ITO, WARD-7(2), Nagpur V. M/S PLASTOMATIC INDUSTRIES, Nagpur

ITA 268/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1716 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: S C THAKAR; C J THAKAR
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B; 2

Judgement Text

1 ITA NO. 268/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 268/NAG/2013 ASSESSMENT YEAR : 2007 - 08. THE INCOME - TAX OFFICER, M/S PLASTOMATIC INDUSTRIES, WARD - 7(2), NAGPUR. V/S. S - 12, MIDC, HINGNA, NAGPUR. PAN AABFP8190R. APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE.. RES PONDENT BY : SHRI C.J. THAKAR & SHRI S.C.THAKAR. DATE OF HEARING : 30 - 07 - 2015 DATE OF PRONOUNCEMENT : 21 ST AUGUST, 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. . THIS IS AN APPEAL FILED BY THE REVENUE EMANATING FROM THE ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 22 - 03 - 2013. 2. THE REVENUE HAS CHALLENGED THE DELETION OF PENALTY BY LEARNED CIT(APPEALS) IMPOSED UNDER SECTION 271E OF THE I.T. ACT AT ` .15,48,982/ - . 3. FACTS IN BRIEF AS EMERGED FROM THE PENALTY ORDER PASSED UNDER SECTION 2 71E DATED 21 - 03 - 2011 WERE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF PLASTIC BAGS. ONE OF THE BROTHER OF THE PARTNER, NAMELY, SHRI ANAND WHO IS IN THE BUSINESS OF BOX STREPPING WAS TRANSFERRING 2 ITA NO. 268/NAG/2013 TEMPORARILY MO NEY IN THE ACCOUNT OF THE FIRM. LIKEWISE THERE WAS A TRANSACTION THAT TOO BY CHEQUE BY THE ASSESSEE FIRM WITH SHRI ANAND, BROTHER OF SHRI NANDLAL, PARTNER. THE UNDISPUTED FACT WAS THAT THE AMOUNTS WERE TAKEN BY THE ASSESSEE FIRM FROM SHRI ANAND BY ACCOUNT PAYEE CHEQUES ONLY. THE OBJECTION OF THE REVENUE WAS THAT AT THE T IME OF RETURN OF THE SAID AMOUNT FEW OF THEM WERE RETURNED BY CASH. IN THE PENALTY ORDER THE DATES AND THE AMOUNTS REPAID IN CASH HAVE BEEN MENTIONED. DURING THE YEAR THE FIRM HAD TAKEN M ONEY FROM SHRI ANAND TOTALING ` .39,90,300/ - . THERE WAS NO DISPUTE ABOUT THE SOURCE OR THE GENUINENESS OF THE TRANSACTION. THE ONLY OBJECTION WAS THAT THE ASSESSEE FIRM HAD REPAID A SUM OF ` .15,48,982/ - IN CASH, HOWEVER, THERE WAS NO DISPUTE IN RESPECT OF REST OF THE AMOUNT WHICH WAS PAID THROUGH CHEQUE. ACCORDING TO THE ASSESSING OFFICER THE ASSESS E E HAS NOT FURNISHED ANY COGENT REASON FOR REPAYMENT OF DEPOSIT IN CASH. HENCE BY INVOKING THE PROVISIONS OF SECTION 271E , A PENALTY OF ` .15,48,982/ - WAS IMPOSED. BEING AGGRIEVED , THE LEVY OF PENALTY WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY. 4. LEARNED CIT(APPEALS) HAS DISCUSSED FEW CASE LAWS, NAMELY, M/S BALAJI TRADERS (2006) (12) TMI 126 (MADRAS HIGH COURT), WHEREIN THERE WAS A DISCUSSION OF TWO MORE CASES, NAMELY, CIT V/S. KUNDRATHUR FINANCE AND CHIT CO. 283 ITR 329 (MAD.) AND THE DECISION OF KUM. A.B. SHANTHI 255 ITR 258 (SC). LEARNED CIT(APPEALS) HAS ALSO REFERRED AN ANOTHER CASE, NAMELY CIT V/S. SAINI MEDICAL STORES 277 ITR 420. FINALLY I T WAS HELD AS UNDER : 5.1 THE FACTS OF THE CASE UNDER CONSIDERATION ARE SIMILAR TO THE ABOVE JUDGMENT. PENALTY IS NOT TO BE ORDINARILY IMPOSED UNLESS THE PARTY EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW AND WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISH ONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATIONS. THERE IS NO DOUBT ABOUT THE GENUINENESS OF THE TRANSACTION WHICH HAVE BEEN FULLY ACCEPTED IN THE ASSESSMENT MADE FOR THE YEAR UNDER CONSIDERATION. EVEN IF, THERE IS ANY IGNORANCE, WHICH RESULTED IN THE 3 ITA NO. 268/NAG/2013 INFRACTION OF LAW, THE DEFAULT IS TECHNICAL OR VENIAL WHICH DID NOT PREJUDICE THE INTEREST OF THE REVENUE AS NO TAX AVOIDANCE OR TAX EVASION WAS INVOLVED. THUS THE BONA FIDE BELIEF, COUPLED WITH THE GENUINENESS OF THE TRANSACTIONS WOULD CONSTIT UTE A REASONABLE CAUSE UNDER SECTION 271B FOR NOT INVOKING THE PROVISIONS OF SECTION 271E OF THE ACT. IN VIEW OF THE SAME THE PENALTY IS CANCELLED. 5. FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. NARENDRA KANE APPEARED AND STRONGLY SUPPORTED THE ACTI ON OF THE ASSESSING OFFICER. HE HAS PLACED RELIANCE ON AN ORDER OF CHAUBEY OVERSEAS CORPORATION V/S. CIT 170 TAXMAN 9 (ALLAHABAD) FOR THE LEGAL PROPOSITION THAT QUOTE THE APPLICABILITY OF SECTION 269T IS NOT DEPENDENT ON FACTS AS TO WHETHER THE TRANSACTI ON IS A GENUINE ONE OR OF A DOUBTFUL CHARACTER. EVEN THE GENUINE DEPOSITS ARE ALSO COVERED UNDER SECTION 269T. THE SOURCE OF THE DEPOSIT, CAPACITY OF THE DEPOSITORS, ETC. ARE WHOLLY IRRELEVANT SO FAR AS THE APPLICABILITY OF SECTION 269T IS CONCERNED. NO EV IDENCE COULD BE REFERRED TO OR POINTED OUT WHICH HAD BEEN OMITTED TO BE CONSIDERED BY THE TRIBUNAL IN HOLDING THAT THE SAID DEPOSIT WAS NOT A TRADE ADVANCE. THE FINDING OF THE TRIBUNAL, HOLDING THAT THE DEPOSIT IN QUESTION WAS NOT A TRADE DEPOSIT, WAS BAS ICALLY A FINDING OF FACT AND WAS RIGHTLY ARRIVED AT BY IT. UNQUOTE. LEARNED D.R. HAS ALSO PLACED RELIANCE ON AN ANOTHER ORDER OF ITAT, DELHI BENCH PRONOUNCED IN THE CASE OF AJAY GOEL V/S. ACIT 126 ITD 89 (DEL.) FOR THE LEGAL PROPOSITION THAT WHEN THE AS SESSEE HAD NOT PRODUCED ANY IOTA OF EVIDENCE ABOUT FINANCIAL DIFFICULTY THEN THERE WAS NO COMPULSION TO MAKE THE PAYMENT IN CASH. SINCE THERE WAS NO SUFFICIENT AND REASONABLE CAUSE FOR MAKING THE PAYMENT IN CASH, THEREFORE, THE INVOCATION OF PROVISIONS OF SECTION 269 T WAS UPHELD. LEARNED D.R. HAS, THEREFORE, ARGUED THAT THE LEVY OF PENALTY SHOULD BE CONFIRMED. 6 . ON THE OTHER HAND, FROM THE SIDE OF THE RESPONDENT - ASSESSEE LEARNED A.R. MR. C.J. THAKAR APPEARED AND PLACED RELIANCE ON THE FOLLOWING DECISIONS : 4 ITA NO. 268/NAG/2013 I) CIT V/S. M/S BALAJI TRADERS (MADRAS) (2008) 303 ITR 312. II) CIT V/S. SAINI MEDICAL STORE (P&H) (2005 ) 277 ITR 420. III) CIT V/S. EATACHI AGENCIES (BOM.) (2001) 248 ITR 525. IV) CIT V/S. RATNA AGENCIES (MADRAS) (2006) 284 ITR 609. 7. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT PRIMA FACIE THIS IS NOT A FIT CASE TO IMPOSE THE PENALTY FOR ALLEGED DEFAULT UNDER SECTION 271E OF THE I.T. ACT. THE UNDISPUTED FACT WAS THAT THE ASSESSEE FIRM WAS HAVING TRANSACTIONS REGULARLY WITH ONE OF THE CLOSE RELATIVE OF THE PARTNER. HENCE IT WAS NOT IN DISPUTE THAT THE BROTHER OF THE PARTNER WAS TRANSFERRING THE MONEY FROM HIS INDEPENDENT BUSINESS ACCOUNTS. IT IS ALSO NOT IN DISPUTE THAT AT THE TIME WHEN THE LOAN WAS TAKEN BY THE ASSESSEE FIRM, THE SAME WAS THROUGH CHEQUE. IT WAS ONLY AT THE TIME OF REPAYMENT THAT SOME OF THE AMOUNTS WERE REPAID IN CASH. THE EXPLANATION OF THE ASSESSEE WAS THAT THERE WAS A BONAFIDE BELIEF THAT WHEN THE LOANS WERE TAKEN THROUGH CHEQUE THEN THE MAIN PROVISIONS OF I.T. ACT WERE PROPERLY FOLLOWED. IT WAS EXPLAINED THAT THE ASSESSEE FIRM WAS UNDER BONAFIDE BELIEF THAT THE LOANS