P. Elizebeth, CHENNAI V. The Joine CIT, CHENNAI

ITA 2141/CHNY/2013

• Counselvise Citation: 214121714 RSA 2013
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Keywords: Gift; Reasonable cause; Ignorance of law
• Section: 273B; 68; 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . , . . , ! ' [BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMB ER AND SHRI S. S. GODARA, JUDICIAL MEMBER] ./ I.T.A.NO.2141/MDS/2013 / ASSESSMENT YEAR : 2008-09 P. ELIZABETH NO.1/16, LEITH CASTLE ROAD SANTHOME CHENNAI - 28 VS. THE JT. COMMISSIONER OF INCOME TAX RANGE I CHENNAI [PAN AAMPE 0025 F ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : NONE /RESPONDENT BY : SHRI N. MADHAVAN, JCIT / DATE OF HEARING : 28-01-2014 ! / DATE OF PRONOUNCEMENT : 30-01-2014 ' / O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09, IS DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME- TAX (APPEALS)-I CHENNAI, DATED 26.11.2013, PASSED I N APPEAL I.T.A.NO.2141/13 :- 2 -: NO.156/2013-14, CONFIRMING PENALTY IMPOSED UNDER SE CTION 271D R.W.S 274 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ). 2. AT THE OUTSET, WE NOTICE THAT THE ASSESSEE HAS MOV ED AN APPLICATION WITH VAKALATH SEEKING ADJOURNMENT ON TH E GROUND THAT HER AUTHORIZED REPRESENTATIVE REQUIRES MORE TIME TO COL LECT THE DETAILS ETC. NOBODY IS THERE TO PURSUE THE SAME. IN THESE CIRCU MSTANCES, WE PROCEED EX-PARTE AGAINST THE APPELLANT. BY DRAWING SUPPORT FROM THE CASE LAW OF CIT VS S. CHENNIAPPA MUDALIAR [1969] 74 ITR 41 (SC), WE PROPOSE TO DECIDE THE APPEAL ON MERITS ITSELF. 3. THE GROUNDS RAISED IN THE APPEAL READ AS UNDER: 1. THE ORDER OF THE COMMISSIONER OF APPEALS CONFIR MING THE PENALTY UNDER SECTION 271D IS CONTRARY TO LAW, ERRONEOUS AN D CONTRARY TO THE FACTS OF THE CASE. 2. THE CIT(A) ERRED IN CONFIRMING THE PENALTY UNDE R SECTION 271D. 3. THE CIT(A) FAILED TO APPRECIATE THAT THE AMOUNTS HAVE BEEN BORROWED FROM CLOSE RELATIVES WAS FOR THE PURPOSE O F INVESTMENT IN PROPERTY AND THAT THE TRANSACTION HAD TO CONCLUDED IMMEDIATELY. HENCE, THE ASSESSEE RESORTED TO CASH BORROWAL AND T HEREFORE THE PENALTY CONFIRMED WAS UNSUSTAINABLE IN LAW AS WELL AS IN FACTS. 4. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT BE ING CLOSE RELATIVES LIKE BROTHER AND MOTHER THE BORROWAL MAY BE CONVERTED IN TO GIFTS AND THIS POSSIBILITY CONSTITUTED REASONABLE CAUSE AND HENCE THE LEVY OF PENALTY IS UNJUSTIFIABLE ON THE FACTS OF THE CASE. 5. THE CIT(A) FURTHER FAILED TO APPRECIATE THE E NTIRE FACTS AND CIRCUMSTANCES OF THE CASE IN THE PROPER PERSPECTIVE AND HENCE THE PENALTY OUGHT TO HAVE BEEN CANCELLED. I.T.A.NO.2141/13 :- 3 -: 6. THE CIT(A) OUGHT TO HAVE TAKEN INTO CONSIDERAT ION THE CONTENTIONS RAISED BEFORE THE JOINT COMMISSIONER AS WELL AS THE WRITTEN SUBMISSIONS LAID BEFORE HIM AND IN THE LIGHT OF THO SE THE CIT(A) OUGHT TO HAVE CANCELLED THE PENALTY. 7. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT TH E PROCEEDINGS OF PENALTY WERE INITIATED ON THE DIRECTIONS OF THE JOI NT COMMISSIONER OF INCOME TAX AND SUCH INITIATION WAS BAD IN LAW. 8. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT TH E INITIATION WAS BAD IN LAW, THE CONSEQUENT PROCEEDINGS SUFFER THE SAME FAT E AND HENCE THE PENALTY OUGHT TO HAVE BEEN CANCELLED. 9. THE CIT(A) IN ANY VIEW OF THE MATTER, HAVING DUE REGARD TO THE WRITTEN SUBMISSIONS MADE BEFORE HIM AND FOR OTHER R EASONS AND ADDITIONAL GROUNDS OUGHT TO HAVE CANCELLED THE PENA LTY. 4. ON BEING GRANTED OPPORTUNITY, THE REVENUE STRONGLY SUPPORTS THE FINDINGS OF THE CIT(A) CONFIRMING THE IMPUGNED PENALTY IMPOSED U/S 271D OF THE ACT. IT ATTEMPTS TO DRAW A DISTINCTION BETWEEN SECTIONS 68 AND 271D AND SUBMITS THAT IN TH E FORMER CASE, AN ADDITION IS MADE WHEN THE CONCERNED ASSESSEE FAILS TO PROVE THE SOURCE OF THE CASH CREDITS, WHEREAS IN THE LATTER I NSTANCE, EVEN WHEN THE ASSESSEE SUCCESSFULLY EXPLAINS THE SOURCE ETC, A PENALTY IS IMPOSED FOR HAVING VIOLATED THE PROVISIONS OF SECTI ON 269SS OF THE ACT I.E OBTAINING CASH LOANS WITHOUT ACCOUNT PAYEE CHEQ UE ETC. THEREAFTER, THE REVENUE QUOTES CASE LAW OF P. BASKA R VS CIT [2012 340 ITR 560(MAD) AND KASI CONSULTANT CORPORATION VS DCIT [2009] 311 ITR 419(MAD) AND PRAYS FOR DISMISSING THE APPEA L. I.T.A.NO.2141/13 :- 4 -: 5. IT IS TO BE SEEN FROM THE CASE FILE THAT THE ASSES SEE IS AN INDIVIDUAL. THERE IS NO DISPUTE THAT SHE IS NOT ENGAGED IN ANY VOCATION. IN THE IMPUGNED ASSESSMENT YEAR, THE AS SESSEE HAD FILED HER RETURN ON 21.7.2008 DISCLOSING INCOME OF ` 2,21,940/- FROM OTHER SOURCES. THE SAME WAS ACCEPTED ON 29.5.2009 U/S 143(1)(A) OF THE ACT. 6. IN THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS F OR THE SUCCEEDING ASSESSMENT YEAR I.E 2009-10, THE ASSESS ING OFFICER CAME TO KNOW THAT THE ASSESSEE HAD PURCHASED A PROPERTY AT LEITH CASTLE NORTH ROAD, SANTHOME, FOR ` 75 LAKHS. ON BEING PUT UP TO NOTICE ABOUT THE SOURCE OF INVESTMENT, THE ASSESSEE STAT ED THAT SHE HAD BORROWED LOANS FROM HER RELATIVES WHO LIVED IN SOUT HERN AREA OF THE STATE. ON THIS, THE ASSESSING OFFICER GOT INITIATE D PENALTY PROCEEDINGS U/S 271D R.W.S 269SS OF THE ACT AGAINST HER ON THE GROUND THAT THE AFORESAID LOANS HAD BEEN TAKEN IN CASH AND NOT THRO UGH APPROVED MODES OF PAYMENT LIKE ACCOUNT PAYEE CHEQUES ETC. D URING PENALTY PROCEEDINGS, THE ASSESSEE CONTENDED THAT SHE WAS ONLY A HOUSEWIFE AND SINCE HER RELATIVES DID NOT HAVE BANK ACCOUNTS, SHE HAD TAKEN THE LOANS IN CASH. IN SUPPORT, SHE CHOSE TO FILE THE A FFIDAVITS OF HER RELATIVES. WE FIND FROM THE PENALTY ORDER DATED 19 .12.2012 THAT EVEN THE ASSESSING OFFICER FOUND THE SAID ASSERTIONS TO BE CORRECT [PAGE 4 I.T.A.NO.2141/13 :- 5 -: PARA 7]. HOWEVER, HE HELD THAT THE ASSESSEE HAD F AILED TO PROVE ANY REASONABLE CAUSE U/S 273B OF THE ACT FOR HAVING AC CEPTED THE LOANS IN CASH. ACCORDING TO HIM, THE PROVISIONS OF SECTI ON 269SS MANDATED THAT EACH AND EVERY MONETARY TRANSACTION BEYOND ` 20,000/- EXCEPT THOSE PRESCRIBED IN THE STATUTE ITSELF, HAD TO BE R OUTED THROUGH BANKING CHANNELS. IN THIS MANNER, PENALTY IN QUESTION OF ` 70,50,000/- STOOD IMPOSED. 7. THE ASSESSEE CARRIED THE MATTER IN APPEAL. WE FIN D THAT THE CIT(A) HAS AFFIRMED THE PENALTY AS UNDER: 7.1. ON CAREFUL ANALYSIS OF THE ABOVE FACTS, IT IS UNDER STOOD THAT THE APPELLANT HAS VIOLATED THE PROVISIONS U/S 269SS OF THE ACT. THE APPELLANT HAS ACCEPTED AN AMOUNT OF RS.70,50,00 0/- FROM HER RELATIVES BY WAY OF CASH AND THUS WARRANTING TH E PENALTY U/S 271D OF THE ACT. THE APPELLANT HAS NOT REVEALED THA T SHE OWES THE SAID AMOUNT TO HER RELATIVES WHEN SHE FILED THE RETURN OF INCOME FOR THE A.Y 2008-09. THE DEPARTMENT HAS COME TO KNOW OF THIS FACT. SUBSEQUENTLY THE APPELLANT HAS SHOWN THE SAME IN THE BALANCE SHEET FILED AS ON 31.3.2009. AS A TAX PAYER, THE APPELLANT SHOULD HAVE BROUGHT ALL THE TRANSACTIONS IN HER ACCOUNT AND CORRESPONDING ENTRIES IN THE BOOKS OF ACCOUNT OF THE RESPECTIVE PARTIES OR CREDITORS WHICH SATISFIED THE TEST OF BUSINESS EXIGENCY. HOWEVER, THE APPELLANT BROUGHT THESE ENTR IES TO LIGHT ONLY AT THE ASSESSMENT PROCEEDINGS FOR A.Y 2009-10 BY FILING THE REVISED BALANCE SHEET. THE APPELLANT CANNOT TAKE THE PLEA O F IGNORANCE AS IT IS A WELL SETTLED PRINCIPLE THAT IGNORANCE OF LAW IS NOT AN EXCUSE. FURTHER, THE APPELLANT HAD NOT PRODUCED ANY MATERIAL EVIDENC E TO SHOW THAT THE PERSONS I.E HER RELATIVES DO NOT HAVE ANY BANK ACC OUNT. IT IS UNBELIEVABLE THAT ANY PERSON COULD KEEP SUCH HUGE M ONEY AT HOME FOR ANY PURPOSE WHATSOEVER. IN THE INSTANT CAS E, HER RELATIVES HAVE GIVEN HER AMOUNTS TO THE TUNE OF RS.20 LAKHS, RS.13.5 LAKHS, RS.15 LAKHS, ,RS.3.5 LAKHS, RS 4 LAKHS, RS.2 LAKHS ETC. WHICH CAN BE CONSIDERED AS BIG AMOUNTS. IN VIEW OF THE ABOVE, IT CAN BE CONCLUDED THAT THE APPELLANT HAS BROUGHT THE CONCEPT OF LOAN TRANSACTIONS ONLY AT A TIME WHEN SOURCES FOR PURCHASE OF THE SAID PROPERTY WERE CALLED I.T.A.NO.2141/13 :- 6 -: FOR/EXAMINED BY THE DEPARTMENT. 7.2. FURTHER, FROM THE ABOVE, IT IS CLEAR THAT THE APPEL LANT HAS NOT CONDUCTED THE TRANSACTIONS IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 269SS OF THE ACT. HOWEVER, WHAT IS TO BE SE EN IS THAT WHETHER THE APPELLANT WAS PREVENTED BY REASONABLE CAUSE FOR NOT ADHERING TO THE PROVISIONS OF THE ACT U/S 269SS. AN ANALYSIS OF THE ABOVE TRANSACTIONS REVEALS THAT THE APPELLANT WAS NOT PRE VENTED BY SUFFICIENT REASONS IN DOING SO. SEC.273B OF THE ACT STIPULATES THAT 'NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASS ESSEE AS THE CASE MAY BE, FOR ANY FAILURE, REFERRED TO IN THE SAID PROVISO, IF HE PROVES THAT THERE HAS BEEN REASONABL E CAUSE FOR THE SAID FAILURE'. 7.3. ON CONSIDERATION OF THE FACTS, IT IS OBSERVED THAT THE APPELLANT SHOULD HAVE ACCEPTED THESE LOANS FROM HER RELATIVES WITHOUT VIOLATING THE PROVISIONS OF SECTION 269SS AND NO SU CH URGENCY WAS PROVED BY THE APPELLANT TO DO SO. BUT THE APPELLANT HAS NOT MADE ANY ATTEMPT TO FOLLOW THE SAID PROVISIONS BY ACCEPTING LOANS OTHER THAN BY CASH FROM THE LENDERS. THUS IT IS VERY CLEAR THAT T HE APPELLANT FAILED TO ESTABLISH ANY REASONABLE CAUSE FOR NOT ADHERING TO THE PROVISIONS U/S 269SS. THE REASONS ADDUCED ABOVE BY THE AR ARE NOT SUFFICIENT AND ALSO THE CASE LAWS RELIED UPON BY THE AR OF THE APP ELLANT ARE DISTINGUISHABLE FROM THE FACTS OF THE APPELLANT'S C ASE. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS FULLY JUSTIFIED IN LEVYING PENALTY U/S 271D FOR VIOLATION OF PROVISIONS U/S 269SS AND THE PENALTY OF RS.70,50,000/- LEVIED BY THE AO U/S 271D OF THE ACT IS HEREBY CONFIRMED. AS A RESULT, THE GROUNDS RAISED IN THIS REGARD ARE DISMISSED. THIS LEAVES THE ASSESSEE AGGRIEVED. 8. WE HAVE HEARD THE REVENUE AND PERUSED THE CASE FILE . THE JUDICIAL PRECEDENTS QUOTED (SUPRA) HAVE ALSO BEEN G ONE THROUGH. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E QUESTION WHICH ARISES FOR OUR CONSIDERATION IS AS TO WHETHER THE I MPUGNED PENALTY U/S 271D R.W.S 269SS OF THE ACT HAS BEEN RIGHTLY IMPOSE D OR NOT. AT THE COST OF REPETITION, WE REITERATE THAT THE ASSESSEE IS NOT IN ANY I.T.A.NO.2141/13 :- 7 -: BUSINESS. ON BEING POINTED OUT, THE REVENUE QUOTES THE RELEVANT PROVISION AND SUBMITS THAT THE ACT DOES NOT DISTING UISH BETWEEN A PERSON WITH OR WITHOUT VOCATION. THERE IS NO DIS PUTE REGARDING THIS FACTUAL POSITION. UNDISPUTEDLY, THE ASSESSEE WAS N OT IN ANY BUSINESS. SO, SHE COULD HAVE PURCHASED THE PROPERTY ONLY BY R AISING FUNDS FROM HER RELATIVES AND FRIENDS. THIS IS WHAT THE ASSESS EE HAS DONE IN THE INSTANT CASE. HOWEVER, SINCE THE IMPUGNED LOANS HA VE BEEN TAKEN IN CASH, THIS HAS ATTRACTED PENALTY. IT HAS COME ON R ECORD THAT THE ASSESSEES RELATIVES ARE ALL AGRICULTURISTS WITHOUT HAVING ANY BANK ACCOUNTS. THAT BEING THE CASE, IN OUR VIEW, SHE CO ULD NOT HAVE FORCIBLY INSISTED HER RELATIVES TO FIRST OPEN BANK ACCOUNTS AND THEN LEND HER THE IMPUGNED LOANS. SO, SHE TOOK THE LOANS IN CASH WHI CH FORMS A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 27 3B OF THE ACT. 9. THE OTHER ARGUMENT OF THE REVENUE IN DRAWING DISTI NCTION BETWEEN SECTIONS 68 AND SECTION 271D (SUPRA) RATHER GOES AGAINST ITS CASE. WE MAKE IT CLEAR THAT THE PRESENT IS NOT A C ASE COVERED BY THE FORMER PROVISION BUT THE LATTER ONE WHEREIN THE SOU RCE ETC. OF THE LOANS ARE NOT IN DISPUTE. THEREFORE, THE RELEVANT GROUNDS OF THE ASSESSEE THAT SINCE HER RELATIVES WERE NOT HAVING B ANKING OPERATIONS, SHE TOOK LOANS IN CASH ALSO REPEL THE REVENUES CON TENTIONS AS THE GENUINENESS AND BONAFIDES ARE ALREADY PROVED. I.T.A.NO.2141/13 :- 8 -: 10. COMING TO THE JUDICIAL PRECEDENTS QUOTED BY THE REV ENUE (SUPRA), WE FIND THAT THEREIN THE FACTS ARE NOT SIM ILAR. THE CONCERNED ASSESSEES BEFORE THE HON'BLE JURISDICTIONAL HIGH CO URT HAD NOT BEEN ABLE TO PROVE ANY REASONABLE CAUSE OF SHORTAGE OF CASH OR BUSINESS EXIGENCY INVOLVED FOR ACCEPTING CASH LOANS. TO THE CONTRARY, WE HAVE ALREADY HELD IN THE PRECEDING PARAGRAPHS THAT THE ASSESSEE WAS HAVING NO SOURCE OF INCOME SO AS TO PURCHASE A PROP ERTY FOR ` 75 LAKHS. THUS, SHE HAD RAISED CASH LOANS FROM HER RELATIVES. SO, THESE JUDICIAL AUTHORITIES DO NOT RESCUE THE REVENUES CAUSE. 11. THE APPEAL IS ALLOWED AND THE IMPUGNED PENALTY STANDS DELETED. ORDER PRONOUNCED ON THURSDAY, THE 30 TH OF JANUARY, 2014, AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (S. S. GODARA) JUDICIAL MEMBER DATED: 30 TH JANUARY, 2014 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR