M/s Arkit Vincom Pvt. Ltd, Kolkata V. Addl. CIT Range 9, Kolkata, Kolkata

ITA 2397/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1322 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 22-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Source of fund; Initiation of penalty proceedings; Reasonable cause; Commercial expediency
• Section: 273B; 147; 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 2397/KOL/20 16 ASSESSMENT YEAR : 2008-0 9 M/S ARKIT VINCOM PVT. LTD. -VS- ACIT, RANGE-9, KOLKATA [PAN: AACCA 3907 B] (APPELLANT) ( RESPONDENT) FOR THE APPELLANT : SHRI ARVIND AGARWA L, ADVOCATE FOR THE RESPONDENT : SHRI ARINDAM BHATTACHARJ EE, ADDL. CIT DATE OF HEARING : 19.02.2018 DATE OF PRONOUNCEMENT : 07.03.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL IS DIRECTED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 15, KOLKATA (IN SHORT THE LD CITA) AGAINST THE ORDER PASSED BY THE LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX , RANGE -9, KOLKATA (IN SHORT THE LD AO) LEVYING THE PENALTY U/ S 271E OF THE ACT. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE LEVY OF PENALTY U/S 271E OF THE AC T, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF TRADING OF IRON AND STEEL AND HAD FILED ITS RETURN OF INCOM E ON 25.9.2008 FOR THE ASST YEAR 2008- 09 DECLARING LOSS OF RS 40,549/- . THE ASSESSEE H AD RAISED ITS SHARE CAPITAL DURING THE YEAR AND HAD INCURRED FEES FOR INCREASE IN AUTHORIZ ED CAPITAL TO THE TUNE OF RS 22,000/-. THIS SUM WAS DISALLOWED BY THE LD AO IN THE ASSESSM ENT AS THE SAME IS CAPITAL IN NATURE. 2 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 2 APART FROM THIS, THE LD AO OBSERVED THAT THERE WAS A REDUCTION IN LOANS DURING THE YEAR WHEN COMPARED TO THE EARLIER YEAR BY A SUM OF RS 6, 76,500/-. THIS IN THE OPINION OF THE LD AO, WAS REPAID BY THE ASSESSEE OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DRAFT AND ACCORDINGLY SOUGHT TO INITIATE PENALTY PR OCEEDINGS U/S 271E OF THE ACT FOR VIOLATION OF PROVISIONS OF SECTION 269T OF THE ACT. THE ASSESSEE REPLIED BEFORE THE LD AO THAT IT HAD BROUGHT FORWARD LOAN OF RS 6,76,500/ - FROM THE FOLLOWING PERSONS ON 1.4.2007 WHICH WAS SQUARED OFF DURING THE RELEVANT PREVIOUS YEAR :- A) PRAKASH ELECTRONICS SYSTEM LTD RS 6,00,000/- C ONVERTED INTO EQUITY B) SHRI RAJESH BHUTORIA RS 70,875/- - REPAID ON 3 .4.07 C) SHRI G.P.BHUTORIA RS 5,625/- - REPAID ON 18.1. 08 4. THE LOAN RECEIVED FROM PRAKASH ELECTRONICS SYSTE M LTD AMOUNTING TO RS 6,00,000/- WAS SQUARED OFF BY WAY OF ALLOTMENT OF 6000 EQUITY SHARES OF RS 10 EACH WITH A PREMIUM OF RS 90 PER SHARE IN THE ASSESSEE COMPANY. IN OTHER WORDS, THE LOAN WAS CONVERTED INTO EQUITY BY WAY OF BOOK ENTRY WITHOUT ANY PHYSICAL OUTFLOW OF FUNDS FROM THE SIDE OF THE ASSESSEE. THE LOAN RECEIVED FROM SHRI RAJESH BHUTORIA WAS SQUARED UP BY SALE OF SHARES OF M/S HITON INDUS ENGG. CO. LTD. THE LOAN RECEIVED FROM SHRI G.P.BHUTORIA WAS REPAID IN CASH AND IS WITHIN THE L IMIT PRESCRIBED U/S 269T OF THE ACT. 5. THE ASSESSEE PLEADED THAT THE TERM REPAYMENT M ENTIONED IN SECTION 269T OF THE ACT REFERS ONLY TO REPAYMENT IN THE FORM OF MONEY AND D OES NOT APPLY TO REPAYMENT IN KIND OR THROUGH BOOK ADJUSTMENTS. THE LD AO OBSERVED TH AT ON EXAMINATION OF THE BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31.3.2008, THAT THE ASSESSEE HAS CLAIMED LOSS IN OPERATION. IT HAS A SMALL TURNOVER OF RS 77,210/-. THE SOURCE OF FUND WITH THE ASSESSEE IS SHARE CAPITAL OF RS 7.25 LACS , SHARE PREMIUM OF RS 5.40 LACS AND ADVANCE OF RS 4.65 LACS. THE ENTIRE FUND HAS BEEN INVESTED FOR ACQUIS ITION OF CO-OWNERSHIP PROPERTY AMOUNTING TO RS 15.68 LACS. THE LD AO FURTHER OBSE RVED THAT THE CO-OWNERSHIP PROPERTY 3 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 3 HAS BEEN MORTGAGED WITH HARYANA FINANCIAL CORPORATI ON, CHANDIGARH AS THE ADDITIONAL SECURITY AGAINST THE SANCTION OF LOAN OF M/S PERFEC T GOLD INDIA LTD, JAIPUR. THE ASSESSEE HAS RAISED FRESH FUNDS OF RS 4.89 LACS IN THE FORM OF SHARE CAPITAL AND A SUM OF RS 4.65 LACS BY WAY OF ADVANCE AGAINST PROPERTY AGG REGATING TO RS 9.54 LACS. REPAYMENT OF LOAN OF RS 6.76 LACS COULD HAVE BEEN M ADE USING THIS AMOUNT OF RS 9.54 LACS BY OBSERVING THE PROVISION CONTAINED U/S 269T OF THE ACT. INTERESTINGLY, THIS FUND HAS NOT BEEN UTILIZED FOR THE BUSINESS OF THE ASSES SEE BUT HAS BEEN UTILIZED TO ACQUIRE PROPERTY AND THE SAME HAS BEEN MORTGAGED TO THE BAN K FOR THE BENEFIT OF AN ALLIED COMPANY. THERE WAS NO COMPULSION ON PART OF THE AS SESSEE TO UTILIZE THE FRESH FUNDS FOR ITS OWN BUSINESS. ACCORDINGLY, THE FRESH FUNDS CO ULD HAVE BEEN UTILIZED FOR REPAYMENT OF OUTSTANDING LOAN. THE LD AO OBSERVED THAT THE P LEA OF THE ASSESSEE THAT IT DID NOT HAD FUND TO REPAY THE LOAN AND THEREFORE, IT WAS UNDER COMPULSION TO SQUARE UP THE OUTSTANDING LOAN BY WAY OF CONVERSION INTO EQUITY I N CASE OF PRAKASH ELECTRONICS SYSTEM LTD AND BY WAY OF TRANSFER OF SHARES IN CASE OF SHRI RAJESH BHUTORIA, IS FACTUALLY INCORRECT. THE LD AO OBSERVED FURTHER THAT THE ASS ESSEE HAD NOT ALSO BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT IT WAS PREVENTED B Y ANY REASONABLE CAUSE FOR FAILURE TO OBSERVE THE PROVISION CONTAINED U/S 269T OF THE ACT AND THEREFORE WOULD NOT GET THE BENEFIT U/S 273B OF THE ACT. WITH THESE OBSERVATI ONS, THE LD AO LEVIED PENALTY OF RS 6,70,875/- U/S 271E OF THE ACT IN RESPECT OF LOAN O F PRAKASH ELECTRONICS SYSTEM LTD ( RS 6,00,000/-) AND SHRI RAJESH BHUTORIA (RS 70,875/-) . 