The DCIT, Circle-2, Surat V. Shri Manukant C.Shah,HUF, Surat

ITA 2884/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0159 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-08-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-07-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K PATEL
• Assessee Lawyers: K M MAHESH
• Keywords: Recovery proceedings; Bonafide belief; Reasonable cause; Wrong claim; Assessment record
• Section: 273B; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BLE S HRI N.S. SAINI, A.M.) I.T.A. NO. 2884/AHD./2007 ASSESSMENT YEAR : 2005-2006 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- SHRI MANUKANT C. SHAH, HUF, CIRCLE-2, SURAT SURAT (PAN : AACH M 8178 B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.K. PATEL RESPONDENT BY : SHRI K.M. MAHESH, SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 30.04.2007 IN APPEAL NO. CAS/II/214/06-07 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT CANCELLING THE PENALTY OF RS.20,60,000/- LEVIED BY THE JOINT COMMI SSIONER OF INCOME TAX, RANGE-2, SURAT UNDER SECTION 271D OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE-H UF IS ENGAGED IN THE BUSINESS OF DISCOUNTING OF DRAFTS/ CHEQUES, I.E. COMMISSION AGE NT. A SURVEY ACTION UNDER SECTION 133A WAS CONDUCTED BY THE DEPARTMENT ON 25.01.2006. IN THE S AID SURVEY, IT WAS NOTICED THAT THE ASSESSEE HAD ALLEGEDLY TAKEN CASH LOANS/ DEPOSITS IN EXCESS OF RS.20,000/-FROM 18 DIFFERENT PERSONS. SINCE THE ACCEPTANCE OF SUCH DEPOSITS APPARENTLY VIOLATED THE PROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT, THE JCIT, RANGE-2, ISSUED A SHOW-CA USE NOTICE DATED 23.02.2006 ASKING THE ASSESSEE TO EXPLAIN WHY PENALTY UNDER SECTION 271D SHOULD NOT BE LEVIED. IN REPLY TO THE AFORESAID SHOW-CAUSE NOTICE, HE SUBMITTED THAT IT W AS ENGAGED IN THE BUSINESS OF BILL DISCOUNTING AND THE AMOUNTS ALLEGED TO BE DEPOSITS WERE IN FACT CASH PAYMENTS RECEIVED FROM DIFFERENT PARTIES AFTER THE CHEQUES ISSUED BY THEM WERE RETURNED BY T HE BANK. THUS THERE WAS NO VIOLATION OF PROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT, 1961. CITING A SPECIFIC EXAMPLE (PAGES 3-4 OF THE PENALTY ORDER), THE ASSESSEE EXPLAINED THAT AS A BILL DISCOUNTER OR A SHROFF, THE ASSESSEE GAVE CASH AGAINST CHEQUES RECEIVED FROM DIFFERENT P ARTIES. THE CHEQUES WERE SUBSEQUENTLY ENCASHED FROM THE BANK. HOWEVER, THERE WERE CASES W HEN THE CHEQUES BOUNCED, I.E. WERE 2 ITA NO. 2884/AHD/2007 RETURNED BY THE BANK. IN SUCH CASES, THE CONCERNED PARTIES PAID CASH, WHICH COULD BE A FULL PAYMENT OF THE AMOUNT ORIGINALLY TAKEN OR A PART PA YMENT. SUCH PAYMENTS, ESPECIALLY THOSE WHICH WERE RECEIVED IN PART, WERE SHOWN IN THE BOOK S AS CREDITS UNTIL THE FULL PAYMENT WAS RECEIVED. IN SUPPORT OF THIS CONTENTION, THE ASSESS EE FURNISHED COPIES OF THE CASH BOOK, BANK BOOK AS WELL AS THE LEDGER ACCOUNTS. ALONG WITH THE SUB MISSIONS, THE ASSESSEE ALSO FURNISHED COMPLETE DETAILS OF SUCH TRANSACTIONS, ESPECIALLY WITH REGAR D TO THE 18 ALLEGED DEPOSITS (PAGES 5 & 6). IT WAS FURTHER SUBMITTED THAT THE ASSESSEE MAINTAINED TWO LEDGERS, ONE IN WHICH WERE ENTERED THE DEBITS I.E. THE AMOUNTS GIVEN AGAINST CHEQUES WHILE THE OTHER LEDGER RECORDED THE AMOUNTS RECEIVED FROM THE CUSTOMERS, THE CREDITS. THE JCIT ASKED FURTHER CLARIFICATION, WHICH WAS ALSO SUBMITTED. 3. THE JCIT REJECTED ALL THE SUBMISSIONS ON SEVERAL GROUNDS AND LEVIED THE PENALTY OF RS.20,60,000/- UNDER SECTION 271D OF THE ACT ACCORD ING TO THE JC1T, IT WAS MENTIONED THAT THE NAMES APPEARING AS CREDITORS IN THE BALANCE-SHEET O F THE YEAR ENDED 31/3/2005, WERE DIFFERENT FROM THE NAMES APPEARING ON THE ASSET SIDE OF THE S AME BALANCE-SHEET. THE JCIT CITED SOME EXAMPLES (PAGE-10). SECONDLY, THE CHEQUE NUMBERS WR ITTEN ON THE SUIT DOCUMENTS WERE DIFFERENT FROM THE CHEQUE NUMBERS WRITTEN IN THE LEDGER ACCOU NTS. THIRDLY, THE ASSESSEE HAD FAILED TO FURNISH CONFIRMATION LETTERS FROM THE SAID PARTIES ALONG WITH THEIR ASSESSMENT DETAILS. FOURTHLY, IT WAS UNUSUAL FOR THE ASSESSEE TO MAINTAIN TWO SETS O F LEDGERS, WHICH SHOWED DIFFERENT NAMES. SINCE, THE NAMES OF ALL THESE PARTIES APPEARED AS C REDITORS IN THE BOOKS OF ACCOUNT, THE ASSESSEE'S CONTENTION THAT SUCH PARTIES WERE IN FACT DEBTORS T O WHOM AMOUNTS HAD BEEN ADVANCED BY THE ASSESSEE, REMAINED UNSUBSTANTIATED. FIFTHLY, THE AS SESSEE HAD FAILED TO PROVIDE DETAILS OF THE COMMISSION RECEIVED FROM THE 18 PARTIES AGAINST THE SERVICE OF CHEQUE DISCOUNTING PROVIDED BY THE ASSESSEE. THE ASSESSEE'S ARGUMENT THAT THE COMM ISSION RECEIVED WAS CREDITED DIRECTLY TO THE COMMISSION ACCOUNT WAS NOT VALID. SIXTHLY, THE ASSE SSEE HAD MAINTAINED DUPLICATE SETS OF BALANCE-SHEETS FOR THY YEAR ENDED 31/3/2005, WHICH WERE IMPOUNDED IN COURSE OF THE SURVEY. THE NAMES APPEARING IN SUCH BALANCE-SHEETS WERE MISSING FROM THE BALANCE-SHEET FILED ALONG WITH THE RETURN OF INCOME FILED FOR THE A.Y. 2005-06. THE AS SESSEE HAD THEREFORE FAILED TO DISCHARGE THE ONUS OF PROVING THE TRANSACTIONS WITH THE SAID 18 P ARTIES, AS CLAIMED IN THE WRITTEN SUBMISSIONS. THE JCIT TOOK THE VIEW THAT THE I T. ACT DID NOT PR OVIDE ANY EXCEPTION TO THE PERSONS ENGAGED IN THE BUSINESS OF SHROFF AND THEREFORE, THE PROVISION S OF SECTION 271D WAS CLEARLY APPLICABLE. THE 3 ITA NO. 2884/AHD/2007 ASSESSEE HAD NO REASONABLE CAUSE FOR FAILING TO COM PLY WITH THE PROVISIONS OF SECTION 269SS OF THE L T. ACT. ACCORDING TO THE JCIT, IN THE ABSENCE OF ANY REASONABLE CAUSE FOR SUCH VIOLATION, ALL OTHER ISSUES SUCH AS THE GENUINENESS OF THE LEN DER OR THE BORROWERS OR THE TRANSACTIONS ETC. WERE TOTALLY IRRELEVANT. THE JCIT THEREFORE, CAME T O THE CONCLUSION THAT IT WAS A CLEAR CASE OF VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE I. T. ACT. 4. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS :- (I) A PERUSAL OF THE DETAILS FURNISHED BY THE ASSESSEE WHICH WAS REPRODUCED BY THE JC1T ON PAGES 5 & 6 OF THE ORDER WOULD CLEARLY SHOW THAT TH E DATES OF RECEIPT OF VARIOUS CASH AMOUNTS FROM THE SAID PARTIES SUCCEEDED THE DALES O N WHICH CASH AMOUNTS WERE GIVEN TO THEM. THESE WORE CLEARLY VERIFIABLE FROM THE ASSESS EE'S BOOKS OF ACCOUNT. THEREFORE, IT COULD NOT BE A CASE OF ACCEPTING ANY LOAN OR DEPOSI T. (II) THE JCIT'S OBSERVATION THAT THE PERSONS FROM WHOM T HE AMOUNTS RECEIVED WERE NOT THE SAME PERSONS TO WHOM THE AMOUNTS WERE ADVANCED, WAS NOT SUPPORTED BY FACTS. THE ASSESSEE MAINTAINED TWO SETS OF LEDGER ACCOUNTS. A SCRUTINY OF THESE TWO LEDGER ACCOUNTS WOULD CLEARLY SHOW THAT THE PERSONS WERE THE SAME. IN CERTAIN CASES, THE FATHER'S NAME IN THE MIDDLE WAS WRITTEN IN FULL IN ONE LEDGER, WHILE IN THE OTHER LEDGER, ONLY THE INITIAL WAS USED. THIS WAS DONE BECAUSE WHENEVER A CHEQUE OR DR AFT RECEIVED BY THE ASSESSEE WAS DISHONOURED AND RETURNED BY THE BANK, RECOVERY SUIT WAS FILED IN THE COURT. BEFORE THE COURT, THE ASSESSEE HAD TO SHOW THAT THE AMOUNT WAS STILL OUTSTANDING. WHILE THE RECOVERY PROCEEDINGS WERE IN PROGRESS, IF CERTAIN AMOUNTS WE RE RECEIVED FROM SUCH PARTY IT WAS ACCOUNTED FOR AND CREDITED IN A DIFFERENT LEDGER AC COUNT WHICH WAS NOT TO BY PRODUCED BEFORE THE COURT SINCE, EVEN PART RECOVERIES WOULD MAKE THE SUIT DIFFICULT TO ENFORCE. IT WAS FOR THE REASON OF FACILITATING THE ASSESSEE'S C ASE BEFORE THE COURT THAT TWO SEPARATE LEDGER ACCOUNTS WERE MAINTAINED AND IT WAS FOR THIS REASON THAT THE NAMES WERE SLIGHTLY CHANGED FOR EXAMPLE, FROM ASHOKBHAI MANHERDAN GHADH AVI TO ASHOK M. GHADHAVI. THIS WAS ALSO TO ENSURE THAT THE COMPUTER SOFTWARE DID N OT MERGE THE TWO ACCOUNTS THAT IS, THE ONE WHICH SHOWED THE TOTAL OUTSTANDING AND THE ONE WHICH SHOWED PART RECOVERY. THAT BOTH THE ACCOUNTS WERE THE SAME WAS EXEMPLIFIED BY THE FACT THAT THE DATES AND THE AMOUNTS WOULD MATCH IN BOTH THE ACCOUNTS. THE JCIT ONLY ATTEMPTED TO CONFUSE THE ISSUE. IT WAS NO COINCIDENCE THAT IN CASES OF ALL THE 18 P ARTIES THE INITIALS AND THE NAMES IN ONE ACCOUNT WOULD MATCH WITH THE INITIALS AND FULL NAME S WRITTEN IN THE OTHER ACCOUNT. (III) IT WAS NOT FOR THE FIRST TIME THAT THE CASH B OOK, BANK BOOK, BANK STATEMENTS AND LEDGER ACCOUNTS ETC. WERE PRODUCED BEFORE THE JCIT. IN FAC T, THESE BOOKS OF ACCOUNT WERE FOUND BY THE OFFICERS IN COURSE OF THE SURVEY OF THE ASSESSE E'S PREMISES, AND WERE IMPOUNDED. THEREFORE, THERE COULD NOT BE ANY CASE FOR MANIPULA TING OR ADJUSTING THE BOOKS OF ACCOUNT TO SUIT THE PURPOSES OF THE ASSESSEE DURING THE PENALT Y PROCEEDINGS. (IV) THE JCIT HAD ERRED IN VIEWING EACH ENTRY IN ISOLATION, THAT IS, THE ENTRIES OF CASH RECEIVED FROM THE SAID PARTIES. HE FAILED TO APPREC IATE THE CORRESPONDING ENTRIES ESPECIALLY THE ENTRIES, SHOWING THE ADVANCES GIVEN BY THE ASSE SSEE AND THE REJECTION OF THE CHEQUES BY 4 ITA NO. 2884/AHD/2007 THE BANKS. HE ALSO FAILED TO APPRECIATE THAT WHERE PART PAYMENT WAS MADE THE BALANCE AMOUNT DUE WAS TRANSFERRED TO THE BAD DEBT ACCOUNT. COPIES OF SUCH ACCOUNTS HAD BEEN FURNISHED BEFORE THE AO. (V) HE ALSO FAILED TO EXAMINE THE SUIT DOCUM ENTS AND COMPARED THE SAME WITH THE LEDGER ACCOUNTS. A COMPARISON WOULD SHOW THAT THE DATES AN D THE CHEQUE NOS. AS ENTERED IN THE SUIT DOCUMENTS PERFECTLY MATCHED WITH THE LEDGER ACCOUNT S. THE JCIT HAD THUS INCORRECTLY STATED THAT THE CHEQUE NOS. AND DATES AS MENTIONED ON THE SUIT DOCUMENTS WERE DIFFERENT FROM THE CORRESPONDING ENTRIES IN THE LEDGER ACCOUNTS. THE A R HAS FILED PHOTOCOPIES OF THE RELEVANT DOCUMENTS TO SUBSTANTIATE HIS POINT. (VI) ONE OF THE GROUNDS TAKEN BY THE JC1T WAS THAT, THE AMOUNTS RECEIVED FROM SUCH PARTIES HAD BEEN SHOWN UNDER THE HEAD OF CREDITORS. HE HAD FAILED TO APPRECIATE THAT IF SUCH AMOUNTS HAD BEEN IN THE NATURE OF LOANS OR DEPOSITS THE SAME WOULD HAVE BEEN SHOWN UNDER THE HEAD OF SECURED/UNSECURED LOANS IN THE BALANCE- SHEET. THE FACT THAT SUCH AMOUNTS HAD BEEN SHOWN UNDER THE HEAD OF CREDITORS, CLEARLY SHO WED THAT THESE WERE BUSINESS CREDITORS, A POSITION WHICH HAD OBTAINED IN COURSE OF THE REGULA R BUSINESS ACTIVITY OF THE ASSESSEE. (VII) AS REGARDS THE JCITS CLAIM THAT THE COMM ISSION INCOME RECEIVED WAS NOT REFLECTED IN THE LEDGER ACCOUNTS OF THE 18 PARTIES, IT HAS BEEN SUBMITTED BY THE AR THAT DURING THE YEAR, THE ASSESSEE HAD AFFECTED A TURNOVER OF RS. 55,94,18,85 6/- IN ITS BUSINESS AS A SHROFF. THE ASSESSEE HAD DISCOUNTED CHEQUES AND DRAFTS OF HUNDR EDS OF CUSTOMERS AND THEREFORE, IT WAS NOT POSSIBLE TO MAINTAIN SEPARATE LEDGER ACCOUNTS F OR EACH CUSTOMER WHERE THE COMMISSION RECEIVED COULD BE ACCOUNTED FOR. THUS, BECAUSE OF T HE VOLUMES, THE COMMISSION WAS CREDITED TO THE COMMISSION ACCOUNT. IF THE JCIT WAS DISSATIS FIED WITH THE METHOD OF ACCOUNTING HE COULD AT BEST HAVE ESTIMATED THE ASSESSEE'S COMMISS ION INCOME, BUT HE WAS NOT COMPETENT TO TREAT THE CASH REPAYMENT FROM 18 PARTIES AS LOANS/D EPOSITS. (VIII) THE VERY FACT THAT THE ASSESSEE HAD FILED RECOVERY SUITS CLEARLY ESTABLISHED THE FACT THAT THE ASSESSEE WAS A CREDITOR AND NOT A DEBTOR. IF TH E JCITS CONCLUSION WAS TO BE ACCEPTED THEN THE ASSESSEE COULD NOT HAVE FILED SUCH SUITS. 5. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLED THE P ENALTY FOR THE DETAILED REASONS GIVEN IN PARAS 5.4 TO 5.8, WHICH ARE AS UNDER :- 5.4. IN THE CASE OF THE ASSESSEE, IT WAS IMPERATI VE FOR THE JCIT TO ESTABLISH THAT THE CREDITS WERE ESSENTIALLY IN THE NATURE OF LOANS OR DEPOSITS. THIS HO FAILED TO DO. HE FAILED TO ESTABLISH THAT IF SUCH AMOUNTS WERE DEPOSITS, TH E PARTIES WHO HAD GIVEN THE DEPOSITS HAD BENEFITED BY EARNING INTEREST ON THE SAME. IF T HEY WERE LOANS, THE ASSESSEE OUGHT TO HAVE ASKED FOR SUCH LOANS ON WHICH HE OUGHT TO HAVE PAID INTEREST. APART FROM SUCH INTENTIONS WHICH WOULD HAVE BEEN INBUILT INTO SUCH TRANSACTIONS, IT WAS ALSO TO BE ESTABLISHED THAT THE ASSESSEE HAD THE OBLIGATION TO RETURN SUCH AMOUNTS. SUCH A RELATIONSHIP BETWEEN THE SAID 19 PARTIES AND THE AS SESSEE, WAS NOT ESTABLISHED. IN THE FACE OF PERSISTENT DENIAL BY HE ASSESSEE THAT SUCH AMOUN TS WERE NEITHER LOANS NOR DEPOSITS, THE JCIT OUGHT TO HAVE EXAMINED THE SAID PARTIES TO EST ABLISH WHETHER OR NOT SUCH AMOUNTS WERE LOANS OR DEPOSITS, AS PRESUMED BY HIM. THE BOT TOMLINE WAS THAT, NEITHER WAS ANY INTEREST PAYABLE NOR WAS ANY INTEREST PAID BY THE A SSESSEE TO THE SAID PARTIES. THIS WAS 5 ITA NO. 2884/AHD/2007 CLEARLY ESTABLISHED BY THE BOOKS OF ACCOUNT PRODUCE D BY THE ASSESSEE, EVEN THOUGH THE JCIT FAILED TO EXAMINE THE ISSUE FROM THE INTEREST ANGLE. IN SUCH A SCENARIO, SUCH CREDITS IN THE BOOKS OF THE ASSESSEE COULD NOT BE TREATED E ITHER AS LOANS OR DEPOSITS AND CONSEQUENTLY, IT COULD NOT BE SAID THAT THE PROVISI ONS OF SECTION 2695$ WAS VIOLATED, 5.5. FROM THE PENALTY ORDER ON ONE HAND AND T HE WRITTEN SUBMISSIONS OF THE AR ON THE OTHER, I FIND THAT THE JCIT HAD FAILED TO APPRECIAT E THE METHODOLOGY ADOPTED BY THE ASSESSEE IN ACCOUNTING FOR SUCH TRANSACTIONS, ESPEC IALLY IN THE CONTEXT OF THE RECOVERY SUITS FILED IN THE COURT, HE THUS FAILED TO APPRECI ATE THAT THE CREDIT SIDE OF THE BALANCE- SHEET SHOWED THE NAMES OF THE SAME PERSONS WHICH WE RE ALSO REFLECTED IN THE ASSET SIDE, THE NAMES BEING SLIGHTLY CHANGED BY ABBREVIATING TH E MIDDLE NAME BY AN INITIAL. IT WAS FOR THE PURPOSES OF THE SUITS THAT THE ASSESSEE HAD MAINTAINED TWO SETS OF LEDGER ACCOUNTS, ONE WHICH SHOWED THE TOTAL SUM ADVANCED AS DUE, WHI LE THE OTHER SHOWED THE PART PAYMENTS RECEIVED AGAINST SUCH ADVANCES MADE. THE A SSESSEE EXPLAINED THAT ITS CASE WOULD BE WEAKENED BEFORE THE COURT IF IT WAS FOUND OUT THAT PART RECOVERIES HAD ALREADY BEEN MADE. IN ANY CASE, BOTH THESE LEDGER ACCOUNTS WERE CONSOLIDATED AND REFLECTED IN THE BALANCE-SHEET, WHERE BOTH THE ADVANCES AND THE PART PAYMENTS WERE DULY REFLECTED. THAT THE NAMES WERE NOT REALLY DIFFERENT BETWEEN TH E CREDIT AND THE DEBIT SIDES WAS ESTABLISHED BY THE FACTS THAT THE AMOUNTS AND THE D ATES OF TRANSACTIONS CLEARLY TALLY. IN ANY CASE, IF THE JC1T WAS TO DOUBT THE ASSESSEE'S E XPLANATION HE COULD HAVE EASILY REQUISITIONED THE FULL ADDRESSES OF THE PARTIES ON THE OTHER SIDE OF THE BALANCE-SHEET AND EXAMINED THEM, TO SUPPORT HIS VIEW THAT THE ASSESSE E HAD NOT ONLY MAINTAINED DUPLICATE SETS OF ACCOUNTS BUT HAD ALSO MADE FALSE CLAIMS REG ARDING THE METHODOLOGY ADOPTED IN ACCOUNTING OF SUCH TRANSACTIONS. 5.6. THE JCIT RAISED A QUESTION REGARDING THE RECE IPT OF COMMISSION. THE ASSESSEE EXPLAINED THAT SINCE THERE WERE HUNDREDS OF PARTIES WITH WHOM THE ASSESSEE HAD TRANSACTED, THE TURNOVER FOR THE YEAR BEING TO THE EXTENT OF RS. 55,94,18,856/-, IT WAS NOT POSSIBLE TO MAINTAIN SEPARATE LEDGER ACCOUNTS FOR A LL SUCH PARTIES AND ACCOUNT FOR THE COMMISSION RECEIPTS IN INDIVIDUAL ACCOUNTS. THE ASS ESSEE HAD THEREFORE, MAINTAINED A CONSOLIDATED COMMISSION ACCOUNT TO WHICH SUCH COMMI SSION HAD BEEN CREDITED. THIS WAS CLEARLY STATED BY THE ASSESSEE IN COURSE OF THE PEN ALTY PROCEEDINGS, AND YET THE JCIT CHOSE LO IGNORE THE SAME AND TAKE HIS OWN VIEW IN T HE MATTER WITHOUT MAKING ANY FURTHER INQUIRIES. WHILE REJECTING THE ASSESSEE'S EXPLANATI ON, THE JCIT REFERRED TO ONLY THE 18 PARTIES WHO WERE THE FOCUS OF HIS ATTENTION AND IGN ORED THE FACT THAT THE ASSESSEE HAD TRANSACTED WITH HUNDREDS OF OTHER PARTIES IN THE CO URSE OF HIS REGULAR BUSINESS. 5.7. MOST IMPORTANTLY, THE JCIT COMPLETELY ERRED I N TAKING THE VIEW (PAGE 13) THAT UNDER THE PROVISIONS OF SECTION 269SS, ISSUES CONCE RNING THE GENUINENESS OF LENDERS/BORROWERS AND OF THE TRANSACTIONS, WERE TOT ALLY IRRELEVANT. EQUALLY IRRELEVANT WAS THE INTENTION OF THE PROVISIONS. WHILE TAKING SUCH A VIEW, HE COMPLETELY IGNORED THE NATURE OF THE TRANSACTIONS AND FAILED TO CONSIDER S UCH TRANSACTIONS AGAINST THE BACKGROUND OF THE ASSESSEE'S BUSINESS ACTIVITY. SIN CE, HE BEGAN WITH THE PRECONCEIVED NOTION THAT ALL SUCH CREDITS WERE IN THE NATURE OF LOANS OR DEPOSITS, HE MAY HAVE BEEN JUSTIFIED IN OBSERVING THAT THE GENUINENESS OF THE LENDERS OR THE BORROWERS WAS NOT RELEVANT. BUT HE WAS DEFINITELY NOT JUSTIFIED IN OB SERVING THAT THE GENUINENESS OF THE TRANSACTIONS WAS NOT RELEVANT. SINCE, THE FACTS CLE ARLY SHOWED THAT THE ASSESSEE HAD NOT ACCEPTED ANY LOAN OR DEPOSIT, IT WAS NOT INCUMBENT ON THE ASSESSEE TO CITE ANY REASONABLE CAUSE FOR THE PURPORTED VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE I. T. ACT. 6 ITA NO. 2884/AHD/2007 5.8. TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AS GLEANED FROM THE BODY OF THE PENALTY ORDER, AS WELL AS THE WRITTEN SUBMISSIONS OF THE AR AND THE ACCOMPANYING DOCUMENTS INCLUDING PHOTOCOPIE S OF THE RELEVANT PAGES OF THE BOOKS OF ACCOUNT AND BANK STATEMENTS, I HAVE COME T O THE DEFINITE CONCLUSION THAT THERE WAS ABSOLUTELY NO CASE FOR TREATING THE AMOUNTS REC EIVED FROM THE 18 PARTIES, AS LOANS /DEPOSITS. CONSEQUENTLY, IT COULD NOT BE SAID THAT THERE WAS ANY VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE I. T. ACT AND THEREFORE, NO PENALTY COULD BE LEVIED UNDER THE PROVISIONS OF SECTION 271D, THE JCIT IS DIRECTED TO DELETE THE PENALTY OF RS. 20,60,000/- LEVIED BY HIM UNDER THE PROVISIONS OF SECTION 271D OF THE ACT. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING, ON BEHALF OF REVENUE SHR I K.M. MAHESH, LD. SR. D.R. APPEARED AND CONTENDED THAT THERE IS A CLEAR-CUT VIOLATION O F PROVISIONS CONTAINED IN SECTION 269SS OF THE INCOME TAX ACT BECAUSE THE ASSESSEE ACCEPTED CASH L OANS/ DEPOSITS ABOVE RS.20,000/- FROM 18 DIFFERENT PERSONS. THE LD. D.R. POINTED OUT THAT TH E LOANS OR DEPOSITS WERE RECEIVED DURING THE COURSE OF BUSINESS OF OTHERWISE IS IMMATERIAL FOR V ERIFYING WHETHER THERE IS VIOLATION OF PROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT. THE LD. D.R. SUBMITTED THAT THE PENALTY OF RS.20,60,000/- UNDER SECTION 271D WAS RIGHTLY LEVIE D BY THE JCIT AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIE D IN CANCELLING THE SAME FOR THE FOLLOWING REASONS :- 1. THE NAMES APPEARING AS CREDITORS IN THE BALANCE SHEET OF THE YEAR ENDED 31.03.2005 WERE DIFFERENT FROM THE NAMES APPEARING ON THE ASSE TS SIDE OF SAME BALANCE SHEET. 2. THE CHEQUE NOS. WRITTEN ON THE SUIT DOCUMENTS WE RE DIFFERENT FROM THE CHEQUE NOS. WRITTEN IN THE LEDGER ACCOUNTS. 3. THE ASSESSEE HAD FAILED TO FURNISH CONFIRMATION LETTERS FROM THE SAID 18 PARTIES ALONGWITH THE ASSESSMENT DETAILS. 4. THE ASSESSEE MAINTAINED TWO SETS OF LEDGERS WHIC H SHOWED DIFFERENT NAMES. SINCE THE NAMES OF ALL THESE PARTIES APPEARED AS CREDITORS IN THE BOOKS OF ACCOUNTS, THE ASSESSEE'S CONTENTION THAT SUCH PARTIES WERE IN FACT DEBTORS T O WHOM AMOUNTS HAD BEEN ADVANCED BY THE ASSESSEE REMAINED UNSUBSTANTIATED. 5. THE ASSESSEE HAD FAILED TO PROVIDE THE DETAILS O F THE COMMISSION RECEIVED FROM THE 18 PARTIES AGAINST THE SERVICE OF CHEQUE DISCOUNTING P ROVIDED BY THE ASSESSEE. IN THIS REGARD, THE ASSESSEE'S ARGUMENT THAT COMMISSION WAS RECEIVE D DIRECTLY TO THE COMMISSION ACCOUNT WAS NOT FOUND VALID. 7 ITA NO. 2884/AHD/2007 6. THE ASSESSEE HAD MAINTAINED DUPLICATE SETS OF BA LANCE SHEETS FOR THE YEAR ENDED 31.03.2005 WHICH WAS IMPOUNDED DURING THE COURSE OF SURVEY. THE NAMES APPEARING IN SUCH BALANCE SHEETS WERE MISSING FROM THE BALANCE S HEET FILED ALONG WITH THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2005-06. 7. THUS, THE ASSESSEE HAD FAILED TO DISCHARGE THE O NUS OF PROVING THE TRANSACTIONS WITH THE SAID 18 PARTIES AS CLAIMED IN THE WRITTEN SUBMISSIO NS FURNISHED BY THE ASSESSEE. 8. THE INCOME TAX ACT DOES NOT PROVIDE ANY EXCEPTIO N TO THE PERSONS ENGAGED IN THE BUSINESS OF SHROFF AND THEREFORE, THE PROVISIONS OF SECTION 271D ARE DEARLY APPLICABLE. 9. IN THE ABSENCE OF REASONABLE CAUSE FOR VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT, ALL OTHER ISSUES SUCH AS GENUINENESS OF THE FE NDER OF THE BORROWERS OR THE TRANSACTIONS ETC. WERE TOTALLY IRRELEVANT. THE LD. D.R. FURTHER SUBMITTED THAT THE LD. CIT(A)- II, SURAT HAS DELETED THE PENALTY OF THE SUM OF RS.20,60,000/- LEVIED U/S. 271D OF THE ACT BY TREAT ING THE AMOUNTS OF DEPOSITS/ LOANS AS BUSINESS TRANSACTIONS ON THE BASIS OF ARGUMENTS AND SUBMISSI ON OF THE ASSESSEE. THE LD. D.R. FURTHER CONTENDED THAT THE ORDER OF THE CIT(A) DELETING THE PENALTY U/S,271D OF THE ACT IS NOT ACCEPTABLE AS HE HAS NOT TAKEN INTO ACCOUNT THE VARIOUS COGENT REASONS WHICH ESTABLISH THAT THE ASSESSEE FAILED TO SHOW ANY REASONABLE CAUSE FOR THE VIOLATI ON OF PROVISION OF SECTION 269SS. FURTHER, THE CIT(A) HAS NOT APPRECIATED THE FACTS OF THE CASE IN PROPER PERSPECTIVE WHICH LAID TO LEVY OF PENALTY U/S.271D OF THE ACT. 7. ON THE OTHER HAND, SHRI M.K. PATEL, LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). THE LD. COUNSEL OF THE ASSESSEE ALSO DREW OUR ATTENTION TO THE ASSESSMENT ORDER, WHEREIN THE JCIT HIMSELF STATED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EARNING COMMISSION THROUGH DISCOUNTING CHEQUES/ DRAFTS, ETC. AS A SHROFF AND FINANCIER IN THE NAME AND STYLE OF M/S. C.M. CORPORATION. THE LD. COUNSEL SUBMITTED THAT ON PERUSAL OF ENTIRE ASSESSMENT RECORD AND ASSESSMENT ORDER, IT IS EVIDENT THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF DISCOUNTING OF DRAFTS/ CHEQUES, I.E. COMMISSION AGENT. THE JCIT IN THE PENALTY ORDER FAI LED TO ESTABLISH THAT CREDITORS WERE ESPECIALLY INVOLVED IN THE NATURE OF LOANS AND DEPOSITS, THERE FORE, PROVISIONS CONTAINED IN SECTION 269SS ARE NOT APPLICABLE. 8. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS THE REASONING GIVEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN 8 ITA NO. 2884/AHD/2007 THE IMPUGNED ORDER FOR CANCELLING THE PENALTY OF RS .20,60,000/- LEVIED BY THE JCIT FOR ALLEGED VIOLATION UNDER THE PROVISIONS OF SECTION 269SS OF THE ACT. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR THAT THE JCIT HIMSELF HAS ADMITT ED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DISCOUNTING OF DRAFTS/ CHEQUES, I.E. COMMISSION AGE NT. THE NATURE OF CREDIT WAS DULY EXPLAINED BY THE ASSESSEE. IT APPEARS THAT THE ALLEGED CREDITS A RE NEITHER LOANS NOR DEPOSITS. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THREE IS NO VIOLATION OF PROVISIONS CONTAINED IN SECTION 269SS. EVEN OTHERWISE, PRIMA FACIE, IT APPEARS THAT THE ASSESSEE WAS OF THE BONAFIDE BELIEF THAT HE HAS NOT ACCEPTED LOANS OR DEPOSITS, SINCE HE IS ENGAGED IN THE BUSINESS OF DISCOUNTING OF DRAFTS/ CHEQUES AS A ROLE OF COMMISSION AGENT. BY C ONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, IN OUR OPINION, IT CONSTITUTES A REA SONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE INCOME TAX ACT, 1961. ON THIS GROUND AL SO, PENALTY UNDER SECTION 271D IS NOT LEVIABLE. WE ARE, THEREFORE, OF THE VIEW THAT THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS GIVEN COGENT REASON FOR CANCELLING THE PENALTY OF RS.20,60,000/- LEVIED BY THE JCIT, RANGE- 2, SURAT UNDER SECTION 271D OF THE I.T. ACT. WE INC LINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND REJECT THE GROUND OF APPEAL RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 18.08.201 0 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18/ 08 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD LAHA/SR.P.S.