON. THE LAW DISCOURAGES T RANSFER OF SUCH FUNDS BY CASH. THE LAW FURTHER PROVIDES THAT SUCH TRANSFER SHOULD BE MADE THROUGH PRESCRIBED BANK INSTRUMENTS. WHEN THE TERMS ARE PARTICULAR ABOUT THE MOVEMENTS OF FUNDS FROM ONE PE RSON TO ANOTHER, THE SECTION WOULD OPERATE ONLY IF THE LOANS OR DEPO SITS ARE ACCEPTED OR LOANS OR DEPOSITS ARE REPAID DE FACTO BY TRANSMISSION OF FUNDS, IN PRAESENTI. 18. THIS VIEW HAS BEEN EXPRESSED IN A SERIES OF TRIBUNAL DECISIONS REFERRED TO BY THE COMMISSIONER OF INCOME -TAX(APPEALS) IN HIS ORDERS. THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. ITA 1909 TO 1912/10 & 18 44 TO 1847/10 13 AMAR NATH SHIVRAJ(HUF), THE PUNE BENCH OF THE TRIBU NAL IN THE CASE OF SUNFLOWER BUILDERS(P) LTD. VS. DCIT, THE CHENNAI BENCH-C OF THE TRIBUNAL IN THE CASE OF M/S.PHOENIX ENTERTAINMENT P VT. LTD. HAVE HELD THAT SECTIONS 269SS AND 269T APPLY ONLY IN CASES WH ERE MONEY PASSED FROM ONE PERSON TO ANOTHER BY WAY OF ACCEPTI NG OR REPAYING LOAN OR DEPOSITS. IT WAS ALSO HELD IN THOSE DECISI ONS THAT THE SAID SECTIONS CANNOT BE APPLIED WHERE A DEBT IS ACKNOWLE DGED BY PASSING ENTRIES IN THE BOOKS OF ACCOUNTS. 19. IT IS NOW A SETTLED POSITION THA T PENALTIES UNDER SECTIONS 271D AND 271E CANNOT BE LEVIED ON ADJUSTMENTS MADE IN THE PERSONAL ACCOUNTS THROUGH JOURNAL ENTRIES AS NO ACT UAL PAYMENT OR RECEIPT OF MONEY IS INVOLVED. IN VIEW OF THIS POSI TION THE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUSTIFIED IN HOLDING THAT THE AMOUNT COVERED BY JOURNAL ENTRIES REFERRED IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE CONSIDERED FOR THE PURPOS E OF EITHER SECTION 269SS OR SECTION 269T. ACCORDINGLY THE COM MISSIONER OF INCOME-TAX(APPEALS) IS JUSTIFIED IN LAW IN RESTRICT ING THE QUANTUM OF VIOLATION AND CONSEQUENTLY MODIFYING THE QUANTUM OF PENALTY LEVIED UNDER SECTIONS 271D AND 271E. ITA 1909 TO 1912/10 & 18 44 TO 1847/10 14 20. THE APPEALS FILED BY THE REVENUE ARE LIABLE TO BE DISMISSED. 21. NOW REGARDING THE APPEALS FILED BY THE ASSESSEE, THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS) D O NOT DEAL WITH ALMOST ALL THE GROUNDS RAISED BY THE ASSESSEE BOTH IN LAW AND IN FACTS. THE DECISION OF THE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD., 285 ITR 221 HAS HEL D THAT WHEN THE TRANSACTIONS BETWEEN COMPANY AND ITS DIRECTORS ARE GONE THROUGH CURRENT ACCOUNTS BETWEEN THEM, THE PROVISIONS OF LA W CONTAINED IN SECTION 269SS CANNOT BE INVOKED. THIS PRINCIPLE WA S VERY MUCH HIGHLIGHTED BEFORE THE COMMISSIONER OF INCOME-TAX(A PPEALS). BUT HE HAS NOT STATED ANYTHING REGARDING THE FIDUCIARY POS ITION OF THE ASSESSEE VIS--VIS THE COMPANY WITH WHICH TRANSACTI ON HAD TAKEN PLACE. AGAIN THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. LAKSHMI TRUST CO., 303 ITR 99 HAS HELD THAT IF THE TRANSACTIONS WERE GENUINE AND BONA FIDE AND THE TAX PAYER COULD NOT G ET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR BONA FIDE REASONS, THE AUTHORITY VESTED WITH THE POWER TO IMP OSE PENALTY HAS A DISCRETION NOT TO LEVY PENALTY. IN ORDER TO EXAMIN E WHETHER THE ABOVE DECISIONS ARE APPLICABLE TO THE PRESENT CASE OR NOT , THE ITA 1909 TO 1912/10 & 18 44 TO 1847/10 15 COMMISSIONER OF INCOME-TAX(APPEALS) SHOULD HAVE CON SIDERED THE FACTS OF THE CASES IN THE LIGHT OF THE PROVISIONS O F LAW STATED IN SECTION 273B. BUT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS NOT MADE ANY SUCH ATTEMPT IN HIS ORDERS. 22. IN SHORT, WHAT WE FIND IS THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS CONSIDERED ONLY THE ISSUE O F TRANSACTIONS COVERED BY JOURNAL ENTRIES WHICH FINALLY LED HIM TO EXCLUDE THE JOURNAL ENTRY AMOUNTS FROM THE SCOPE OF SECTIONS 269SS AND 269T. HE HAS NOT CONSIDERED ANY OF THE ARGUMENTS OF THE ASSESSEE ON THE QUESTION OF THE FIDUCIARY POSITION OF THE PARTIES, THE NATUR E OF THE ACCOUNTS, WHETHER CURRENT OR LOAN OR DEPOSIT, WHETHER THE TRA NSACTIONS WERE BONA FIDE AND MADE IN COMPELLING CIRCUMSTANCES, ETC . 23. IN SUCH CIRCUMSTANCES IT IS NOT POSSIBLE FOR US TO EFFECTIVELY CONSIDER THE GROUNDS RAISED IN THE APPE ALS FILED BY THE ASSESSEE SO AS TO MAKE A FAIR AND PROPER ADJUDICATI ON. THE ONLY REMEDY IS THAT THE GROUNDS RAISED BY THE ASSESSEE H AVE TO BE RE- EXAMINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IN THE LIGHT OF THE RELEVANT FACTS AND THE CIRCUMSTANCES OF THE CAS E IN A DETAILED MANNER. THEREFORE, WE FIND IT NECESSARY TO REMIT B ACK THE ISSUES ITA 1909 TO 1912/10 & 18 44 TO 1847/10 16 RAISED BY THE ASSESSEE IN HIS APPEALS FOR THE CONSI DERATION OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IN ACCORDANCE W ITH LAW. 24. WE ACCORDINGLY REMIT BACK THESE FILES TO THE COMMISSIONER OF INCOME-TAX(APPEALS) TO CONSIDER THE CONTENTIONS RAISED BY THE ASSESSEE AGAINST THE PENALTIES SUSTAI NED BY HIM UNDER SECTIONS 271D AND 2271E, IN THE LIGHT OF THE FACTS OF THE CASE TO BE DISCUSSED IN DETAIL AND IN ACCORDANCE WITH LAW. TH E ASSESSEE SHALL BE GIVEN EFFECTIVE OPPORTUNITY OF BEING HEARD. 25. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. THE APPEALS FILED BY THE ASSESSEE ARE T REATED AS ALLOWED FOR STATISTICAL PURPOSES AS THE MATTERS RAISED BY T HE ASSESSEE HAVE BEEN REMANDED BACK TO THE COMMISSIONER OF INCOME-TA X(APPEALS). ORDER PRONOUNCED ON THURSDAY , THE 5 TH DAY OF MAY, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 5 TH MAY, 2011. COPY TO: 1. APPELLANT. V.A.P. 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR 6. GUARD FILE