WERE REQUIRED TO BE ACCEPTED ONLY THROUGH ACCOUNT PAYEE CHEQUES. BECAUSE OF THIS REASON THE ASSESSEE HAS PLACED RELIANCE ON THE PROVISIONS OF SECTION 273B OF I.T. ACT WHICH PRESCRIBES THAT NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF SECTION 271E OF I.T. ACT, NO PENALTY SHOULD BE IMPOSED IF THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. THERE WAS ONE MORE REASON FOR PLACING RELIANCE ON THE PROVISIONS OF SECTION 273B OF I.T. ACT BECAUSE THE ASSESSEE WAS UNDE R BONAFIDE BELIEF THAT SINCE THE TRANSACTION WAS WITHIN THE FAMILY MEMBERS AND THE SOURCE OF DEPOSIT WAS FULLY EXPLAINABLE THEN ALSO NO PENALTY UNDER SECTION 271E SHOULD BE IMPOSED. UNDISPUTEDLY THE TRANSACTION WAS WITHIN CLOSE FAMILY MEMBERS. 5 ITA NO. 268/NAG/2013 8. IN THE CA SE OF CIT V/S. SAINI MEDICAL STORES 277 ITR 420 (P&H) IT WAS HELD THAT THE PROVISIONS OF SECTION 271E ARE REQUIRED TO BE READ ALONG WITH THE PROVISIONS OF SECTION 273B OF I.T. ACT. A COMBINED READING OF BOTH THE SECTIONS MADE IT CLEAR THAT IF THE ASSESSEE HAS DEMONSTRATED A REASONABLE CAUSE THE PENALTY FOR ITS VIOLATION SHALL NOT BE IMPOSABLE ON THE ASSESSEE. AN ANOTHER LEGAL PROPOSITION HAS BEEN LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V/S. BALAJI TRADERS 303 ITR 312 (MAD) THAT IF TH ERE IS A BUSINESS EXIGENCY FORCING THE ASSESSEE TO HAVE CASH TRANSACTION AND THE GENUINENESS OF THE TRANSACTION WAS NOT DOUBTED THEN THERE WAS NO LOSS TO THE REVENUE DEPARTMENT AND SUCH BUSINESS EXIGENCY WAS A REASONABLE CAUSE FOR THE CASH TRANSACTION. THE REFORE, THE PENALTY WAS NOT CONFIRMED. 9. WE HAVE ALSO PERUSED THE DECISION CITED BY LEARNED D.R. IN THE CASE OF AJAY GOEL (SUPRA) THE TRANSACTION OR THE REPAYMENT OF LOAN IN CASH WAS NOT WITHIN THE CLOSE FAMILY MEMBERS. OTHERWISE ALSO IN THAT CASE THE AS SESSEE HAS NOT PLEADED THAT THERE WAS A REASONABLE CAUSE OR A BONAFIDE REASON. HENCE THE IMPOSITION OF PENALTY WAS TO BE TREATED AS COVERED UNDER THE EXCEPTIONS PRESCRIBES UNDER SECTION 273B OF THE I.T. ACT. WE HAVE ALSO PERUSED THE DECISION OF M/S CHAUBEY OVERSEAS CORPORATION (SUPRA) CITED BY LEARNED A.R. AND NOTED THAT THE TRANSACTION WAS NOT WITHIN THE CLOSE FAMILY RELATIVES AND THAT THE ASSESSEE WAS NOT IN A POSITION TO DEMONSTRATE THAT THERE WAS A REASONABLE CAUSE FOR SUCH TRANSACTION IN CASH. THE ONLY ARGUMENT BEFORE THE HONBLE COURT WAS THAT IN A SITUATION WHEN THE TRANSACTION WAS GENUINE AND THERE WAS NO DOUBT ABOUT THE DEPOSITORS THEN THERE WAS NO OCCASION TO APPLY THE PROVISIONS OF SECTION 269T OF I.T. ACT AND ON THAT ISSUE THE HONBLE COURT HAS O PINED THAT WHEN IT WAS NOT A TRADE DEPOSIT AND THERE WAS NO BONAFIDE REASON THEN MERELY ON THE GROUND THAT THE TRANSACTION WAS GENUINE, THE PENALTY COULD NOT BE DELETED. ON THE OTHER HAND, THE FACTS OF THE APPEAL 6 ITA NO. 268/NAG/2013 NOW BEFORE US ARE DIFFERENT, HENCE THESE TW O DECISIONS CANNOT BE APPLIED ON THE APPEAL IN HAND. WE ARE OF THE CONSIDERED OPINION THAT LEARNED CIT(APPEALS) HAS CORRECTLY APPLIED THE PROVISIONS OF LAW AND RIGHTLY FOLLOWED FEW PRECEDENTS AS CITED IN THE APPELLATE ORDER, HEN C E THE VIEW TAKEN BY HIM IS HEREBY CONFIRMED. THE GROUND RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF AUGUST, 2015. SD/ - SD/ - ( SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 21 ST AUGUST, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR