ACIT, Madurai V. Solamalai Automobiles Pvt. Ltd., Madurai

ITA 2751/CHNY/2014

• Counselvise Citation: 275121714 RSA 2014
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 19-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2014
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: V SUBBARAYAN IT P
• Keywords: Reasonable cause
• Section: 273B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2751/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE I(1) MADURAI VS. M/S SOLAMALAI AUTOMOBILES PVT. LTD 28/5, MELUR ROAD UTHANGUDI MADURAI [PAN AABCS 9923 N ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI A.B. KOLI, JCIT /RESPONDENT BY : SHRI V.SUBBARAYAN, ITP / DATE OF HEARING : 19 - 08 - 2015 ! / DATE OF PRONOUNCEMENT : 04 - 0 9 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, MADURA I, DATED 28.8.2014 , DELETING THE PENALTY LEVIED BY THE ASSE SSING OFFICER U/S 271E OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMEN T YEAR 2010-11. 2. SHRI A.B KOLI, LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THE ASSESSEE REPAID THE LOAN RECEIVED FROM M/ S SOLAMALAI ITA NO.2751/14 :- 2 -: ENTERPRISES, A SISTER CONCERN OF THE ASSESSEE-COMPA NY, IN CASH EXCEEDING ` 20,000/-. THE ASSESSEE HAS ALSO REPAID LOAN IN CA SH TO M/S SUPERIOR INVESTMENTS, M/S VISHVA FINANCE AND M/ S SUPER INVESTMENTS. IN THE ABSENCE OF ANY PROPER EXPLANAT ION FROM THE ASSESSEE, THE ASSESSING OFFICER LEVIED PENALTY U/S 271E OF THE ACT FOR REPAYMENT OF THE LOANS IN CASH EXCEEDING ` 20,000/-. REFERRING TO SEC. 271E OF THE ACT, THE LD. DR POINTED OUT THAT REPAYM ENT OF LOANS EXCEEDING ` 20,000/- HAS TO BE MADE EITHER BY ACCOUNT PAYEE C HEQUE OR ACCOUNT PAYEE DEMAND DRAFT. THE ASSESSEE COULD NOT EXPLAIN ANY REASONABLE CAUSE FOR MAKING THE PAYMENT EXCEEDING ` 20,000/- IN CASH, THEREFORE, THE ASSESSING OFFICER LEVIED PENAL TY U/S 271E OF THE ACT. HOWEVER, THE CIT(A) FOUND THAT THE PAYMENT WA S MADE TO M/S SOLAMALAI ENTERPRISES, WHICH IS A SISTER CONCERN OF THE ASSESSEE. THE ASSESSEE WAS HAVING A RUNNING CURRENT ACCOUNT WITH M/S SOLAMALAI ENTERPRISES, ACCORDINGLY, HE DELETED THE PENALTY LE VIED BY THE ASSESSING OFFICER. REFERRING TO THE PENALTY ORDER, THE LD. DR POINTED OUT THAT REPAYMENT OF LOAN IN CASH IN ONE OR TWO OC CASIONS MAY BE ACCEPTABLE TO THE DEPARTMENT. HOWEVER, MORE THAN TW O TIMES, THERE CANNOT BE ANY REASONABLE CAUSE FOR MAKING THE REPAY MENT OF LOAN IN CASH. REFERRING TO THE PENALTY ORDER AT PAGE NO.2, THE LD. DR POINTED OUT THAT THE ASSESSEE HAS PAID ` 60,00,000/- ON VARIOUS OCCASIONS IN ITA NO.2751/14 :- 3 -: CASH, THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN DEL ETING THE PENALTY LEVIED BY THE ASSESSING OFFICER. 3. ON THE CONTRARY, SHRI V.SUBBARAYAN, LD. REPRESENTAT IVE FOR THE ASSESSEE SUBMITTED THAT M/S SOLAMALAI ENTERPRI SES IS A SISTER CONCERN OF THE ASSESSEE. WHEN THERE IS A TRANSACT ION BETWEEN THE RELATED CONCERN, ACCORDING TO THE LD. REPRESENTATIV E, THE PROVISIONS OF SECTION 271E ARE NOT APPLICABLE. EVEN OTHERWISE, T HE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE WAS MAI NTAINING A RUNNING CURRENT ACCOUNT WITH THE SISTER CONCERN, TH E ASSESSEE WHENEVER NECESSARY, USED TO DRAW FUNDS AND ALSO MAK E PAYMENTS. PENALTY CAN BE LEVIED U/S 271E IN CASE THE LOAN OR DEPOSIT WAS REPAID BY THE ASSESSEE. WHEN THE ASSESSEE WAS MAINTAINI NG A RUNNING CURRENT ACCOUNT WITH THE SISTER CONCERN, THE PAYMEN T CANNOT BE TREATED AS REPAYMENT OF LOAN OR DEPOSIT. THEREFORE , THE CIT(A) HAS RIGHTLY DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER. REFERRING TO THE ORDER OF THE CIT(A), THE LD. REPRESENTATIVE SUBMITTED THAT THE SISTER CONCERN OF THE ASSESSEE, M/S SOLAMALAI ENTE RPRISES, WAS IN URGENT NEED OF MONEY TO REMIT CASH IN THE LOAN ACCO UNT WITH UCO BANK, MADURAI MAIN BRANCH. ACCORDING TO THE LD. RE PRESENTATIVE, THE SISTER CONCERN HAS TO NECESSARILY DEPOSIT THE FUNDS IN CASH SINCE THE BILLS RAISED BY THE SUPPLIERS WERE COMING FOR CLEAR ANCE BEFORE THE BANK. THEREFORE, IN ORDER TO CLEAR THE CHEQUES ISS UED BY M/S ITA NO.2751/14 :- 4 -: SOLAMALAI ENTERPRISES, THE MONEY HAS TO BE DEPOSITE D IN CASH DIRECTLY IN THE ACCOUNT OF M/S SOLAMALAI ENTERPRISES. THERE FORE, THERE WAS A BUSINESS NECESSITY FOR MAKING PAYMENT TO SISTER CON CERN IN CASH. REFERRING TO PAYMENT MADE TO FINANCE COMPANIES, NAM ELY, M/S SUPERIOR INVESTMENTS, M/S VISHVA FINANCE AND M/S SU PER INVESTMENTS, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE , IN FACT, ISSUED CHEQUES FOR REPAYMENT OF THE LOANS BORROWED FROM TH E RESPECTIVE COMPANIES AND FOR WANT OF FUNDS, THE CHEQUES WERE R ETURNED BY THE BANKERS WITHOUT ANY PAYMENT, THEREFORE, THE FINANCE COMPANIES INSISTED FOR CASH PAYMENTS. IN ORDER TO AVOID CR IMINAL PROSECUTION U/S 138 OF THE NEGOTIABLE INSTRUMENTS ACT, THE ASS ESSEE REPAID THE LOAN IN CASH FOR THE CHEQUES RETURNED BY THE BANKER S FOR WANT OF SUFFICIENT FUNDS. THEREFORE, THE CIT(A) HAS RIGHTL Y DELETED THE PENALTY LEVIED IN RESPECT OF THE PAYMENTS MADE TO FINANCE C OMPANIES ALSO. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE ASSESSEE HAS PAID ` 60,00,000/- ON TWELVE OCCASIONS TO M/S SOLAMALAI ENTERPRISES @ ` 5,00,000/-. IT IS ALSO NOT IN DISPUTE THAT THE A BOVE PAYMENT WAS MADE IN CASH TO M/S SOLAMALAI ENTERPRIS ES. THE REVENUE HAS NOT DISPUTED THE FACT THAT M/S SOLAMALA I ENTERPRISES IS A SISTER CONCERN OF THE ASSESSEE. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SEC. 271E OF THE ACT. PENALTY U/S 2 71E CAN BE LEVIED IN ITA NO.2751/14 :- 5 -: CASE THE ASSESSEE REPAYS ANY LOAN OR DEPOSIT OTHER WISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DEMAND DRA FT. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE AM OUNT RETURNED BY THE ASSESSEE BY WAY OF CASH EXCEEDING ` 20,000/- IS A LOAN OR DEPOSIT? THE FACT THAT THE ASSESSEE IS MAINTAININ G A RUNNING CURRENT ACCOUNT WITH ITS SISTER CONCERN, M/S SOLAMALAI ENTE RPRISES, IS NOT IN DISPUTE. THE ASSESSEE USED TO DRAW FUNDS FROM THE SISTER CONCERN AND ALSO USED TO MAKE PAYMENTS. WHEN THE ASSESSE E DRAWS FUNDS AND MAKES THE PAYMENT TO THE RUNNING CURRENT ACCOUN T, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SUCH TRANSACTION CANNOT BE CONSTRUED AS LOAN OR DEPOSIT. WHEN THE ASSESSEE MAKES PAYM ENT TOWARDS RUNNING CURRENT ACCOUNT MAINTAINED WITH ITS SISTER CONCERN, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PROV ISIONS OF SECTION 271E COULD NOT BE ATTRACTED. SEC. 271E WOULD BE AT TRACTED ONLY FOR REPAYMENT OF LOAN OR ADVANCE IN CASH. IN THIS CASE , WHAT WAS REPAID BY THE ASSESSEE IS NEITHER A LOAN NOR A DEPOSIT, T HEREFORE, THE PROVISION OF SECTION 271E IS NOT AT ALL APPLICABLE. HENCE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS RI GHTLY DELETED THE PENALTY OF ` 60 LAKHS. 5. NOW COMING TO PENALTY OF ` 3 LAKHS LEVIED BY THE ASSESSING OFFICER, THE ASSESSEE HAS ISSUED CHEQUES TO THE FI NANCE COMPANIES FOR REPAYMENT OF LOAN. THE CHEQUES WERE BOUNCED. IN OTHER WORDS, THE ITA NO.2751/14 :- 6 -: CHEQUES WERE RETURNED BY THE BANKERS WITHOUT PAYMEN T FOR WANT OF SUFFICIENT FUNDS, THEREFORE, THE FINANCE COMPANIES INSISTED FOR CASH PAYMENTS. NATURALLY, THE ASSESSEE HAS TO COMPLY W ITH THE REQUEST OF THE FINANCE COMPANIES IN ORDER TO AVOID CRIMINAL P ROSECUTION U/S 138 OF THE NEGOTIABLE INSTRUMENTS ACT. THEREFORE, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WAS A REASONABLE CAUS E FOR REPAYMENT OF ` 3 LAKHS TO THE FINANCE COMPANIES AS PROVIDED U/S 273B OF THE ACT. 6. THE REVENUE HAS TAKEN ONE MORE GROUND WITH REGARD T O VIOLATION OF RULE 46A OF THE INCOME-TAX RULES AS GR OUND NO.2.3. WHAT WAS PRODUCED BEFORE THE CIT(A) AS ADDITIONAL EVIDEN CE IS COPY OF THE CHEQUES RETURNED BY THE BANKERS. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS POWERS CO-TERMINUS WITH THAT OF THE ASSESSING OFFICER, THEREFORE, WHEN A MATERIAL WAS FILED, THE CIT(A) CAN VERY WELL ENTERTAIN THE SAME AND IF IT IS FOUND GEN UINE, HE CAN ALWAYS ACT UPON THE ADDITIONAL MATERIAL FILED BEFORE HIM. THE COPY OF THE CHEQUES RETURNED BY THE BANKERS WERE FILED BEFORE T HE CIT(A). THE FACT THAT THE BANKERS RETURNED THE CHEQUES FOR WANT OF SUFFICIENT FUNDS IS NOT IN DISPUTE. IN THOSE CIRCUMSTANCES, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO VIOLATION OF RU LE 46A OF THE INCOME- TAX RULES. THEREFORE, THIS TRIBUNAL DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER IS CONFIRME D. ITA NO.2751/14 :- 7 -: 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH OF SEPTEMBER, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 4 TH SEPTEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF