The ACIT, Vapi Circle, Vapi V. M/s. Satadhar Enterprises, Vapi

ITA 2353/AHD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9743 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-08-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 07-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: S N L AGARWAL
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND D.C.AGRAWAL , AM ASSTT. CIT, VAPI CIRCLE, VAPI. VS. M/S SATADHAR ENTERPRISES, CHANDRALOK SHOPPING COMPLEX, NR. CINE PARK MULTI-COMPLEX, VAPI SILVASSA ROAD, CHANOD, VAPI. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R. K. DHANESTA, D.R. RESPONDENT BY:- SHRI S. N. L. AGARWAL, A.R. O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS:- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.15,0 0,000/- LEVIED U/S 271D OF THE ACT. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ADDITION OF RS .25,16,000/- MADE U/S 41(1) OF THE ACT IN ASST. YEAR 2004-05, CO NSISTED THE NAME OF SHRI HEMCHANDRA SHAH AND HENCE THE AMOUNT I N QUESTION WAS A BOOKING ADVANCE AND NOT A LOAN W ITHOUT CONSIDERING THE FACT THAT NAME OF HEMCHANDRA SHAH I S NOT IN THE LIST OF PERSONS WHOSE ADVANCES HAVE BEEN ADDED U/S 41(1) OF THE ACT. 2. THE ONLY ISSUE INVOLVED IS LEVY OF PENALTY OF RS .15 LACS UNDER SECTION 271D. ITA NO.2353/AHD/2009 ASST. YEAR :2002-03 ITA NO.2353/AHD/2009 ASST. YEAR 2002-03 2 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PAR TNERSHIP FIRM CARRYING ON CONSTRUCTION BUSINESS. A SURVEY UNDER SECTION 13 3A WAS CARRIED OUT AT THE PREMISES OF ONE M/S MEHSANA STEEL SUPPLIERS ON 17.7.2002 DURING THE COURSE OF WHICH IT WAS FOUND THAT THEY HAVE SUPPLIE D STEEL TO THE ASSESSEE FIRM OUTSIDE THE BOOKS OF ACCOUNT. ON FURTHER VERIF ICATION IT WAS FOUND THAT ASSESSEE HAS RECEIVED A TOTAL SUM OF RS.78,57 ,800/- (IN THE PERIOD RELEVANT TO AY 2003-04) IN WHICH CASH PORTION INCLU DED RS.49,02,800/-. SUCH RECEIPTS WERE NOT FOUND RECORDED IN THE REGULA R BOOKS OF THE ASSESSEE. THE ASSESSEE FIRM DENIED THAT IT RECEIVI NG ANY ON MONEY. HOWEVER THE AO FOUND, ON THE BASIS OF ANNEXURE BF- 9 IMPOUNDED FROM THE SITE OFFICE OF CHANDRALOK PROJECT, THAT A SUM OF RS.54,73,288/- WAS RECEIVED BY THE ASSESSEE DURING THE ACCOUNTING YEAR RELEVANT TO AY 2002- 03. THIS FIGURE WAS WORKED OUT ON THE BASIS OF HIS FINDING FOR THE A.YR. 2003-0 AS THIS DOCUMENT ALSO REVEALED THE NAMES OF THE PARTIES, DETAILS OF THE SHOPS, OFFICE AND FLATS, TOTAL PRICE OF THE SHO PS AND DATE WISE PAYMENT ETC. RECEIVED DURING ACCOUNTING YEAR RELEVANT TO A .YR. 2003-04. ON THE BASIS OF HIS FINDING IN AY 2003-04 THE AO WORKED OU T THAT 62% RECEIPTS ARE IN CASH. IN AY 2002-03 AMOUNT FOUND RECORDED IN THE BOOKS WERE RS.33,54,596. THEREFORE , AND ON THAT BASIS, AO CAL CULATED THAT ASSESSEE WOULD HAVE RECEIVED SUM OF RS.54,73,288/- IN CASH. TREATING THIS AMOUNT AS UNEXPLAINED HE ADDED IT AS ASSESSEES INCOME FR OM UNDISCLOSED SOURCES. HOWEVER THE LD. CIT(A) DELETED THE ADDIT ION OF RS.54,73,288/- ON THE GROUND THAT IT IS BASED ON SURMISES AND CONJ ECTURES AND ON MATHEMATICAL FORMULA. HOWEVER, LD.CIT(A) EXAMINED T HE SUM RECORDED IN THE BOOKS IN AY 2002-03 AND FOUND THAT IT INCLUD ED A SUM OF RS. 15 LACS RECEIVED BY THE ASEESEE IN CASH FROM ONE SHRI HEMANT SHAH. ABOUT THIS SUM HE GAVE FOLLOWING FINDING:- ITA NO.2353/AHD/2009 ASST. YEAR 2002-03 3 FURTHER, EVEN THE AMOUNT OF RS.15,00,000/- WHICH I S BEING TREATED AS LOAN FROM HEMANT SHAH WAS ACTUALLY BOOKING AMOUNT F ROM VARIOUS PARTIES WHICH WAS OBTAINED THROUGH HEMANT SHAH. THE PARTIES WHO HAD APPLIED THROUGH SHRI HEMANT SHAH HAVE SUBMITTED THE IR CONFIRMATIONS. MOREOVER, AGAINST THESE PARTIES NO ADVERSE REPORT H AS BEEN GIVEN BY THE RAJKOT INVESTIGATION WING. THESE AMOUNTS ALREADY FO RM PART OF RS.34,54,596/- AGAINST WHICH NO ADVERSE EVIDENCE HA S BEEN FOUND AND THE TRANSACTIONS STAND CONFIRMED FROM THE PARTIES INCLU DED THEREIN. HENCE, NO ADVERSE INFERENCE CAN BE DRAWN ON THIS COUNT ALSO. WHEN THE MATTER CAME BEFORE THE TRIBUNAL, VIDE ITS ORDER IN ITA NO.51/AHD/2007 FOR ASST. YEAR 2002-03 DATED 31.5.10 THE TRIBUNAL CONFIRMED THE FINDINGS OF LD. CIT(A) AS UNDER:- 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY AND AS POINTED OUT BY THE LD. CI T(A) SINCE THE AO HIMSELF ACCEPTED THE FACT IN PARA-7 OF HIS REMAND R EPORT DATED 2/6/2006 THAT THE AMOUNT OF RS.34,54,596/- IS TO BE SUBSTITU TED AS UNEXPLAINED CASH CREDIT, THE LD. CIT(A) CONCLUDED THAT THERE WAS NO JUSTIFICATION TO RETAIN THE ADDITION OF RS.54,73,288/-. THE LD. CIT(A) FURT HER OBSERVED THAT EVEN OTHERWISE THE CALCULATION OF RS.54,73,288/- SUFFERE D FROM SERIOUS INFIRMITY BECAUSE THE CASH BOOKING AMOUNT WAS ALREA DY INCLUDED IN THE AMOUNT OF RS.34,54,596/- DECLARED IN THE RETURN OF INCOME AND HENCE NO FURTHER ESTIMATION COULD HAVE BEEN MADE. INTER ALIA , IT WAS ALSO CONCLUDED THAT THE TRANSACTIONS STOOD CONFIRMED BY THE RESPECTIVE PARTIES AND THERE WAS NO BASIS EVEN FOR MAKING ADDITION U/S 68 OF THE ACT. THE LD. DR APPEARING BEFORE US DID NOT REFER US TO ANY MATE RIAL, CONTROVERTING THESE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) AFTER HAVING A REMAND REPORT FROM THE AO IN THE ABSENCE OF ANY BASIS TO E NABLE US TO TAKE A ITA NO.2353/AHD/2009 ASST. YEAR 2002-03 4 DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE. THEREFORE, GROUND NO.1 IN THE APPEAL IS DISMISSED. THUS ON THE BASIS OF ENTRY IN THE BOOKS IN RESPECT OF RS.15 LACS THE AO INITIATED PENALTY UNDER SECTION 271D HOLDING THAT T HIS IS THE SUM RECEIVED BY THE ASSESSEE IN CASH AND, THEREFORE, IT IS A VIO LATION OF THE PROVISIONS OF SECTION 269SS. HE TREATED THIS SUM AS LOAN AND FIND ING THAT THERE IS NO SATISFACTORY EXPLANATION HE LEVIED PENALTY OF RS.15 LACS UNDER SECTION 271D. 4. LD. CIT(A) HELD THAT THE SUM OF RS.15 LACS IS NO T A LOAN TAKEN IN CASH FROM SHRI HEMANT SHAH. IT IS ONLY A BOOKING AD VANCE AGAINST THE SALE OF STOCK-IN-TRADE I.E. OFFICE/SHOPS. IN THIS R EGARD WE REFER TO PARA 3 FROM THE ORDER OF LD. CIT(A) AS UNDER:- 3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AND PERUSED THE VARIOUS EVIDENCES ON RECORD. IN THE ASST. YEAR 2004 -05 THE AO HAS TREATED THE AMOUNTS RECEIVED THROUGH HEMENDRA SHAH AS BOOKING ADVANCES AGAINST THE SALE OF STOCK-IN-TRADE AND INVOKED THE PROVISIONS OF SECTION 41(1) AFTER TREATING THE FORFEITURE OF T HESE AMOUNTS AS TRADING INCOME LIABLE FOR TAX UNDER THE HEAD INCOME FROM B USINESS OF PROFESSION. IN THE APPEAL AGAINST THE SAID ORDER, ACTION OF THE AO HAS BEEN UPHELD IN TREATING THE SAID AMOUNTS AS TRADING GAIN. MOREOVER, THE VERY NATURE AND GENUINENESS OF THESE TRANSACTIONS A LSO STAND DULY CONFIRMED AND ACCEPTED BY THE LD. CIT(A)-III, SURAT IN ASST. YEAR 2002- 03. THE DIFFERENCE BETWEEN LOAN AND BOOKING ADVA NCE IS OF FUNDAMENTAL IMPORTANCE HERE. THE PROVISIONS OF SECT ION 271D ARE APPLICABLE TO THE AMOUNT WHICH IS REPAYABLE AS SUCH EITHER ON DEMAND OR ON ELAPSE OF THE AGREED PERIOD. WHEREAS THE BOOKING ADVANCE IS THE SALE ITA NO.2353/AHD/2009 ASST. YEAR 2002-03 5 PROCEEDS SINCE IT IS GIVEN FOR THE VALUE TO BE RECE IVED IN KIND. IN FACT THERE WAS NO LIABILITY ON THE APPELLANT TO REPAY THE SAID AMOUNT AND HENCE THE SAME HAS BEEN FORFEITED BY THE APPELLANT ALSO IN AS ST. YEAR 2004-05. THE DECISION OF THE HON. CHENNAI HIGH COURT IN THE CASE OF KAILASH TRIPLE STERLISED WATER (CHENNAI) (P) LTD. IS SQUARELY APPL ICABLE. MOREOVER EVEN OTHERWISE THERE IS NO DISPUTE FROM THE DEPARTMENT R EGARDING THE GENUINENESS OF THE AMOUNT AND BONA FIDE OF TRANSACT ION. HENCE, NO PENALTY U/S 271D IS APPLICABLE AS HAS HELD BY THE H ON. SUPREME COURT IN THE CASE OF A.B. SHANTHI 255 ITR 258 (SC). IN VIEW OF THE ABOVE, I DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S 271D. 5. THE LD. DR SUBMITTED THAT LD. CIT(A) HAS INCORRE CTLY GIVEN A FINDING THAT WHAT WAS RECEIVED BY THE ASSESSEE WAS NOT A LOAN OR DEPOSIT AS THESE AMOUNTS WERE TREATED AS PROFIT UNDER SECT ION 41(1) IN THE A.YR. 2004-05 AND, THEREFORE, IN THE CURRENT YEAR I.E. A Y 2002-03 THESE WOULD BE LOAN OR DEPOSIT. 6. ON THE OTHER HAND, LD. AR SUBMITTED THAT THE TRI BUNAL HAS GIVEN A FINDING IN QUANTUM PROCEEDINGS BY UPHOLDING THE ORD ER OF LD. CIT(A) THAT SUM OF RS. 15 LACS RECEIVED FROM SHRI HEMANT SHAH W AS A BOOKING AMOUNT AND NOT A LOAN OR DEPOSIT. SECONDLY, LD. AR SUBMITTED THAT OUT OF ABOVE SUM RECORDED IN THE BOOKS, ASSESSEE HAS RETU RNED A SUM OF RS.45,000/- IN THE PERIOD RELEVANT TO AY 2003-04. T HIS SUM WAS TREATED BY THE AO AS RETURN OF LOAN IN CASH AND, THEREFORE, VIOLATING SECTION 269T AND ACCORDINGLY HE LEVIED PENALTY UNDER SECTION 271 E.THE MATTER TRAVELLED TO THE TRIBUNAL WHICH VIDE ITS ORDER DATE D 16.7.10 IN ITA NO.2356/A/2009 UPHELD THE CANCELLATION OF PENALTY B Y HOLDING THAT WHAT WAS RETURNED BY THE ASSESSEE WAS NOT A CASH LOAN BU T WAS OUT OF MONEY ADVANCED TO IT BY SHRI HEMENDRA SHAH WHO WAS IN FA CT A BROKER. THUS ITA NO.2353/AHD/2009 ASST. YEAR 2002-03 6 ONCE THERE IS A FINDING THAT AMOUNT RECEIVED FROM S HRI HEMENDRA SHAH WAS A BOOKING AMOUNT AND NOT A LOAN OR DEPOSIT, PEN ALTY UNDER SECTION 271D CANNOT BE LEVIED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE REVENUE AUTHO RITIES HAVE NOT EXAMINED WHETHER MONEY WAS PAID BY SHRI HEMANT SHAH FOR HIMSELF OR WAS COLLECTION FROM VARIOUS BUYERS AS HE WAS ACTING AS BROKER. IF WE PRESUME THAT IT WAS ONE TIME PAYMENT BY SHRI HEMANT SHAH ON HIS BEHALF STILL THEN PENALTY CANNOT BE LEVIED UNDER SECTION 2 71D BECAUSE IT IS NEITHER LOAN NOR DEPOSIT FROM SHRI HEMANT SHAH BUT IT WAS A BOOKING AMOUNT FOR OFFICE/FLATS. A CORRECT FINDING BY THE T RIBUNAL HAS BEEN GIVEN IN TWO OF THEIR JUDGMENTS ONE IN QUANTUM PROCEEDING S AND ANOTHER IN RESPECT OF PENALTY UNDER SECTION 271E. ON THE FACE OF THESES FINDING IT IS NOT POSSIBLE TO HOLD THAT WHAT WAS PAID BY SHRI HE MANT SHAH WAS A LOAN OR DEPOSIT ON HIS OWN BEHALF. SECONDLY, THE ISSUE R EGARDING SE.41(1) RAISED BY THE DEPARTMENT IN SECOND ROUND OF ITS APP EAL IS OF NO CONSEQUENCE BECAUSE EVEN IF LD. CIT(A) MIGHT HAVE C ONFIRMED THE ADDITION UNDER SECTION 41(1) IN AY 2004-05 BY HOLDI NG THAT SUM REMAINING WITH THE ASSESSEE WOULD BE HIS PROFIT UND ER SECTION 41(1) STILL ONE CAN ONLY INFER THAT WHAT WAS RECEIVED BY THE AS SESSEE WAS NOT A LOAN OR DEPOSIT BUT AN AMOUNT RECEIVED AGAINST SALE OF S TOCK-IN-TRADE AS FORFEITURE OF LOAN OR DEPOSIT CANNOT BE TAXED AS IN COME UNDER SECTION 41(1). IN NO CASE ANY LOAN OR DEPOSIT COULD BE CONS IDERED UNDER SECTION 41(1) AS IT HAS NEVER PASSES THROUGH PROFIT AND LOS S ACCOUNT FOR COMPUTING INCOME WHICH IS A NECESSARY CONDITION FOR COMING TO THE CONCLUSION THAT IF THERE IS A REMISSION OR CESSATION OF LIABILITY T HEN IT WOULD BE PROFIT UNDER SECTION 41(1). ADITION UNDER SECTION 41(1) CA N BE MADE ONLY OF ANY ITA NO.2353/AHD/2009 ASST. YEAR 2002-03 7 TRADING LIABILITY PASSED THROUGH PROFIT AND LOSS AC COUNT AND NOT OF ANY LOAN OR DEPOSIT. 8. HON. MADRAS HIGH COURT IN CIT VS. KAILASH TRIPL E STERLISED WATER (CHENNAI) (P) LTD. (2008) 215 CTR 198 (MAD) HELD THAT IF CASH WAS RECEIVED BY AN ASSESSEE ON ACCOUNT OF SALE AND THE SAME WAS SHOWN IN THE BOOKS AS TRADE CREDIT, THERE IS NO VIOLATION OF SEC TION 269SS SO AS TO ATTRACT THE PENALTY UNDER SECTION 271D. SIMILAR VIE W WAS TAKEN BY HON. MADRAS HIGH COURT IN CIT VS. IDHAYAM PUBLICATIONS L TD. 285 ITR 221 (MAD) AND CIT VS. RUGMINI RAM RAGAV SPINNERS (P) LT D. (2008) 304 ITR 417 (MAD). HON. M.P. HIGH COURT IN CIT VS. INDO RE PLASTICS (P) LTD. (2003) 262 ITR 163 (M.P.) ALSO HELD THAT WHERE PAYM ENTS WERE NOT MADE BY WAY OF DEPOSIT OR LOAN BUT TOWARDS ADJUSTMENT OF THE AMOUNT DRAWN THEN IT WOULD NOT ATTRACT PENALTY UNDER SECTION 271 D. THUS, WE UPHOLD THE ORDER OF LD. CIT(A) IN CANCELLI NG THE PENALTY. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 17/9/10. SD/- SD/- (MUKUL KR. SHRAWAT) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD, DATED : 17/9/10. MAHATA/- ITA NO.2353/AHD/2009 ASST. YEAR 2002-03 8 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 31/8/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..