Shri Khemabhai R.Prajapati, Sabarkantha V. The Addl.CIT.,S.K.Range, Himatnagar

ITA 3501/AHD/2010

• Counselvise Citation: 350120514 RSA 2010
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 31-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWANI
• Assessee Lawyers: S N DIVATIA
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M .) I.T.A. NO. 3501/AHD./2010 ASSESSMENT YEAR : 2005-2006 SHRI KHEMABHAI R. PRAJAPATI, ABAD -VS- ADDL.C.I.T., SABARKANTHA RANGE (PAN : ACYPP 9743P) (APPELLANT) ( RESPONDENT) APPELLANT BY : SHRI S.N.DIVATIA, A.R . RESPONDENT BY : SHRI VINOD TANWANI, SR. D.R. DATE OF HEARING : 17.08.2011 DATE OF PRONOUNCEMENT : 19.08.2011 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 03.11.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI II, AHMEDABAD CONFIRMING THE PENALTY OF RS.2,00,000/- LEVIED BY THE ADDITIONAL C OMMISSIONER OF INCOME-TAX, SABARKANTHA RANGE, HIMATNAGAR UNDER SECTION 271E OF THE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2005-2006. 2. BRIEFLY STATED, THE FACTS ARE THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR UNDER APPEAL, THE AO OBSERVED T HAT THE ASSESSEE HAD REPAID CERTAIN LOANS/DEPOSITS IN CASH IN VIOLATION OF SECTION 269T OF THE I.T. ACT, 1961. THE AO ACCORDINGLY MADE REFERENCE TO THE ADDITIONAL COMMIS SIONER OF INCOME-TAX, SABARKANTHA RANGE, HIMATNAGAR FOR INITIATION OF PENALTY PROCEED INGS UNDER SECTION 271E OF THE I.T. ACT, 1961. ADDITIONAL COMMISSIONER OF INCOME-TAX, S ABARKANTHA RANGE, HIMATNAGAR, ISSUED NOTICE TO THE ASSESSEE TO SHOW-CAUSE WHY THE PENALTY UNDER SECTION 271E OF THE 2 ITA NO. 3501-AHD-2010 I.T. ACT SHOULD NOT BE LEVIED IN RESPECT OF REPAYME NT OF LOAN IN CASH AMOUNTING TO RS.2 LAKHS TO SHRI JETHABHAI PATEL. IN RESPONSE TO THIS NOTICE, THE ASSESSEE SUBMITTED THAT HE IS A RETIRED CLERK. HE WAS WORKING AS A CLERK IN HIGH SC HOOL AT VILLAGE RANASAN. HE STUDIED UPTO SSC. FROM THE POST-RETIREMENT FUNDS, HE WANTED TO HAVE SOME INCOME EARNING ACTIVITY AFTER RETIREMENT. FOR THIS PURPOSE, HE BOR ROWED RS.2 LAKHS FROM JETHABHAI PATEL. FOR MAKING PRE-DEPOSITS BEFORE THE PETROLEUM TANKER IS DELIVERED BY THE IOC. FOR THIS PURPOSE, A PARTNERSHIP FIRM WAS ALSO MADE AND DUE T O LEGAL AND TECHNICAL DIFFICULTIES AND ULTIMATELY, LICENSE WAS ISSUED IN HIS INDIVIDUAL NA ME. THE SAID BUSINESS WAS COMMENCED BY HIM WITH THE FINANCIAL SUPPORT FROM THE FRIENDS AND RELATIVES. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE RETURN OF INCOME WAS FILED DECLAR ING TOTAL INCOME AT RS.78,995/-. IT WAS ALSO PLEADED THAT THE ASSESSEE WAS NOT CONVERSANT W ITH THE TAX LAWS AND AS SUCH HE HAD NO KNOWLEDGE THAT AMOUNT EXCEEDING RS.20,000/- HAS TO BE REPAID BY ACCOUNT PAYEE CHEQUE OR DRAFT. HE WAS UNDER A BONA FIDE BELIEF THAT WHENEVER THE LENDER IS IN URGENT NECES SITY AND PRESSING FOR RETURN OF MONEY, IMMEDIATELY, IT W OULD BE PAID IN CASH. IT WAS ALSO CONTENDED THAT AMOUNT WAS PAID FROM HDFC BANK ACCOU NT AT HIMMATNAGAR. THERE WAS REASONABLE CAUSE FOR MAKING THE PAYMENT TO JETHABHA I PATEL IN CASH. THEREFORE, PENALTY UNDER SECTION 271E BE DROPPED. THE RELIANCE WAS ALS O PLACED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF A.B.SHANTI REP ORTED IN 255 ITR 258. 2.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, TH E AO LEVIED THE PENALTY OF RS.2 LAKHS UNDER SECTION 271E ON THE GROUND THAT THE ASS ESSEE HAD REPAID RS.2 LAKHS TO JETHABHAI PATEL IN CASH WITHOUT ANY REASONABLE CAUS E. 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO ON THE GROUND THAT THE ASSESSEE HAS FAILED T O PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM THAT AMOUNT RECEIVED WAS A FRIENDLY LOAN. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 3 ITA NO. 3501-AHD-2010 4. AT THE TIME OF HEARING, SHRI S.N.DIVATIA, A.R. A PPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE REPAID THE FRIENDLY LOAN BY BEARER CHEQUE. THE PAYEE, NAMELY, SHRI JETHABHAI PATEL CONFIRMED THAT HE REQU IRED THE RETURN OF MONEY IMMEDIATELY. THEREFORE, IT WAS PAID FROM HDFC BANK ACCOUNT AT HI MMATNAGAR. IT WAS ALSO PLEADED THAT THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT IN CASE OF URGENCY AND ON DEMAND BEING MADE BY THE PARTY, THE MONEY HAS TO BE RETURN ED IN CASH. ON THIS BASIS, IT WAS PLEADED THAT THERE WAS A REASONABLE CAUSE WITHIN TH E MEANING OF SECTION 269T. THEREFORE, PENALTY OF RS.2 LAKHS BE CANCELLED. 5. ON THE OTHER HAND, SHRI VINOD TANWANI, SR.D.R., APPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). 6. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE RETIRED AS A CLERK IN A HIGH SCHOOL AFTER 37 YEARS OF SERVICE. AFTER RETIREMENT, HE WANTED TO START A BUSINESS IN PETROL PUMP WITH HIS FRIEND AS PARTNER. HOWEVER, THE LICEN SE WAS ISSUED IN HIS INDIVIDUAL NAME. IN THESE CIRCUMSTANCES, THE PARTNERSHIP WAS NOT FOR MED. BE THAT IT MAY BE, PRIMA FACIE , IT APPEARS THAT THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT THERE IS NO VIOLATION OF PROVISIONS CONTAINED IN SECTION 271E IN RESPECT OF PAYMENT OF FRIENDLY LOAN OF RS.2 LAKHS. IN MY OPINION, THIS BONA FIDE BELIEF OF THE ASSESSE E CONSTITUTES A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273D OF THE I.T. ACT, 1961. BOTH THE DEPARTMENTAL AUTHORITIES BELOW REJECTED THIS EXPLANATION OF THE ASSESSEE ON DOUBTS AND SUSPICION. I, THEREFORE, CANCEL THE PENALTY OF RS.2 LAKHS LEVIED UNDER SECTI ON 271E OF THE I.T. ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19.08.2 011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 19/08/2011 4 ITA NO. 3501-AHD-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 REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.