Makewell Inducto Cast Pvt. Ltd., Ahmedabad V. The JCIT, Range-4, Ahmedabad

ITA 2235/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67972 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 03-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: A C SHAH
• Keywords: Search and seizure; Reasonable cause

Judgement Text

ITA NO 2235/ AHD/2013 . A.Y. 20 08- 09 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2235/AHD/2013 (ASSESSMENT YE AR: 2008-09) MAKEWELL INDUCTO CAST PVT. LTD., PLOT NO. 510, ROAD NO. 13, GIDC ESTATE, KATHWADA, AHMEDABAD- 382430 V/S THE JCIT, RANGE-4 AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAECM 3061 C APPELLANT BY : SHRI A.C. SHAH RESPONDENT BY : SHRI P.L. KUREEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 31-10-2013 DATE OF PRONOUNCEMENT : 29 -11-2013 PER SHRI ANIL CHATURVEDI,A.M 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE PENALTY ORDER DATED 16/17.6.2011 PASSED U/S 271D OF THE ACT AND C ONFIRMED BY CIT(A) VIDE ORDER DATED 17.7.2013. 2. THE BRIEF FACTS AS PER THE MATERIAL ON RECORDS IS A S UNDER: 3. ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING OF CL CASTING. DURING THE COURSE OF A SSESSMENT ITA NO 2235/ AHD/2013 . A.Y. 20 08- 09 2 PROCEEDINGS AO NOTICED THAT ASSESSEE HAS RECEIVED C ASH LOANS ON VARIOUS DAYS AGGREGATING TO RS 8,89,000/- FROM SHRI RAMUSIN GH BADORIA, THE DIRECTOR, OF THE ASSESSEE. AO WAS OF THE VIEW THAT THE ACCEPTANCE OF LOAN IN CASH WAS IN CONTRAVENTION OF PROVISIONS OF S. 26 9SS. THE SUBMISSIONS OF THE ASSESSEE WITH RESPECT TO BUSINESS EXIGENCIES WAS NOT FOUND ACCEPTABLE AND ACCORDINGLY HE INITIATED PENALTY PRO CEEDINGS U/S 271D OF THE ACT AND THEREAFTER VIDE ORDER DATED 16/17.6.201 1 LEVIED PENALTY OF RS 8,89,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 17.7.2013 CO NFIRMED THE ORDER OF AO BY HOLDING AS UNDER: 2.3 I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER, FACT S OF THE CASE AND THE WRITTEN SUBMISSION GIVEN BY THE APPELLANT. IN THIS CASE A PENALTY UNDER SECT ION 271D WAS IMPOSED AS THE APPELLANT HAD TAKEN CASH LOANS ON VARIOUS DATES FROM SHRI RAMU SI NGH BHDORIA, DIRECTOR OF THE COMPANY. THE FACTS SHOW THAT THERE WAS A VIOLATION OF THE PR OVISIONS OF SECTION 269SS. HOWEVER THE APPELLANT CLAIMS THAT DUE TO BUSINESS EXIGENCY IT H AD TO ACCEPT LOAN FROM THE DIRECTOR IN CASH. THE TRANSACTIONS WERE BONA FIDE AND THE DEPOSIT WAS SHOWN IN THE BOOKS OF ACCOUNT. THE TRANSACTIONS WERE BETWEEN COMPANY AND THE DIRECTOR WHO MANAGES THE COMPANY. THERE WAS NO UNACCOUNTED MONEY INVOLVED AND NO REVENUE LOSS HAS OCCURRED. THE APPELLANT HAS THEREFORE, PLEADED THAT IT WAS A TECHNICAL AND VENIAL BREACH O F LAW AND THERE WAS A REASONABLE CAUSE FOR ACCEPTING THE CASH DEPOSITS AND THEREFORE, THE PENA LTY SHOULD NOT BE IMPOSED. THE APPELLANT HAS ALSO RELIED ON CERTAIN CASE LAWS IN SUPPORT OF HIS CONTENTION, WHICH HAVE BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS WHERE THE SUBMISSIONS OF THE A PPELLANT HAVE BEEN MENTIONED. THE EXPLANATIONS AND THE JUDICIAL DECISIONS GIVEN B Y THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. THERE IS NO DISPUTE REGARDING THE VIOLA TION OF THE PROVISIONS OF SECTION 269SS. THE APPELLANT CLAIMS THAT THERE WAS A REASONABLE CAUSE FOR ACCEPTING THE LOAN IN CASH FROM THE DIRECTOR. ON EXAMINATION OF THE BONFIDES FOR ACCEPT ING THE LOAN IN CASH IT IS NOTED THAT THE APPELLANT HAS NOT COME CLEAN ON THE ISSUE. THE REAS ONABLE CAUSE WHICH IS BEING CLAIMED IS NOT 'REASONABLE' AT ALL. THE APPELLANT HAS CLAIMED THAT IT WAS IN NEED OF MONEY FOR PAYMENT TO CERTAIN SUPPLIERS AND THE BANK LOAN WAS NOT SANCTI ONED THEREFORE, IT HAD TO ACCEPT LOAN IN CASH FROM THE DIRECTOR. THE DETAILS SHOW THAT THE CLAIM OF THE APPELLANT IS FALSE. THE APPELLANT ACCEPTED CASH LOAN OF RS. 1 LAKH ON 13/09/2007 AND RS. 89,000/- ON 18/09/2007 WHICH WAS UTILISED FOR MAKING THE PAYMENT TO PARTY ON 19/09/2 007. SIMILARLY A CASH LOAN OF RS. 1 LAKH ACCEPTED ON 20/09/2007 WAS UTILISED FOR PAYMENT OF RS. 64.500/- ON 24/09/2007. ANOTHER LOAN OF RS. 4 LAKH WAS TAKEN FROM THE DIRECTOR ON 21/09/ 2007 AND UTILIZED FOR MAKING PAYMENT ON 25/09/2007. IT SHOWS THAT THE PAYMENT WAS RECEIVED FEW DAYS EARLIER AND THE PAYMENT WAS MADE TO THE SUPPLIERS LATER. HAD THERE BEEN AN URGENCY O R BUSINESS EXIGENCY THE DATE OF ACCEPTANCE OF LOAN AND THE PAYMENT SHOULD HAVE BEEN SAME. THE APP ELLANT COULD HAVE ASKED THE DIRECTOR TO DEPOSIT THE CASH IN HIS ACCOUNT FIRST AND THEN ISSU E A CHECK TO THE COMPANY IF THE INTENTIONS WERE CLEAR. IT APPEARS TO BE A CASE WHERE THE CASH WAS DEPOSITED IN THE COMPANY'S ACCOUNT FOR MAKING THE PAYMENT OR ISSUING THE CHECKS AND LATER ON THE SOURCE HAS BEEN CLAIMED TO BE THE CASH RECEIVED FROM THE DIRECTOR. THESE FACTS ARE CL EARLY AGAINST THE APPELLANT AND BELIE THE CLAIM OF BONFIDES OF THE APPELLANT. THE CLAIM OF BU SINESS EXPEDIENCY IS ALSO NOT SUPPORTED BY ANY VALID REASON. IT CAN BE ACCEPTED THAT THE APPEL LANT NEEDED MONEY FOR MAKING THE PAYMENT TO THE SUPPLIERS BUT THE REASON FOR ACCEPTING THE LOAN IN CASH CANNOT BE EXPLAINED BY CLAIMING THAT THERE WAS BUSINESS EXPEDIENCY AS THERE WAS NONE. ITA NO 2235/ AHD/2013 . A.Y. 20 08- 09 3 REGARDING THE JUDICIAL DECISIONS RELIED BY THE APP ELLANT IT IS NOTED THAT APPELLANT HAS MENTIONED TWO JUDGMENTS IN PARA 5.1 AND 5.2 OF ITS SUBMISSION WHICH ARE REGARDING THE SINGLE PERSON MANAGING AFFAIRS OF TWO CONCERNS. IN THESE CASES TH ERE WERE TRANSFER OF FUNDS FROM ONE COMPANY TO THE OTHER COMPANY AND THEREFORE, CONSIDERING 'TH E BUSINESS NECESSITY THE PENALTY WAS NOT HELD TO BE IMPOSABLE. IN THE PRESENT CASE, HOWEVER, THE APPELLANT HAS FAILED TO PRODUCE THE REASON FOR BUSINESS EXPEDIENCY. IN PARA 5.3, 5.4 AND 5.5 THE A PPELLANT HAS QUOTED JUDGMENTS WHICH RELATES TO BUSINESS EXIGENCY. THESE CASES ALSO ARE NOT APPL ICABLE TO THE FACTS OF THE PRESENT CASE AS EACH CASE HAD PECULIAR FACTS AND THE FACTS ARE NOT SIMIL AR. IN PARA 5.6 THE APPELLANT HAS MENTIONED A CASE OF MOTTA CONSTRUCTIONS PRIVATE LIMITED( 338 IT R 66, BOMBAY) WHEREIN THE DIRECTOR OF THE COMPANY HAD OFFERED UNDISCLOSED EXPENDITURE INCURRE D ON BEHALF OF THE COMPANY FOR TAXATION AND THEREFORE, NO PENALTY WAS HELD TO BE LEVIABLE. THE FACTS OF THIS CASE ARE CLEARLY DISTINGUISHABLE AND THE JUDGMENT IS THEREFORE, NOT APPLICABLE TO THE PRESENT CASE. IN PARA 5.7 THE APPELLANT HAS SUBMITTED A JUDGMENT IN THE CASE OF BHAGWATI PRASAD BAJORIA (263 ITR 487), WHICH IS REGARDING THE BONA FIDES AND GENUINE TRANS ACTION. THE FACTS OF THAT CASE ALSO ARE TYPICAL AND CANNOT BE RELATED TO THE FACTS OF THE P RESENT CASE. IN PARA 5.8, 5.9 AND 5.10 THE JUDGMENTS QUOTED BY THE APPELLANT RELATES TO BOOK E NTRIES WHICH HAVE BEEN TAKEN AS A REASONABLE EXPLANATION FOR THE DEFAULT. THESE CASES ALSO ARE TYPICAL TO RESPECTIVE FACTS AND THEREFORE, CANNOT BE APPLIED IN THE PRESENT CIRCUMS TANCES. THE APPELLANT HAS ALSO RAISED THE ISSUE THAT IT WAS MERELY A TECHNICAL AND VENIAL BREACH OF LAW AND THEREFORE, PENALTY SHOULD NOT BE IMPOSED IT IS ALSO RELIED ON CERTAIN JUDGEMENTS WHICH ARE QUOTED BY IT IN PARA 6.1. THE PRESENT CASE CANNOT B E PUT IN THE CATEGORY OF TECHNICAL AND VENIAL BREACH. IT IS THE CLEAR CASE WHERE LOAN IN CASH HAS BEEN ACCEPTED AND NO REASONABLE EXPLANATION HAS BEEN GIVEN BY THE APPELLANT . THE A PPELLANT HAS ACTED DELIBERATELY IN DEFIANCE OF LAW AND THEREBY VIOLATED THE PROVISIONS OF THE I NCOME TAX ACT. THE FACTS CLEARLY SHOW THAT THERE WAS SUFFICIENT TIME WITH THE APPELLANT TO ARR ANGE LOAN BY WAY OF CHEQUE AND, THEREFORE, IT WAS A DELIBERATE ATTEMPT ON BEHALF OF THE APPELLANT . ACCORDINGLY, IT CANNOT BE CATEGORIZED AS IT TECHNICAL OR VENIAL BREACH. THE APPELLANT HAS ALSO RAISED THE ISSUE THAT IS NO FINDING ABOUT THE UNACCOUNTED MONEY USED IN THE TRANSACTION. IN MY OPINION IT IS A FIT CASE WHE RE THE INTENTION OF THE LEGISLATURE IN BRINGING THE PROVISIONS INTO THE ACT HAS BEEN PROVED TO BE U SEFUL. AS DISCUSSED IN THE PRECEDING PARAGRAPHS IT IS NOTED THAT THERE WAS SUFFICIENT TI ME FOR THE APPELLANT TO ARRANGE LOAN BY CHEQUE FOR PAYMENT HOWEVER THE APPELLANT DID NOT DO THE SA ME, ACCEPTED THE LOAN BY CASH FROM THE DIRECTOR AND THEREFORE, THE VIOLATED THE PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE MENTIONED DISCUSSION, I AM OF THE CONSIDERED OPINION THAT IT IS A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271 D. THE ACTION OF THE'A.O IS, THEREFORE, UPHELD. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. 5. BEFORE US, THE LD. A.R. SUBMITTED THAT THE YEAR UND ER CONSIDERATION WAS THE FIRST YEAR OF ITS OPERATION. THE CONSTRUCTION O F FACTORY BUILDING AND INSTALLATION OF PLANT WAS IN PROGRESS. ASSESSEE HAD APPLIED FOR A LOAN FROM BANK OF BARODA WHICH WAS SANCTIONED BY THE BANK ON 28.9.2007 AND THE FIRST DISBURSEMENT OF THE LOAN WAS RECEIVED ON 16.1 0.2007. IN THE MEANTIME, ASSESSEE HAD TO MAKE PAYMENTS TO THE MACH INERY SUPPLIERS ITA NO 2235/ AHD/2013 . A.Y. 20 08- 09 4 AND THEREFORE THERE WAS URGENT NEED OF FUNDS. TO MA KE THE PAYMENTS TO THE SUPPLIERS, THE DIRECTOR OF THE COMPANY, SHRI RA MUSINGH BHADORIA DEPOSITED THE AMOUNT IN THE BANK ACCOUNT OF THE ASS ESSEE DIRECTLY AND WHICH IN TURN WAS USED TO MAKE THE PAYMENTS TO THE SUPPLIERS. THE TRANSACTION WERE BONAFIDE AND OUT OF BUSINESS EXIGE NCY. HE FURTHER PLACED ON RECORD AT PAGE 7 OF THE PAPER BOOK THE CO PY OF THE BANK ACCOUNT AS APPEARING IN ITS BOOKS OF ACCOUNTS. FROM THE AFO RESAID ACCOUNT HE POINTED TO THE FACT THAT THE AGGREGATE LOAN OF RS 1 ,89,000/- RECEIVED ON 13.9.2007 AND 18.9.2007 (RS 1 LAC AND RS 89,000 RES PECTIVELY) WAS USED TO MAKE THE PAYMENT IMMEDIATELY ON 19.9.2007. SIMIL ARLY, THE AGGREGATE LOAN OF RS 5 LACS (RS 1 LAC RECEIVED ON 20.9.2007 A ND RS 4 LAC RECEIVED ON 21.9.2007) WAS ALSO USED TO MAKE THE PAYMENT TO SUPPLIERS ON 24.9.2007, 25.9.2007 AND 26.9.2007. HE THEREFORE SU BMITTED THAT DUE TO URGENT REQUIREMENT OF FUNDS AND BUSINESS EXIGENCY T HE AMOUNTS WERE BORROWED. HE FURTHER SUBMITTED THAT NO UNACCOUNTED MONEY WAS INVOLVED IN THE TRANSACTION, THE TRANSACTION HAS BEEN HELD T O BE GENUINE AND THE RECEIPT OF LOAN IN CASH CAN AT THE MOST BE TERMED T O BE A TECHNICAL BREACH. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF CHANDRA CEMENT LTD VS DCIT (2000) 68 TTJ (JP) 35, VIRAMBHAI RAMABH AI PATEL (ITA NO 2230/AHD/2012 ORDER DATED 22.3.2013 AND VARIOUS OTH ER DECISIONS. HE THUS SUBMITTED THAT THE PENALTY LEVIED BE DELETED. 6. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF AO AND CIT(A) AND FURTHER PLACED RELIANCE ON THE DECISION OF DELHI HC IN THE CASE CIT VS SAMORA HOTELS (P) LTD (2012) 19 TAXMANN .COM 285 (DEL) AND DECISION IN THE CASE OF BUILTEC ENGINEERS & BUI LDERS VS DCIT (2013) ITA NO 2235/ AHD/2013 . A.Y. 20 08- 09 5 31 TAXMANN.COM 406 (MAD). HE ALSO PLACED ON RECORD A COPY OF THE AFORESAID DECISIONS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS OBTAINED CASH LOANS FROM ITS DIRECTOR, SHRI RAMUSINGH BHADORIA. IT IS ALSO A FAC T THAT THE AMOUNTS WERE UTILISED FOR THE PURPOSE OF MAKING THE PAYMENT TO THE SUPPLIERS OF MACHINERY. THE COPY OF THE BANK BOOK AS FURNISHED A LSO REVEALS THAT THE BALANCE IN THE BANK ACCOUNT BEFORE THE RECEIPT OF T HE AMOUNTS FROM THE DIRECTOR WAS ONLY RS 7500/- AND AFTER THE RECEIPTS, THE PAYMENTS WERE MADE TO THE SUPPLIERS WITHIN 1 TO 5 DAYS OF THE REC EIPT OF AMOUNTS. THE SUBMISSION OF THE ASSESSEE THAT IT HAD APPLIED FOR LOAN FROM BANK OF BARODA AND THE SAME WAS DISBURSED ON 16.10.2007 HAS NOT BEEN CONTROVERTED BY REVENUE. IT IS NOT THE CASE OF THE REVENUE THAT TRANSACTION ENTERED BY THE ASSESSEE IS NOT GENUINE OR THE SUPPLIER OF THE MACHINERY TO WHOM THE PAYMENTS HAVE BEEN MADE WERE NOT GENUINE AND THE TRANSACTION OF PURCHASE IS IN DOUBT. FURTHER TH ERE IS NO FINDING OF THE THE AO THAT THE TRANSACTION IN BREACH OF THE AFORES AID PROVISIONS MADE BY THE ASSESSEE WAS MALA FIDE AND WITH THE SOLE OBJECT TO DISCLOSE THE CONCEALED OR UNDISCLOSED MONEY. 8. THE H'BLE APEX COURT IN THE CASE OF ADI (INV) VS. K UM. A.B. SHANTHI (2002) 255 1TR 258 (SC) HAS HELD THAT THE OBJECT OF INTRODUCING S. 269SS IS TO ENSURE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY, OR IF HE HAS GIVEN SOME FALSE EN TRIES IN HIS ACCOUNTS, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. DURING SEARCH AND SEIZURES, UNACCOUNTED MONEY IS UNEARTHED AND THE TAXPAYER ITA NO 2235/ AHD/2013 . A.Y. 20 08- 09 6 WOULD USUALLY GIVE THE EXPLANATION THAT HE HAD BORR OWED OR RECEIVED DEPOSITS FROM HIS RELATIVES OR FRIENDS AND IT IS EA SY FOR THE SO-CALLED LENDER ALSO TO MANIPULATE HIS RECORDS LATER TO SUIT THE PLEA OF THE TAXPAYER. THE MAIN OBJECT OF S. 269SS WAS TO CURB THIS MENACE . THE OBJECT SOUGHT TO BE ACHIEVED WAS TO ERADICATE THE EVIL PRACTICE O F MAKING OF FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIVING EXPLANATION F OR THE SAME. 9. CONSIDERING THE TOTALITY OF THE FACTS AND IN THE PE CULIAR CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IN THE PRESENT CA SE NO PENALTY IS LEVIABLE. WE THUS DELETE THE PENALTY. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 29 -11 - 2013. SD- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD