T.R.Thirugnanam, CHENNAI V. JCIT Non Corporate Range 7, CHENNAI

ITA 2206/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6878 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 23-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR D KUMUDHA
• Keywords: Search and seizure
• Section: 273B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2206/CHNY/2018 ( / ASSESSMENT YEAR: 2013-14) SHRI T.R. THIRUGNANAM, NO.33, RAILWAY STATION ROAD, GUMMIDIPOONDI 601 201. VS THE JOINT COMMISSIONER OF INCOME TAX, NON CORPORATE RANGE 7, CHENNAI. PAN: ACZPT7322D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : NONE / RESPONDENT BY : DR.D. KUMUDHA, JCIT /DATE OF HEARING : 01.01.2019 /DATE OF PRONOUNCEMENT : 07.01.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-7, CHENNAI, DATED 31.05.2018 IN ITA NO.29/CIT(A)-7/2017-18 FOR THE ASSESSMENT YEAR 2013-14 PASSED U/S. 250(6) R.W.S. 271D OF THE ACT. AT THE TIME OF HEARING THE LD.AR WAS NOT PRESENT BEFORE THE BENCH, HOWEVER ON PERUSING THE FILE AND THE SUBMISSION OF THE LD.DR THE BENCH DECIDED TO HEAR THE APPEAL EX-PARTE ON MERITS. 2 ITA NO.2206 /CHNY/2018 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.JCIT WHO HAD LEVIED PENALTY OF RS.5,40,000/- BY INVOKING THE PROVISIONS OF SECTION 271D OF THE ACT FOR VIOLATING THE PROVISIONS OF SECTION 269SS OF THE ACT. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD OBTAINED LOAN BY WAY OF CASH RS.5,40,000/- FROM T.R. THIRUGNANAM (HUF) PAN NO. AABHT7288Q DURING THE FINANCIAL YEAR 2012-13 RELEVANT TO THE ASSESSMENT YEAR 2013-14. ON QUERY THE ASSESSEE HAS SUBMITTED THE FOLLOWING WRITTEN SUBMISSION BEFORE THE LD.AO VIDE LETTER DATED 17.08.2017:- 1) THE ASSESSEE HAS DUAL ROLE, ONE AS INDIVIDUAL AND ANOTHER AS KARTA OF HUF. THE HUF HAS NO PHYSICAL FORM AND ITS AFFAIRS ARE HANDLED BY THE KARTA. IN THIS CASE THE ASSESSEE HAS HANDLED THE CASH AS AN INDIVIDUAL AND KARTA OF HUF AND AS SUCH THERE IS NO ESTABLISHED LENDER-BORROWER RELATIONSHIP. THEREFORE, THERE IS NO LOAN AT ALL IN THE CASH TRANSACTIONS BETWEEN THE ASSESSEE AS AN INDIVIDUAL AND KARTA OF THE HUF. 2) AS PER I. T. ACT, LOAN HAS TO BE TAKEN BY WAY OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR WHICH TWO INDIVIDUALS ARE NECESSARY. IN THIS CASE TRANSACTION HAS TAKEN PLACE BETWEEN A REAL PERSON AND AN IMAGINARY PERSON, WHERE BOTH THE INDIVIDUALS ARE SAME, ISSUING OF CROSSED CHEQUE OR DEMAND DRAFT BY ONE PERSON ON HIMSELF IS DIFFICULT. HON'BLE ITAT, PUNE IN THE CASE OF RAJENDRA SURYAVANSHI VS ACIT (2011) REPORTED IN 141 TT J 620, HAS HELD THAT IN A TRANSACTION BETWEEN THE ASSESSEE AS AN INDIVIDUAL AND KARTA OF HUF, THERE IS NO ELEMENT OF LOAN. 3 ITA NO.2206 /CHNY/2018 3) THE AMOUNT OF RS.5,40,000/- HAD BEEN CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE WITH NO OBLIGATION OF REPAYMENT AND INTEREST PAYMENT. THE TRANSACTION SHOULD NOT BE TREATED AS LOAN. THE SAME VIEW WAS EXPRESSED BY THE HON'BLE ITAT, HYDERABAD IN THE CASE OF DILLU CINE ENTERPRISES (P) LTD. VS ADDL. CIT (2002) REPORTED IN 80 ITD 484. 4) SEC.10(2.) OF THE INCOME TAX ACT EXEMPTS ANY SUM RECEIVED BY A MEMBER OF HUF FROM THE HUF WHERE THE SAID SUM BEING PAID HAD BEEN PAID BY THE HUF OUT OF THE INCOME ACCRUING OR ARISING TO SUCH HUF. HOWEVER THE LD.AO OPINED THAT SINCE THE CASH LOAN TRANSACTION WAS BETWEEN THE ASSESSEE, AN INDIVIDUAL, AND THE OTHER PARTY BEING THE HUF WHEREIN THE ASSESSEE IS THE KARTHA ARE TWO DISTINCT ENTITIES WHO ARE ASSESSABLE TO TAX INDEPENDENTLY AND THEREFORE THE CASH LOAN OBTAINED BY THE ASSESSEE FROM HIS HUF IS IN VIOLATION OF THE PROVISION OF SECTION 269SS OF THE ACT AND ACCORDINGLY PENALTY U/S.271D OF THE ACT IS ATTRACTED. THE LD.AO ALSO REJECTED THE DECISIONS RELIED BY THE ASSESSEE BY DISTINGUISH IT FROM THE CASE OF THE ASSESSEE AND THEREAFTER INVOKED THE PENAL PROVISION OF SECTION 271D OF THE ACT AND LEVIED PENALTY ON THE ASSESSEE FOR A SUM OF RS.5,40,000/- BEING THE AMOUNT OF LOAN OBTAINED BY THE ASSESSEE IN CASH FROM HIS HUF IN VIOLATION TO THE PROVISION OF SECTION 269SS OF THE ACT. ON APPEAL THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY AGREEING WITH HIS VIEW AND FURTHER RELIED IN THE DECISION 4 ITA NO.2206 /CHNY/2018 RENDERED IN THE CASE ADIT(INV) VS. KUM. A.B. SHANTHI REPORTED IN 255 ITR 258 WHILE HOLDING SO. 4. THE LD.DR ARGUED IN SUPPORT OF THE ORDERS OF THE LD.REVENUE AUTHORITIES BEFORE US AND PLEADED FOR CONFIRMING THE SAME. 5. WE HAVE PERUSED THE MATERIALS ON RECORD AND HEARD THE LD.DR. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE HAS OBTAINED CASH LOAN FROM THE HUF IN WHICH HE IS KARTA. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE AS WELL AS THE HUF SHARES THE SAME ADDRESS. BOTH THE ASSESSEE AND THE HUF ARE CLOSELY INTER- RELATED BECAUSE THE ASSESSEE IS THE KARTA OF THE HUF FROM WHOM HE HAS BORROWED LOAN BY WAY OF CASH. IN THESE CIRCUMSTANCES, IT IS NOTHING BUT TRANSFER OF CASH FROM ONE CASH BOX TO ANOTHER LOCATED IN THE SAME PLACE. IN THIS CONTEXT THE DECISION RELIED BY THE LD.CIT(A) IN THE CASE KUM.A.B. SHANTHI CITED SUPRA IS IN FAVOUR OF THE ASSESSEE AND NOT AGAINST THE ASSESSEE AS INFERRED BY THE LD.CIT(A). FOR REFERENCE THE GIST OF THE SAME IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 5 ITA NO.2206 /CHNY/2018 THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENSURE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY, OR IF HE MAKES SOME FALSE ENTRIES, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. DURING SEARCH AND SEIZURES, UNACCOUNTED MONEY IS UNEARTHED AND THE TAX-PAYER WOULD USUALLY GIVE THE EXPLANATION THAT HE HAD BORROWED OR RECEIVED DEPOSITS FROM HIS RELATIVES OR FRIENDS AND IT IS EASY FOR THE SO-CALLED LENDER ALSO TO MANIPULATE HIS RECORDS TO SUIT THE PLEA OF THE TAXPAYER. THE MAIN OBJECT OF SECTION 269SS WAS TO CURB THIS MENACE OF MAKING FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIVING AN EXPLANATION FOR THE SAME. THE UNDUE HARDSHIP OF THE PROVISIONS OF SECTION 271D, WHICH REPLACED SECTION 276DD PROVIDING FOR A PENALTY, IS SUBSTANTIALLY MITIGATED BY THE INCLUSION OF SECTION 273B PROVIDING THAT IF THERE WAS A GENUINE AND BONAFIDE TRANSACTION AND THE TAXPAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT- PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONAFIDE REASON, THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETIONARY POWER NOT TO LEVY THE PENALTY. IN THE CASE OF THE ASSESSEE THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE HAS USED THE CASH LOAN TRANSACTION IN ORDER TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE TRANSACTION IS NOT BONAFIDE. THEREFORE, IT WOULD BE ABSURD TO INVOKE THE PENAL PROVISION OF SECTION 271D OF THE ACT WHEN THE ASSESSEE HIMSELF IS PART AND PARCEL OF THE HUF FROM WHERE HE HAS OBTAINED THE CASH LOAN. HENCE DRAWING STRENGTH FROM THE PROVISIONS OF SECTION 273B OF THE ACT WE HEREBY SET ASIDE THE ORDER OF THE LD.CIT(A) AND FURTHER DIRECT THE LD.AO TO DELETE THE 6 ITA NO.2206 /CHNY/2018 LEVY OF PENALTY U/S.271D OF THE ACT IN VIOLATION OF 269SS OF THE ACT IN THE CASE OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 7 TH JANUARY, 2019 AT CHENNAI. SD/- SD/- ( . ) ( . ) ( DUVVURU RL REDDY ) ( A . MOHAN ALANKAMONY ) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /CHENNAI, /DATED 7 TH JANUARY, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF