ITO, Ward - 3(4), Kolkata, Kolkata V. M/s. Jaggi Ispat Pvt. Ltd., Kolkata

ITA 2194/KOL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99932 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 1996-1997
• Appeal Filed On: 13-12-2010
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Assessee Lawyers: N O N E
• Keywords: Gift; Question of law; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI WASEEM AHMED , AM] I.T.A NO.2194/KOL/2010 ASSESSMENT YEAR: 1996-97 INCOME-TAX OFFICER, WD-3(4), KOLKATA. VS. M/S. JAG GI ISPAT PVT. LTD. ` (PAN: AABCM9300R) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 26.10.2015 DATE OF PRONOUNCEMENT: 29.10.2015 FOR THE APPELLANT: N O N E FOR THE RESPONDENT: N O N E ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-I, KOLKATA IN APPEAL NO.241/CIT(A)-I/CIR-3/07-08 DATED 30.08.2010. PENA LTY U/S. 271D OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS IMP OSED BY ADDL. CIT, RANGE-3, KOLKATA VIDE ITS ORDER DATED 29.12.2006. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) DELETING THE PENALTY LEVIED BY ADDL. CIT, RANGE-3, KOLKATA U/S. 271D OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SECTION 269SS FOR ACCEPTING LOAN IN C ASH. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NOS. 5 AND 6: 5. LD. CIT(A) HAS ERRED ON THE FACTS AND CIRCUMST ANCES OF THE CASE IN DELETING THE PENALTY OF 8,40,000/- THAT WAS IMPOSED BY ADDL. CIT RANGE-3 U/S. 271D OF THE I. T. ACT. 6. LD. CIT(A) HAS ERRED ON THE FACTS & CIRCUMSTANC ES OF THE CASE, IN ACCEPTING THE ASSESSEES EXPLANATION THAT NECESSITY WAS PURELY A MATTER OF COMMERCIAL EXPEDIENCY WITHOUT APPRECIATING THE FINDINGS OF THE AO THAT ASSESSEE C OULD NOT FURNISH SUFFICIENT AND VALID REASON FOR ACCEPTING CASH DEPOSITS VIOLATING PROVIS IONS OF SECTION 269SS OF THE I. T. ACT. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS R ECEIVED PAYMENT OF RS.1.75 LACS AND CASH LOAN OF RS.6.65 LACS FROM HIND OVERSEAS CORPOR ATION ASSESSEES SISTER CONCERN. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS INIT IATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT FOR RECEIVING THIS LOAN IN CAS H. THE ADDL. CIT, RANGE-3 LEVIED THE PENALTY BY NOT ACCEPTING THE SUBMISSIONS OF THE ASS ESSEE U/S. 271D OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT FOR R ECEIPT OF CASH LOAN IN EXCESS OF 2 ITA NO.2194/K/2010 M/S. JAGGI ISPAT PVT. LTD. AY 1996-97 RS.20,000/- AT RS.8.40 LACS. THE ASSESSEE BEFORE U S SUBMITTED THAT THE PENALTY OF RS.8.40 LACS HAVE BEEN WORKED OUT AS UNDER: RS.1,75,000/- BEING THE AMOUNT DIRECTLY DEPOSITED BY THE SISTER CONCERN, HIND OVERSEAS CORPORATION IN TO THE APPELLANTS BANK A/C TO CLEA R THE CHEQUE ISSUED IN FAVOUR OF M/S. ORISSA SPONGE LTD. RS.6,65,000/- BEING THE AMOUNT RECEIVED IN CASH ON VARIOUS DATES FROM SISTER CONCERN, M/S. HIND OVERSEAS CORPORATION TO MEET THE URGENT BUSIN ESS NEEDS OF THE APPELLANT AS PER STATEMENT ATTACHED. ___________ RS.8,40,000/- AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE PENALTY. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. NONE APPEARED ON BEHALF OF BOTH THE SIDES AT THE TIME OF HEARING BEFORE US. AFTER PERUSING THE ORDERS OF THE LOWER AUTHORITIES AND CO NSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS ISSUED ONE CHEQUE IN FAVOUR OF ORISSA SPONGE LTD. AGAINST PURCHASES MADE BUT THIS CHEQUE WAS DISHONOU RED DUE TO INSUFFICIENT FUNDS. ACCORDINGLY, ASSESSEE REQUESTED ITS SISTER CONCERN M/S. HIND OVERSEAS CORPORATION TO ARRANGE FUNDS SO THAT PAYMENT CAN BE MADE TO ORISSA SPONGE LTD. AND ACCORDINGLY, M/S. HIND OVERSEAS CORPORATION HAS WITHDRAWN CASH FROM T HEIR BANK ACCOUNT MAINTAINED WITH PUNJAB NATIONAL BANK VIDE CHEQUE NO. 734525 AND DIR ECTLY DEPOSITED THE CASH INTO ASSESSEES BANK ACCOUNT TO CLEAR CHEQUE ISSUED BY T HE ASSESSEE. ACCORDINGLY, THIS CASH OF RS.1.75 LAC WAS NOT RECEIVED BY ASSESSEE IN CASH RA THER IT WAS DIRECTLY DEPOSITED TO ITS BANK ACCOUNT BY SISTER CONCERN HIND OVERSEAS CORPORATION . AS REGARDS TO THE RECEIPT OF RS.6.65 LACS IN CASH ON VARIOUS DATES BY ASSESSEE FROM SIST ER CONCERN M/S. HIND OVERSEAS CORPORATION THE AMOUNT WAS RECEIVED TO MEET THE URG ENT BUSINESS NEEDS SUCH AS PAYMENT FOR ELECTRICITY CHARGES, RENT, SALARY, WAGES, EXCIS E DUTY, PURCHASE OF RAW MATERIAL AND TRANSPORTATION CHARGES ETC. THE ASSESSEE EXPLAINED BEFORE THE ADDL. CIT, RANGE-3 AND CIT(A) THAT THIS LOAN IN CASH IS RECEIVED FROM SIST ER CONCERN FOR COMMERCIAL EXPEDIENCY AND SISTER CONCERN HAVING COMMON SHAREHOLDERS AND D IRECTORS AND THIS IS NOT A LOAN IN STRICTER SENSE BUT TEMPORARY ACCOMMODATION OF FUNDS WHICH IS DULY REFLECTED IN THE RUNNING ACCOUNT MAINTAINED BY ASSESSEE AND ITS SISTER CONCE RN. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE WHERE FUNDS ARE RECEIVED FROM SI STER CONCERN BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. IDHAYAM PU BLICATIONS LTD. (2006) 285 ITR 221 (MAD), WHEREIN THE HONBLE HIGH COURT HAS HELD AS U NDER: 3 ITA NO.2194/K/2010 M/S. JAGGI ISPAT PVT. LTD. AY 1996-97 WE HEARD THE AR G UMENTS OF LEARNED COUNSEL FOR THE REVENUE . WE HA V E PERUSED THE MATER I A L S AVAILABLE IN RECORD. ADMITTEDLY MR . S. V . S. MA NI AN WAS ONE OF THE DIR EC TO RS. THEREFORE THE ORDER OF THE LOWER AUTHORIT Y CL EARL Y SHOWS THAT THERE W A S A RUNNING CURRENT ACCOUNT IN THE BOOKS OF ACC OUNT OF THE ASSESSEE IN THE NA ME OF MR . S. V . S . MANIAN . MR . S. V . S. MA NIAN USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND USED TO WITHDRA W TH E MON EY ALSO FROM THE CURRENT AC COUNT . THE REVENUE SHOULD ESTABLISH THAT WHAT W AS RECEIVED BY THE ASSESSE E IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECT I ON 269SS. THE DEPOSIT A N D THE WITHDRAWAL OF THE MONEY FROM TH E CUR R ENT ACCOUNT COULD NOT BE C ONSIDERED AS A LOAN OR ADVANCE . FURTH E R IT WAS A L SO FOUND THAT THE ASSESS E E FILED A LETT E R DATED SEPTEMBER 29, 1997 , AN D I N T HAT LETTER HE EXPLAINED THAT THE AMOUNT RECEIVED FROM MR. S. V . S. M A NI AN HAD BEEN SHOWN AS SEC U R E D LOAN FROM DIRECTORS' IN THE BALANCE- S H EET . AS PER THE COMPANIES ACT, UNDER THE COMPANIES (ACCEPTANCE OF D E P OSITS ) RULES, 1975, UNDER R UL E 2 (B) (IX) , DEPOSIT DOES NOT INCLUDE AN Y AMOUN T RECEIVED FROM A DIRECTOR OR A SHAREHOLDER OF A PRIVATE LIMITED COMP AN Y . THEREFORE, THE TRANSACTION BETWEEN THE APPELLANT AND THE DIR E CT O R CU M SHAREHOLDER IS NOT A LOAN OR DEPOSIT AND IT IS O NL Y A CURRENT A CCOU NT IN NATURE AND NO INTEREST I S BEING CHARGED FOR TH E ABOVE TRANSACTION. IN THE FOREGOING CONCLUSIONS , WE ARE OF THE VIEW THA T SI NC E TH E SAID TRANSACTION DOES NOT FALL WI T HIN THE MEANING OF L O AN OR ADVAN CE , TH ER E I S NO VIOLATION OF SECTION 269SS OF THE INCOME- TAX ACT. WE FIND NO ERROR IN THE ORDER OF THE TRIB UNAL AND THE SAME REQUIRES NO INTERFERENCE. HENCE, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CO NSIDERATION OF THE COURT. ACCORDINGLY, WE DISMISS THE ABOVE TAX CASE. WE FURTHER FIND THAT THE ISSUE IS ALSO COVERED BY T HE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NATVARLAL PURSHOTTAMDA S PAREEKH (2008)303 ITR 5 (GUJ), WHEREIN HONBLE HIGH COURT HAS REPRODUCED PARA 18 O F TRIBUNALS ORDER AND CONFIRMED THE ISSUE AS UNDER: 18. AS DISCUSSED ABOVE, THE ANNEXURE ATTACHED TO TH E PENALTY O RDER GOES TO SHOW THAT EACH OF THE FAMILY MEMBERS OF THE ASSESSEE A ND EACH ONE OF THEM WAS HAVING SUFFICIENT OPENING B ALANCE AS ON AP RIL 1, 1990 . AFTER THAT WE HAVE TO LOOK INTO SOURCES OF THE AMOU NTS RE CEI V ED BY THE ASSESSEE ON BEHALF OF HIS FAMILY MEMBERS AS THE S A ME IS AN IMPORTANT FACTOR . HANDSOME AMOUNT HAS BEEN RECEIVED O N ACCOUNT OF MATURITY OF NSCS AND THEN MOST OF THE AM OUNTS HAVE B E EN CREDITED ON ACCOUNT OF GIFTS RECEIVED FROM ONE FAMILY MEMBER TO O THER AND THAT WAS THROUGH JOURNAL ENTRY EXCEPT RS . 32,000 WHICH W A S GIFT BY ONE FAMILY MEMBER TO OTHER . THESE AMOUNTS WERE NOT REC EIVED BY THE ASSESSEE IN CASH AS THESE WERE MERE BOOK ENT RIES. THESE AMOUNTS CANNOT BE EQUATED WITH ANY OF THE AMOUNTS INVOLVED IN TH E CASES RELIED ON BY BOTH THE PARTIES AS IN THOSE C ASES , THE AM O UNTS WERE RECEIVED BY THE ASSESSEE AS DEPOSITS IN C ASH AND THAT IS NO T THE POSITION HERE BECAUSE THESE WERE BOOK ENTRIES EXCEPT THE AM O U NTS OF NSCS AND OTHER CASH LOAN OF RS . 11 , 910. IN THE SAME BREATH, THE AMOUNT OF RS.1,920 CREDITED ON ACCOUNT OF RENT AND RS. 2 4 , 360 CREDIT IN THE ACCOUNT OF HARENDRAKUMAR AND HITESHKUMAR C AN NO T BE TREATED AS DEPOSITS OR LOAN BECAUSE THESE WERE CREDIT EN TRI ES ON ACCOUNT OF SALARY AND BONUS . ACCORDINGLY , THE CRUX OF THE MATTER IS THAT MOST OF THE AMOUNTS AS REFERRED TO ABOVE WAS BASED ON M ERE BOOK ENTRIES AND NOT RECEIVED IN CASH B Y THE ASSESSEE FROM FAMILY MEMBERS EXCEPT THE AMOUNT OF NSCS AND OTHER CASH LOAN AND THAT CANNOT BE TREATED AS LOAN OR DEPOSITS FOR THE PURPO SE OF SECTION 269SS. 5. WE HAVE GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE FACTS ARE THAT THE ASSESSEE COMPANY RECEIVED CASH LOAN FR OM ITS SISTER CONCERN. IN VIEW OF THE ABOVE PROPOSITION LAW LAID DOWN BY VARIOUS HIGH COU RTS I.E. HONBLE MADRAS HIGH COURT IN THE CASE OF IDHAYAM PUBLICATIONS LTD., SUPRA AND HONBLE GUJARAT HIGH COURT IN THE CASE 4 ITA NO.2194/K/2010 M/S. JAGGI ISPAT PVT. LTD. AY 1996-97 OF NATVARLAL PURSHOTTAMDAS PAREEKH, SUPRA, WE FIND THAT THE PENALTY LEVIED BY ADDL.CIT, RANGE-3, KOLKATA AND CONFIRMED BY CIT(A) NEEDS TO B E QUASHED. IN TERM OF THE ABOVE, WE DELETE THE PENALTY LEVIED BY ADDL. CIT AND CONFIRME D BY CIT(A). APPEAL OF ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29.10.2 015 SD/- SD/- (WASEEM AHMED) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29TH OCTOBER, 2015 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-3(4), KOLKATA. 2 RESPONDENT M/S. JAGGI ISPAT PVT. LTD., 1, NELLIE SENGUPTA SARANI, KOLKATA-700087. 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR . 5 ITA NO.2194/K/2010 M/S. JAGGI ISPAT PVT. LTD. AY 1996-97