The Ad CIT, Range-., Rajahmundry V. Sri Kuntla Ramakrishna, Rajahmundry

ITA 226/VIZ/2008

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6907 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Salary income; Bonafide belief; Reasonable cause
• Section: 273B; 133A

Judgement Text

ITA NOS 225 & 226 OF 2008 OF KUNTLA RAMAKRISHNA RAJ AHMUNDRY PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS. 225 & 226/VIZAG/2008 ASSESSMENT YEAR:2005-06 ADD.CIT RANGE, RAJAHMUNDRY VS. KUNTLA RAMA KRISHNA, RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO:APUPK 1410 R APPELLANT BY: SHRI D.S. SUNDER SINGH, SR.DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAINS T THE COMMON ORDER DATED 11-2-2008 PASSED BY LEARNED CIT(A), RAJ AHMUNDRY AND THEY RELATE TO THE ASSESSMENT YEAR 2005-06. 2. THE PENALTIES LEVIED UNDER SECTION 271 D AND SEC TION 271 E OF THE ACT, HAVING BEEN DELETED BY THE LEARNED CIT (A), TH E REVENUE IS IN APPEAL BEFORE US CHALLENGING THE DECISION OF THE LEARNED C IT (A). 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE HEREIN IS DERIVING SALARY INCOME AND INTEREST INCOM E. HIS FATHER IS RUNNING A CYCLE SPARE PARTS SHOP. THE DEPARTMENT CARRIED OUT A SURVEY OPERATION IN THE BUSINESS PREMISES OF THE ASSESSEES FATHER. DUR ING THE COURSE OF SURVEY OPERATIONS, THE ASSESSEES FATHER AGREED TO OFFER A N ADDITIONAL INCOME OF RS.1,61,000/- IN THE HANDS OF THE ASSESSEE. IT WAS STATED THAT THE ASSESSEE HEREIN DID NOT HAVE TAXABLE INCOME TILL SU CH TIME. CONSEQUENT TO THE SURVEY OPERATION STATED ABOVE, THE ASSESSEE FIL ED A RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 BY OFFERING THE ADDITIO NAL INCOME OF RS.1,61,000/- CITED ABOVE. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, IT CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS BORROWED CERTAIN AMOUNTS EXCEEDING RS.20,000/- IN C ASH IN VIOLATION OF THE ITA NOS 225 & 226 OF 2008 OF KUNTLA RAMAKRISHNA RAJ AHMUNDRY PAGE 2 OF 6 PROVISIONS OF THE SECTION 269SS AND ALSO REPAID THE SAME IN CASH IN VIOLATION OF SEC.269T OF THE ACT. THE DETAILS OF AM OUNTS SO BORROWED AND REPAID IN CASH HAVE BEEN TABULATED THE ASSESSING OF FICER AS UNDER: NAME DATE OF BORROWAL AMOUNT BORROWED (RS) AMOUNT PAID (RS.) REPAYMENT DATE SRI V.SATYANARAYANA 15-12-2004 60,000 60,000 20-01-2005 450* SRI R. GANESWARA RAO 15-12-2004 60,000 60,000 10-01-2005 450* SRI R. RAMANA 15-12-2004 50,000 50,000 10-01-2005 375* SRI B. SRIRAMA MURTHY 15-12-2004 50,000 50,000 10-01-2005 375* SRI A.V.SUDHAKAR 15-12-2004 60,000 60,000 10-01-2005 450* 2,80,000 2,82,100 *INTEREST HENCE THE ADDITIONAL CIT, WHO IS THE COMPETENT AUTH ORITY IN THIS REGARD, INITIATED PENALTY PROCEEDINGS UNDER SECTION 271D AN D 271E OF THE ACT FOR VIOLATION OF THE PROVISIONS OF 269SS AND SEC.269T O F THE ACT. THE ASSESSEE SUBMITTED THAT HE PURCHASED A SITE ON 22-12-2004 FO R RS.9,55,065/- AND FOR THAT PURPOSE HE INTENDED TO UTILIZE THE MATURITY PR OCEEDS OF THE DEPOSITS MADE BY HIM WITH M/S RAGHAVENDRA FINANCE, RAJAHMUND RY. SINCE THE SAID FINANCE COMPANY COULD NOT ARRANGE FUNDS BY THE DATE OF REGISTRATION OF THE LAND, HE WAS CONSTRAINED TO OBTAIN SHORT TERM LOANS IN CASH FROM PERSONS WHO ARE MAINLY AGRICULTURISTS. SINCE THE SAID PERS ONS INSISTED FOR REPAYMENT OF LOANS IN CASH, HE WAS CONSTRAINED SO TO REPAY TH E LOANS. FURTHER THE ASSESSEE SUBMITTED THE FOLLOWING BEFORE THE ADD. CI T: 1. I AM NOT A REGULAR ASSESSEE ON FILE AND I AM NOT HAVING TAXABLE INCOME WHICH WARRANT ME TO SUBMIT RETURN OF INCOME. AS SUCH I AM NOT AWARE OF THE PROVISIONS OF THE INCOME TAX ACT, 1961 WHICH PRESCRIBED THE ACCEPTANCE OF ANY REPAYMENT OF LOANS OF RS.20,000/- AND ABOVE SHOULD BE THROUGH ACCOUNT PAYEE CHEQUE/DEMAND DRAFT. 2. I HAVE SUBMITTED MY RETURN OF INCOME IN SPECIAL CIRCUMSTANCES (AFTER SURVEY OPERATIONS UNDER SECTIO N 133A ON SRI K. SURYANARAYANA) ONLY TO PURCHASE PEAC E FROM THE DEPARTMENT AND ALSO TO EXTEND COOPERATION ITA NOS 225 & 226 OF 2008 OF KUNTLA RAMAKRISHNA RAJ AHMUNDRY PAGE 3 OF 6 TO THE DEPARTMENT FOR SMOOTH CONDUCTING OF TAX AFFA IRS OF SRI K. SURYANARAYANA AND ALSO IN MY CASE. 3. I HAVE BORROWED THE ABOVE LOANS ONLY FOR A SHORT TER M AND I HAVE REPAID THEM IN A MONTHS TIME ON RECEIVIN G THE AMOUNT FROM SRI RAGHAVENDRA FINANCE, RAJAHMUNDRY. 4. I AM NOT HAVING ANY BUSINESS NOR DO I BORROW LOANS FO R ANY PURPOSE OTHER THAN THIS OCCASION. 5. I AM ONLY A SALARIED EMPLOYEE HAVING ALWAYS BELOW TAXABLE LIMIT. THE ADDITIONAL CIT WAS NOT CONVINCED WITH THE EXPLA NATIONS OF THE ASSESSEE. ACCORDINGLY HE LEVIED A PENALTY OF RS.2,8 0,000/- UNDER SECTION 271D OF THE ACT FOR ACCEPTING LOANS IN CASH VIOLATI ON OF PROVISIONS OF SECTION 269SS OF THE ACT. SIMILARLY HE LEVIED A PENALTY OF RS.2,82,100/- FOR REPAYMENT OF LOANS IN CASH IN VIOLATION OF THE PROV ISIONS OF SEC.269T OF THE ACT. 4. THE ASSESSEE CHALLENGED BOTH THE ORDERS PASS ED BY THE ADDL. CIT BEFORE THE LEARNED CIT(A). THE FIRST APPELLATE AUTHORITY DELETED BOTH THE PENALTIES WITH THE FOLLOWING OBSERVATIONS: (III). IN TERMS OF SECTION 273B OF THE ACT WHERE R EASONABLE CAUSE FOR FAILURE TO COMPLY WITH THE RELEVANT PROVI SIONS OF SECTIONS 269SS AND 269T OF THE ACT IS CONVINCINGLY DEMONSTRATED TO THE PENALTY IMPOSING AUTHORITY, WIL L THEN THE APPELLANTS CASE BE CONSIDERED FOR KEEPING OUT OF T HE NET OF SUCH PENALTIES, AND NOT OTHERWISE. ORDINARILY, BONA FIDE BELIEF RESULTING IN MISCONSTRUWAL OF THE RELEVANT LEGAL PR OVISIONS, AND THE CONSEQUENTIAL VIOLATION OF SUCH LEGAL PROVI SIONS COULD BE TAKEN AS A REASONABLE CAUSE FOR SEEKING EXONERAT ION FROM LEVY OF PENALTY. BUT, THEN, THE BONAFIDE BELIEF OF A PERSON SHOULD BE SUCH THAT IT SHOULD INSPITE PLAUSIBILITY AND CONVICTION IN THE AUTHORITY CONDUCTING PENALTY PROC EEDINGS, HAVING REGARD TO THE SURROUNDING FACTS AND CIRCUMST ANCES, SUCH AS THE EDUCATIONAL QUALIFICATION OF A PERSON, HIS GENERAL AWARENESS LEVEL, THE FACT OF HE ENLISTING OR NOT EN LISTING THE SERVICES OF A INCOME-TAX CONSULTANT OR ADVISOR, THE FACT OF WHETHER HE HAS BEEN A REGULAR INCOME-TAX ASSESSEE F OR THE PAST MANY YEARS OR THE FIRST TIME FILER OR A RETURN ETC. IF SUCH CIRCUMSTANCES AND FACTORS ARE NOT CONSIDERED FOR WE IGHING THE GENUINENESS OR OTHERWISE OF A BONAFIDE BELIEF , THEN ALL ITA NOS 225 & 226 OF 2008 OF KUNTLA RAMAKRISHNA RAJ AHMUNDRY PAGE 4 OF 6 VIOLATORS OF THE RELEVANT PROVISIONS OF LAW WOULD G ET AWAY SCOT-FREE BY MERELY CLAIMING THAT THEY HAD ENTERTAI NED A BONAFIDE BELIEF THAT RESULTED IN INFRINGEMENT OF THE RELEVANT PROVISIONS OF THE I.T. STATUTE. (IV) APPLYING THE AFORE STATED CIRCUMSTANCES AND FA CTORS IN THE APPELLANTS CASE, IT WOULD BE SEEN THAT THE APP ELLANT IS A FIRST TIME ASSESSEE, AND, THEREFORE, DESERVES TO BE GIVEN THE BENEFIT OF DOUBT OF NOT BEING FAMILIAR WITH THE REL EVANT PROVISIONS OF LAW RESTRICTING THE TRANSACTIONS IN C ASH, LOANS EXCEEDING RS.20,000. FURTHERMORE, THE EXIGENCY OF T HE CIRCUMSTANCES FOR CLINCHING THE LAND PURCHASE DEAL CAN ALSO BE SAID TO CONSTITUTE REASONABLE CAUSE IN THE APPEL LANTS CASE. ACCORDINGLY, THE APPELLANTS CASE DESERVES TO BE CO NSIDERED SYMPATHETICALLY, AND, AS SUCH, OUGHT TO HAVE BEEN F REED FROM THE NET OF THE SAID PENALTIES. IT IS NOT UNDERSTOOD AS TO HOW NO SATISFACTORY EXPLANATIONS HAVE BEEN ADVANCED BY THE APPELLANT, AS OBSERVED BY THE PENALTIES IMPOSING AU THORITY. MERE REPETITION OF THE APPELLANTS EXPLANATIONS TEN DERED BEFORE THE ASSESSING OFFICER EARLIER, WOULD NOT LES SEN THE SIGNIFICANCE AND FORCE OF SUCH EXPLANATIONS. HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, IM POSITION OF PENALTIES UNDER SECTION 271D OF RS.2,80,000 AND UND ER SECTION 271E OF RS.2,82,100 WERE NOT EXIGIBLE. HENC E, BOTH THE PENALTIES UNDER SECTIONS 271D R.W.S 269SS AND 2 71E R.W.S. 269T OF THE ACT IMPOSED FOR THE ASSESSMENT Y EAR 2005- 06, ARE, HEREBY, DELETED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. ACCORDING TO LEARNED D.R, THE EXPLANATIONS GIVEN BY THE ASSESSEE CANNOT BE TAKEN AS REASONABLE ONE AND FURTHER THE A SSESSEE HAS FAILED TO CORROBORATE ALL HIS EXPLANATIONS WITH NECESSARY EVI DENCES, MORE PARTICULARLY THE ASSESSEE HAS FAILED TO PROVE THAT THE IMPUGNED LOANS HAVE BEEN TAKEN FROM AGRICULTURALISTS AND ALSO THE AVAILABILITY OF FUNDS WITH M/S RAGAVENDRA FINANCE. THE LEARNED D.R ALSO CONTENDED THAT THE A SSESSEE, BEING A LITERATE, CANNOT BE TAKEN AS IGNORANT OF THE PROVIS IONS OF THE ACT. 6. ON THE OTHER HAND, THE LEARNED AUTHORISED RE PRESENTATIVE SUBMITTED THAT THE EXPLANATIONS FURNISHED BY THE ASSESSEE ARE VERY MUCH REASONABLE. THE FACT THAT THE ASSESSEE DID NOT HAVE TAXABLE INC OME IN EARLIER YEARS IS BORNE OUT OF RECORD AND HE WAS CONSTRAINED TO FILE THE RETURN OF THE YEAR UNDER CONSIDERATION DUE TO THE STATEMENT GIVEN BY H IS FATHER DURING THE COURSE OF SURVEY. HE FURTHER SUBMITTED THAT THE AS SESSEE HAS TAKEN THE ITA NOS 225 & 226 OF 2008 OF KUNTLA RAMAKRISHNA RAJ AHMUNDRY PAGE 5 OF 6 IMPUGNED LOANS IN CASH IN ORDER TO MEET URGENT FUND REQUIREMENTS AND THEY HAVE BEEN REPAID WITHIN SHORT PERIOD UPON THE RECEI PT OF THE MATURITY PROCEEDS OF THE DEPOSITS MADE WITH M/S RAGAVENDRA F INANCE. THE ASSESSEE WAS CONSTRAINED TO REPAY THE DEPOSITS IN CASH AS TH E LENDERS INSISTED ON CASH PAYMENTS. ACCORDINGLY HE SUBMITTED THAT THE O RDER OF LEARNED CIT(A) SHOULD BE UPHELD. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. DURING THE COURSE OF HEARING, THE LEARNED A.R FILED A COPY OF THE ASSESSMENT ORDER PASSED IN THE HANDS OF THE ASSESSE E FOR THE YEAR UNDER CONSIDERATION. FROM THE SAID ASSESSMENT ORDER, IT IS NOTICED THAT THE ASSESSEE HAS OFFERED INTEREST INCOME OF RS.42,269/- RECEIVED FROM M/S RAGAVENDRA FINANCE, MEANING THEREBY THE CLAIM OF TH E ASSESSEE THAT HE WAS HAVING DEPOSITS WITH M/S RAGAVENDRA FINANCE IS SUBSTANTIATED. THERE IS ALSO NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS PURCHASED A PLOT ON 22.12.2004 FOR A CONSIDERATION OF RS.9,55,0 65/-. THE IMPUGNED LOANS HAVE BEEN TAKEN ON 15.12.2004 AND THEY HAVE B EEN REPAID ON 10.01.2005/20.01.2005, I.E. MOSTLY WITH IN ONE MONT H. HENCE IT CAN BE INFERRED THAT THE ASSESSEE WAS IN NEED