Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 128493 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-10-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
15-10-2023
Assessment Year
2017-2018
Appeal Filed On
27-12-2022
Judgement Text
आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No. 249/Viz/2022 (Ǔनधा[रण वष[ / Assessment Year : 2017-18) DCIT, Central Circle-1, 3 rd Floor, Rajkamal Complex, Lakshmipuram Main Road, Guntur-522007, Andhra Pradesh. Vs. M/s. Bharathi Consumer Care Products Private Limited, Sy. No. 280, 281, Peddaparimi Village, Nidumukkala Post, Guntur – 522016, Andhra Pradesh. PAN: AADCB 9107 B (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) C.O. No. 17/Viz/2023 (In आयकर अपील सं./ I.T.A. No. 249/Viz/2022 (Ǔनधा[रण वष[ / Assessment Year : 2017-18) M/s. Bharathi Consumer Care Products Private Limited, Sy. No. 280, 281, Peddaparimi Village, Nidumukkala Post, Guntur – 522016, Andhra Pradesh. PAN: AADCB 9107 B Vs. DCIT, Central Circle-1, 3 rd Floor, Rajkamal Complex, Lakshmipuram Main Road, Guntur-522007, Andhra Pradesh. (Cross Objector) (Appellant in appeal) अपीलाथȸ कȧ ओर से/ Assessee by : Sri M.V. Prasad, AR Ĥ×याथȸ कȧ ओर से / Revenue by : Dr. Satya Sai Rath, CIT-DR सुनवाई कȧ तारȣख / Date of Hearing : 16/10/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 31/10/2023 2 O R D E R PER S. BALAKRISHNAN, Accountant Member : The captioned appeal is filed by the Revenue against the penalty order passed U/s. 271D by the Ld.AO in DIN No. ITBA/PNL/F/271D/2021-22/1034956727(1) dated 18/8/2021 for the AY 2017-18. 2. Briefly stated the facts of the case are that the assessee is into the business of manufacturing of detergent products such as detergent powders and soaps. A search and seizure operation U/s. 132 of the Act was conducted on 30/08/2016 in the group case of Sri Arunachalam Manickavel. During the course of assessment proceedings, the Ld. AO noticed the cash deposits of Rs. 1,74,52,500/- during the demonetization period. The assessee claimed that the source of such cash deposits was loan from Sri Arunachalam Manickavel, one of the Directors of the assessee company. The Ld. AO called for confirmation from Sri Arunachalam Manickavel wherein Mr. Arunachalam Manickavel has confirmed that the amount of cash loan was out of money received from M/s. Gowtham Buddha Textile Park P. Ltd. The Ld. AO rejected the contention of the assessee as well as the confirmation of Mr. Arunachalam Manickavel and considered the cash deposits of Rs. 1.74 Crs 3 as unexplained cash credit U/s. 68 of the Act and brought to tax as per section 115BBE of the Act. Further, the same amount was brought to tax in the hands of Sri Arunachalam Manickavel (individual) on the same ground but on protective basis. Aggrieved by the additions made by the Ld. AO, the assessee filed an appeal before the Ld. CIT(A) who has deleted the addition as the creditworthiness and genuineness of the transactions were proved by the assessee. Aggrieved by the order of the Ld. CIT(A), the Revenue filed an appeal before the ITAT, Visakhapatnam Bench wherein the Tribunal upheld the order of the Ld. CIT(A). Thereafter, the Ld. AO considered that the assessee-company has violated the provisions of section 269SS of the Act and made a proposal to levy the penalty U/s. 271D of the Act vide letter dated 8/6/2021. In response to the notice, the Ld. Counsel for the assessee appeared and submitted the explanation before the Ld. AO by filing the written submissions on 7/7/2021. The Ld. AO rejected the submissions made by the Ld. Counsel for the assessee and found that there is no any reasonable cause for acceptance of cash of Rs. 1.74 Crs by the assessee company from one of its Directors and considered that it is a fit case for levy of penalty U/s. 271D of the Act and therefore levied a penalty of Rs. 1.74 Crs U/s. 271D of the Act. Aggrieved by the order of the Ld. 4 AO, the assessee filed an appeal before the Ld. CIT(A), Visakhapatnam. The Ld. CIT(A) considered that the sources for the deposits have been proved in the case of Sri Arunachalam Manickavel and thereby relying on the decision of the Hon’ble ITAT, Visakhapatnam in the case of Dharmana Products (P) Ltd vs. ACIT, Circle-4(1), Visakhapatnam allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us and raised the following grounds of appeal: “1. The ord er of the Ld. CIT (A) is erron eou s in l aw and th e f acts and ci rcu mstan ces of th e c ase. 2. The Ld.CIT (A) erred in l aw and f ac ts in deleting the pen al ty l evied U/ s. 271 D of Rs. 1,74,00,000/-. 3. The Ld. CIT (A) has erred in ignorin g th e judicial pronouncemen t of Hon’ble Supreme C ourt in th e c ase of M/s. Vasan Heal thcare Vs. Addl. CIT reported in [2011 ] 125 taxmann.com 266 (SC). 4. The Ld. CIT (A) has erred in l aw and f ac ts in deleting th e pen al ty even wh en th e assessee comp an y cou ld not establ ish any bon a f ide reason as to wh y th e assessee c ould not g et a l oan or dep osit by A/c P ayee Cheque or A/c P ayee Demand Draf t. 5. The Ld. CIT (A) has erred in not c onsid ering the con ten tion of th e AO th at th e assessee has not p roved an y exigency to forego the rou te of tran sac ting through bank ing ch annel. 6. The L d. CIT (A) has erred in rel ying on the sub mission s of th e assessee th at u nder th e C omp an ies (Accep tance and Dep osits) Rules, 1975, Rule 2(b)(ix), tran saction between th e Director an d comp any are not l oan or dep osit bu t only in th e n ature of curren t accoun t ignoring th e judicial pron ouncemen ts given by th e Hon’ble Delhi High Court in th e case of Commission er of Income T ax vs. S amora Hotel s (P) L td reported in [2012 ] 19 taxmann.c om 285 (Delh i) an d the Hon’ble Madras High Court in th e case of Vasan Heal thcare (P ) 5 Ltd vs. Addl Commi ssion er of Income T ax, Range-2, rep orted in [2019] 103 taxman n.com 26 (Mad.). 7. The L d. CIT (A) erred in concl uding th at wh en genuinen ess of tran saction s is p roved to be c orrect, no pen al p roceed ings g et attrac ted, even though no bon a f ide reason exists. 8. Any oth er grou nd th at may be urged at th e time of hearing.” 3. Further, we also find that the assessee has filed the Cross Objection by raising the following grounds: “1. The L d. CIT (A) is ju stif ied in f inding th at th e f acts as con tain ed in Hon’ble Su preme Court in the c ase of M/ s. Vasan Heal thc are Pvt L td., are distingu ish abl e with the f acts of th e presen t case, sinc e th e D irec tor of th e c omp an y do n ot h ave sourc e to give cash l oan and furth er ob tain ed cash loan f rom fin anciers who al so do not h ave any sourc es. 2. The Ld. CIT (A) is ju stif i ed in holding that wh en the genuinen ess of the tran saction, creditworth in ess of th e D irec tor and c omp an y are n ot doub ted and hel d to be genu ine, no pen al proc eed ing s are attrac ted an d hen ce p en al ty l evied U/ s. 271D is unreason abl e an d th eref ore the establ ish men t of an y b onaf ide reason does not warran t. 3. The Ld. CIT (A) is ju stified in holdin g that as p er th e Comp an ies ( Accep tance and Deposi ts) Rules, 1975, under Rule 2(b)(ix), dep osi t d oes n ot include an y amoun t rec eived f rom a Direc tor or Sharehold er of a Private L imited C omp an y and therefore, th e tran sac tion between th e Direc tor and the comp an y is not in th e n atu re of a l oan or d eposi t. Hence viol ation of provision s of section 269SS does not attrac t. 4. The Ld. CIT (A) is ju stif ied in f ollo win g th e Hon’ble Madras High Court in th e case of CIT vs. Id ayan Publication s L imited sinc e th e f ac ts and issu e invol ved in the case of Del hi High Court in CIT vs. S amora Hotel s Pvt L td is on “bon afide b el ief ” but not on th e viol ation of provision s of section 269SS and hence distin gu ish abl e. 5. The Ld. CIT (A) is ju stif i ed in holding that wh en the pen al provision s itself are not attracted, the oth er technical issu es l ik e bon afide reason s etc., are n ot rel evan t. 6 6. On the f ac ts and circu mstanc es of th e c ase, the pen al ty order passed U/ s. 271D is inval id in l aw as th ere is n o sati sf ac tion wri tten in th e Assessmen t Ord er. 7. Any oth er ground of cross ob jection s th at may be raised at th e time of hearing.” 4. At the outset, the Ld. AR pleaded that Ground No.6 of the Cross Objection shall be taken up first as this being a legal issue and depending upon the adjudication and outcome of the same, the other grounds may be considered on merits. Accordingly, first we take up the Ground No.6 of the Cross Objection raised by the assessee being a legal issue wherein the assessee contested that the penalty order passed U/s. 271D is invalid since there is no satisfaction written in the assessment order. 5. Before us, the Ld. AR submitted that the Ld. AO in his order U/s. 143(3) of the Act has proposed to levy the penalty U/s. 271AAB and 271AAC of the Act. The Ld. AR further vehemently argued that since the quantum appeal before the Ld. CIT(A) as well as before the Hon’ble ITAT has been held in favour of the assessee, penalty U/s. 271D cannot be levied. The Ld. AR relied on the decision of the Visakhapatnam Bench in the case of ACIT vs. Kanchumarthi Venkata Sita Ramachandra Rao in ITA Nos. 245 & 246/Viz/2020 (AY 2016- 17), dated 30/08/2022. The Ld. AR also relied on the decision 7 of the Hon’ble High Court of Telangana in the case of Srinivasa Reddy Reddeppagari vs. JCIT, Central Circle, Range-2, Hyderabad in W.P No. 44285 of 2022. Further, the Ld. AR also placed reliance on the judgment of the Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills Ambala City reported in [2015] 64 taxmann.com 75 (SC). Per contra, the Ld. DR submitted that the penalty proceedings U/s. 271D and the quantum proceedings are mutually exclusive and as per section 271D of the Act the Joint Commissioner of Income Tax cam impose penalty in the case if there is any contravention of the provisions of section 269SS of the Act. The Ld. DR placed heavy reliance on the case of M/s. Vasan Healthcare (P) Ltd vs. Addl. CIT reported in [2019] 103 taxmann.com 26 [Mad.]. 6. We have heard the rival contentions and perused the material available on record. Admittedly, in the quantum proceedings both in the case of the assessee company and in the case of Sri Arunachalam Manickavel, the Hon’ble Tribunal has held in favour of the assessee. Further, the reliance placed by the Ld. AR on the judgment of the Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills Ambala City (supra), wherein the Hon’ble Supreme Court has held that the 8 Ld. AO has to record his satisfaction for the purpose of initiating penalty proceedings under the Act. The Hon’ble Supreme Court has held as follows: “As pointed out above, insof ar as, f resh assessment order is concerned, there was no satisf action recorded regarding penalty proceeding under section 271E of the Act, though in that order the Assessing Off icer wanted penalty proceeding to be initiated under sec tion 271(1)(c) of the Act. Thus, insofar as penalty under sec tion 271E is concerned, it was without any satisfaction and theref ore no such penalty could be levied.” 7. Further, this Bench of the Tribunal in the case of ACIT vs. Kanchumarthi Venkata Sita Ramachandra Rao (supra) has followed the decision of the Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills Ambala City (supra) and has held that when there is no satisfaction report recorded by the Ld. AO in the assessment record, no penalty could be levied. The decision of the Hon’ble Supreme Court in the case of M/s. Vasan Healthcare (P) Ltd vs. Addl. CIT (supra) relied on by the Ld. DR is distinguishable on the fact that in that case the creditworthiness and genuineness of the source of the funds could not be proved by the assessee. Further, in the instant case, the Hon’ble jurisdictional Bench of the Tribunal has deleted the additions both under the protective basis and the substantive basis as the creditworthiness and genuineness of the source of the funds were proved beyond doubt. 9 Considering these facts and circumstances of the case as stated above and following the principles of consistency as well as following the judicial pronouncements as discussed above, we are of the considered view that the penalty order U/s. 271D passed by the Ld. AO without recording proper satisfaction, deserves to be quashed and hence there is no infirmity in the order of the Ld. CIT(A) and therefore no interference is required. It is ordered accordingly. 8. Since the legal issue raised by the assessee is allowed in favour of the assessee, the other grounds of cross objections raised by the assessee its CO which are supportive in nature need no separate adjudication. 9. Similarly, considering the outcome of the legal issue raised by the assessee which is allowed in favour of the assessee in the foregoing paragraphs of this order, the adjudication of the grounds raised by the Revenue in its appeal ITA No.249/Viz/2022 becomes merely an academic exercise and hence dismissed. 10. In the result, appeal of the Revenue is dismissed and the Cross Objection of the assessee is allowed as indicated herein above. 10 Pronounced in the open Court on 31 st October, 2023. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated : 31.10.2023 OKK - SPS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – M/s. Bharathi Consumer Care Products Private Limited, Sy. No. 280, 281, Peddaparimi Village, Nidumukkala Post, Guntur – 522016, Andhra Pradesh. 2. राजèव/The Revenue – Deputy Commissioner of Income Tax, Central Circle-1, 3 rd Floor, Rajkamal Complex, Lakshmipuram Main Road, Guntur – 522007, Andhra Pradesh. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam
AI Insights
The case revolves around a penalty imposed under Section 271D of the Income Tax Act, 1961, for alleged violations of Section 269SS concerning the acceptance of cash deposits during the demonetization period. The assessee, M/s. Bharathi Consumer Care Products Private Limited, was accused of accepting unexplained cash credits amounting to Rs. 1.74 Crores from one of its directors, Sri Arunachalam Manickavel. The Assessing Officer (AO) initially brought these deposits to tax as unexplained cash credits under Section 68 and later proposed a penalty under Section 271D for not adhering to the procedural requirements of accepting loans or deposits through banking channels. The CIT(A) deleted the penalty, which was contested by the Revenue before the ITAT. The ITAT upheld the CIT(A)'s decision, leading to the dismissal of the Revenue's appeal and the allowance of the assessee's Cross Objection.
