Sattar Sons Packaging Private Limited , Hyderabad V. Addl. Commissioner of Income Tax, Range-3, Hyderabad

ITA 2077/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3212 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2012-2013
• Appeal Filed On: 26-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: SYED JAMEELUDDIN
• Keywords: Bonafide belief; Reasonable cause
• Section: 6; 273B; 143(3); 271D; 271E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO. 2077/HYD/2018 ASSESSMENT YEAR: 2012-13 M/S. SATTAR SONS PACKAGING PRIVATE LIMITED, HYDERABAD [PAN: AAFCS4535G] VS ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-3, HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI SYED JAMEELUDDIN, AR FOR REVENUE : SHRI NILANJAN DEY, DR DATE OF HEARING : 19-02-2019 DATE OF PRONOUNCEMENT : 27-02-2019 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS ASSESSEES APPEAL FOR THE AY. 2012-13, AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD, DATED 23-11-2017. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE-COMPAN Y, ENGAGED IN THE BUSINESS OF MANUFACTURE OF CORRUGATED BOXES, E-FILED ITS RETURN OF INCOME FOR THE AY. 2012-13 ON 30 -09-2012, ADMITTING TOTAL INCOME OF RS. NIL. THE ASSESSMENT WA S COMPLETED U/S. 143(3) OF THE INCOME TAX ACT [ACT], AC CEPTING THE ASSESSEES RETURNED INCOME. THEREAFTER, THE ASSES SING ITA. NO. 2077/HYD/2018 :- 2 -: OFFICER ISSUED A SHOW CAUSE NOTICE FOR LEVY OF PENAL TY U/S. 271E OF THE ACT FOR VIOLATING THE PROVISIONS OF SECTION 269T OF THE ACT. 2.1. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED ITS REPLY DT. 03-12-2015 STATING THAT THE ASSESSEE HAS M ADE THE RE-PAYMENT OF LOAN IN CASH UNDER THE BONAFIDE BELI EF THAT REPAYMENT CAN BE MADE IN CASH TO THE DIRECTORS OF THE COMPANY AND ALSO TO REPUTED COMPANIES. IT WAS SUBMITTE D THAT IT WAS NOT AIMED AT AVOIDING ANY TAX LIABILITY AND TH E GENUINENESS OF TRANSACTION WAS NOT DOUBTED BY THE ASSES SING OFFICER. THE ASSESSEE RELIED UPON THE JUDGMENT OF TH E HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. MUTHOOT FIN ANCERS [371 ITR 408] (DELHI) AND ALSO THE DECISION OF THE HO N'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. LOKPAT FILM EXCHANGE (CINEMA) [212 CTR 371] (RAJ.) IN SUPPORT OF ABOVE CONTENTIONS. THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE SUBMISSIONS OF ASSESSEE. HE OBSER VED THAT THE DECISIONS OF THE HON'BLE HIGH COURTS OF DELHI AND RAJASTHAN WERE RENDERED IN THE CONTEXT OF TRANSACTIONS BETWEEN A FIRM AND ITS PARTNERS, WHEREAS IN THE PRESEN T CASE OF ASSESSEE, THE TRANSACTIONS ARE BETWEEN COMPANY, ITS DIR ECTORS AND OTHERS AND THEREFORE THE SAID DECISIONS ARE NOT AP PLICABLE TO THE CASE ON HAND. HE ALSO OBSERVED THAT ASSESSEE HAS NOT ESTABLISHED THE REASONABLE CAUSE FOR VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT. HE RELIED UPON VARIOUS OTHE R DECISIONS TO HOLD THAT THE PENALTY U/S. 271E OF THE ACT I S LEVIABLE, WHERE THE ASSESSEE HAS NOT GIVEN ANY REASON S FOR NOT ITA. NO. 2077/HYD/2018 :- 3 -: COMPLYING WITH THE PROVISIONS OF SECTION 269T OF THE ACT. THUS, HE LEVIED PENALTY OF RS. 12,18,059/- U/S. 271 E OF THE ACT BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, HYDERABAD, IS WRONG IN CONFIRMING THE PENALTY ORDER U/S. 271E OF THE I.T. ACT, 1961, DT. 27- 05-2016, PASSED BY THE ADDITIONAL COMMISSIONER OF I NCOME-TAX, RANGE-3, HYDERABAD. 2. THE C.I.T. (APPEALS) IS NOT JUSTIFIED IN NOT CON SIDERING THE SUBMISSION MADE BY THE ASSESSEE THAT BONA FIDE BELI EF COUPLED WITH THE GENUINENESS OF THE TRANSACTIONS WOULD CONSTITUT E REASONABLE CAUSE UNDER SECTION 273B FOR NOT INVOKING THE PROVI SIONS OF SECTION 271E OF THE I.T. ACT, 1961, AS HELD BY THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF C.LT. VS. MUTHOOT FINANCIERS, REPORT ED IN (2015) 371 ITR 408 (DELHI). 3. THE C.I.T.(APPEALS) IS NOT JUSTIFIED IN NOT CONS IDERING THE SUBMISSION THAT THE ALLEGED CONTRAVENTION OF SECTIO N 269T DID NOT RESULT IN ANY UNACCOUNTED TRANSACTION AND THE SAID TRANSACTIONS WERE MADE UNDER BONA FIDE BELIEF AND WERE NOT MADE WITH A VIEW TO AVOID OR EVADE TAX. IN THIS REGARD, THE ASSESSEE RELIES O N THE DECISION OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF C.I.T. VS. RATNA AGENCIES, REPORTED IN (2006) 284 ITR 609 (MAD). 4. THE C.I.T. (APPEALS) IS NOT JUSTIFIED IN NOT CON SIDERING THE FACT THAT THE ASSESSEE COMPANY WAS RUNNING IN LOSSES RIG HT FROM THE ASSESSMENT YEAR 2006-07 AND THE EXPLANATION OF THE ASSESSEE THAT THE REPAYMENT OF LOANS WAS MADE IN CASH UNDER THE B ONA FIDE BELIEF THAT PAYMENT CAN BE MADE IN CASH TO THE DIRECTORS O F THE COMPANY AND ALSO TO REPUTED COMPANIES AND THE GENUINENESS O F THE SAID TRANSACTIONS WAS NOT AT ALL IN DOUBT. 5. ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT OR BEFORE THE TIME OF HEARING. 2.2. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER OF THE ASSESSING OFF ICER AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. ITA. NO. 2077/HYD/2018 :- 4 -: 3. LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, SUBMITTE D THAT THE ASSESSEES RETURN OF INCOME WAS ACCEPTED BY THE ASSESSING OFFICER, AFTER SCRUTINY U/S. 143(3) OF THE ACT AND NONE OF THE PAYMENTS WERE FOUND TO BE NOT GENUINE AND NO DISALLOWANCE OF ANY EXPENDITURE OR REPAYMENT OF LOAN WAS MADE BY THE ASSESSING OFFICER. HE SUBMITTED THAT ASSESSE E WAS UNDER A BONAFIDE BELIEF THAT THE LOANS TAKEN FROM TH E DIRECTORS AND OTHER REPUTED COMPANIES CAN BE REPAID I N CASH AS WAS SUBMITTED BEFORE THE ASSESSING OFFICER AND CIT( A) IN RESPONSE TO THE NOTICE U/S. 271E OF THE ACT. IN REPLY TO THE ASSESSING OFFICERS FINDING THAT THE DECISION OF THE HO N'BLE HIGH COURT OF DELHI WAS IN THE CASE OF TRANSACTIONS B ETWEEN ASSESSEE-FIRM AND ITS PARTNERS AND THEREFORE IS NOT AP PLICABLE TO THE CASE ON HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RATIO LAID DOWN THEREIN IS APPLICABLE TO THE FACTS OF THE CASE BEFORE US ALSO. HE SUBMITTED THAT IN T HE SAID CASE, THE RATIO LAID DOWN WAS THAT THE CREDITWORTHINESS OF THE PARTNERS AND THE GENUINENESS OF THE TRANSACTIONS COUPLE D WITH RELATIONSHIP WITH TWO PERSONS AND TWO DIFFERENT LEGA L INTERPRETATIONS PUT FORWARD, COULD CONSTITUTE A REASONAB LE CAUSE FOR NOT INVOKING THE PROVISIONS OF SECTION 271D AND 271E OF THE ACT AND THAT SECTION 273B WOULD COME TO THE A ID AND HELP OF ASSESSEE. HON'BLE HIGH COURT FURTHER HE LD THAT MONEY WAS BROUGHT BY PARTNERS OF ASSESSEE-FIRMS AND SOURCE OF MONEY HAD ALSO NOT BEEN DOUBTED BY REVENUE TRA NSACTION MADE BY ASSESSEE WAS BONAFIDE AND NOT AIMED TO AVOI D ANY TAX LIABILITY. THE LD. COUNSEL HAS STATED THAT IN THE CASE ITA. NO. 2077/HYD/2018 :- 5 -: BEFORE US ALSO, THE GENUINENESS OF THE REPAYMENT MADE IN CASH ARE NOT DOUBTED AND THE ASSESSEE HAD SUBMITTED THE SAID EXPLANATION IN RESPONSE TO THE SHOW CAUSE NOTICE U/S. 271E OF THE ACT. 4. LD.DR, ON THE OTHER HAND, HAD ARGUED THAT THE ASSESSE E HAD CLEARLY VIOLATED THE PROVISIONS OF SECTION 269T A ND HAS FAILED TO GIVE SATISFACTORY EXPLANATION AS TO WHY THE PR OVISIONS OF SECTION 269T WERE NOT FOLLOWED AND THEREFORE THE PEN ALTY ORDER IS TO BE SUSTAINED. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT AND NO DISALLOWANCE WHAT-SO-EVER WAS MADE BY THE ASSESSING OFFICER. THUS, IT IS TO BE PRESUMED THAT THE GENUINENESS OF THE PAYMENTS IS NOT DOUBTED BY THE ASSESS ING OFFICER. THE PENALTY U/S. 271E OF THE ACT IS SOUGHT T O BE LEVIED FOR MAKING THE REPAYMENT OF LOANS IN CASH. ASSESSEE H AD PLEADED BONAFIDE BELIEF AS A REASON FOR NOT CONFIR MING WITH THE SAID PROVISION, WHILE THE ASSESSING OFFICER HAS H ELD THAT THE ASSESSEES BOOKS OF ACCOUNT ARE AUDITED AND THE AS SESSEE WAS ASSISTED BY A TAX CONSULTANT AND THEREFORE, THE B ONAFIDE BELIEF IS NOT BELIEVABLE. LET US THEREFORE EXAMINE THE FACTS OF THE CASE AND THE REASONABLENESS OF ASSESSEES EXPLANA TION. THE DETAILS OF THE LOANS REPAID IN CASH ARE AS UNDER: ITA. NO. 2077/HYD/2018 :- 6 -: S. NO. NAME AMOUNT (RS) 1 SRI MOHD . IMRAN B A IG, PAN: ADDPM 3170 H 5,00,000 2 SRI MOHD. IRFAN BAIG, PAN: ABZPM 3780 B 5,00,000 3 MAHINDRA AND MAHIND RA FINANCIAL SERVICES (P) LTD., 1,03,700 4 TATA MOTORS FINANCE LTD., 1,14,359 5.1. FROM THESE DETAILS, WE FIND THAT THE FIRST TWO PERS ONS ARE THE DIRECTORS OF THE COMPANY AND THEIR IDENTITY IS PROVE D AND THE GENUINENESS OF THE SAID PAYMENT IS ALSO NOT DOUBTED BY THE ASSESSING OFFICER. AS REGARDS THE OTHER TWO PARTIE S, WE FIND THAT ASSESSEE HAD TAKEN VEHICLE LOANS AND THE REP AYMENT WAS MADE IN CASH AND THEREFORE, THE GENUINENESS OF TH ESE TRANSACTIONS ALSO COULD NOT BE DOUBTED. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DILLU CINE ENTE RPRISES (P) LTD., VS. ADDL. CIT IN ITA NO. 184/HYD/1999 DT. 27 TH SEPT. 2001 HAS CONSIDERED THE ISSUE OF PENALTY LEVIABLE FO R TECHNICAL BREACH OF PROVISIONS WHERE THE TRANSACTIONS ARE GENUIN E, AND HAS HELD THAT WHEN THE TRANSACTIONS ARE NOT FOR EVASION OF TAX/CONCEALMENT OF INCOME AND BONAFIDE BELIEF OF TH E ASSESSEE WAS THAT IT COULD HAVE MADE THE PAYMENT IN CASH, PE NALTY IS NOT AUTOMATIC AND THE PENALTY LEVIED THERE UNDER U/S. 2 71D OF THE ACT IS NOT VALID . FOR THE SAKE OF CLARITY, AND READY REFERENCE, THE RELEVANT PORTION OF THE SAID TRIBUNALS ORDER IS RE PRODUCED HEREUNDER: THIS BENCH OF THE TRIBUNAL IN INDUSTRIAL ENTERPRI SES VS. DY.CIT (2008) 68 TTJ (HYD) 373 : (2000) 73 ITD 252 (HYD), HELD IN PARA 17 OF ITS ORDER, AS FOLLOWS: ITA. NO. 2077/HYD/2018 :- 7 -: 'PROVISIONS OF S. 269SS WERE BROUGHT IN THE STATUTE BOOK TO COUNTER THE EVASION OF TAX IN CERTAIN CASES, AS CLEARLY STA TED IN THE HEADING OF CHAPTER XX-B OF THE IT ACT, 1961 WHICH READS 'REQUI REMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX.' LEGISLATIVE INTENTION I N BRINGING S. 269SS IN THE IT ACT WAS TO AVOID CERTAIN CIRCUMSTANCES OF TA X EVASION, WHEREBY HUGE TRANSACTIONS