OF FUNDS TO PURCHASE THE PLOT CITED ABOVE. HOWEVER, IT IS TO BE SEEN WHETHER THERE WAS ANY URGENT FUND REQUIREMENTS WHICH FORCED THE ASSESSEE TO ACCEPT TH E IMPUGNED LOANS IN CASH. ACCORDING TO THE ASSESSEE, HE HAD ORIGINALL Y CONTEMPLATED TO UTILIZE THE MATURITY PROCEEDS OF THE DEPOSITS KEPT BY HIM W ITH M/S RAGAVENDRA FINANCE AND SINCE THE SAID FINANCE COMPANY COULD NO T ARRANGE FUNDS BY THE DATE OF REGISTRATION OF PLOT, HE WAS CONSTRAINED TO BORROW THE IMPUGNED LOANS. THE SAID CLAIM OF THE ASSESSEE, IF SUBSTANTI ATED, CAN BE TAKEN AS A REASONABLE ONE FOR THE URGENT FUNDS REQUIREMENT. A S CONTENDED BY LEARNED D.R, THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SA ID CLAIM WITH ANY EVIDENCE. FURTHER THE CLAIM OF THE ASSESSEE THAT HE HAS RECEIVED THE DEPOSIT AMOUNTS SUBSEQUENTLY AND THE SAME WERE USED TO REPAY THE IMPUGNED LOANS WAS ALSO NOT SUBSTANTIATED. THERE C ANNOT BE ANY DISPUTE THAT IT IS THE RESPONSIBILITY OF THE ASSESSEE TO SU BSTANTIATE ANY CLAIM MADE BY HIM WITH NECESSARY EVIDENCES. IT IS ALSO QUIET N ATURAL THAT THE LENDERS MAY INSIST FOR REPAYMENT OF LOANS ALSO IN CASH. IN THE INSTANT CASES, THE ITA NOS 225 & 226 OF 2008 OF KUNTLA RAMAKRISHNA RAJ AHMUNDRY PAGE 6 OF 6 EXPLANATIONS OFFERED BY THE ASSESSEE FOR ACCEPTANCE /REPAYMENT OF DEPOSITS IN CASH CAN BE TAKEN AS REASONABLE ONE, PROVIDED TH E CLAIM WITH REGARD TO THE DELAY IN GETTING THE MATURITY PROCEEDS OF DEPOS ITS KEPT WITH M/S RAGAVENDRA FINANCE IS SUBSTANTIATED WITH COGENT EVI DENCES. ACCORDINGLY, IN OUR VIEW, THE ASSESSEE SHOULD BE GIVEN ONE MORE OPP ORTUNITY TO SUBSTANTIATE SAID EXPLANATION. ACCORDINGLY WE SET ASIDE THE ORDERS OF LEARNED CIT(A) AND RESTORE THE SAME TO THE FILE OF ADDL CIT WITH A DIRECTION TO AFFORD NECESSARY OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATIONS WITH REGARD TO THE TRANSACTIONS WITH M /S RAGAVENDRA FINANCE. IF THE ASSESSEE IS ABLE TO SUBSTANTIATE THE SAID CLA IM, WE DIRECT THE ADDL. CIT TO DELETE THE IMPUGNED PENALTIES LEVIED BY HIM. OTHERWISE THE PENALTIES LEVIED WOULD BE SUSTAINED. 8. IN THE RESULT, THE APPEALS OF THE REVENUE ARE TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 2 ND JUNE, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:02-06-2011 COPY TO 1 THE ADDL.COMMISSIONER OF INCOME TAX, RAJAHMUNDRY RANGE, AAYAKAR BHAVAN, KAMBALA CHERUVU, RAJAHMUNDRY 2 SRI KUNTLA RAMA KRISHNA, C/O RAMAKRISHNA CYCLE ST ORES, STADIUM ROAD, RAJAHMUNDRY 3 4. THE CIT RAJAHMUNDRY THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM