Envogue Wood Working Pvt. Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 293/DEL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0258 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: R S ADLAKHA
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. T .S. KAPOO R, ACCOUNTANT MEMBER I.T.A .NO. - 293 & 294 /DEL/201 2 (ASSESSMENT YEAR - 200 6 - 07 ) ENVOGUE WOOD WORKING PVT. LTD., 1024, GALI TELIAN TILAK BAZAR, NEW DELHI - 110006. PAN - AABCE4310M (A PPELLANT) VS AC IT, RANGE - 11, NEW DELHI. (RESPONDENT) APPELLANT BY SH.R.S.ADLAKHA, ADV. RESPONDENT BY SMT. PARWINDER KAUR, SR. DR ORDER PER DIVA SINGH, JM BOTH THESE APPEALS FILED BY THE ASSESSEE PERTAINING TO 200 6 - 07 ASSESSMENT YEAR ARE BEING D ECIDED BY A COMMON ORDER. THE ASSESSEE BY THE PRESENT APPEALS ASSAILS THE CORRECTNESS OF THE SEPARATE ORDERS DATED 25.10.2011 OF THE CIT(A) - XIII, NEW DELHI WHEREIN THE PENALTY ORDERS IMPOSED BY THE AO U/S 271 E & 271 E HAVE BEEN UPHELD . 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHO IS STATED TO BE ENGAGED IN THE MANUFACTURING OF FURNITURE AS PER THE ASSESSMENT ORDER U/S 143(2) DATED 24.12.2008 CLAIMED AN INCREASE IN SHARE CAPITAL. IN VIEW OF THE FACT THAT THE ASSESSEE RECEIVED AND REPAID LOANS THEREBY VIOLATING THE PROVISIONS OF SECTION 269SS AND SECTION 2 69T AS PER PAGE 1 & 2 OF THE ASSESSMENT ORDER PENALTIES U/S 271D AND 271E WERE INITIATED ON THE FOLLOWING FACTS: - L OANS TAKEN IN CASH - VIOLATION OF SECTION 269SS OF INCOME TAX ACT, 1961: - DATE NAME OF THE PERSON AMOUNT 29.06.2005 DIVAS JAIN 25,000/ - 31.10.2005 - DO - 10,000/ - DATE OF HEARING 01 .0 6 .2015 DATE OF PRONOUNCEMENT 10 .0 6 .2015 I.T.A .NO. - 293 & 294 /DEL/201 2 PAGE 2 OF 5 08.03.2006 GOKUL CHAND JAIN 1,00,000/ - 31.10.2005 - DO - 20,000/ - 15.05.2005 MADHU JAIN 20,000/ - 29.03.2006 - DO - 1,00,000/ - 14.04.2005 SWETA JAIN 40,000/ - TOTAL 3,05,000/ - LOANS REPAID IN CASH - VIOLATION OF SECTION 269T OF INCOME TAX ACT, 1961: - DATE NAME OF THE PERSON AMOUNT 08.03.2006 GOKUL CHAND JAIN 25,000/ - 18.03.2006 - DO - 10,000/ - 20.03.2006 - DO - 15,000/ - 22.03.2006 - DO - 50,000/ - 10.09.2005 GOKUL CHAND JAIN HUF 50,000/ - 23.09.2005 - DO - 50,000/ - 18.03.2006 - DO - 10,000/ - 23.03.2006 MADHU JAIN 40,000/ - 27.03.2006 - DO - 50,000/ - TOTAL 3,00,000 3. THE AO REQUIRED THE ASSESSEE TO EXPLAIN WHY FOR THE ALLEGED VIOLATION PENALTY U/S 271D SHOULD NOT BE IMPOSED. THE ASSESSEE S REP LY IS FOUND EXTRACTED IN THE PENALTY ORDER. A PERUSAL OF THE SAME SHOWS THAT REGARDING THE LOANS FROM SH. DIVAS JAIN; SH.G.C.JAIN , IT WAS STATED THAT THEY WERE WHOLE TIME DIRECTORS ; AND ADDRESSING THE LOAN S FROM SMT. MADHU JAIN IT WAS STATED THAT SHE WAS ALSO A DIRECTOR . SMT. SWETA JAIN, IT WAS STATED IS A SHAREHOLDER. THE LOAN AMOUNTS WERE STATED TO BE OUT OF THE AMOUNTS WITHDRAWN FROM THE RESPECTIVE BANK ACCOUNTS OF EACH OF THE PERSONS AS PER THE ANNEXURE S ATTACHED. THE AMOUNTS WERE STATED TO BE DEPOSITED IN THE COMPANY BANK A/C WITH NANITAL BANK A/C NO. - 10035, NOIDA AMOUNTING TO RS. ONE LAC AND THE REMAINING AMOUNT OF RS.2.05 LACS WAS STATED TO BE FOR MEETING THE EXPENSES OF SALES TAX, SALARY AND WAGES, PURCHASES ETC. FOR DAY TO DAY WORKING OF THE COMPANY. APART FROM THAT FOLLOWING SUBMISSIONS EXTRACTED FROM THE PENALTY ORDER WERE ALSO FOUND TO BE MADE: - 1. THE ASSESSEE COMPANY ACCOUNTED FOR EACH ENTRY AND ALSO EXPLAINED THE SOURCE OF THE SAME. 2. THE AMOUNT IS TAKEN FROM DIRECTOR AND ONE SHAREHOLDER. ALL THE PERSONS ARE INCOME TAX ASSESSEES. 3. ALL THE TRANSACTIONS ARE GENUINE AND DULY VERIFIED DURING THE COURSE OF ASSESSMENT. 4. TRANSACTIONS MADE BETWEEN THE COMPANY AND DIRECTORS/SHAREHOLDERS WERE UNDER EXCEPTION AL CIRCUMSTANCES TO I.T.A .NO. - 293 & 294 /DEL/201 2 PAGE 3 OF 5 ACCOMMODATE THE EMERGENCY NEEDS OF THE COMPANY FOR A VERY SHORT AND TEMPORARY PERIOD. 5. THE ASSESSEE COMPANY IS MANAGED BY THE MEMBERS OF THE SAME FAMILY. 6. THE ASSESSEE HAD NO INTENTION TO CONCEAL ANY PARTICULARS OF THOSE TRANSACTIONS. 4 . NOT CONVINCED WITH THE EXPLANATION OFFERED THE PENALTY OF RS. 3,05,000/ - WAS IMPOSED . THE ASSESSEE CHALLENGED THE SAID ORDER UNSUCCESSFULLY IN APPEAL BEFORE THE CIT(A) . 5 . SIMILARLY THE AO REQUIRED THE ASSESSEE TO EXPLAIN WHY PENALTY SHOULD NOT BE IMPOS ED IN TERMS OF SECTION 271E OF THE ACT FOR THE VIOLATION OF PROVISIONS OF SECTION 269T . THE ASSESSEE AS PER RECORD IS FOUND TO HAVE RE - ITERATED THAT THE SOURCE OF PAYMENT IS FULLY EXPLAINABLE AND THE PAYMENTS WERE MADE IN CASH ONLY BY VIRTUE OF THE IGNO RANCE OF THE PROVISIONS OF THE LAW AS PER PARA 4.2 OF THE EXPLANATION EXTRACTED IN THE IMPUGNED ORDER AT PAGE 3. ACCORDINGLY IN THESE CIRCUMSTANCES, IT WAS PLEADED THAT IN THE FACE OF THE GENUINE HARDSHIPS FACED IN MEETING THE FINANCIAL NEEDS, THE AMOUNT WAS RECEIVED IN CASH AND IT IS NOT A CASE OF TAX EVASION. THE TECHNICAL VIOLATION IN THESE CIRCUMSTANCES IT WAS SUBMITTED WOULD CONSTITUTE A REASONABLE CASE IN TERMS OF SECTION 273B OF THE ACT. 6 . STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TR IBUNAL. 7 . THE LD. AR, SH.R.S.ADLAKHA RE - ITERATED THE SUBMISSIONS ADVANCED BEFORE THE AO AND THE CIT(A). IT WAS PLEADED THAT THE PERSONS WHO HAD ADVANCED THE AMOUNTS WERE LARGELY WHOLE TIME DIRECTOR S AND ONE WAS A DIRECTOR AND ONE A SHAREHOLDER. ALL THES E PERSONS WERE FROM THE SAME FAMILY AND SINCE THE AMOUNTS TAKEN FOR BONAFIDE BUSINESS NEEDS AFTERWARDS WERE PAID TO THE S A ME IDENTIFIED PEOPLE . A PART FROM SWETA JAIN FROM WHOM ONLY RS.40,000/ - WAS RECEIVED IN CASH , T HE REMAINING PERSONS IT WAS SUBMITTED WERE DIRECTORS AND WHOLE TIME DIRECTORS OF THE ASSESSEE COMPANY AND IN ORDER TO MEET THE BUSINESS NEEDS OF THE ASSESSEE COMPANY, CASH WAS RECEIVED FROM THEM AND SUBSEQUENTLY ALSO PAID TO THEM. THE ASSESSEE BEING IGNORANT OF THE LEGAL CONSEQUENCES CONSIDE RING THE FACT THAT ALL PERSONS WERE KNOWN, TAX PAY ING ASSESSEE S FROM THE SAME FAMILY MADE PAYMENT AND WERE REPAID IN CASH IN A BONAFIDE BELIEF FOR BUSINESS EXIGENCIES ON ACCOUNT OF IGNORANCE OF I.T.A .NO. - 293 & 294 /DEL/201 2 PAGE 4 OF 5 THE PROVISIONS OF LAW AS THEY HAD TRIED TO KEEP THE FAMILY BUS INESS RUNNING . IN THESE CIRCUMSTANCES, IT WAS HIS SUBMISSION THAT KEEPING IN MIND THAT THE INTENTION FOR INTRODUCING THE SECTION WAS TO TACKLE UNACCOUNTED MONEY MOVING IN CASH AND THE CASES LIKE THE PRESENT CASE WERE NOT CONTEMPLATED TO BE SUCH A CASE AS IT IS A CASE OF IDENTIFIED PERSONS WHO ARE DIRECTORS OF THE COMPANY AND ONLY ONE IS SHAREHOLDER WHO HAVE ESTABLISHED THAT THE AMOUNTS WERE TAKEN FROM THE IR SPECIFIC BANK ACCOUNTS . THESE FACTS, EVIDENCES AND SUBMISSIONS IT WAS SUBMITTED HAVE NOT BEEN REBUT TED AND ON A HYPER - TECHNICAL VIEW THE PENALTY HAS BEEN IMPOSED. INVITING A TTENTION TO PAGES 17 & 17A IN THE CASE OF SWETA JAIN AND 18 OF THE LEDGER ACCOUNT IT WAS SUBMITTED IT SHOWS THAT IT WAS A RUNNING ACCOUNT, SIMILAR LEDGER ENTRIES IT WAS SUBMITTED HAVE BEEN PASSED IN THE CASE OF OTHER DIRECTORS ALSO AVAILABLE IN THE PAPER BOOK FILED. COPIES OF THE RETURN OF THESE PERSONS IT WAS SUBMITTED HAVE ALSO BEEN FILED FOR THE YEAR UNDER CONSIDERATION AND ARE PART OF THE ANNEXURES BEFORE THE AO . IN THESE CI RCUMSTANCES RELYING UPON THE FOLLOWING DECISIONS IT WAS SUBMITTED THAT THE PENALTY ORDER MAY BE QUASHED. 8. THE LD. SR. DR, ON THE OTHER HAND, INVITING ATTENTION TO SECTION 269SS AND 269T OF THE ACT SUBMITTED THAT VIOLATIONS OF THE SPECIFIC PROVISIONS IS BORNE OUT FROM THE RECORD. IN THESE CIRCUMSTANCES, IT WAS HIS SUBMISSION THAT THE PENALTY U/S 271D & 271E FOR WANT OF AN EXPLANATION ON REASONABLE CA U SE U/S 273B OF THE ACT HAS RIGHTLY BEEN IMPOSED. RELIANCE WAS PLACED UPON THE PENALTY ORDER AND THE IMP UGNED ORDER. 9 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION OF THE ENTIRE FACTUAL MATRIX AND THE JUDICIAL PRECEDENT THEREON IN THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THERE WAS BONAFI DE BELIEF ON THE PART OF THE ASSESSEE THAT THE TRANSACTION WITH THE DIRECTORS AND THE SHAREHOLDERS FOR MEETING URGENT CASH REQUIREMENTS FOR RUNNING THE BUSINESS WOULD NOT RESULT IN ANY VIOLATIONS. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CA SE AND THE PLEADINGS OF THE PARTIES BEFORE THE BENCH AND THE MANDATE OF SECTION 273B OF THE ACT, WE HOLD THAT THE EXPLANATION OFFERED BY THE ASSESSEE COMPANY BEING BONAFIDE CONSTITUTES A REASONABLE CAUSE AND BEING SATISFIED BY THE SAME CONSIDERING THE JU DICIAL PRECEDENT CITED, WE ACCEPT THE SAME. ACCORDINGLY, THE IMPUGNED ORDERS ARE I.T.A .NO. - 293 & 294 /DEL/201 2 PAGE 5 OF 5 SET ASIDE IN BOTH THE APPEALS AND THE PENALTY IMPOSED U/S 271D AND 271E ACCORDINGLY IS QUASHED. THE SAID ORDER WAS ANNOUNCED IN THE OPEN COURT IN THE PRESENT OF THE PARTIES. 10. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 0 T H OF JUNE 2015. S D / - S D / - ( T .S. KAPOOR ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 0 /0 6 /2015 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI