PRAYER HOUSING LLP (SUCCESSOR TO PRAYER HOUSING PVT LTD), MUMBAI V. ADDL CIT 8(2), MUMBAI

ITA 2007/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3303 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 05-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2011
• Court: TRIBUNAL
• Department Lawyers: AMIT KUMAR SINGH
• Assessee Lawyers: D V LAKHANI
• Keywords: Period of limitation; Reasonable cause; Competent authority; Time period of passing order
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 2007 /MUM/ 2011 (ASSESSMENT YEAR 2006 - 07 ) PRAYER HOUSING LLP (SUCCESSOR OF PRAYER HOUSING PVT. LTD.) ABHIJIT, PLOT NO. B - 9 1 ST FLOOR, KA POLE CHSL JUNCTION OF M.V. & 11 TH ROAD JVPD SCHEME, JUHU MUMBAI - 400 049. VS. ADD. CIT - 8(2) ROOM NO. 264 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AACCP1239K ASSESSEE BY SHRI D.V. LAKHANI DEPARTMENT BY SHRI AMIT KUMAR SINGH DATE OF HEARING 10.3 . 201 6 DATE OF PRONOUNCEMENT 1.6 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 15 - 12 - 2010 PASSED BY LD CIT(A) - 17, MUMBAI FOR ASSESSMENT YEAR 2006 - 07, WHER EIN HE HAS CONFIRMED THE PENALTY LEVIED BY THE ADDL. CIT U/S 271D OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SEC. 269SS OF THE ACT. 2. THE FACTS RELATING TO THE ISSUE UNDER CONSIDERATION ARE SET OUT IN BRIEF. THE ASSESSING OFFICER NOTICED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS RECEIVED A LOAN OF RS.16.00 LAKHS BY WAY OF CASH AND THE SAME HAS VIOLATED THE PROVISIONS OF SEC. 269SS OF THE ACT. ACCORDINGLY HE INTIMATED THE SAME TO THE ADDL. COMMISSIONER OF INCOME TAX ON 31. 12.2008. SUBSEQUENTLY, THE ADDL. CIT INITIATED PENALTY PROCEEDINGS U/S 271D OF THE ACT BY ISSUING NOTICE PRAYER HOUSING LLP 2 ON 11.06.2009. ANOTHER NOTICE WAS ALSO ISSUED ON 17.08.2009. THE PENALTY ORDER WAS FINALLY PASSED ON 21.10.2009. 3. THE ASSESSEE SUBMITTED THA T THE AMOUNT OF RS.16.00 LAKHS WAS RECEIVED FROM ITS DIRECTOR NAMED SHRI GAUTAM PATEL AS ADVANCE AMOUNT TOWARDS SALE OF FLAT THAT IS GOING TO BE CONSTRUCTED IN BHANDUP AREA. IN SUPPORT OF THE SAME, THE ASSESSEE SUBMITTED A CONFIRMATION LETTER, WHEREIN IT WAS STATED 5000 SQ.FT. WAS AGREED TO BE ALLOTTED FOR RS.1,500/ - PER SQ.FT. THE ASSESSEE ALSO FILED ANOTHER CONFIRMATION LETTER, WHEREIN IT WAS STATED THAT 5000 SQ.FT. WAS AGREED TO BE ALLOTTED FOR RS.2000/ - SQ.FT. FURTHER, IT WAS CONTENDED THAT THE TRANS ACTIONS BETWEEN A DIRECTOR AND CLOSELY HELD COMPANY SHOULD NOT BE TREATED AS LOAN OR DEPOSIT COVERED BY SEC. 269SS OF THE ACT. THE ASSESSEE ALSO CONTENDED THAT THE PROCEEDING IS BARRED BY LIMITATION ALSO. 4. THE ADDL. CIT HELD THAT THE PROCEEDINGS AR E NOT BARRED BY LIMITATION. THE ADDL. CIT NOTICED THAT THE ABOVE SAID AMOUNT OF RS.16.00 LAKHS WAS SHOWN AS UNSECURED LOANS IN ITS BALANCE SHEET. FURTHER THE ALLEGED RECEIPT OF ADVANCE TOWARDS SALE OF FLAT WAS IN RESPECT OF A PROJECT, FOR WHICH NEITHER THE LAND HAS BEEN PURCHASED NOR PLAN PREPARED. FURTHER, THERE WAS DIFFERENCE IN THE SELLING RATE SHOWN IN THE TWO CONFIRMATION LETTERS FILED BY THE ASSESSEE. ACCORDINGLY HE REJECTED THE SUBMISSIONS OF THE ASSESSEE AND ACCORDINGLY HELD THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 269SS OF THE ACT AND ACCORDINGLY LEVIED A PENALTY OF RS.16.00 LAKHS U/S 271D OF THE ACT. 5. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) HELD THAT THE PROCEEDING WAS NOT BARRED BY LIMITATION. WITH REGARD TO THE CONT ENTIONS URGED ON MERITS, THE LD CIT(A) HELD THAT THE ADDL. CIT WAS JUSTIFIED IN LEVYING THE PENALTY U/S 269SS OF THE ACT. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. PRAYER HOUSING LLP 3 6. THE FIRST ISSUE RELATES TO THE LIMITATION. THE CONTENTION OF THE AS SESSEE IS THAT THE ASSESSING OFFICER HAS INTIMATED THE ADDL CIT ABOUT THE VIOLATION OF PROVISIONS OF SEC. 269SS OF THE ACT ON 31.12.2008 AND HENCE THE LIMITATION PERIOD SHOULD BE COUNTED FROM THAT DATE. IN THIS REGARD, THE LD A.R PLACED RELIANCE ON THE DE CISION RENDERED IN THE CASE REPORTED IN 287 ITR 239. ACCORDINGLY, IT WAS CONTENDED THAT THE PENALTY PROCEEDINGS SHOULD HAVE BEEN COMPLETED BY 30 - 06 - 2009. HOWEVER, THE LD CIT(A) NOTICED THAT THE ADDL. CIT HAS INITIATED PROCEEDING ONLY ON 11.06.2009 AND HE NCE THE PENALTY PROCEEDING WAS NOT BARRED BY LIMITATION. 7. WE HEARD THE PARTIES ON THIS ISSUE. A PROCEEDING UNDER THE ACT CAN BE SAID TO BE INITIATED ONLY WHEN A NOTICE WAS ISSUED TO THE ASSESSEE BY THE COMPETENT AUTHORITY. UNDER THE ACT, THE ASSESS ING OFFICER IS NOT ENTITLED TO INITIATE PENALTY PROCEEDINGS U/S 271D OF THE ACT. HENCE THE AO HAS INTIMATED ABOUT THE VIOLATION OF THE PROVISIONS OF SEC. 269SS OF THE ACT ON 31.12.2008. IT IS THE ONLY ADDL. COMMISSIONER, BEING A COMPETENT AUTHORITY, HAS ISSUED NOTICE U/S 271D OF THE ACT FOR THE FIRST TIME ON 11 - 06 - 2009. THE PROVISIONS OF SEC. 275(1)(C) OF THE ACT PRESCRIBE THE TIME LIMIT FOR COMPLETION OF THE PENALTY PROCEEDINGS U/S 271D OF THE ACT AND THE SAME READS AS UNDER: - 275(1) NO ORDER IMPOSIN G A PENALTY UNDER THIS CHAPTER SHALL BE PASSED -- - (A) (B). (C) IN ANY OTHER CASE, AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED , OR SIX MON THS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIOD EXPIRES LATER. PRAYER HOUSING LLP 4 ON A CAREFUL PERUSAL OF THE ABOVE SAID PROVISIONS, WE ARE OF THE VIEW THAT THE TIME LIMIT SHOULD BE COMPUTED FROM THE DATE ON WHICH ACTI ON FOR IMPOSITION OF PENALTY HAS BEEN INITIATED. 8. ACCORDING TO THE ASSESSEE, THE INTIMATION GIVEN BY THE AO TO THE ADDL. CIT ABOUT THE IMPUGNED VIOLATION WOULD AMOUNT TO INITIATION OF ACTION FOR IMPOSITION OF PENALTY. WE ARE UNABLE TO AGREE WIT H THE SAME. THE AUTHORITY PRESCRIBED UNDER THE ACT FOR IMPOSITION OF PENALTY IS NOT THE ASSESSING OFFICER. FURTHER THE ASSESSING OFFICER HAS ONLY INTIMATED ABOUT THE VIOLATION TO THE ADDL CIT ON 31.12.2008. THE ADDL. CIT, UNDER THE ACT, MAY ACCEPT THE R ECOMMENDATION OF THE AO OR HE MAY REJECT THE SAME. ACCORDINGLY, WE ARE OF THE VIEW THAT THE INTIMATION GIVEN BY THE AO CANNOT BE CONSIDERED TO BE INITIATION OF PENALTY PROCEEDING U/S 271D OF THE ACT. FURTHER, AS STATED EARLIER, THE PENALTY PROCEEDINGS CAN BE SAID TO HAVE BEEN INITIATED ONLY WHEN THE NOTICE RELATING TO THE SAME ARE ISSUED TO THE ASSESSEE. ACCORDINGLY WE AGREE WITH THE VIEW OF THE TAX AUTHORITIES THAT THE PENALTY WAS INITIATED IN THE INSTANT CASE ONLY ON 11.06.2009. THE TIME LIMIT FOR COMP LETION OF THE PENALTY PROCEEDINGS AS PER SEC. 275(1)(C) SHALL BE EITHER 31.3.2010 OR 31.12.2009, WHICHEVER EXPIRES LATER. ACCORDINGLY, IN THE INSTANT CASE, THE TIME LIMIT SHALL EXPIRE ON 31.3.2010. IN THE INSTANT CASE, THE PENALTY ORDER HAS BEEN PASSED O N 21.10.2009 AND HENCE WE ARE OF THE VIEW THAT THE SAME IS NOT BARRED BY LIMITATION. IN THE CASE RELIED UPON BY THE ASSESSEE, WE NOTICE THAT THE HONBLE HIGH COURT WAS REFERRING TO THE INITIATION OF PROCEEDINGS BY THE ASSESSING OFFICER, I.E., THE COMPETEN T AUTHORITY IS REFERRED AS AO. ACCORDINGLY, WE CONFIRM THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 9. WITH REGARD TO THE ISSUE URGED ON MERITS, THE LD A.R RAISED FOLLOWING CONTENTIONS BEFORE US: - PRAYER HOUSING LLP 5 (A) THE AMOUNT WAS RECEIVED AS ADVANCE TOWARDS SALE O F FLAT FROM A DIRECTOR. THE DIFFERENCE BETWEEN THE SELLING RATE MENTIONED IN THE CONFIRMATION LETTERS IS DUE TO OFFERING OF ADDITIONAL AMENITIES. (B) EVEN IF IT IS CONSIDERED AS DEPOSIT, THE AMOUNT RECEIVED FROM DIRECTOR IS NOT TREATED AS DEPOSIT UNDER COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975. (C) EVEN THOUGH THE AMOUNT RECEIVED FROM GAUTAM PATEL (DIRECTOR) AS ADVANCE TOWARDS SALE OF FLATS AS UNSECURED LOANS IN THE BALANCE SHEET, THE BOOKS OF ACCOUNT WOULD SHOW THAT THE ASSESSEE HAS ACCOUNTE D FOR RS.16.00 LAKHS SEPARATELY, I.E., IN THE BALANCE SHEET, BOTH THE ACCOUNTS WERE GROUPED TOGETHER. (D) GAUTAM PATEL HAS ACTED IN DUAL CAPACITY, I.E., IN HIS PERSONAL CAPACITY WHEN GIVEN ADVANCE TO THE ASSESSEE AND AT THE TIME OF RECEIVING THE AMOUNT AS DIRECTOR OF THE ASSESSEE COMPANY. (E) THE AMOUNT RECEIVED AS ADVANCE HAS BEEN USED TO MEET THE LABOUR PAYMENTS FOR DEVELOPMENT WORK. (F) THE GENUINENESS OF TRANSACTIONS WAS NOT DOUBTED. 10. SECTION 273B PROVIDES THAT THE PENALTY U/S 271D OF THE ACT SHALL NOT BE IMPOSABLE IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. THUS THE PENALTY U/S 271D OF THE ACT SHALL NOT BE LEVIEBLE, IF THE ASSESSEE SHOWS THAT THERE WAS A REASONABLE CAUSE FOR ACCEPTING THE LOAN OR DEPOSIT BY WAY OF CASH. WE NOTICE THAT THE ASSESSEE HAS ONLY CONTENDED BEFORE THE TAX AUTHORITIES THAT THE IMPUGNED AMOUNT WAS RECEIVED AS ADVANCE TOWARDS SALE OF FLAT. BEFORE US, THE ASSESSEE HAS RAISED SOME MORE CONTENTIONS, WHICH WERE NOT EXAMINED BY THE TAX AUTHORITIES. WITH REGARD TO THE OBSERVATION OF THE TAX AUTHORITIES THAT THE ASSESSEE HAS SHOWN THE ADVANCE AMOUNT AS UNSECURED LOANS IN THE BALANCE SHEET, THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MAINTAINED TWO SEPARATE ACCOUNTS. THIS FACT ALSO REQUIRES EXAMINATION BY THE TAX AUTHORITIES, SINCE IT IS URGED BEFORE US FOR THE FIRST TIME. PRAYER HOUSING LLP 6 11. IN VIEW OF THE FRESH CONTENTIONS RAISED BEFORE US AND ALSO IN VIEW OF THE FACT THAT THE ACCOUNTS OF THE ASSESSEE REQUIRE VERIFICATION, IN THE INTEREST OF N ATURAL JUSTICE, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND RESTORE THE SAME TO THE FILE OF THE ADDL. COMMISSIONER WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY CONSIDERING VARIO US CONTENTIONS THAT MAY BE RAISED BY THE ASSESSEE. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 1 . 6 .2016 . SD/ - SD/ - (RAMLAL NEGI ) (B .R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 1 / 6 /20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GU ARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS