Srico Projects Private Limited , Hyderabad V. Addl. Commissioner of Income Tax, Range-3, Hyderabad

ITA 216/Hyd/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4583 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 16-09-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 20-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J PRABHAKAR ANAND
• Assessee Lawyers: B SAI PRASAD
• Keywords: Source of fund; Question of law; Reasonable cause
• Section: 273B; 143(3); 271D; 250; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L . P . SAHU, ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO. 216 /HYD/20 20 (ASSESSMENT YEAR : 20 13 - 14 ) M/S. SRICO PROJECTS PVT. LTD., HYDERABAD. PAN AAGCS 7109F ..APPELLANT. VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 3, HYDERABAD. ..RESPONDENT. APPELLANT BY : SHRI B.SAI PRASAD (A.R.) RESPONDEN T BY : SHRI D. J. PRABHAKAR ANAND. (D.R.) DATE OF HEARING : 16.09. 2021. DATE OF PRONOUNCEMENT : 29. 0 9 .2021. O R D E R PER SHRI S.S. GODARA, J.M. : THIS ASSESSEES APPEAL FOR ASST. YEAR 201 3 - 14 ARISES FROM THE COMMISSIONER OF INCOME TAX (APPEALS) - 9 , HYDERABAD S ORDER DT. 23.10.2020 PASSED IN CASE NO. ITBA / APL / S / 250 / 2019 - 20 / 1024161918(1) I N PROCEEDINGS UNDER SECTION 250 OF INCOME TAX ACT, 1961 (THE ACT). 2 ITA NO. 216/HYD/2020 HEARD BOTH THE PARTIES . C ASE FILE PERUSED. 2. COMING TO THE ASSESSEE'S SOLE SUBSTANTIVE GRIEVANCE THAT BOTH THE LEARNED LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS HWILE IMPOSING SECTIN271D PENALTY REGARDING THE ALLEGED CASH LOAN (S) AVAILED FORM ITS MANAGING DIRECTOR IN CURRENT ACCOUNT OF RS.59,02,330/ - , WE NOTE THAT IT STAND FROM DAY ONE WAS THAT THE SAID AMOUNT WAS NOT ONLY MEANT TO MEET THE DAY TO DAY EXPENSES ON THE CONSTRUCTION SITES BUT ALSO IT INVOLVED OVERWHELMING GENUINENESS ELEMENT THEREIN. WE NOTE IN THIS FACTUAL BACKDROP THAT THE VERY ISSUE HAD ARISEN BETWEEN THE PARTIES IN PRECEDING ASSESSMENT YEAR 2012 - 13 AS WELL WHEREIN LEARNED CO - ORDINATE BENCH S ORDER DT.27.04.2021 IN ITA NO.162/HYD/2018 HAS RESTORED THE SAME BACK TO THE ASSESSING OFFICER AS FOLLOWS : - 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACT WORKS FILED ITS RETURN ON 30/09/2012 AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 16/3/2015. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LD. AO THAT THE ASSESSEE COMPANY HAS RECEIVED CASH LOANS EXCEEDING RS. 20,000/ - FROM SHRI M. SRINIVASA RAO, MANAGING DIRECTOR OF THE COMPANY. ON QUERY, THE ASSESSEE HAD EXPLAINED THAT THE TRANSACTIO N BETWEEN THE ASSESSEE AND ITS MANAGING DIRECTOR CANNOT BE TREATED AS LOAN TRANSACTION BECAUSE IT IS IN THE NATURE OF CURRENT ACCOUNT. THE ASSESSEE HAD FURTHER RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF M/S. IDHAYAM PUBLICATIONS PRIVATE LIMITED REPORTED IN 285 ITR 221 WHEREIN THE HIGH COURT OBSERVED AS UNDER: 3 ITA NO. 216/HYD/2020 4. WE HEARD THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE REVENUE. WE HAVE PERUSED THE MATERIALS AVAILABLE IN RECORD. ADMITTEDLY MR. S. V. S. MANIAN WAS ONE OF THE DIRECTORS. THEREFORE THE ORDER OF THE LOWER AUTHORITY CLEARLY SHOWS THAT THERE WAS A RUNNING CURRENT ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NAME OF MR.S.V.S.MANIAN. MR.S.V.S.MANIAN USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND USED TO WI THDRAW THE MONEY ALSO FROM THE CURRENT ACCOUNT. THE REVENUE SHOULD ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS. THE DEPOSIT AND THE WITHDRAWAL OF THE MONEY FROM THE CURRENT ACCOUNT COULD NOT BE CONSIDERED AS A LOAN OR ADVANCE. FURTHER IT WAS ALSO FOUND THAT THE ASSESSEE FILED A LETTER DATED 29.09.97 AND IN THAT LETTER HE EXPLAINED THAT THE AMOUNT RECEIVED FROM MR.S.V.S.MANIAN HAD BEEN SHOWN AS 'UNSECURED LOAN FROM DIRECTORS' IN THE BALANCE SHEET. AS PER THE COMPANIES ACT, UNDER COMPANIES (ACCEPTANCE OF DEPOSIT) RULES 1975, UNDER RULE 2(B)(IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A SHARE HOLDER OF A PRIVATE LIMITED COMPANY. THEREFORE THE TRANSACTION BETWEEN THE APPELLANT AND THE DIRECTOR CUM SHARE HOLDER IS NOT A LOAN OR DEPOSIT AND IT IS ONLY CURRENT ACCOUNT IN NATURE AND NO INTEREST BEING CHARGED FOR THE ABOVE TRANSACTION. 5. IN THE FOREGOING CONCLUSIONS, WE ARE OF THE VIEW THAT, SINCE THE SAID TRANSACTION DOES NOT FA LL WITHIN THE MEANING OF LOAN OR ADVANCE, THERE IS NO VIOLATION OF SECTION 269SS OF THE INCOME TAX ACT. WE FIND NO ERROR IN THE ORDER OF THE TRIBUNAL THE SAME REQUIRES NO INTERFERENCE. HENCE, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION OF THIS COURT 6. HOWEVER, THE LD. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 3, HYDERABAD WAS OF THE VIEW THAT THE ASSESSEES CASE IS A FIT CASE FOR LEVY OF PENALTY U/S. 271D OF THE ACT. ON APPEAL, THE LD. CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVIN G AS UNDER: - DURING THE APPEAL PROCEEDINGS THE APPELLANT WAS ALSO ASKED TO SUBMIT BANK ACCOUNT OF SRI M. SRINIVASA RAO, MD OF THE COMPANY. IN RESPONSE, THE APPELLANT SUBMITTED MDS BANK ACCOUNT WITH STATE BANK OF INDIA AND WITH PUNJAB NATIONAL BANK FOR AY 2011 - 12. BOTH THE BANK ACCOUNTS DID NOT CONTAIN ANY CREDIT ENTRIES REFLECTING INCOME OF SRI M. SRINIVASA RAO. IT WAS FURTHER EXPLAINED THAT THE ENTIRE SALARY OF SRI M. SRINIVASA RAO WAS DIRECTLY PAID BY THE APPELLANT COMPANY TOWARDS HOUSING LOANS AVAILED BY SRI M. SRINIVASA RAO, THEREFORE NO SALARY CREDITS ARE FOUND IN THE BANK ACCOUNTS. THERE ARE NO CREDITS IN THE BANK ACCOUNT OF RENTAL INCOME / INCOME FROM CONSULTANCY BUSINESS. FURTHER, THE AMOUNT RECEIVED BY SRI M. SRINIVASA RAO BY SELLING WIRE MESH TO M/S. MURUGAN ENTERPRISES IS NOT REFLECTED ANYWHERE IN THE COMPUTATION OF INCOME OF SRI M. SRINIVASA RAO. THEREFORE, OBVIOUS CONCLUSION IS THAT SRI M. SRINIVASA RAO DID NOT OFFER TO TAX THE AMOUNTS RECEIVED FROM M/S. MURUGAN ENTERPRISES. THIS UNACCOUNTED IN COME IS GIVEN AS CASH LOAN TO THE APPELLANT COMPANY. SECTION 269SS IS BROUGHT INTO STATUTE TO BLOCK THE INTRODUCTION OF BLACK MONEY IN THE FORM OF CASH RECEIPTS, MORE PARTICULARLY IN THE CASES WHERE SOURCES ARE UNACCOUNTED / UNEXPLAINED. THEREFORE, THE FAC TS OF THE CASE CLEARLY ATTRACT PROVISIONS OF SECTION 271D AND EXPLANATION GIVEN BY THE APPELLANT DOES NOT CONSTITUTE REASONABLE CAUSE U/S. 273B, THEREFORE THE APPEAL IS DISMISSED. 4 ITA NO. 216/HYD/2020 7. BEFORE US, THE LD. AR ARGUED BY STATING THAT THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY HAD EXTENDED CASH TO THE COMPANY FOR MEETING ITS DAY - TO - DAY EXPENSES, SUCH AS PAYMENT FOR DAILY LABOURERS ETC., ON - SITES WHICH WAS REMOTELY LOCATED. IT WAS FURTHER EXPLAINED THAT CERTAIN CASH PAYMENTS WERE ALSO MADE FOR ATTENDING TO THE MEDICAL EMERGENCIES OF CERTAIN LABOURERS WHO MET WITH ACCIDENTS ON THE WORK SITE. IT WAS FURTHER SUBMITTED THAT THE AMOUNT PAID BY THE MANAGING DIRECTOR WAS OUT OF THE AMOUNT RECEIVED BY HIM FROM THE SALE OF SCRAP OF THE ASSESSEE - COMPANY. IT WAS THEREF ORE ARGUED THAT THE TRANSACTION CANNOT BE CONSIDERED AS LOAN RECEIVED FROM THE ASSESSEE COMPANIES MANAGING DIRECTOR. THE LD. AR FURTHER RELIED ON THE FOLLOWING DECISIONS: (I) CIT VS. SUNIL KUMAR GOEL [2009] 315 ITR 163/183 TAXMANN 53 (PUNJ. HAR.) (II) C IT VS. MAHESWARI NIRMAN UDYOG [2008] 302 ITR 201/170 TAXMAN 502 (RAJ.) (III) CIT VS. LAKSHMI TRUST CO [2008] 303 ITR 99 (MAD.) 8. THE LD. DR ON THE OTHER VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE LD. REVENUE AUTHORITIES. 9. WE HAVE HEARD THE RI VAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT APPEARS THAT THE ASSESSEE COMPANY HAS RECEIVED CASH FROM ITS MANAGING DIRECTOR FOR MEETING ITS DAY - TO - DAY EMERGENCY EXPENSES. IN THIS SITUATION, THE DECISION RELI ED BY THE ASSESSEE WILL BE RELEVANT AND THE ASSESSEE COMPANY SHALL BE ENTITLED TO RELIEF AS PER THE PROVISIONS OF SECTION 273B OF THE ACT. HOWEVER, FROM THE ORDER OF THE LD. CIT (A) IT APPEARS THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE GENUINENESS OF TH E SOURCE OF FUNDS OBTAINED FROM ITS MANAGING DIRECTOR. THEREFORE, IN THE INTEREST OF JUSTICE, WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LD. AO TO EXAMINE THAT NO UNEXPLAINED FUNDS ARE INTRODUCED IN THE BUSINESS OF THE ASSESSEE COMPANY AS LOAN FRO M THE MANAGING DIRECTOR AND IF IT FOUND THAT THE SOURCE OF FUND OBTAINED FROM THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY IS EXPLAINED THEN DELETE THE PENALTY LEVIED INVOKING THE PROVISIONS OF SECTION 271D OF THE ACT. IF FOUND OTHERWISE, THE LD. AO SHALL PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW AND MERIT. 3. WE THUS ADOPT THE ABOVE DETAILED DISCUSSION MUTATIS MUTANDIS AND RESTORE THE INSTANT ISSUE AS WELL BACK TO THE ASSESSING OFFICER IN THE VERY TERMS. IT WOULD BE APPRECIATED IF THE LEARNED ASSESSING OFFICER PASS A CONTIGUOUS ORDER IN BOTH THESE ASSESSMENT YEARS AFTER EXAMINING ALL THE RELEVANT FACTS AND CIRCUMSTANCES. 5 ITA NO. 216/HYD/2020 4. THIS ASSESSEE'S APPEAL IS ALLO W ED FOR STATISTICAL PURPOSES IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH SEPT . , 2021. SD/ - SD/ - (L .P. SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DT. 29 .0 9 .2021. * REDDY GP COPY TO : 1. M/S. SRICO PROJECTS PVT. LTD., PLOT NO.178/A, MLA COLONY, ROAD NO.12, BANJARA HILLS, HYDERABAD - 500034 . 2. ADDL. COMMISSIONER OF INCOME TAX, RANGE 3, HYDERABAD. 3. PR. C I T - 3 , HYDERABAD. 4. CIT(A) - 9, HYD ERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY, ITAT, HYDERABAD.