Magnaguest Techonologies Ltd., Hyderabad V. ADDL.CIT, Hyderabad

ITA 242/HYD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1375 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: misc
• Appeal Filed On: 15-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E S NAGENDRA PRASAD
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Business expenditure; Reasonable cause; Set aside
• Section: 273B; 271D

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'B' BEFORE SHRI N.R.S.GANESAN AND SHRI CHANDRA POOJARI I.T.A.NO.242/HYD/2008 ASSESSMENT YEAR 2003-04 MAGNAQUEST TECHNOLOGIES LTD., HYDERABAD. .. APPELLANT (PAN AACCM3117F) VERSUS ADDL. CIT, RANGE 16, HYDERABAD. ..RESPONDENT APPELLANT BY : SHRI P.MURALI MOHAN RAO RESPONDENT BY : SHRI E.S.NAGENDRA PRASAD O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT (APPEALS) V, HYDERABAD, DATED 14-9-2007, AND PERTAI NS TO ASST. YEAR 2003-04. 2. SHRI MURALI MOHAN RAO, LEARNED REPRESENTATIVE FO R THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF DEVELOPMENT AND EXPORT OF SOFTWARE. ACCORDING TO THE LEARNED REPRES ENTATIVE, THE ASSESSEE HAD TAKEN A LOAN IN CASH FROM FOUR PERSONS DUE TO URGEN T BUSINESS EXPENDITURE. ACCORDING TO THE LEARNED REPRESENTATIVE, THE ASSESS EE UTILIZED THE LOAN FOR PAYMENT OF SALARIES TO THE EMPLOYEES AND PAYMENT TO THE VENDORS OF THE COMPANY. THE LEARNED REPRESENTATIVE FURTHER SUBMITT ED THAT THE ASSESSEE RECEIVED RS.1,00,000 EACH FROM SHRI T.SUNIL KUMAR A ND SHRI SRIKANTH ON 5-3- 2003 AND THE SAME WAS DEPOSITED IN THE BANK ACCOUNT WITH ICICI BANK FOR PAYMENT OF SALARY ON THE VERY SAME DAY. THE LEARNED REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE HAD ALSO RECEIVED RS.25 ,000 EACH FROM TWO 2 INDIVIDUALS AND THE SAME WAS DEPOSITED IN THE BANK ACCOUNT WITH VYSYA BANK ON 15-5-2002 AND THE SAME WAS ALSO UTILIZED FOR TAKING A DEMAND DRAFT FOR PAYING THE VENDOR. THEREFORE, ACCORDING TO THE LEARNED REP RESENTATIVE, DUE TO BUSINESS NECESSITY THE ASSESSEE WAS FORCED TO RECEIVE CASH. THEREFORE, THERE CANNOT BE LEVY OF PENALTY UNDER SEC. 271D OF THE INCOME-TAX A CT, 1961. 3. ON THE CONTRARY, SHRI E.S.NAGENDRA PRASAD, LEARN ED DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE HAD TAK EN CASH LOAN OF RS.2,00,000 FROM TWO INDIVIDUALS ON 5-3-2003. THE ASSESSEE CLAR IFIED BEFORE THE LOWER AUTHORITIES THAT SALARY WAS PAID IN THE FIRST WEEK OF EVERY MONTH. WHEN THE ASSESSEE KNOWS THAT THE SALARY HAS TO BE PAID IN TH E FIRST WEEK OF EVERY MONTH, IT WOULD HAVE MADE SOME ARRANGEMENT THROUGH BANKING CHANNELS INSTEAD OF TAKING ADVANCES ON 5-3-2003. ACCORDING TO THE LEARN ED DEPARTMENTAL REPRESENTATIVE, THE STATEMENT OF BANK ACCOUNT WITH ICICI BANK FOR THE PERIOD 1- 4-2002 TO 31-3-2003 SHOWS THAT THE SALARY FOR APRIL 2002 WAS PAID TO THE EMPLOYEES ON 8-4-2002 AS AGAINST WITHDRAWAL OF RS.7 ,24,814 ON 8-4-2002. THEREFORE, ACCORDING TO THE LEARNED DEPARTMENTAL RE PRESENTATIVE, THE CIT (A) HAS RIGHTLY CONFIRMED THE LEVY OF PENALTY UNDER SEC . 271D. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY CONTENTION O F THE DEPARTMENT IS THAT THE SALARY IS PAID IN THE FIRST WEEK OF EVERY MONTH AND , THEREFORE, THE ASSESSEE WOULD HAVE MADE SOME ARRANGEMENT TO GET THE MONEY T HROUGH BANKING CHANNELS. HOWEVER, THE FACT REMAINS THAT THE ASSESS EE RECEIVED RS.2,00,000 FROM TWO INDIVIDUALS AND DEPOSITED THE SAME ON THE VERY SAME DAY WITH ICICI BANK AND PAID THE SALARY ON THAT DAY ITSELF. PAYMEN T OF SALARY IS ONE OF THE 3 IMPORTANT FUNCTIONS OF A BUSINESS ORGANIZATION AS O THERWISE THE BUSINESS OF THE ASSESSEE MAY COLLAPSE. THEREFORE, THE ASSESSEE HAS TO ORGANIZE ITS FUNDS FOR PAYMENT OF SALARY. NO DOUBT THE ASSESSEE COULD HAVE ORGANIZED THE FUNDS THROUGH BANKING CHANNELS. THE FACT THAT THE FUNDS W ERE RECEIVED ON 5-3-2003 AND THE SAME WERE DEPOSITED WITH ICICI BANK AND SAL ARY WAS PAID ON THE VERY SAME DAY CANNOT BE DOUBTED MERELY BECAUSE IT WAS NO T OBTAINED THROUGH BANKING CHANNELS. THE FACT REMAINS THAT THERE WAS A CLEAR URGENCY FOR THE ASSESSEE TO ORGANIZE THE FUNDS FOR PAYMENT OF SALAR Y TO ITS EMPLOYEES. LIKEWISE, THE AMOUNT OF RS.25,000 EACH OBTAINED FRO M TWO INDIVIDUALS WAS ALSO UTILIZED FOR MAKING PAYMENT TO THE VENDORS. THEREFO RE, IN OUR OPINION, THERE WAS REASONABLE CAUSE ON THE PART OF THE ASSESSEE FO R OBTAINING LOANS IN CASH. THEREFORE, IN VIEW OF THE PROVISIONS OF SEC. 273B O F THE INCOME-TAX ACT, THERE CANNOT BE LEVY OF PENALTY UNDER SEC. 271D. IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTHORI TIES. ACCORDINGLY, THE SAME IS SET ASIDE AND THE ENTIRE PENALTY IS DELETED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 20-11-09. SD SD (CHANDRA POOJARI) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, 20TH NOVEMBER, 2009. RRRAO. 4 COPY OF THE ORDER FORWARDED TO:- 1. P.MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1ST FLOOR, SOMAJIGUDA, HYDERABAD 500 082. 2. ADDL. CIT, RANGE 16, HYDERABAD. 3. CIT IV, HYDERABAD. 4. CIT (A) V, HYDERABAD. 5. DR, ITAT, HYDERABAD. 1. DATE OF DICTATION : 16-11-2009 2. DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER: 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER: 17-11-09 AND OTHER MEMBERS: 5. DATE ON WHICH THE FAIR ORDER GOES TO THE SR. 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. DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR: 9. DATE OF DESPATCH OF THE TRIBUNAL ORDER: