LINK SHIPPING & MANAGEMENT SYSTEMS P.LTD, MUMBAI V. ADDL CIT 2(2), MUMBAI

ITA 3537/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48541 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NO.3537/MUM/2010 : ASST.YEAR 2006-2007 M/S.LINK SHIPPING & MANAGEMENT SYSTEMS PRIVATE LIMITED 1601, MAKER CHAMBERS V NARIMAN POINT, MUMBAI 400 021. PAN : AAACL0904F. VS. THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 2(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MADHUR AGARWAL RESPONDENT BY : SHRI RAJEEV AGARWAL O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 08.03.2010 UPHOLDING PENALTY OF RS.66,00,000 IMPOSE D BY THE ASSESSING OFFICER U/S.271E OF THE I.T.ACT, IN RELATION TO ASSESSMENT YEAR 2006-2007. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WAS ENGAGED IN THE BUSINESS OF FREIGHT, FORWARDING, SHIPPING AGENCY AN D BROKERAGE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE REPAID LOAN OF RS.40.00 LAKHS TO RIJA TRANSPORT SERVICES AND RS.26.00 LAKHS TO GERALDINE KAMAT IN CONTRAVENTION OF PROVISION OF SECTION 269T. PENALTY PROCEEDINGS U/S.271E WERE INITIATED. IN THESE PENALTY PROCEEDINGS IT WAS NOTI CED BY THE A.O. THAT UNSECURED LOAN OF RS.66 LAKHS FROM THE ABOVE REFERRED TWO PAR TIES WAS SHOWN AS OUTSTANDING ON 31.03.2005, WHICH WAS REPAID DURING THE FINANCIA L YEAR IN THE FORM OF ADJUSTMENT AGAINST TRAILER HIRE CHARGES . IN THE OPINION OF THE ASSESSING OFFICER SINCE THE ASSESSEE DID NOT REPAY OF LOAN OF RS.66 L AKHS OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR BANK DRAFT, PROVISIONS OF S ECTION 269T WERE ATTRACTED. HE, ITA NO.3537/MUM/2010 M/S.LINK SHIPPING & MANAGEMENT SYSTEMS P.LTD. 2 THEREFORE, IMPOSED PENALTY U/S.271E AT RS.66 LAKHS. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS AN ADMITTED POSITION THAT LOAN OF RS. 26.00 LAKHS AND RS.40.00 LAKHS WAS TAKEN BY THE ASSESSEE FROM THE ABOVE REFERRED P ARTIES IN AN EARLIER YEAR WHICH WAS OUTSTANDING AT THE BEGINNING OF THE PREVIOUS Y EAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. DURING THE YEAR THE LOAN WAS ADJUSTED AGAINST TRAILER HIRE CHARGES AND NO AMOUNT WAS PAID. THE RESULTING INCOM E IN THE SHAPE OF ADJUSTMENT WAS OFFERED TO TAX, WHICH FACT HAS NOT BEEN DENIED IN THE ASSESSMENT ORDER. THE CASE OF THE REVENUE IS THAT SINCE THE AMOUNT WAS AD JUSTED BY WAY OF JOURNAL ENTRIES PENALTY IS ATTRACTED U/S.271E FOR THE REASON THAT I N ORDER TO ESCAPE THIS PENALTY REPAYMENT OF LOAN MUST BE MADE BY ACCOUNT PAYEE CH EQUE OR ACCOUNT PAYEE BANK DRAFT. WE ARE NOT CONVINCED WITH THE VIEW POINT OF THE AUTHORITIES BELOW FOR THE REASON THAT SECTION 269T PROVIDES THAT NO COMPANY, BANK BRANCH OR CO-OPERATIVE SOCIETY AND NO FIRM OR OTHER PERSON SHALL REPAY AN Y LOAN OR DEPOSIT MADE WITH IT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUN T PAYEE BANK DRAFT BEYOND THE SPECIFIED MONETARY LIMIT. OBVIOUSLY THIS SECTION DO ES NOT COVER THE ADVANCES PAID OR RECEIVED IN THE COURSE OF BUSINESS. PRIMARILY IT IS SEEN THAT THE AMOUNT IN QUESTION HAS BEEN ADJUSTED AGAINST THE TRAILER HIRE CHARGES, WHICH CONSTITUTES A SOURCE OF INCOME OF THE ASSESSEE. THUS IT BECOME CL EAR THAT THE SUM OF RS.66.00 LACS WAS RECEIVED IN THE COURSE OF BUSINESS, WHICH WAS ULTIMATELY ADJUSTED AGAINST THE GIVING OF TRAILER ON HIRE TO THESE TWO PARTIES. IT IS OBVIOUS THAT ONLY THE LOANS OR ADVANCES ARE COVERED WITHIN THE PROVISION AND NOT T HE TRADE ADVANCES. IT IS FURTHER SEEN THAT THE BALANCE IN THESE ACCOUNTS HAS BEEN AD JUSTED BY WAY OF JOURNAL ENTRY AND THERE IS NO REPAYMENT MADE BY THE ASSESSEE COMP ANY OF ANY LOAN OR ADVANCE. IN OUR CONSIDERED OPINION THE AUTHORITIES BELOW WER E NOT JUSTIFIED IN IMPOSING AND CONFIRMING THE PENALTY, WHICH IS HEREBY ORDERED TO BE DELETED. ITA NO.3537/MUM/2010 M/S.LINK SHIPPING & MANAGEMENT SYSTEMS P.LTD. 3 4. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DAY OF APRIL, 2011 . SD/- SD/- (V.DURGA RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 29 TH APRIL, 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) V, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.