Sanjay Ramchandra Phand, Ahmednagar V. Addl CIT Rg- Ahmednagar, Ahmednagar

ITA 2237/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72503 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 09-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GARIMA CHOUHARY
• Assessee Lawyers: MALPANI
• Keywords: Bonafide belief; Reasonable cause; Ignorance of law
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2237/PN/2012 (ASSTT.YEAR : 2006-07) SANJAY RAMCHANDRA PHAND, C/O. HOTEL RADHIKA OPP. ST STAND, SHRIRAMPUR, DIST : AHMEDNAGAR. .. APPELLANT PAN NO.AAZPP7219F VS. ADDL.CIT, RANGE-9, AHMEDNAGAR .. RESPONDENT ASSESSEE BY : SHRI MALPANI REVENUE BY : SMT. GARIMA CHOUHARY DATE OF HEARING : 26-12-2013 DATE OF PRONOUNCEMENT : 31-12-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29-06-2012 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2006-07. LEVY OF PENALTY OF RS. 2 LAKHS U/S.271D B Y THE ADDL.CIT, AHMEDNAGAR AND UPHELD BY THE CIT(A) IS THE ONLY ISS UE IN THIS APPEAL. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS OWNER OF BUILDING COMPRISING OF HOTEL AND DINING HALL. ASSE SSMENT IN THIS CASE WAS COMPLETED U/S.143(3) ON A TOTAL INCOME OF RS.5, 93,720/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED FROM THE BALANCE SHEET THAT IT HAS SHOWN ADVANCE FO R HOTEL RADHIKA AMOUNTING TO RS.2 LAKHS. FROM THE DETAILS FURNISHE D BY THE ASSESSEE, HE NOTED THAT SHRI JAYRAM GOPAL SHETTI AND SHRI SUDHAK AR L. KOTTIYAN HAD TAKEN ON RENT THE RESTAURANT PART AND DINING HALL P ART OF HOTEL RADHIKA 2 RESPECTIVELY BY PAYING RS. 1 LAKH EACH IN CASH AS D EPOSIT. DURING THE ASSESSMENT PROCEEDINGS ON BEING QUESTIONED BY THE A SSESSING OFFICER, IT WAS CLARIFIED THAT ABOVE AMOUNTS WERE TAKEN AS A DVANCE AND NOT AS A LOAN OR DEPOSIT. IT WAS EXPLAINED THAT THE SAME HA S BEEN ACCEPTED AS SECURITY AGAINST ANY DAMAGE HAPPENING TO THE FURNIT URE, DECORATION, KITCHEN SETS ETC. AND THESE ADVANCES WILL BE RETURN ED TO THEM WHEN THEY WILL STOP TO RUN ON RENTAL BASIS. SINCE THE ASSESS EE HAS ACCEPTED THE DEPOSIT OF RS.2 LAKHS IN CASH THE ASSESSING OFFICER WAS OF THE OPINION THAT PROVISIONS OF SECTION 269SS WERE ATTRACTED. H E, THEREFORE, REFERRED THE MATTER TO THE ADDL.CIT FOR INITIATING PENALTY U /S.271D OF THE I.T. ACT. ON BEING QUESTIONED BY THE ADDL.CIT, THE ASSE SSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFIC ER. IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE DECISION OF HYDERAB AD BENCH OF THE TRIBUNAL IN THE CASE OF DILLU CINE ENTERPRISES PVT. LTD. VS. ADDL.CIT REPORTED IN 80 ITD 484 WAS RELIED UPON. 2.1 IT WAS FURTHER SUBMITTED THAT THE AMOUNT ACCEPT ED BY THE ASSESSEE IS SECURITY DEPOSIT AGAINST FUTURE CONTINGENCIES. I T WAS BROUGHT TO THE NOTICE OF THE ADDL.CIT THAT AN AMOUNT OF RS.5,200/- HAD BEEN DEBITED TO SUCH ACCOUNT DUE TO SOME BREAKAGE OF GLASS. IT WAS FURTHER ARGUED THAT THE VERY BASIS OF BRINGING THE PROVISION IN THE ACT WAS TO AVOID TAX EVASION BY BRINGING CASH IN THE BOOKS UNDER THE GRA B OF LOAN OR DEPOSIT. IN THE INSTANT CASE, THE SECURITY DEPOSIT IS ACCEPT ED AS GENUINE AND GENUINE TRANSACTIONS ARE OUTSIDE THE NET OF PROVISI ONS OF SECTION 269SS. IT WAS FINALLY ARGUED THAT THE DEFAULT, IF ANY CAN BE SAID TO BE TECHNICAL IN NATURE AND THEREFORE, PROCEEDINGS MAY BE DROPPED . 3 2.2 HOWEVER, THE ADDL.CIT WAS NOT CONVINCED WITH TH E EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THERE IS NO R EASONABLE CAUSE ON THE PART OF THE ASSESSEE IN NOT ACCEPTING SUCH DEPOSIT IN ACCOUNT PAYEE CHEQUES OR BANK DRAFTS. HE ALSO REJECTED THE ALTER NATE CONTENTION OF THE ASSESSEE THAT THE DEPOSITORS HAVE NO BANK ACCOUNT I N SHRIRAMPUR ON THE GROUND THAT THOSE PERSONS SHOULD HAVE GIVEN OUT STA TION CHEQUES AS THERE WAS NO EMERGENCY IN MAKING THE PAYMENTS OR TH EY COULD HAVE TELEGRAPHIC TRANSFER OF THE AMOUNTS. REFERRING TO VARIOUS DECISIONS THE ADDL.CIT LEVIED PENALTY OF RS.2 LAKHS FOR VIOLATION OF PROVISIONS OF SECTION 269SS. 3. IN APPEAL THE LD.CIT(A) UPHELD THE PENALTY SO LE VIED BY THE ADDL.CIT. WHILE DOING SO, HE REJECTED THE CONTENTI ON OF THE ASSESSEE THAT THE MONEY WAS RECEIVED AS SECURITY DEPOSIT FOR THE SAFETY OF ANY DAMAGE TO THE PHYSICAL PROPERTY OR FINANCIAL DAMAGE TO OMISSION OR COMMISSION OF THE TENANTS AND, THEREFORE, IS NOT OF THE NATURE OF DEPOSIT OR LOAN COVERED U/S.269SS. HE ALSO REJECTED THE AR GUMENT OF BONAFIDE BELIEF. 3.1. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE ASSESSING OFFICER AND THE CIT(A) . IT WAS SUBMITTED THAT THE ADVANCE RECEIVED AGAINST FUTURE CONTINGENC IES CANNOT BE TERMED AS LOAN OR DEPOSIT. HE SUBMITTED THAT THE CONTINGE NCY WAS PROVED BY FILING EXTRACT OF TENANT WHERE AN AMOUNT OF RS.5,20 0/- WAS DEBITED DUE TO BREAKAGE OF ONE GLASS. THERE IS ONE MORE DEBIT TO THE SAID ACCOUNT IN 4 THE LAST ACCOUNTING YEAR TOWARDS PAYMENT OF VAT BY THE ASSESSEE BECAUSE THE TENANT HAS GONE TO HIS NATIVE PLACE. T HESE INSTANCES, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, PROV E THAT THE SAID AMOUNT IS CONTINGENCY ADVANCE AND CANNOT BE TERMED AS A LOAN OR DEPOSIT. HE FURTHER SUBMITTED THAT BOTH THE TENANT S WERE NOT HAVING BANK ACCOUNT AT SHRIRAMPUR. REFERRING TO THE AFFID AVIT OF BOTH THE PERSONS HE SUBMITTED THAT THESE AFFIDAVITS WERE PRO DUCED BEFORE THE ADDL.CIT. 4.1 REFERRING TO THE DECISION OF THE MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF DR. DEEPAK MUCHALA VS. ITO REPORTED IN 58 TTJ (BOM) 524 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT IN CASE OF GENUINE TRANSACTION EVEN IF THERE WAS INFRACTION OF LAW RESULTING FROM IGNORANCE OF LAW, WHICH DID NOT PREJUDICE THE INTER EST OF THE REVENUE, THE DEFAULT WAS ONLY TECHNICAL OR VENIAL INFRACTIO N OF LAW AND COULD BE EXCUSED IN VIEW OF THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA REPORTE D IN 83 ITR 126. REFERRING TO THE DECISION OF PUNE BENCH OF THE TRIB UNAL IN THE CASE OF BHARADIYA TRADING CO. HE SUBMITTED THAT THE TRIBUNA L IN THE SAID DECISION HAS DELETED THE PENALTY LEVIED U/S.271D AN D 271E ON THE GROUND OF REASONABLE CAUSE. HE SUBMITTED THAT THE RE WAS A REASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR ACCEPTING SUC H DEPOSIT IN CASH SINCE THE RENT OF THE PROPERTY WAS ON A DAILY BASIS , AND THEREFORE IN VIEW OF THE PROVISIONS OF SECTION 273B THE PENALTY LEVIE D BY THE ADDL.CIT AND UPHELD BY THE CIT(A) SHOULD BE CANCELLED. 5 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN THE INSTANT CASE HAS RECEIVED SECURITY DEPOSIT OF RS.1 LAKH EACH FROM 2 TENANTS NAMELY SHRI JAYRAM GOPAL S HETTI AND SHRI SUDHAKAR L. KOTTIYAN TOWARDS RENT OF RESTAURANT PAR T AND DINING HALL PART OF HOTEL RADHIKA. ACCORDING TO THE ADDL.CIT, BY ACCEPTING SUCH SECURITY DEPOSIT IN CASH THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS. THEREFORE, SHE LEVIED PENALTY U/S.27 1D OF THE I.T. ACT OF THE EQUIVALENT AMOUNT WHICH HAS BEEN UPHELD BY T HE CIT(A). 6.1 IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSES SEE THAT THE AMOUNT OF RS.1 LAKH EACH HAS BEEN TAKEN AS SECURITY DEPOSI T TO MEET THE FUTURE CONTINGENCY SUCH AS LOAN TO ASSESSEE DUE TO BREAKIN GS, FIRE OR MISHANDLING ETC. ACCORDING TO HIM, IT IS A COMMON EXPERIENCE THAT THESE TENANTS SUDDENLY BREAK THE CONTRACT TO GO TO THEIR NATIVE PLACE WITHOUT INTIMATING TO THE LANDLORD AND IN SUCH SITU ATION THE TENANT EVEN DO NOT PAY THE OUTSTANDING BILLS TOWARDS ELECTRICI TY, VAT, TELEPHONE BILL OR SALARY ETC. IT IS ALSO THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE 2 TENANTS DID NOT HAVE BANK ACCOUNTS AT SH RIRAMPUR. IT IS ALSO THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE HOTEL HAS BEEN LET OUT ON A DAILY RENT BASIS AND INSTANCES HAVE OCCURR ED WHEN AMOUNTS 6 HAVE BEEN RECOVERED FROM THE SAID SECURITY DEPOSIT TOWARDS BREAKAGE OF GLASS AND PAYMENT OF VAT. 6.2 AS PER THE PROVISIONS OF SECTION 273B PENALTY U /S.271D SHALL NOT BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS, IF HE P ROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE IN THE INSTANT CASE, WE ARE OF TH E OPINION THAT WHEN THE ASSESSEE HAS LET OUT THE HOTEL BUILDING ON A DAILY BASIS, WHEN THE TENANTS HAD NO BANK ACCOUNT AT SHRIRAMPUR AND THE GENUINENE SS OF THE TRANSACTION HAS NOT BEEN DOUBTED, A FACT NOT CONTRO VERTED BY THE REVENUE, THEREFORE, THERE WAS A REASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR ACCEPTING SUCH SECURITY DEPOSIT IN CAS H. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271D OF THE I.T. ACT. WE AC CORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE PENAL TY IS DIRECTED TO BE DELETED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31-12-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 31 ST DECEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE