ITO 9(3)(4), MUMBAI V. RAJ SPECIALITY ADDITIVES P. LTD, MUMBAI

ITA 318/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3426 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJEEV V JOSHI
• Keywords: Income from undisclosed sources; Search and seizure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BIL LAIYA, AM ./I.T.A. NO.318/MUM/2011 ( / ASSESSMENT YEAR : 2007-08 THE ITO 9(3)(4), AAYAKAR BHAVAN, MUMBAI-400 020 M/S. RAJ SPECIALITY ADDITIVES PVT. LTD., 165, KRISHAN KUTIR, SHRI KRISHNA NAGAR, BORIVALI (E), MUMBAI-400 042 ./ !' ./PAN/GIR NO. : AADCR 2153B ( # /APPELLANT ) .. ( $%# / RESPONDENT ) # & / APPELLANT BY : ` SHRI JAVED AKHTAR $%# ' & /RESPONDENT BY : SHRI SANJEEV V. JOSHI ' ( / DATE OF HEARING :06.06.2013 )* ' ( / DATE OF PRONOUNCEMENT : 12.6.2013 +, / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE REVENUE HAS CHALLENGED THE COR RECTNESS OF THE ORDER OF THE LD. CIT(A)-20, MUMBAI DT.1.11.2010 PE RTAINING TO A.Y. 2007-08. 2. THE SHORT GRIEVANCE OF THE REVENUE IS THAT THE L D. CIT(A) ERRED IN DELETING THE PENALTY OF RS. 3 LAKHS LEVIED U/S. 271 D OF THE ACT. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER WHI LE SCRUTINIZING THE ITA NO.318/M/2011 2 BALANCE SHEET OF THE ASSESSEE NOTICED THAT AN AMOUN T OF RS. 3 LAKHS WAS PAID BY DIRECTOR TO M/S. SILVERLINE ON BEHALF OF TH E ASSESSEE COMPANY AND ON FURTHER VERIFICATION, THE AO FOUND THAT THE SAID PAYMENT MADE BY DIRECTOR ON BEHALF OF THE ASSESSEE COMPANY WAS PAID IN CASH AS UNDER: DATE OF PAYMENT AMOUNT 18.1.2007 RS. 1,00,000/- 28.12.2006 RS. 2,00,000/- 4. TAKING A LEAF OUT OF THESE OBSERVATIONS MADE DUR ING THE ASSESSMENT PROCEEDINGS, THE AO INITIATED PENALTY PR OCEEDINGS U/S. 271D OF THE ACT AND SOUGHT EXPLANATION FROM THE ASSESSEE AS TO WHY PENALTY BE NOT LEVIED AGAINST IT FOR CONTRAVENTION OF SEC. 26 9SS OF THE ACT. THE ASSESSEE EXPLAINED THAT THE ENTIRE TRANSACTIONS ARE GENUINE, SINCE THERE WAS BUSINESS EXIGENCY THE ASSESSEE HAD NO CHOICE BU T TO MAKE THE PAYMENT IN CASH. HOWEVER, THE AO WAS OF THE FIRM BELIEF THAT THERE IS NO RELEVANCE OF GENUINENESS OF THE TRANSACTION SO FA R AS PENALTY U/S. 271D IS CONCERNED AND LEVIED A PENALTY OF RS. 3,00,000/-. 5. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A) AND EXPLAINED THE BUSINESS EXIGENCY . LD. CIT(A) W AS CONVINCED BY THE EXPLANATION OF THE ASSESSEE AND CANCELLED THE PENAL TY. 6. AGGRIEVED BY THIS FINDING, REVENUE IS BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE AO. 7. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON VAR IOUS JUDICIAL DECISIONS AND SUBMITTED COPIES OF THE SAME. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES AND THE JUDICIAL DECISIONS RELIED UPON BY THE ITA NO.318/M/2011 3 ASSESSEE. THE OBJECT OF INTRODUCING SEC. 269SS IS TO ENSURE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION F OR HIS UNACCOUNTED MONEY OR IF HE MAKES ANY FALSE ENTRIES, HE SHALL N OT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. DURING SEARCH AND SEIZURES, UNACCOUNTED MONEY IS UNEARTHED AND THE TAXPAYER WOULD USUALLY G IVE THE EXPLANATION THAT HE HAD BORROWED OR RECEIVED DEPOSITS FROM HIS RELATIVES OR FRIENDS AND IT IS EASY FOR THE SO CALLED LENDER ALSO TO MAN IPULATE HIS RECORDS TO SUIT THE PLEA OF THE TAXPAYER. THE MAIN OBJECT OF SECTI ON 269SS WAS TO CURB THIS MENACE OF MAKING FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIVING AN EXPLANATION FOR THE SAME. 8.1. THE CBDT IN CIRCULAR NO. 387 DT. 6.7.1984 HAS IN EXPLANATORY NOTES ISSUED AFTER THE FINANCE ACT, 1984 HAS CONSID ERED THE SAME AS UNDER: UNACCOUNTED CASH FOUND IN THE COURSE OF SEARCHES C ARRIED OUT BY THE INCOME-TAX DEPARTMENT IS OFTEN EXPLAINED BY TAXPAYERS AS REPRESENTING LOANS TAKEN FROM OR DEPOSITS MADE B Y VARIOUS PERSONS. UNACCOUNTED INCOME IS ALSO BROUGHT INTO T HE BOOKS OF ACCOUNT IN THE FORM OF SUCH LOANS AND DEPOSITS AND TAXPAYERS ARE ALSO ABLE TO GET CONFIRMATORY LETTERS FROM SUCH PER SONS IN SUPPORT OF THEIR EXPLANATION. 9. IN THE INSTANT CASE, WE FIND THAT SINCE THE ASSE SSEE WAS IN WANT OF FUNDS TO MAKE PAYMENTS TO THE CONTRACTORS, IT ASKED ITS DIRECTOR TO MAKE THE PAYMENT DIRECTLY TO THE CONTRACTOR AND ACCORDIN GLY, THE DIRECTOR HAS MADE PAYMENT TO THE CONTRACTOR, THOUGH IN CASH. TH EREFORE, IN OUR CONSIDERATE OPINION, THERE WAS NO VIOLATION OF THE LEGISLATIVE INTENT BEHIND THE INTRODUCTION OF SECTION 269SS, INASMUCH AS THE TRANSACTION HAS DULY BEEN RECORDED IN THE ACCOUNTS WITH PROPER NARRATION . SINCE THE ASSESSEE WAS IN URGENT NEED OF MONEY, CONSIDERING THE URGENC Y, ONE OF THE DIRECTORS HAS MADE THE PAYMENT DIRECTLY. THEREFORE , IN OUR HUMBLE OPINION, THE ASSESSEE HAD REASONABLE AND SUFFICIENT CAUSE FOR MAKING ITA NO.318/M/2011 4 PAYMENT IN CASH THROUGH ITS DIRECTOR, THOUGH TECHNI CALLY THE ASSESSEE ITSELF HAS NOT MADE THE PAYMENT IN CASH, AS ONE OF THE DIR ECTORS HAS MADE THE PAYMENT. CONSIDERING THE FACTS OF THE CASE, IN THE LIGHT OF THE LEGISLATIVE INTENT AS DISCUSSED HEREINABOVE, WE CONFIRM THE FIN DINGS OF THE LD. CIT(A). THE PENALTY SO LEVIED IS ACCORDINGLY CANCE LLED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.6.2013 . +, ' * - .+/ 12.6.2013 * ' 0 SD/- SD/- (VIJAY PAL RAO ) ( N.K. BILLAIYA ) + /JUDICIAL MEMBER + / ACCOUNTANT MEMBER MUMBAI; .+ DATED 12/06 /2013 . . ./ RJ , SR. PS +, +, +, +, ' '' ' $(1 $(1 $(1 $(1 21( 21( 21( 21( / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. 140 $( , , / DR, ITAT, MUMBAI 6. 0 5 / GUARD FILE. +, +, +, +, / BY ORDER, %1( $( //TRUE COPY// 6 66 6 / 7 7 7 7 ! ! ! ! (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI