ITO, Ward-3(1),Asansol, Asansol V. M/s Ranjit Jewellers, Asansol

ITA 2425/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4105 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 19-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2013
• Court: TRIBUNAL
• Keywords: Salary income; Reasonable cause
• Section: 273B; 143(3)

Judgement Text

ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 1 IN THE INCOME TAX APPELLATE TRIBUNAL,A BENCH KOLKATA BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2425/KOL/2013 A.Y: 2008-09 I.T.O WARD 3(1), ASANSOL VS. M/S. RANJIT JEWE LLERS PROP. RANJIT ROY JEWELLERS C/O C.M ROY & SONS. PAN: ACMPR 5680F (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI SALLONG YADEN, A DDL.CIT, DR NONE APPEARED FOR THE ASSESSEE DATE OF HEARING : 19-10-2016 DATE OF PRONOUNCEMENT : 14 -12-2016 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 11-04-2013 PASSED BY THE COMMISSIONER OF INCO ME TAX(APPEALS),ASANSOL FOR THE ASSESSMENT YEAR 2008-0 9. 2. IT IS NOTICED THAT THIS APPEAL WAS FILED WITH A DELAY OF 104 DAYS. FOR WHICH, THE APPELLANT REVENUE HAS FILED AN AFFIDAVIT STATING THAT THE RECORD OF ASSESSMENT WAS MISPLACED DURING THE PERIOD OF HO USEKEEPING MAINTENANCE AND IT WAS ONLY TRACED ON 25-7-2013 AND IMMEDIATELY THEREAFTER, TOOK STEPS TO FILE APPEAL AND URGED TO CONDONE THE SAME. PERUSING THE CONTENTS OF AFFIDAVIT, WE CONDONE THE DELAY AND HEARD THE APPEAL ON MERITS. ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 2 3. NONE APPEARED FOR RESPONDENT ASSESSEE. THEREFORE , WE PROCEEDED TO DISPOSE OF THE APPEAL HEARING THE LD. DR OF THE APP ELLANT REVENUE AND PERUSING THE MATERIAL AVAILABLE ON RECORD. 4. THE REVENUE RAISED THE FOLLOWING EFFECTIVE GROUN D OF APPEAL:- THAT THE LD. CIT(A), ASANSOL HAS ERRED IN LAW AND ON FACTS BY ALLOWING THE RELIEF OF RS.12,31,400/- IMPOSING OF P ENALTY BY THE AO U/S. 271E. 5. THE ABOVE SOLE GROUND IS TO BE DECIDED AS TO WHE THER THE CIT-A JUSTIFIED IN DELETING THE PENALTY AS IMPOSED BY THE AO TO AN EXTENT OF RS.12,31,400/- U/SEC.271E OF THE ACT. 6. THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF TRADING OF GOLD AND CONDUCTING HIS BUSINESS IN THE NAME AND STYLE AS RANJIT ROY JEWELLERS WHICH IS A PROPRIETARY CONCERN. THE ASSE SSEE FILED HIS RETURN DECLARING A TOTAL INCOME AT RS.2,23,021/- AND UNDER SCRUTINY, THE AO DETERMINED THE TOTAL INCOME AT RS.30,19,764/- AND T O THAT EFFECT AN ORDER U/SEC. 143(3) OF THE ACT WAS PASSED. 7. DURING SCRUTINY PROCEEDINGS, THE AO FOUND THAT T HE ASSESSEE HAS REPAID A LOAN OF RS.12,31,400/- IN CASH TO M/S. C.M . ROY & SONS ON VARIOUS DATES WITH DIFFERENT AMOUNTS OF RS.2,90,000/-, RS.2 ,72,000/-, RS.2,72,000/-, RS.2,92,000/- AND RS.1,05,400/- AND INITIATED PENALTY PROCEEDINGS U/SEC. 271E BY ISSUING A NOTICE FOR VIO LATION OF SECTION 269T OF THE ACT. THE ASSESSEE EXPLAINED THAT HE IS A PARTNE R IN THE SAID FIRM AND IT IS A PAYMENT BETWEEN PARTNER AND HIS FIRM AND PLEAD ED THAT SECTION 269T IS NOT APPLICABLE. 8. CONSIDERING THE CONTENTIONS AS MADE BY THE ASSES SEE THROUGH HIS REPLY DT. 09-06-2011 AS DISCUSSED ABOVE, THE AO WAS OF THE OPINION THAT ASSESSEE HIMSELF ADMITTED IN THE ASSESSMENT PROCEED INGS THAT HE REPAID ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 3 THE LOAN IN CASH AND ACCORDINGLY, IMPOSED A PENALTY OF RS.12,31,400/- U/SEC. 271E OF THE ACT 9. THE CIT-A BY RELYING ON THE DECISION OF HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF ITO VS. LOKHPAT FILM EXCHA NGE (CINEMA) REPORTED IN 304 ITR 172 (RAJ) AND ON A DECISION OF KOLKATA T RIBUNAL IN ITA NO.1916/KOL/2004 HELD THAT THE FIRM AND PARTNERS AR E NOT SEPARATE AND CANCELLED THE PENALTY IMPOSED BY THE AO. 10. BEFORE US THE LD.DR SUBMITS THAT THE ASSESSEE H IMSELF ADMITTED THAT HE REPAID THE LOAN AMOUNTS TO THE SAID FIRM C.M.ROY & SONS IN THE ASSESSMENT PROCEEDINGS AND CHANGED HIS VERSION DURI NG THE PENALTY PROCEEDINGS WITH A NEW THEORY THAT HE IS THE PARTNE R IN THE SAID FIRM AND RELIED ON THE DECISION OF HONBLE HIGH COURT OF KER ALA IN THE CASE OF GRIHALAKSHMI VERSION REPORTED IN (2015) 63 TAXMANN. COM 196 (KERALA) AND ARGUED THAT THERE WAS NO SUCH MATERIAL TO SHOW THAT THE ASSESSEE IS PARTNER IN THE SAID FIRM AND TO SHOW FURTHER ON WHI CH BASIS REPAYMENTS WERE MADE TO THE SAID FIRM AND URGED TO ALLOW THE A PPEAL. 11. HEARD LD.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. TAKING INTO CONSIDERATION THE FACTS BORNE BY THE RECORD AND WE MAY EXAMINE THE FACTS AND LAW LAID DOWN THEREON IN THE CASE SUPRA RELIED ON BY THE LD.DR. THE BRIEF FACTS, DURING THE ASSESSMENT PROCEEDINGS, IT WAS FOUND THA T THE ASSESSEE ACCEPTED DEPOSITS AND MADE REPAYMENTS IN VIOLATION OF THE PR OVISIONS CONTAINED IN SECTION 269SS AND 269T OF THE ACT AND PENALTY PROVI SIONS OF SECTION 271D AND 271E ARE INITIATED AND U/SECTION 271D A PENALTY OF RS.10,83,000/- WHICH IS EQUAL TO THE CASH LOANS TAKEN BY THE ASSESSEE IN CO NTRAVENTION OF 261SS OF THE ACT AND U/SECTION 271E, PENALTY OF RS.2,97,000/- WH ICH IS EQUAL TO THE AMOUNT OF CASH LOANS REPAID BY THE ASSESSEE IN CONTRAVENTI ON OF 269T OF THE ACT WERE LEVIED. THE PENALTY ORDER WAS CONFIRMED BY THE COMM ISSIONER OF INCOME TAX (APPEALS) AND BY THE TRIBUNAL. ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 4 12. THEREFORE, THE ASSESSEE RAISED QUESTIONS OF LA W AMONGST OTHERS BEFORE THE HONBLE HIGH COURT RELEVANT TO THE ISSUE ON HAN D IS WHETHER THE AUTHORITIES BELOW ERRED IN NOT CONSIDERING THE ISSUE WHETHER TH E CASH RECEIPTS, BEING BONAFIDE TRANSACTIONS BETWEEN THE ASSESSEE AND ITS SISTER CONCERNS/PARTNERS, CAN BE CONSIDERED AS LOANS OR DEPOSITS ATTRACTING T HE PROVISIONS OF SECTIONS 269SS AND 269T OF THE ACT. THE HONBLE HIGH COURT O F KERALA HELD AS UNDER: 15. THE THIRD CONTENTION THAT WAS RAISED BY THE ASS ESSEE WAS THAT IF MONEY IS TAKEN FROM PARTNERS OR SISTER CONCERNS, IT COULD NOT BE TREATED AS LOANS OR DEPOSITS. IN SUPPORT OF THIS CONTENTION, C OUNSEL FOR THE ASSESSEE RELIED ON JUDGMENTS IN COMMISSIONER OF INCOME TAX V. T.PERUMAL (INDUL.) [2015] 370 ITR 313 (MAD) AND COMMISSIONER OF INCOME TAX V. MUTHOOT FINANCIERS AND ANOTHER [2015] 371 ITR 408 (DELHI). READING OF THESE JUDGMENTS SHOW THAT THESE CASES WERE DECIDED ON THE BASIS OF THE DOCUMENTS THAT WERE AVAILABLE BEFORE THE COURT. ON THE OTHER HAND, INSOFAR AS THESE CASES ARE CONCERNED, THOUGH IT IS THE ADMITTED CASE THAT AMOUNTS WERE RECEIVED FROM PARTNERS AND OTHER SISTE R CONCERNS OF THE ASSESSEE AND WERE REPAID, THERE IS NO MATERIAL WHAT SOEVER TO INFER THAT THESE RECEIPTS WERE ANYTHING OTHER THAN LOANS OR DE POSITS. THERE IS NO LAW THAT EVERY RECEIPT FROM A PARTNER OR A SISTER CONCE RN CANNOT, IN ALL CIRCUMSTANCES, BE TREATED AS A LOAN OR DEPOSIT. ON THE OTHER HAND, THE NATURE OF THE RECEIPT WOULD DEPEND UPON THE AGREEME NT BETWEEN THE PARTIES AND THE EVIDENCE THAT IS PRODUCED. AS WE HA VE ALREADY STATED, THERE IS NO MATERIAL WHATSOEVER TO ACCEPT THE CASE OF THE ASSESSEE THAT THESE ARE LOAN OR DEPOSIT. IN SUCH CIRCUMSTANCES, T HE FINDINGS OF THE ASSESSING OFFICER CONFIRMED BY THE APPELLATE COMMIS SIONER AND THE TRIBUNAL THAT IT WAS A LOAN OR DEPOSIT THAT WAS REC EIVED BY THE ASSESSEE ALSO HAS TO BE UPHELD AND WE DO SO. 13. IN THE AFORESAID DECISION, THE CONTENTION OF TH E ASSESSEE WAS THAT THE MONEY TAKEN FROM PARTNERS AND SISTER CONCERNS DOES NOT CONSTITUTE A LOAN OR DEPOSIT, BUT HOWEVER, THE HONBLE HIGH COURT UPHELD THE FINDINGS OF THE AUTHORITIES BELOW IN FAVOUR OF THE REVENUE ON THE G ROUND THAT THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL WHATSOEVER TO INFER THAT THE SAID RECEIPTS WERE ANYTHING OTHER THAN LOANS OR DEPOSITS. IN THE PRESE NT CASE, THE CONTENTION OF THE ASSESSEE WAS THAT IN THE PENALTY PROCEEDINGS VI DE ITS LETTER DT:15-11-2010 ADMITTING THE FACT THAT IT IS A LOAN REPAID TO HIS PARTNERSHIP FIRM AND SUCH REPAYMENT DOES NOT ATTRACT THE PROVISIONS UNDER SEC TION 269SS OF THE ACT AS THERE WAS NO TERM LENDER AND BORROWER EXISTS BETWEE N THE PARTNER AND ITS ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 5 FIRM. WE FIND THAT BASING ON WHICH SUBMISSIONS THE CIT-A CANCELLED THE PENALTY IMPOSED BY THE AO PLACING RELIANCE ON THE DECISION IN THE CASE OF CIT VS LOKHPAT FILM EXCHANGE (CINEMA) OF HONBLE HIGH COUR T OF RAJASTHAN REPORTED IN 304 ITR 172 (RAJ), HELD UNDER THE GENERAL PROVIS ION RELATING TO PARTNERSHIP ACT THAT PARTNERSHIP FIRM IS NOT A JURISTIC PERSON AND FOR INTER RELATIONSHIP DIFFERENT REMEDIES ARE PROVIDED TO ENFORCE THE RIGH TS ARISING OUT OF THEIR INTER SE TRANSACTIONS, THE ISSUE ABOUT SEPARATE ENTITIES APART, IT CANNOT BE DOUBTED THAT THE ASSESSEE HAS ACTED BONA FIDE AND HIS PLEA THAT INTER SE TRANSACTIONS BETWEEN THE PARTNERS AND THE FIRM ARE NOT GOVERNED BY THE PROVISIONS OF SS. 269SS OF THE ACT AND THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW: 2. THESE TWO APPEALS ARISE OUT OF TWO SEPARATE ORDERS PASSED BY THE AO LEVYING PENALTY UNDER SS. 271D AND 271E IN RESPECT OF CERTAIN TRANS ACTIONS BETWEEN THE ASSESSEE FIRM AND ITS PARTNERS DESCRIBED AS DEPOSITS FROM THE PARTNERS. T HE TRANSACTION RELATES TO RECEIPT OF DEPOSIT DURING THE ACCOUNTING PERIOD RELEVANT TO AS ST. YR. 1990-91 FROM ITS PARTNERS SHRI JAY P. MOTINANI AND SHRI BHAGWATI CHANDNANI BY WAY OF D EPOSITS. THE AO CONSIDERING IT TO BE INTRA PARTY TRANSACTIONS OF DEPOSIT OTHERWISE THEN BY WAY OF CHEQUE OR BANK DRAFT INVITING THE PROVISIONS OF SS. 269SS AND 269T AND CONSIDERING TH ESE PAYMENTS AND REPAYMENTS WERE IN VIOLATION OF SS. 269SS AND 269T IMPOSED PENALTY UND ER SS. 271D AND 271E RESPECTIVELY FOR RECEIVING THE DEPOSIT IN CASH AND PAYMENT IN CASH. THE ASSESSEE HAD CLAIMED THAT IN VIEW OF THE FACT T HAT PARTNERS AND FIRM ARE NOT INDEPENDENT OF EACH OTHER AND THE FIRM IS NOT JURISTIC PERSON, THESE TRANSACTIONS CANNOT BE CONSIDERED AS INTRA PERSON BUT WERE ONLY FOR THE PURPOSE OF CARRY ING ON PARTNERS OWN BUSINESS. THE FACT THAT UNDER THE IT ACT, THE FIRM AND PARTNERS OF THE FIRM ARE RECOGNISED AS INDEPENDENT UNITS, THE SAME CANNOT BE TREATED FOR ALL PURPOSES TO BE S EPARATE AND INDEPENDENT. THE ASSESSEE HAD CONTENDED THAT IN THAT VIEW OF THE MATTER, THEY HAD NOT VIOLATED THE REQUIREMENT OF SS. 269SS AND 269T WHILE CONDUCTING THESE TRANSACTIONS. HOWEVER, THE AO DID NOT ACCEPT THIS EXPLANATION AND REJECTED THE PLEA OF THE ASSESSEE A ND IMPOSED PENALTIES UNDER SS. 271D AND 271E. THE PENALTIES WERE NOT SUSTAINED BY THE CIT(A). 3. THE TRIBUNAL RELYING ON A DECISION IN CIT VS. R.M. CHIDAMBARAM PILLAI, ETC. 1977 CTR (SC) 71 : (1977) 106 ITR 292 (SC) WHEREIN THE SUPREME CO URT HAS SAID THAT THERE CANNOT BE A CONTRACT OF SERVICE, IN STRICT LAW, BETWEEN A FIRM AND ONE OF ITS PARTNERS SO AS TO CONSIDER THE SALARY PAID TO THE PARTNER AS INCOME FROM SALARY HE LD THAT FOR THE PURPOSE OF SS. 269SS AND 269T ALSO THE FIRM AND PARTNERS CANNOT BE CONSIDERE D TO BE SEPARATE ENTITY AND DELETED THE PENALTY. HENCE, THESE TWO APPEALS ARE BEFORE US RAISING THE COMMON ISSUE IN BOTH APPEALS. 4. THE FIRM WAS CONSTITUTED WITH A PARTICULAR OBJECT OF CONSTRUCTING CINEMA AND IS NOW NO MORE IN EXISTENCE. SEC. 273B HAS MITIGATED THE PENA LTY TO BE LEVIED UNDER SS. 271D AND 271E BY PROVIDING THAT WHERE ASSESSEE IS ABLE TO ES TABLISH THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO COMPLY WITH SS. 269SS AND 269T, NO P ENALTY IS LEVIABLE. 5. BY CONSIDERING THE DECISION OF THE SUPREME COURT I N THE AFORESAID DECISION AND CONSIDERING THE FACTS THAT UNDER THE GENERAL PROVIS ION RELATING TO PARTNERSHIP ACT THAT PARTNERSHIP FIRM IS NOT A JURISTIC PERSON AND FOR I NTER RELATIONSHIP DIFFERENT REMEDIES ARE PROVIDED TO ENFORCE THE RIGHTS ARISING OUT OF THEIR INTER SE TRANSACTIONS, THE ISSUE ABOUT ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 6 SEPARATE ENTITIES APART, IT CANNOT BE DOUBTED THAT THE ASSESSEE HAS ACTED BONA FIDE AND HIS PLEA THAT INTER SE TRANSACTIONS BETWEEN THE PARTNER S AND THE FIRM ARE NOT GOVERNED BY THE PROVISIONS OF SS. 269SS AND 269T WAS BONA FIDE AND REASONABLE GROUND EXISTED ON WHICH THEY HAD NOT ADHERED TO THE REQUIREMENT OF CONDUCTI NG THE TRANSACTION THROUGH BANK ONLY. THEREFORE, ON THE FACTS FOUND BY THE AO AS WELL AS THE TRIBUNAL, THE ASSESSEE WAS OTHERWISE NOT LIABLE TO BE SUBJECTED TO PENALTY. 14. THE PROVISION CONTEMPLATED UNDER SECTION 269SS EXPLAINS THAT NO PERSON SHALL TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUN T PAYEE BANK DRAFT AFTER THE 30TH DAY OF JUNE, 1984. IN THE AFORESAID DECISION THE HONBLE HIGH COURT UPHELD THE ORDER OF TRIBUNAL IN DELETING THE PENALTY AS IMPOSED BY THE AO U/SECTION 271E FOR VIOLATION OF SECTION 2 69SS OF THE ACT. IT PERTINENT TO NOTE THAT THE TRIBUNAL TAKEN SUPPORT F ROM THE DECISION IN THE CASE OF CIT VS. R.M. CHIDAMBARAM PILLAI, ETC. OF HONBLE SUPREME COURT REPORTED IN 106 ITR 292 (SC) WHICH HELD THAT FOR TH E PURPOSE OF SS. 269SS AND 269T ALSO, THE FIRM AND PARTNERS CANNOT B E CONSIDERED TO BE SEPARATE ENTITY AND DELETED THE PENALTY. WE FIND TH AT THE CIT-A FOUND EXAMINED AND SATISFIED THAT THE ASSESSE IS A PARTNE R IN A FIRM I.E M/S.C.M.ROY & SONS AND THE AO ALSO DURING THE COURS E OF ASSESSMENT PROCEEDINGS ON PERUSAL OF THE LEDGER ACCOUNT IN RES PECT OF ADVANCE RECEIPT AND PAYMENT FOUND THAT THE ASSESSEE CREDITED AN AMO UNT OF RS.23,25,000/- AS ADVANCE FROM CUSTOMERS WITH AN EN DORSEMENT TO ADVANCE MEMO NO- TO- FROM CUSTOMERS AND ALSO FOUND THE ENTIRE SALE TO M/S.C.M.ROY & SONS. THEREFORE, THE ASSESSE TAKES AD VANCES FROM ITS CUSTOMERS AND MAKES PAYMENT TO ITS FIRM TIME TO TIM E FOR MEETING THE BUSINESS NEEDS. WE HOLD THAT THE MONEY RECEIVED OR PAID IN THE ABOVE CIRCUMSTANCES SPECIALLY BETWEEN THE PARTNERS AND IT S FIRM CAN BE TREATED IN THE NATURE OF ADVANCE AND NOT LOAN OR DEPOSIT AS CONTEMPLATED IN SEC.269SS OF THE ACT AND THAT THE PAYMENTS BETWEEN THE PARTNERSHIP FIRM AND ITS PARTNER AND VICE VERSA ARE PAYMENT TO SELF. AS DISCUSSED ABOVE THE ADVANCES RECEIVED BY THE ASSESSEE WERE FROM PRO PER SOURCE AND THERE IS NO DOUBT THE GENUINENESS OF THE TRANSACTIO NS. IN SUCH ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 7 CIRCUMSTANCES, THE PENALTY IMPOSED U/S.271E OF THE ACT IS NOT MAINTAINABLE. IN VIEW OF ABOVE DECISIONS OF HONBLE SUPREME COURT AND HIGH COURT SUPRA , RESPECTFULLY FOLLOWING THE SAME, WE CANCEL THE PE NALTY LEVIED BY THE A.O. U/SEC.271E OF THE ACT. THEREFORE , GROUND INVOLVING THE SAME RAISED BY THE REVENUE IS DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED ORDER PRONOUNCED IN OPEN COURT ON 14-12- 2016 SD/- SD/- M.BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 14/12/ 2016 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT/ DEPARTMENT: INCOME TAX OFFICER WARD 3(1), PARMAR BUILDING, APKAR GARDEN (WEST), 54 G.T ROAD, ASANSOL-713304. 2 THE RESPONDENT/ ASSESSEE: SRI RANJIT ROY PROP: RANJIT ROY JEWELLERS C/O M/S. C.M ROY & SONS, C.R ROAD, RANIGANJ, ASANSO L, DIST: BURDWAN(WB). 3 / THE CIT(A) 4.THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . **PP/SPS TRUE COPY, BY ORDER, ASSTT REGISTRA R ITA NO. 2425/KOL/13 M/S. RANJIT JEWELLERS . 8