ARE MADE OUTSIDE THE BOOKS OF ACC OUNT BY WAY OF CASH. AS FAR AS THE CASE ON HAND BEFORE US IS CONCE RNED, THERE IS NO CASE AGAINST THE ASSESSEE-FIRM THAT THESE TRANSACTIONS H AD ANYTHING TO DO WITH EVASION OF TAX OR CONCEALMENT OF INCOME. AS RIGHTLY POINTED BY THE CIT(A) HIMSELF, IT MAY BE A CASE OF NEGLIGENCE. BUT A NEGLIGENT PERSON DOES NOT HAVE ANY INTENTION OR MEANS REA TO PURPOSE LY VIOLATE ANY PROVISION OF LAW SO AS TO BE VISITED WITH STRINGENT PUNISHMENT OF HEAVY PENALTY.' WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSE L FOR THE ASSESSEE THAT THE OBJECT OF THE PROVISIONS BEING UN EARTHING OF UNACCOUNTED MONEY, IS NOT APPLICABLE TO ANY TRANSAC TION WHICH IS DONE IN AN OPEN MANNER, WHICH IS GENUINE AND IN WHI CH NO UNACCOUNTED MONEY, IS INVOLVED. MERE TECHNICAL BREA CH OF THE PROVISIONS, WHILE THE TRANSACTIONS ARE HELD TO BE G ENUINE, DO NOT ATTRACT THE PROVISIONS OF S. 269SS. IT IS NOT THE C ASE OF THE REVENUE THAT THE AMOUNT INVOLVED WERE UNACCOUNTED TRANSACTI ONS. IT IS AN UNDISPUTED FACT THAT THE TRANSACTIONS ARE GENUINE. BOTH THE ASSESSEE AND THE DIRECTOR WERE ON THE RECORDS OF THE IT DEPA RTMENT AND BOTH DECLARED THESE TRANSACTIONS TO THE DEPARTMENT. THE CHAPTER XX-B AND S. 269SS BEGINS WITH THE HEADING - REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN CERTAIN CASES T O COUNTERACT EVASION OF TAX. THE TERM 'CERTAIN' USED THEREIN, WH EN READ ALONG WITH THE LEGISLATIVE INTENT OF CURBING TAX EVASION, CLEA RLY MEANS THAT ALL LOANS ARE NOT ATTRACTED. THIS SECTION ATTRACTS ONLY 'CERTAIN' LOANS THAT ARE BROUGHT IN BY THE TAXPAYER TO EXPLAIN AWAY HIS UNEXPLAINED CASH OR UNACCOUNTED DEPOSIT. THIS SECTION IS DEFINITELY NOT INTENDED TO PENALISE GENUINE TRANSACTIONS, WHERE NO TAX EVASION IS INVOLVED. IT IS WELL SETTLED THAT THE HEADINGS PREFIXED TO SECTIONS OR SET OF SECTIONS IN SOME MODERN STATUTES ARE REGARDED AS 'PREAMBLES' TO THOSE SECTIONS. THIS VIEW WAS APPROVED BY FAREWELL L.J. IN FLETCHER VS. BIRKENHEAD CORPORATION (1907) 1 K.B. 205. THUS, RESPECTFULLY F OLLOWING THE JUDGMENT OF THIS TRIBUNAL IN INDUSTRIAL ENTERPRISES ' CASE (SUPRA), WE HOLD THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND MR. P.K. SWAMY DO NOT FALL WITHIN THE MISCHIEF SOUGHT TO BE REMEDI ED BY THE SECTION AS THERE IS NO CASE AGAINST THE ASSESSEE THAT THESE TR ANSACTIONS HAD ANYTHING TO DO WITH EVASION OF TAX OR CONCEALMENT O F INCOME. ITA. NO. 2077/HYD/2018 :- 8 -: 5.2. WE FIND THAT SIMILAR VIEW WAS ALSO EXPRESSED BY THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. MUTHOOT FINANCERS (SUPRA). THEREFORE, WE ARE INCLINED TO ACC EPT THE CONTENTIONS OF ASSESSEE OF BONAFIDE BELIEF FOR REPA YMENT OF LOANS IN CASH AND THE PENALTY U/S. 271E OF THE ACT IS DELETED. GROUNDS RAISED BY ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY, 2019 SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED 27 TH FEBRUARY, 2019 TNMM ITA. NO. 2077/HYD/2018 :- 9 -: COPY TO : 1. M/S. SATTAR SONS PACKAGING PRIVATE LIMITED, C/O. SYED JAMEELUDDIN, INCOME-TAX CONSULTANT, 16-7-302, ERRAM COTTAGE, AZAMPURA, CHADERGHAT, HYDERABAD. 2. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-3, HYDERABAD. 3. CIT(APPEALS)-3, HYDERABAD. 4. PR.CIT-3, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.