6. BEFORE THE LD CITA, THE ASSESSEE SUBMITTED THE C IRCUMSTANCES WHICH FORCED IT TO UTILIZE THE AMOUNTS RAISED THROUGH SHARE CAPITAL AN D ADVANCE FROM PROPERTY FOR INVESTMENT IN CO-OWNERSHIP PROPERTY TO THE TUNE OF RS 9.8 LACS DURING THE YEAR. IF THE PAYMENT TOWARDS THE SAID PROPERTY WAS NOT MADE BY T HE FUND AT THE TIME OF ALLOTMENT, THE ASSESSEE COULD HAVE LOST ITS RIGHT IN ACQUIRING OF THE SAME. THE SAID PROPERTY WAS MORTGAGED WITH THE HARYANA FINANCIAL CORPORATION, C HANDIGARH AT A REASONABLE SECURITY AGAINST SANCTION OF LOAN TO PERFECT GOLD INDIA LTD, JAIPUR. THE AMOUNT WHICH IT HAD 4 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 4 RAISED, WAS NECESSARY TO PAY FOR THE SALVAGE OF THE INVESTMENT IN THE PROPERTY AND IT COULD NOT BE REPAID BY ACCOUNT PAYEE CHEQUE TO THE LOAN CREDITORS AS ALLEGED BY THE LD AO IN HIS ORDER. IT WAS FURTHER SUBMITTED THAT TH E CONCLUSION OF THE LD AO IN HIS ORDER THAT THE ASSESSEES PLEA TO REPAY THE LOAN UNDER CO MPULSION TO SQUARE UP THE OUTSTANDING AMOUNT BY CONVERSION INTO EQUITY IS FACTUALLY INCOR RECT, IS BASED ON HIS ASSUMPTION WHICH WOULD BE EVIDENT FROM THE FINDING AS MENTIONE D IN HIS ORDER WHERE HE HAS STATED THAT THE ASSESSEE COULD HAVE UTILIZED CERTAIN AMOUN T AS RAISED TO REPAY BACK THE LOAN, BUT INSTEAD THE SHARES WERE ALLOTTED. SUCH CONCLUSION O F THE LD. AO IS NOTHING BUT AN ASSUMPTION AND HIS CONJECTURES. THE REASON FOR RE PAYMENT OF LOAN BY CONVERTING TO SHARES, WAS EXPLAINED AND SUBMITTED BY DOCUMENTARY EVIDENCES. THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- A) HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS TRIUMPH INTERNATIONAL FINANCE (I) LTD REPORTED IN 345 ITR 270 (BOM) ; AND B) HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS LAKSHMI TRUST CO.VIDE ORDER DATED 18.12.2006 7. THE LD CITA HELD THAT THE TRANSACTIONS OF CONVER SION OF LOAN INTO EQUITY IN THE SUM OF RS 6,00,000/- IN THE INSTANT CASE ARE NOT GENUINE A ND ACCORDINGLY UPHELD THE LEVY OF PENALTY U/S 271 E OF THE ACT BY REITERATING THE SAM E FINDINGS OF THE LD AO. HOWEVER, HE DELETED THE LEVY OF PENALTY U/S 271E OF THE ACT IN THE SUM OF RS 70,875/- WHICH WAS REPAID BY WAY OF SALE OF SHARES. 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US O N THE FOLLOWING GROUNDS:- 1. BECAUSE THAT THE LD. COMMISSIONER OF INCOME TAX( APPEALS) WAS ERRED IN LAW AS WELL AS IN FACTS IN UPHOLDING THE INITIATION OF PENALTY PROCEEDINGS U/S 271E BY THE LD. ADDITIONAL CIT, RANGE-9, BY ISSUE OF SHOW C AUSE NOTICE DATED 29 TH MARCH, 2011, AND AS SUCH HIS CONCLUSIONS ARE BASED ON HIS SURMISES AND CONJUNCTURES AND ARE CONTRARY TO THE FACTS AND MATERIAL ON RECOR D AND PROVISION OF LAW. 5 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 