The DCIT, Circle-1, Surat V. M/s. Eagle Fibers Pvt.Ltd., Surat

ITA 249/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57040 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 28-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: R K MALPANI
• Keywords: Corroborative evidences; TDS
• Section: 271D; 271E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. K. GARO DIA, AM) ITA NO. 249 AND 298/AHD/2010 A. Y.: 2004-05 THE D. C. I. T., CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. EAGLE FIBERS PVT. LTD., 302, TRIVIDH CHAMBERS, RING ROAD, SURAT PA NO. AAACE 5085 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B. L. YADAV, DR RESPONDENT BY SHRI R. K. MALPANI, AR DATE OF HEARING: 11-01-2012 DATE OF PRONOUNCEMENT: 20-01-2012 O R D E R PER BHAVNESH SAINI: BOTH THE APPEALS BY THE REVENUE ARE DIRECTED AGAINST COMMON ORDER OF THE LEARNED CIT(A) -I, SURAT DATED 24-11-2009, FOR ASSESSMENT YEAR 2004-05, CHALLENGIN G CANCELLATION OF PENALTY U/S 271D AND 271E OF THE IT ACT. 2. BRIEFLY, THE FACTS NOTED IN THE IMPUGNED ORDER A RE THAT IN THE PENALTY ORDER, THE AO HAS STATED THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 01-11-2004 DECLARING TOTAL INCOME AT R S.15,52,446/-. AS PER TAX AUDIT REPORT IT WAS SENT THAT THE ASSESSEE HAD ACCEPTED LOAN OF RS.66,16,451/- FROM EAGLE FASHION LTD. AND RS.25 ,45,999/- FROM ITA NO.249 AND 298/AHD/2010 DCIT, CIR-1, SURAT VS M/S. EAGLE FIBERS PVT. LTD. 2 EAGLE SYNTHETICS PVT. LTD. AS PER THE TAX AUDIT REP ORT THE ASSESSEE HAD REPAID THE LOAN OF RS.34,04,950/- TO EAGLE FASH ION LTD. AND OF RS.63,61,035/- TO EAGLE SYNTHETICS PVT. LTD. SINCE AS PER DETAILS IN THE TAX AUDIT REPORT, THE ASSESSEE HAD ACCEPTED THE LOANS AND REPAID THE LOANS OTHERWISE THAN BY A CROSSED CHEQUES OR DE MAND DRAFT, CONTRAVENING THE PROVISIONS OF SECTION 269SS AND 26 9T OF THE IT ACT, THE ASSESSEE WAS ISSUED NOTICE U/S 271D OF THE IT A CT FOR RECEIVING THE LOAN AND U/S 271E OF THE IT ACT FOR REPAYING TH E LOAN OTHERWISE BY ACCOUNT PAYEE CHEQUES OR BANK DRAFT. IN RESPONSE TO THE SAID NOTICES, THE ASSESSEE ENCLOSED LEDGER ACCOUNT OF EAGLE FASHI ON LTD. AND EAGLE SYNTHETICS PVT. LTD. AND STATED THAT THESE AR E NOT LOAN ACCOUNT BUT THE CURRENT ACCOUNT OF THE SISTER CONCERN. THEY ARE MIXED ACCOUNT (CURRENT ACCOUNT) IN WHICH TRANSACTION OF ALL TYPES , SUCH AS SARAFI TRANSACTIONS, PURCHASE, SALES AND RECTIFICATION ENT RIES OF WRONG PAYMENTS FROM CUSTOMERS OF REACH OTHER ARE ENTERED INTO. THE JOURNAL ENTRIES ARE RECTIFICATION ENTRIES IN RESPECT OF WRO NG PAYMENT RECEIVED