SHIV SHARAN TRADING P. LTD, MUMBAI V. ADDL CIT RG 4(3), MUMBAI

ITA 2154/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3687 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SATHYA MOORTHYDR
• Keywords: Reasonable cause; Ignorance of law
• Section: 273B; 27

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/2154/MUM/2013, /ASSESSMENT YEARS: 2008-09 M/S. SHIV SHARAN TRADING PVT. LTD. SHOP NO.3, BUILDING NO.136, KALBADEVI, VITHALWADI, MUMBAI-400 002. PAN:AAJCS 9593 E VS. ACIT-RANGE-4(3) MUMBAI-400 058. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI N. SATHYA MOORTHY-DR ASSESSEE BY: SHRI ATUL MEHTA / DATE OF HEARING: 18.07.2016 / DATE OF PRONOUNCEMENT: 12.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 03.01.2013 OF THE CIT(A )-8,MUMBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL FOR THE ABOVE MENTIONE D ASSESSMENT YEAR.ASSESSEE IS ENGAGED IN RENTING OUT OF VARIOUS COMMERCIAL PRO PERTIES.THE RETURN OF INCOME WAS PROCESSED ON 23-07-2009.ASSESSMENT U/S.1 43 (3)R.W.S. 147 OF THE ACT,WAS COMPLETED ON 30.09.2011,ASSESSING ITS INCOM E AT RS.7,31, 501/-. 2. SOLITARY GROUND OF APPEAL IS ABOUT LEVY OF PENALTY U/S.271D OF THE ACT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD T AKEN A LOAN OF RS.75 LAKHS FROM KOTAK MAHINDRA BANK LTD.FOR PURCHASE OF A PROPERTY, THAT IT HAD TO PAY MONTHLY INSTALLMENT (EMI) OF RS. 2,90,521/-,THAT IT HAD ALR EADY HANDED OVER POST DATED CHEQUES FOR THE EMI FOR THE ENTIRE TENURE OF THE LO AN TO THE BANK WHICH THE BANK WAS PRESENTING ON THE DUE DATES AND COLLEC TING THE EMIS.IN JULY 2007,WHEN THE EMI CHEQUE OF RS.2,90,521/-FOR THE SA ID MONTH WAS PRESENTED IN THE BANK ACCOUNT, THERE WAS BALANCE OF RS.2,27,4 94.28 WAS ONLY AVAILABLE IN THE ACCOUNT OF THE ASSESSEE.IN VIEW OF THE SAME, TH E ASSESSEE COMPANY TOOK A CASH LOAN OF RS. 85,000/- FROM MOHAN B. MOTWANI HUF , A SHAREHOLDER OF THE COMPANY. AS PER THE ASSESSEE THE SAID CASH LOAN WAS TAKEN BY THE COMPANY TO 2154/M/13-SHIVSHARAN TRDG. 2 TIDE OVER THE CRISIS AND TO AVOID DEFAULT IN THE PA YMENT OF EMI SO AS TO AVOID LATE PAYMENT INTEREST AND ALSO PENALTY.IT WAS FURTH ER ARGUED THAT ON DEPOSITING THE SAID CASH IN THE BANK ACCOUNT, THE EMI CHEQUE W AS HONOURED AND TOTAL EMI FOR JULY,2007AMOUNT WAS PAID.THE AO HELD THAT IT W AS CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT.ACCORDINGLY, PENALTY PROCEEDINGS U/S. 271D OF THE ACT WERE INITIATED.THE ASSESSEE MADE DE TAILED SUBMISSIONS,VIDE ITS LETTER DATED 07-11-2011 AND ARGUED THAT THE ASSESSE E WAS FORCED TO TAKE CASH LOAN OF RS. 85,000/- FROM THE HUF TO TIDE OVER THE FINANCIAL CRISIS TO SAFEGUARD ITS CREDIT RATING, THAT THE TRANSACTION WAS BETWEEN THE SHARE -HOLDER AND THE COMPANY,THAT WHILE CARRYING OUT THE TRANSACTION THE ACCOUNTANT WAS UNAWARE OF THE PROVISIONS OF SECTION 269SS. HOWEVER.THE AO DID NOT ACCEPT THE SUBMISSION MADE BY THE ASSESSEE AND HELD THAT IT HAD CLEARLY C ONTRAVENED THE PROVISIONS OF SECTION 269SS OF THE ACT, THAT IGNORANCE OF LAW WAS NOT AN EXCUSE FOR CONTRAVENING THE PROVISIONS OF THE SECTION,THAT THE CREDIT -WORTHINESS OF THE ASSESSEE WAS NOT AT STAKE. FINALLY, HE HELD THAT TH E ASSESSEE HAD CONTRAVENED THE PROVISIONS OF SECTION 269SS. HE LEVIED A PENALTY OF RS.85,000/-, INVOKING THE PROVISIONS OF SECTION 271D OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, IT WAS CONTENDED THAT THERE WAS INSUFFICIENT BALANCE TO THE EXTENT OF RS.85,000/- T O PAY THE EMI, THAT IT WAS FORCED TO TAKE A CASH LOAN TO MEET THE SHORTFALL AN D TO TIDE OVER THE CRISIS AND AVOID DEFAULTING LOAN INSTALMENT/LATE PAYMENT CHARG ES AND PENALTY, THAT ANY DEFAULT IN LOAN INSTALMENT WOULD HAVE ALSO DENTED T HE CREDIT OF THE ASSESSEE AND WOULD HAVE IMPACTED ITS BUSINESS PROSPECTS, THAT TH E CASH LOAN WAS TAKEN FROM THE SHAREHOLDER OF THE COMPANY WHO IS REGULARLY ASS ESSED TO TAX. THE ASSESSEE RELIED UPON CERTAIN CASE LAWS. AFTER CONSIDERING AS SUMPTION OF THE ASSESSEE AND THE PENALTY ORDER, THE FAA HELD THAT THE ASSESSEE H AD TAKEN LOAN IN CASH OF RS. 85,000/-,THAT IT HAD VIOLATED THE PROVISIONS OF SEC TION 269SS OF THE ACT, THAT 2154/M/13-SHIVSHARAN TRDG. 3 ASSESSEE WAS A PRIVATE COMPANY DOING SHARE BROKING BUSINESS,THAT IT WAS GUIDED BY EXPERIENCED CA,THAT IT COULD NOT BE PRESUMED THA T IT WAS NOT AWARE OF THE LAW,THAT THE ARGUMENT OF THE ASSESSEE THAT BREACH W AS ONLY TECHNICAL COULD NOT BE ACCEPTED,THAT THERE WERE NO COMPELLING CIRCUMSTA NCES IN THE CASE UNDER CONSIDERATION, THAT IT WAS AWARE OF THE FACT THAT I T HAD TO PAY MONTHLY EMI OF RS. 2.90 LAKHS EVERY MONTH,THAT IT WAS NOT THE CASE OF THE ASSESSEE THAT IT WAS REQUIRED TO PAY UNFORESEEN PAYMENTS WHICH IT COULD NOT VISUALISE, THAT IT COULD NOT TAKE THE ADVANTAGE OF THE CIRCUMSTANCES WHICH W ERE OF ITS OWN CREATION. FINALLY,HE UPHELD THE PENALTY LEVIED BY THE AO. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE(AR) ARGUED THAT LOAN WAS TAKEN FROM SHAREHOLDER DUE TO COMPELLING CIRCUMSTANCES, THAT IT WAS A SOLITARY TRANSACTION,THAT IT WAS NOT AWARE THAT CERTAIN PROVISIONS OF LAW WOULD BE VIOLATED IF LOANS WERE ACCEPTED IN CAS H FROM A SHAREHOLDER, THE LOAN TRANSACTIONS HAD BEEN ACCEPTED AS GENUINE BY T HE AO,THAT THERE WAS NO ALLEGATION THAT THE ASSESSEE HAD CIRCULATED UNEXPLA INED MONEY IN THE FORM OF LOAN,THAT PENALTY SHOULD NOT BE LEVIED ONLY ON THE GROUND THAT THE AO WAS AUTHORISED TO LEVY THE SAME,THE DEFAULT WAS TECHNIC AL IN NATURE,THAT REASONABLE CAUSE FOR ACCEPTING THE LOAN IN CASH WAS EXPLAINED DURING THE ASSESSMENT/APPELLATE PROCEEDINGS.HE RELIED UPON THE CASES OF TRIUMPH INTERNATIONAL FINANCE (I) LTD.(345ITR270); SMT. DIM PAL YADAV INCOME TAX APPEAL NO.174 OF 2015 DATED 21.8.2015;LODHA BUILDER S PVT. LTD.(ITA476/M/14 DATED 27.06.2014;M/S. SHREEPATI DEVELOPERS & BUILDE R LTD.(ITA NO.7197 & 7198/M/2014,DT.15.04.2015;ZODIAC DEVELOPERS PVT. LT D. (ITA NO.31/M/2011 DT.10.10.2014); SANJU KOTHARI (ITA NO.3790/M/2013 D T.04.3.2016); M/S. R.K. & CO. PVT. LTD. (ITA 2218/M/12 DT.31.7.2013); MRS. RUPALI R. DESAI (088ITD76);BHAGWATI PRASAD BAJORIA(HUF) (263ITR487) AND KUM A.B. SHANTHI (255 ITR 258). THE DEPARTMENTAL REPRESENTA TIVE(DR)SUPPORTED THE ORDER OF THE FAA. 2154/M/13-SHIVSHARAN TRDG. 4 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF TRIUMPH INTERNATIONAL FINA NCE (I.) LTD.(345 ITR 270),THE HONBLE BOMBAY HIGH COURT HAS DISCUSSED THE ISSUE A ND HAS HELD AS UNDER: 23. THE EXPRESSION 'REASONABLE CAUSE' USED IN SECTI ON 273B IS NOT DEFINED UNDER THE ACT. UNLIKE THE EXPRESSION 'SUFFICIENT CAUSE' USED IN SECTION 249(3), 253(5) AND 260A(2A) OF THE ACT, THE LEGISLATURE HAS USED THE E XPRESSION 'REASONABLE CAUSE' IN SECTION 273B OF THE ACT. A CAUSE WHICH IS REASONABL E MAY NOT BE A SUFFICIENT CAUSE. THUS, THE EXPRESSION 'REASONABLE CAUSE' WOULD HAVE WIDER CONNOTATION THAN THE EXPRESSION 'SUFFICIENT CAUSE'. THEREFORE, THE EXPRE SSION 'REASONABLE CAUSE' IN SECTION 273B FOR NON-IMPOSITION OF PENALTY UNDER SECTION 27 1E WOULD HAVE TO BE CONSTRUED LIBERALLY DEPENDING UPON THE FACTS OF EACH CASE. AS HELD BY THE HONBLE COURT,REASONABLE CAUSE HAS T O BE DECIDED IN EACH AND EVERY CASE. CONSIDERING THE PECULIAR FACTS OF THAT MATTER.IN THE CASE UNDER APPEAL THE ASSESSEE HAD TAKEN LOAN FROM ONE OF ITS SHARE H OLDER AND THAT SHARE HOLDER HAD WITHDRAWN THE MONEY FROM ITS BANK ACCOUNT.THUS, THERE WAS NO INTRODUCTION OF CASH ON PART OF THE SHAREHOLDER.THE ASSESSEE HAD TO MAKE THE EMI PAYMENT AND FOR THAT PURPOSE IT HAD TAKEN A CASH LOAN.IN OU R OPINION,IT CAN BE CONSIDERED A REASONABLE CAUSE LOOKING IN TO THE FACTS AND CIRC UMSTANCES.SECTION 269SS WERE INTRODUCED WITH SPECIFIC PURPOSE.THE TRANSACTI ON IN QUESTION DOES NOT FALL IN THE MISCHIEF FOR WHICH THE SECTION WAS BROUGHT O N STATUTE.IT IS CLEARLY COVERED BY THE EXCEPTIONS PROVIDED IN THE SECTION 273B OF T HE ACT.THERE EXISTED THE A REASONABLE CAUSE FOR ACCEPTING CASH IN LOAN IN THE MONTH OF JULY,2007.SO,REVERSING THE ORDER OF THE FAA,WE DECI DE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST,2016. 12 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12 .08.2016. JV.SR.PS. 2154/M/13-SHIVSHARAN TRDG. 5 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ ! , 4. THE CONCERNED CIT / ! 5. DR E BENCH, ITAT, MUMBAI / ' , , . . . 6. GUARD FILE/ #$ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.