5 2. BECAUSE THAT THE LD. COMMISSIONER OF INCOME TAX( APPEALS) WAS ERRED IN LAW AS WELL AS IN FACTS IN UPHOLDING THE LEVY OF PENALT Y U/S 271E BY THE LD. ADDITIONAL CIT, RANGE-9, VIDE HIS ORDER DATED 13THE MAY, 2016, SERVED UPON THE ASSESSEE ON 4 TH NOVEMBER, 2016, AND HIS SUCH CONCLUSIONS ARE BASED ON HIS SURMISES AND CONJUNCTURES AND ARE GROSSLY UNJUSTIFIED, ERRONEOUS AND UNSUSTAINABLE, AND ARE CONTRARY TO THE FACTS AND MATERIAL ON RECORD AND PR OVISION OF LAW. 3. BECAUSE THAT THE LD. COMMISSIONER OF INCOME TAX( APPEALS) WAS ERRED IN LAW AS WELL AS IN FACTS IN UPHOLDING THE CONCLUSION OF THE LD. ADDITIONAL CIT, RANGE- 9, THAT, THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT IT CONTAINED U/S 269T. IT THEREFORE DOES NOT GET ANY B ENEFIT U/S 273B OF THE ACT, AND HIS SUCH CONCLUSIONS ARE BASED ON HIS SURMISE S AND CONJUNCTURES AND ARE GROSSLY UNJUSTIFIED, ERRONEOUS AND UNSUSTAINABLE, A ND ARE CONTRARY TO THE FACTS AND MATERIAL ON RECORD AND PROVISION OF LAW. 4. BECAUSE THAT THE RATIO OF THE JUDGMENT AS RELIED UPON BY THE LD. COMMISSIONER OF INCOME TAX( APPEALS) IS HIS ORDER ARE DISTINGUIS HABLE ON FACTS AND ON POINT OF LAW AND AS SUCH NOT APPLICABLE. 5.BECAUSE THAT THE LD. COMMISSIONER OF INCOME TAX(A PPEALS) WAS ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT, THE CONDUCT OF THE COMPANY IS NOT GENUINE AND BONAFIDE AND AS SUCH THE LEVY OF PENALTY U/S 271E T O THE EXTENT OF RS. 6,70,875/- IS CONFIRMED, AND HIS SUCH CONCLUSIONS ARE BASED ON HIS SURMISES AND CONJUNCTURES AND ARE GROSSLY UNJUSTIFIED, ERRONEOUS AND UNSUSTAINABLE, AND ARE CONTRARY TO THE FACTS AND MATERIAL ON RECORD AND PR OVISION OF LAW. 6. THE APPELLANT CRAVES LEAVE TO ADD FURTHER GROUND S OF APPEAL OR ALTER THE GROUNDS AT THE TIME OF HEARING. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND TH AT THE ENTIRE GAMUT OF TRANSACTIONS OF RAISING OF SHARE CAPITAL WITH PREMIUM DURING THE YE AR, RECEIPT OF ADVANCE AGAINST PROPERTY AND THE UTILIZATION THEREON FOR INVESTMENT IN CO-OWNERSHIP PROPERTY WAS DULY EXPLAINED BY THE ASSESSEE BEFORE THE LD AO AT THE T IME OF SCRUTINY ASSESSMENT OF QUANTUM PROCEEDINGS. THE ASSESSEE HAD DULY PLACED ALL THE RELEVANT DATA IN THIS REGARD BEFORE THE LD AO. HENCE THE BONAFIDE INTENTION OF THE ASSESSEE IN PLACING ALL FACTS ON RECORD CANNOT BE DOUBTED WITH AT ALL IN THE INSTANT CASE. THE TRANSACTION WITH REGARD TO 6 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 6 INCREASE IN SHARE CAPITAL HAS BEEN EXAMINED BY THE LD AO IN THE ASSESSMENT PROCEEDINGS AT THE TIME OF DISALLOWANCE OF FEES PAID FOR INCREA SE IN AUTHORIZED CAPITAL. AFTER THIS EXAMINATION, THE LD AO IN HIS WISDOM HAD NOT PROCEE DED TO MAKE ANY ADDITION TOWARDS THE SHARE CAPITAL. HENCE IT COULD BE SAFELY CONCL UDED THAT THE TRANSACTIONS OF RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM HAS BEEN ACCEPTED A S BONAFIDE AND GENUINE BY THE LD AO IN THE ASSESSMENT. WHILE THIS IS SO, THEN HOW CAN THE VERY SAME TRANSACTION COULD BE TREATED AS INGENUINE AND NOT BONAFIDE FOR THE PU RPOSE OF LEVYING PENALTY U/S 271E OF THE ACT ALONE. EVEN ASSUMING THAT THE RECEIPT OF S HARE CAPITAL WITH PREMIUM OF RS 90 PER SHARE IS NOT GENUINE, STILL THE REVENUE HAD NOT TAKEN ANY ACTION ON THE ASSESSEE TO TREAT THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE POWERS OF THE LD CITA ARE CO-TERMINUS WITH THAT OF THE LD AO. THE LD CI TA WHILE ADJUDICATING THE PENALTY APPEAL, HAVING COME TO A CONCLUSION THAT THE RECEIP T OF SHARE CAPITAL WITH PREMIUM BY THE ASSESSEE WAS NOT GENUINE AND BONAFIDE TRANSACTI ON, OUGHT TO HAVE TRIGGERED THE ADMINISTRATIVE COMMISSIONER OF INCOME TAX TO INITIA TE PROCEEDINGS U/S 263 OF THE ACT, WHICH WAS NOT DONE IN THE INSTANT CASE AND WHICH FA CT IS NOT DISPUTED BY THE REVENUE BEFORE US. THERE ARE ADEQUATE PRECAUTIONS PROVIDE D IN THE STATUTE TO TAKE CARE OF SITUATIONS LIKE THIS I.E BY REOPENING THE ASSESSMEN T U/S 147 OF THE ACT BY THE LD AO OR BY HAVING RECOURSE TO REVISIONARY PROCEEDINGS U/S 263 OF THE ACT BY THE LD CIT. 9.1. WE FIND THAT THE LOAN RECEIVED BY THE ASSESSEE FROM PRAKASH ELECTRONICS SYSTEM LTD HAD BEEN SQUARED OFF BY WAY OF CONVERSION OF LOAN I NTO EQUITY IN THE SUM OF RS 6,00,000/- WAS CARRIED OUT BY THE ASSESSEE THROUGH BOOK ENTRIES WITHOUT ANY PHYSICAL OUTFLOW OF FUNDS. IT IS USUAL BUSINESS PRACTICE A ND IS PART OF ROUTINE CORPORATE DEBT RESTRUCTURING EXERCISE CARRIED OUT BY VARIOUS BANKS AND FINANCIAL INSTITUTIONS, TO GIVE LEEWAY TO THE BORROWERS / DEFAULTERS, TO CONVERT TH EIR EXISTING LOANS ADVANCED TO THE SAID BORROWERS INTO EQUITY CAPITAL. THIS IS DONE AS A NORMAL ROUTINE BUSINESS PRACTICE IN THE MARKET AS PART OF BUSINESS REVIVAL PLANS CARRIED OU T BY THE LENDERS AND BOARD OF INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR) HAVING JURISDICTION OVER SICK INDUSTRIAL 7 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 7 COMPANIES REGISTERED UNDER SICK INDUSTRIAL COMPANIE S PROVISIONS ACT, 1985. IN RESPECT OF EXTERNAL COMMERCIAL BORROWINGS (ECB) AVA ILED BY AN INDIAN COMPANY FROM A PARENT COMPANY IN ABROAD, IT IS QUITE USUAL TO CO NVERT THE SAID LOAN INTO EQUITY AS PART OF RESTRUCTURING EXERCISE AND INCREASE IN STAKE OF THE PARENT COMPANY IN THE INDIAN COMPANY. EVEN IN SUCH A SCENARIO, THE ECB LOAN GE TS CONVERTED INTO EQUITY. CAN IT BE SAID THAT THE SAME IS IN VIOLATION OF PROVISIONS OF SECTION 269T OF THE ACT I.E REPAYMENT OTHERWISE THAN BY WAY OF AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT ? THE ANSWER IS AN EMPHATIC NO. IN THE INSTANT CASE, THE LOAN HAS BEEN BORROWED FROM PRAKASH ELECTRONICS SYSTEM LTD IN THE EARLIER YEAR AND THE SAME HAS BEEN CONVERTED INTO EQUITY DURING THE YEAR UNDER APPEAL. HENCE THE GENUINITY OF THE SAID TRANSACTIONS CANNOT BE QUESTIONED BY THE LD CITA. THE SAID TRA NSACTION CANNOT BE CONSIDERED TO BE IN VIOLATION OF PROVISIONS OF SECTION 269T OF THE A CT. WE HOLD THAT THE ASSESSEE HAD PROPERLY EXPLAINED THE ENTIRE GAMUT OF TRANSACTIONS TOGETHER WITH ITS END USE I.E FOR INVESTMENT IN CO-OWNERSHIP PROPERTY. IT WAS A CON SCIOUS BUSINESS DECISION TAKEN BY THE ASSESSEE TO USE THE AMOUNTS RAISED THROUGH SHARE CA PITAL FOR INVESTING IN CO-OWNERSHIP PROPERTY FOR THE PURPOSE OF ITS BUSINESS AND THE BU SINESSMAN (I.E. ASSESSEE) CANNOT BE COMPELLED BY THE REVENUE TO CONDUCT ITS BUSINESS AS PER THE WHIMS AND FANCIES OF THE REVENUE. IT IS WELL SETTLED THAT THE BUSINESSMAN K NOWS HIS INTEREST BEST AND THE POINT OF COMMERCIAL EXPEDIENCY HAD TO BE VIEWED FROM THE VIE W POINT OF THE ASSESSEE AND NOT FROM THE VIEW POINT OF THE REVENUE. HENCE THE OBS ERVATION OF THE LD CITA THAT THE ASSESSEE COULD HAVE UTILIZED THE AMOUNTS RAISED THR OUGH SHARE CAPITAL FROM OTHER SOURCES TO REPAY THE LOAN TO PRAKASH ELECTRONICS SYSTEM LTD WOULD ONLY TANTAMOUNT TO STEPPING INTO THE SHOES OF THE BUSINESSMAN AND WE HOLD THAT THE SAID OBSERVATION IS NOT WARRANTED, MORE SO IN THE PENALTY PROCEEDINGS U/S 2 71E OF THE ACT. THE BUSINESS COMPULSIONS OF THE ASSESSEE WARRANTING SUCH CONVERS ION OF LOAN INTO EQUITY CANNOT BE BRUSHED ASIDE SIMPLY AS A MATTER OF DOUBT MERELY BE CAUSE THE SHARES WERE ISSUED AT PREMIUM. AS STATED EARLIER, THE REMEDY AVAILABLE T O REVENUE IN SUCH SCENARIO IS PROVIDED ELSEWHERE IN THE ACT AS STATED SUPRA. THE SE FACTORS CANNOT CONTRIBUTE TO 8 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 8 CONFIRMATION OF LEVY OF PENALTY U/S 271E OF THE ACT WHICH IS EQUAL TO THE AMOUNT OF LOAN REPAID. 9.2. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LEVY OF PENALTY U/S 271E OF THE ACT IS NOT JUSTIFIED AND ACCORDINGLY DESERVE TO BE DELETED. ACCORDINGLY, THE GROUNDS RAISED BY THE AS SESSEE ARE ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 07.03.2018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.03.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. M/S ARKIT VINCOM PVT. LTD., C/O, G.P. AGARWAL & ASSOCIATES, 7A, KIRAN SHANKAR RAY ROAD, 2 ND FLOOR, KOLKATA-700001 2. ACIT, RANGE-9, KOLKATA, AAYAKAR BHAWAN, P-7, CHO WRINGHEE SQUARE, KOLKATA- 700069. 3. C.I.T(A)- , KOLKATA 4. C.I.T.- K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 9 ITA NO.2397/KOL/2016 M/S ARKIT VINCOM PVT. LTD. A.YR.2008-09 9