FROM CUSTOMERS OF EACH OTHER. THEY ARE NOT TRANSACT ION IN THE NATURE OF RECEIPT/REPAYMENT OF LOANS. THESE TRANSACTIONS A RE IN THE NATURE OF RECTIFICATION ENTRIES. IT WAS FURTHER STATED BY THE ASSESSEE THAT THE AMOUNTS MENTIONED BY THE A. O. ARE TOTAL OF ALL CRE DITS AND DEBITS INCLUDING THE PAYMENT OF RECEIPTS BY WAY OF ACCOUNT PAYEE CHEQUES, TRANSACTIONS OF PURCHASES AND SALES OF GOODS, SERVI CES AND FIXED ASSETS (PLANT & MACHINERY), TDS AND RECTIFICATION E NTRIES AS MENTIONED ABOVE IN RESPECT OF WRONG PAYMENTS FROM C USTOMERS OF EACH OTHER. SINCE THE RECTIFICATION ENTRIES BY WAY OF JOURNAL ENTRIES WERE PASSED IN THESE CURRENT ACCOUNTS, THE AUDITOR, AS A MATTER OF EXTRA CAUTION HAS PUT THE REMARK JV IN ORDER TO P OINT OUT THAT IN THESE ITA NO.249 AND 298/AHD/2010 DCIT, CIR-1, SURAT VS M/S. EAGLE FIBERS PVT. LTD. 3 CURRENT ACCOUNTS THERE ARE SOME JOURNAL ENTRIES ALS O. THESE JOURNAL ENTRIES ARE RECTIFICATION ENTRIES AS STATED ABOVE. THESE ACCOUNTS ARE MIXED ACCOUNTS OF SISTER CONCERN CONTAINING ALL TYP ES OF TRANSACTIONS AS STATED EARLIER. EXCEPT FOR THE TRANSACTION OF WR ONG PAYMENTS OF CUSTOMERS WHICH ARE RECTIFIED THROUGH JOURNAL ENTRI ES, ALL OTHER PAYMENTS OR RECEIPTS ARE BY ACCOUNT PAYEE CHEQUES. THE ASSESSEE FURTHER STATED THAT IN RESPECT OF M/S. EAGLE SYNTHE TICS PVT. LTD. THERE WERE TWO LEDGER ACCOUNTS, ONE FOR UNIT-II AND OTHER MAIN ACCOUNT. AT THE END OF THE YEAR BOTH THE ACCOUNTS ARE MERGED BY WAY OF TRANSFER OF BALANCE FROM UNIT II ACCOUNTS TO MAIN ACCOUNTS. IN VIEW OF THE ABOVE, THE ASSESSEE STATED THAT NOTICES U/S 271D AN D 271E OF THE IT ACT SHOULD BE DROPPED, AS THEY HAVE NOT VIOLATED AN Y PROVISIONS OF SECTION 269SS AND 279T OF THE IT ACT. THE AO DID NO T ACCEPT THE ABOVE EXPLANATION AND STATED THAT THE ASSESSEE HAS FAILED TO PROVE HOW THE AUDITOR IS NOT CORRECT AND HAS NOT GIVEN AN Y SUPPORTING EVIDENCE LIKE BILLS/VOUCHERS TO SUPPORT ITS CONTENT ION OF RECTIFICATION ENTRIES HAVE PASSED IN THE MIXED ACCOUNTS IN THE SI STER CONCERN. IN VIEW OF THE GENERAL EXPLANATION BY THE ASSESSEE, TH E AO LEVIED PENALTY OF RS.91,62,450/- (RS.66,16,451/- + RS.25,4 5,999/-) FOR VIOLATING THE PROVISIONS OF SECTION 269 SS OF THE IT ACT AND THEREBY LEVIED THE PENALTY U/S 271 D OF THE IT ACT. SIMILA RLY, THE AO LEVIED THE PENALTY U/S 271E OF THE IT ACT OF RS.97,65,985/- (R S.34,04,950/- + RS.62,61,035/-) FOR VIOLATING THE PROVISIONS OF SEC TION 269T OF THE IT ACT. 3. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ENTRIES CONTAINED THEREIN PROVE THAT THESE WERE ADJUSTMENT ENTRIES, THEREFORE, ITA NO.249 AND 298/AHD/2010 DCIT, CIR-1, SURAT VS M/S. EAGLE FIBERS PVT. LTD. 4 THERE IS NO VIOLATION OF THE ABOVE PROVISIONS. IT W AS SUBMITTED THAT ALL THE RECEIPTS ARE THROUGH ACCOUNT PAYEE CHEQUES AND ADJUSTMENT RECTIFICATION ENTRIES AND LATER ON JOURNAL ENTRIES HAVE BEEN PASSED. IT WAS, THEREFORE, SUBMITTED THAT THERE IS NO VIOLATIO N OF THE PROVISIONS OF SECTION 269 SS AND 269T OF THE IT ACT. THE LEARNED CIT(A) IN VIEW OF THE EXPLANATION OF THE ASSESSEE CALLED FOR THE REMA ND REPORT FROM THE AO WHICH IS REPRODUCED IN THE APPELLATE ORDER IN WH ICH THE AO CONFIRMED THE ENTRIES IN THE ACCOUNTS OF THE ASSESS EE REGARDING PURCHASES AND RECTIFICATION ENTRIES AND PAYMENTS MA DE THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE COMMENTED ON TH E REMAND REPORT OF THE AO BEFORE THE LEARNED CIT(A) AND SUBM ITTED THAT THE ENTRIES OF PURCHASES AND SALES AND ACCOUNT PAYEE TR ANSACTIONS HAVE BEEN VERIFIED AND CONFIRMED BY THE AO. THE AO ALSO VERIFIED THE RECTIFICATION, JOURNAL ENTRIES BUT STATED THAT COMP LETE SUPPORTING BILLS HAVE NOT BEEN PRODUCED. THE ASSESSEE, THEREFORE, SU BMITTED THAT THERE IS NO DISPUTE THAT THE ENTRIES CONTAINED IN T HE ACCOUNTS OF THE ASSESSEE ARE RECTIFICATION ENTRIES IN RESPECT OF WR ONG PAYMENT RECEIVED WHICH WAS IN FACT RECEIVABLE BY THE SISTER CONCERN. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE GU JARAT HIGH COURT IN THE CASE OF CIT VS SHREE AMBICA FLUR MILLS CORPO RATION, 6 DTR 169 IN WHICH IT WAS HELD THAT NO PENALTY CAN BE LEV IED IN RESPECT OF JOURNAL ENTRY TRANSACTIONS BETWEEN THE SISTER CONCE RNS. IT WAS, THEREFORE, PLEADED THAT PENALTY MAY BE DELETED. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE, MATERI AL ON RECORD AND REMAND REPORT OF THE AO DELETED THE PENALTIES AND A LLOWED BOTH THE APPEALS OF THE ASSESSEE. HIS FINDINGS IN THE IMPUGN ED ORDER FROM PARA 2.3.1 TO PARA 4 ARE REPRODUCED AS UNDER: ITA NO.249 AND 298/AHD/2010 DCIT, CIR-1, SURAT VS M/S. EAGLE FIBERS PVT. LTD. 5 2.3.1 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. IN THE REMAND REPORT, THE A.O. HAS STATED THAT ON PERUSAL OF TH E SAID ACCOUNT IT IS SEEN THAT THIS INCLUDES ENTRIES OF LOANS, PUR CHASES, RECTIFICATION ENTRIES ETC. ON VERIFICATION OF THE PURCHASE REGISTER, IT IS NOTICED THAT THE ENTRIES OF PURCHASES APPEARI NG IN THE COPY OF THE ACCOUNT FURNISHED BY THE ASSESSEE ARE FOUND REFLECTED IN THE PURCHASE REGISTER. THE ENTRIES OF LOANS SHOWN TO HAVE BEEN TAKEN THROUGH CHEQUE HAVE BEEN VERIFIED FROM THE BA NK ACCOUNT STATEMENT AND THE SAME ARE FOUND REFLECTED IN THE BANK STATEMENT. THE ENTRIES OF PURCHASES SHOWN IN THE COPY OF ACCOUNT HAVE BEEN VERIFIED WITH THE PURCHASE REG ISTER AND THE SAME ARE FOUND REFLECTED IN THE PURCHASE REGIST ER. IN VIEW OF THIS REASON, PENALTY LEVIED BY THE A.O. IN RESPECT OF AMOUNTS MENTIONED AS PURCHASE/ SALE OR PAYMENTS BY ACCOUNT PAYEE CHEQUE OR PAYMENTS RECEIVED BV ACCOUNT PAYEE CHEQUE STANDS DELETED IN VIEW OF THE REMAND REPORT OF THE A.O. 2.3.2 THE A.O. HAS FURTHER STATED THAT THE TRANSA CTIONS MADE THROUGH JOURNAL ENTRIES MENTIONED IN THE COPY OF ACCOUNT OF EAGLE FASHIONS PVT. LTD. AND EAGLE SYNTHETICS PV T. LTD. HAVE BEEN VERIFIED AND HE HAS FOUND THAT OUT OF TOTAL 7 RECTIFICATION ENTRIES THE ASSESSEE HAS PRODUCED SUP PORTING BILLS IN RESPECT OF 4 ENTRIES ONLY NAMELY SHIV KRUP A ASSOCIATE, ABHISHEK TEXTILE. SYNTHETIC SIZER & GOPAI UDHVOQ. HOWEVER, IN THOSE BILLS ALSO DATE AND AMOUN T DOES NOT TALLY. REGARDING OTHER ENTRIES THE ASSESSEE HAS STATED THAT THESE ARE NOT RELATED TO PURCHASE AND SALES BU T RELATED TO INTER UNIT ADJUSTMENT ENTRIES OF SISTER CONCERNS FOR EARLIER YEARS. HOWEVER, NO SUPPORTING PROOF COULD BE FILED BY THE ASSESSEE IN THIS REGARD. THESE EIGHT ENTRIES ARE AS UNDER:- ITA NO.249 AND 298/AHD/2010 DCIT, CIR-1, SURAT VS M/S. EAGLE FIBERS PVT. LTD. 6 SR. NO. OF THE DETAILS FILED BY THE ASSESSEE BEFORE THE A.O. DURING REMAND PROCEEDINGS DATE ' 4 DESCRIPTION AMOUNT REMARKS 6 OF CREDIT SIDE OF EAGLE FASHIONS PVT. LTD. 25.08.03 SHIVKRUPA ASSOCIATE 68204.00 RECTIFICATION ENTRY 13 -DO- 07.11.03 ABHISHEK TEXTILE 50000.00 RECTIFICATION ENTRY 16 -DO- 27.11.03 SYNTHETICS SIZER 22833.00 RECTIFICATION ENTRY 18 -DO- 08.12.03 COM BOZ SILK* MILLS PVT. LTD. 21876.00 RECTIFICATION ENTRY 19 - DO- 08.12.03 MUNI SUVARAT . MARKETING ' 16244.00 RECTIFICATION ENTRY 21 -DO- 31.12.03 GOPAL UDHYOG 22330.00 RECTIFICATION ENTRY 21 OF CREDIT SIDE OF EAGLE SYNTHETICS PVT. LTD. UNIT-II 21.10.03 ALOK INDUSTRIES LTD. 171999.00 RECTIFICATION ENTRY 2 OF DEBIT SIDE OF EAGLE SYNTHETICS PVT. LTD. UNIT-II 16.04.03 KANTIBHAI 18488.00 RECTIFICATION ENTRY THE APPELLANT HAS ARGUED THAT THERE IS NO DISPUTE T HAT THESE ENTRIES ARE RECTIFICATION ENTRIES IN RESPECT OF WRO NG PAYMENTS RECEIVED BY THE APPELLANT WHICH WERE IN FACT RECEIV ABLE BY THE APPELLANT'S SISTER CONCERN. WITH RESPECT TO THE STA TEMENT OF THE A.O. THAT THE DATES AND AMOUNTS IN THE BILLS. DO NO T TALLY WITH THE DATES AND AMOUNTS OF PAYMENTS RECEIVED ON BEHALF OF THE SISTER CONCERN IN RESPECT OF WHICH JOURNAL ENTRIES HAVE BE EN MADE THE APPELLANT HAS ARGUED THAT THE PAYMENTS ARE NOT RECEIVED ON THE SAME DATE ON WHICH SALES ARE MADE AND MANY TIMES PA YMENTS ARE RECEIVED AFTER DISCOUNT OR LATE PAYMENT CHARGES , THIS IS THE REASON FOR DATE AND AMOUNT NOT TALLYING. THE APPELL ANT FURTHER ITA NO.249 AND 298/AHD/2010 DCIT, CIR-1, SURAT VS M/S. EAGLE FIBERS PVT. LTD. 7 RELIED ON THE DECISION OF THE HON'BLE ITAT, AHMEDAB AD IN THE CASE OF ACIT VS. GUJARAT AMBUJA PROTEINS LTD. (89-T TJ-324) TO SAY THAT WHERE ACCOUNTS OF SISTER CONCERN WERE CRED ITED BY THE ASSESSEE BY JOURNAL ENTRIES ON ACCOUNT OF PAYMENT M ADE BY SISTER CONCERN ON BEHALF OF THE ASSESSEE THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 269SS AND HENCE NO PEN ALTY CAN BE LEVIED. I AGREE WITH THE APPELLANT EVEN THOUGH T HE DATES AND AMOUNTS ARE NOT FULLY TALLYING BUT NONE OF THESE EI GHT TRANSACTIONS VIOLATE THE PROVISIONS OF SECTION 269S S & 269T BECAUSE THE JOURNAL ENTRIES HAVE BEEN PASSED IN RES PECT OF ALL THESE EIGHT TRANSACTIONS AND THE CORRESPONDING SECO ND TRANSACTION IS BANK A/C. HENCE IN VIEW OF THE DECISIONS OF THE HON'BLE GUJARAT HIGH COURT AND ITAT, AHMEDABAD CITE D ABOVE THE PENALTY LEVIED IS DELETED IN RESPECT OF J OURNAL ENTRY TRANSACTIONS ALSO. 4. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE FINDINGS OF THE AUTHORITIES BELOW. THE ASSESSEE FUR NISHED COMPLETE DETAILS OF THE TRANSACTIONS WITH THE SISTER CONCERN BEFORE THE AUTHORITIES BELOW AND EXPLAINED THAT EITHER THE PAY MENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES OR THESE ARE RECTIFIC ATION JOURNAL ENTRIES IN RESPECT OF WRONG PAYMENTS RECEIVED FROM CUSTOMERS WHICH PERTAINED TO THE SISTER CONCERN. IT WAS, THEREFORE, CLAIMED THAT THESE WERE NOT RECEIPTS/PAYMENTS OF LOAN IN VIOLATION OF THE PROVISIONS OF LAW. THE ASSESSEE ALSO FILED COMPLETE ENTRIES OF T HE ACCOUNTS OF BOTH THE CONCERNS IN SUPPORT OF THE CONTENTIONS ON WHICH REMAND REPORT WAS CALLED FOR AND VIRTUALLY THE AO ACCEPTED THE CL AIM OF THE ASSESSEE IN THE REMAND REPORT REGARDING JOURNAL ENT RIES BETWEEN ITA NO.249 AND 298/AHD/2010 DCIT, CIR-1, SURAT VS M/S. EAGLE FIBERS PVT. LTD. 8 SISTER CONCERN AND ENTRIES OF PURCHASES AND SALES T HROUGH ACCOUNT PAYEE TRANSACTIONS. THE LEARNED CIT(A) ON PROPER AP PRECIATION OF THE FACTS AND MATERIAL ON RECORD RIGHTLY HELD THAT PENA LTY IS NOT LEVIABLE IN THE MATTER. WE ACCORDINGLY, DO NOT FIND ANY MERIT I N BOTH THE APPEALS OF THE REVENUE. THE SAME ARE ACCORDINGLY DISMISSED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REV ENUE ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD