M/s M.V Raghavulu, Prop: Lakshmi Wines, Kakinada V. The ACIT Kakinada Range Kakinada, Kakinada

ITA 362/VIZ/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67386 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-05-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 20-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SASMAL
• Keywords: Reasonable cause; Difference of opinion
• Section: 273B

Judgement Text

ITA NO.362/VIZ/2011 SRI M.V. RAGHAVULU, KAKINADA PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D MANMOHAN, VICE PRESIDENT AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.362/VIZ/2011 ASSESSMENT YEAR: 2004-05 SRI M.V. RAGHAVULU KAKINADA ADDL. CIT, KAKINADA RANGE KAKINADA (APPELLANT) PAN NO.AFXPR 1530A VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, ADVOCATE RESPONDENT BY: SHRI B. SASMAL, ADDL.CIT DATE OF HEARING: 01.05.2013 DATE OF PRONOUNCEMENT: 13.05.2013 ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 08-09- 2011 PASSED BY LD CIT(A), RAJAHMUNDRY AND IT RELATE S TO THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IS ASSAILING THE DECISI ON OF LD CIT(A) IN CONFIRMING THE PENALTY LEVIED BY THE ADDL. COMMISSI ONER OF INCOME TAX (ADDL.CIT) U/S 271E OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SEC. 269T OF THE ACT. 2. THE FACTS RELATING TO THE ISSUE UNDER CONSIDERAT ION ARE STATED IN BRIEF. WHILE COMPLETING THE ASSESSMENT OF THE ASSE SSMENT YEAR 2004-05, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD REPAID FOLLOWING LOANS IN CASH, IN VIOLATION OF THE PROVISIONS OF SEC. 269T O F THE ACT. AS PER THE PROVISIONS OF SEC. 269T OF THE ACT, THE LOAN OR DEP OSITS OF RS.20,000/- OR MORE HAVE TO BE PAID BY ACCOUNT PAYEE CHEQUES OR AC COUNT PAYEE DEMAND DRAFT. ITA NO.362/VIZ/2011 SRI M.V. RAGHAVULU, KAKINADA PAGE 2 OF 6 NAME OF PERSON PRINCIPAL AMOUNT INTEREST AMOUNT TOTAL SRI K. VENKATESWARA RAO, RAJAHMUNDRY RS.18,000/- RS.3,240/- RS.21,240/- SRI SUNKARA SATHIRAJU, KAKINADA RS.18,000/- RS.3,240/- RS.21,240/- SRI M.SURYANARAYANA MURTHY RS.1,40,000/- RS.25,200/- RS.1,65,200/- HENCE, THE AO REFERRED THE MATTER TO THE ADDL. CIT, WHO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ASKING HIM AS TO WHY T HE PENALTY U/S 271E OF THE ACT SHOULD NOT BE LEVIED. AFTER HEARING THE AS SESSEE, THE ADDL. CIT IMPOSED PENALTY U/S 271E OF THE ACT, EQUIVALENT TO THE AMOUNT OF LOAN REPAID IN CASH. THE LD CIT(A) ALSO CONFIRMED THE O RDER OF THE ADDL. CIT. HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US . 3. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE PROVISIONS OF SEC. 271E ARE SUBJECT TO THE PROVISIONS OF SEC. 273 B. THE PROVISIONS OF 273B MANDATES THAT THE PENALTY U/S 271E OF THE ACT SHALL NOT BE IMPOSABLE FOR THE FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. IT IS WELL SETTLED THAT THE EXISTENCE OF REASONABLE CAUSE HAS TO BE JUDGED FROM THE POINT OF VIEW OF A COMMON MAN. KEEPING IN MIND THESE LEGAL PROPOSITIONS, WE S HALL NOW EXAMINE THE EXPLANATIONS FURNISHED BY THE ASSESSEE WITH REGARD TO THE VIOLATION OF SEC. 269T OF THE ACT. 4. WITH REGARD TO THE LOANS TAKEN FROM SRI K.VE NKATESWARA RAO AND SRI SUNKARA SATHIRAJU, THE ASSESSEE EXPLAINED THAT HE B ORROWED A SUM OF RS.18,000/- EACH FROM THE SAID PERSONS WHEN HE STAR TED BUSINESS IN LIQUORS. HE FURTHER SUBMITTED THAT HE HAS BEEN PAY ING INTEREST @ 18% EVERY YEAR DURING THE LAST WEEK OF MARCH. IT WAS F URTHER SUBMITTED THAT THE ASSESSEE IS HAVING AGRICULTURAL INCOME ALSO AND DURING THE YEAR UNDER CONSIDERATION, HE PAID INTEREST AMOUNT TO BOTH THE PARTIES OUT OF HIS AGRICULTURAL INCOME. SINCE THEY INSISTED ON REPAYM ENT OF LOAN AMOUNT ALSO, ITA NO.362/VIZ/2011 SRI M.V. RAGHAVULU, KAKINADA PAGE 3 OF 6 HE DIRECTED THE CASHIER TO REPAY THE LOAN AMOUNT AL SO FROM OUT OF HIS LIQUOR BUSINESS. LATER HE COLLECTED THE AMOUNT PAID BY HI M FROM OUT OF AGRICULTURAL INCOME, I.E., THE INTEREST AMOUNT, FRO M THE CASHIER OF LIQUOR SHOP. HOWEVER, THE ACCOUNTANT OF THE ASSESSEE HAS PASSED A SINGLE ENTRY IN THE BOOKS OF ACCOUNT TOWARDS PAYMENT OF INTEREST AND THE PRINCIPAL AMOUNT OF LOAN. 5. WE NOTICE THAT THE LD CIT(A) HAS TAKEN THE V IEW THAT THE REPAYMENT OF PART OF LOAN WOULD NOT ABSOLVE THE ASSESSEE FROM THE RIGORS OF SEC. 269T AS LONG AS THE AGGREGATE AMOUNT PAID IN AN YEAR IS RS.20,000/- OR MORE. THE LD CIT(A) ALSO REJECTED THE CONTENTIONS THAT TH E CREDITORS INSISTED UPON CASH PAYMENTS ON THE REASONING THAT IT WAS NOT TAKE N UP BEFORE THE ADDL. CIT. 6. UNDER THE PROVISIONS OF SEC. 269SS RELATING TO ACCEPTANCE OF LOAN OR DEPOSITS, THE LOANS OR DEPOSITS HAVE TO BE ACCEPTED BY WAY OF ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, IF (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGRE GATE AMOUNT OF SUCH LOAN AND DEPOSIT; OR (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN O R DEPOSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH PERSON FR OM THE DEPOSITOR IS REMAINING UNPAID (WHETHER THE REPAYMENT HAS FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID; OR (C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT RE FERRED TO IN CLAUSE (B) IS TWENTY THOUSAND RUPEES OR MORE. 7. UNDER THE PROVISIONS OF SEC. 269T, THE AMOUN T OF LOAN OR DEPOSIT TOGETHER WITH THE INTEREST, IF ANY, PAYABLE THEREON IS TWENTY THOUSAND RUPEES OR MORE, THEN SUCH PAYMENT SHALL BE MADE BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAWN. ITA NO.362/VIZ/2011 SRI M.V. RAGHAVULU, KAKINADA PAGE 4 OF 6 8. IN THE INSTANT CASES, THE AMOUNT OF LOAN TAK EN FROM SRI K. VENKATESWARA RAO AND SRI SUNKARA SATHIRAJU WAS RS.1 8,000/- EACH AND HENCE THE PROVISIONS OF SEC. 269SS WAS NOT ATTRACTE D IN RESPECT OF THESE TWO LOANS. IF THE AMOUNT OF LOAN TOGETHER WITH THE INTEREST, IF ANY, PAYABLE THEREON IS TWENTY THOUSAND RUPEES OR MORE, THEN THE PROVISIONS OF SEC. 269T SHALL BE ATTRACTED, IF THEY ARE PAID TOGETHER. IN THE INSTANT CASES, THE ENTRIES MADE IN THE BOOKS OF ACCOUNT SHOW THAT THE ASSESSEE HAS REPAID LOAN AMOUNT TOGETHER WITH INTEREST HAS EXCEEDED RS. 20,000/- OR MORE. 9. A CAREFUL PERUSAL OF THE PROVISIONS OF SEC. 269T WOULD SHOW THAT THE SAID PROVISIONS ARE ATTRACTED ONLY IF THE PRINCIPAL AND THE INTEREST ARE PAID TOGETHER AND FURTHER THE AGGREGATE AMOUNT OF SUCH P AYMENT IS RS.20,000/- OR MORE. ACCORDING TO THE ASSESSEE, HE HAS BEEN PAY ING INTEREST ON THESE TWO LOANS AT THE END OF EVERY YEAR. IN THE YEAR UN DER CONSIDERATION ALSO, ACCORDING TO HIM, THE INTEREST WAS PAID PRIOR TO TH E PAYMENT OF PRINCIPAL AMOUNT AND THE PRINCIPAL AMOUNT OF RS.18,000/- EACH WAS PAID SUBSEQUENTLY. THUS, THE CLAIM OF THE ASSESSEE IS T HAT THE INTEREST AMOUNT AND THE PRINCIPAL AMOUNT WERE PAID IN TWO DIFFERENT OCCASIONS. THE CLAIM OF THE ASSESSEE, IF ACCEPTED, WOULD NOT LEAD TO CON TRAVENTION OF THE PROVISIONS OF SEC. 269T OF THE ACT, SINCE THE PRINC IPAL AMOUNT REPAID WAS LESS THAN RS.20,000/- IN BOTH THE CASES. IT IS SEE N THAT THE SAID CLAIM WAS NOT CONTROVERTED BY THE TAX AUTHORITIES. SINCE, IT WAS CLAIMED THAT HE HAS BEEN PAYING INTEREST TO THESE CREDITORS AT THE END OF EVERY YEAR; THERE APPEARS TO BE SOME VERACITY IN THE CLAIM THAT HE PA ID INTEREST INITIALLY. SINCE THE PRINCIPAL AMOUNT OUTSTANDING WAS LESS THA N RS.20,000/- IN EACH CASE, THE SAID EXPLANATION ALSO, IN OUR VIEW, CONST ITUTES REASONABLE CAUSE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) IN RESPECT OF THESE TWO LOANS. 10. WITH REGARD TO THE AMOUNT REPAID TO SRI M. S URYANARAYANAMURTHY, THE CLAIM OF THE ASSESSEE WAS THAT THE AMOUNT OUTST ANDING IN HIS NAME ITA NO.362/VIZ/2011 SRI M.V. RAGHAVULU, KAKINADA PAGE 5 OF 6 ACTUALLY REPRESENTED HIS CAPITAL AMOUNT, WHEN THE B USINESS CONCERN WAS RUN AS A PARTNERSHIP FIRM UP TO 31.3.2002. IT IS S AID THAT SHRI M. SURYANARAYANAMURTHY IS THE BROTHER OF THE ASSESSEE. WHEN THE PARTNERSHIP FIRM WAS DISSOLVED, THE CAPITAL BALANCE REMAINED IN THE BUSINESS BOOKS AND THE SAME WAS REPAID DURING THE YEAR UNDER CONSIDERA TION. IT WAS ALSO SUBMITTED THAT THE CAPITAL BALANCE OF THE ABOVE SAI D PERSON HAS TO BE REPAID WITHIN SIX MONTHS FROM THE DATE OF DISSOLUTI ON AND SINCE IT WAS NOT CLEARED BY THAT TIME, THE ASSESSEE HAS AGREED TO PA Y INTEREST THEREON. WE NOTICE THAT THE TAX AUTHORITIES HAVE TAKEN THE VIEW THAT THE CAPITAL BALANCE OF EX-PARTNER WOULD PARTAKE THE CHARACTER OF LOAN, ONCE INTEREST IS PAID ON THE SAID AMOUNT. ACCORDINGLY, THEY HAVE HELD THAT THE REPAYMENT OF THE SAME WOULD ATTRACT THE PROVISIONS OF SEC. 269T OF T HE ACT. 11. THE FACT THAT THE BALANCE OUTSTANDING IN THE NAME OF SRI M. SURYANARAYANAMURTHY REPRESENTS IS CAPITAL BALANCE I S NOT DISPUTED. THERE DOES NOT APPEAR TO BE ANY DIFFERENCE OF OPINION WIT H REGARD TO THE FACT THAT THE REPAYMENT OF CAPITAL BALANCE IN CASH WOULD NOT ATTRACT THE PROVISIONS OF SEC. 269T OF THE ACT, SINCE IT DOES NOT CONSTITUTE LOAN OR DEPOSIT. SINCE THE ASSESSEE HAS PAID INTEREST ON THE OUTSTANDING BALAN CE, THE TAX AUTHORITIES HAVE TAKEN THE VIEW THAT THE OUTSTANDING CAPITAL BA LANCE HAS ACQUIRED THE CHARACTERISTICS OF A LOAN AND HENCE THE REPAYMENT T HEREOF WOULD ATTRACT THE PROVISIONS OF SEC. 269T OF THE ACT. 12. IN OUR VIEW, THE VIEW ENTERTAINED BY THE ASS ESSEE THAT THE AMOUNT OUTSTANDING IN THE NAME OF SRI M. SURYANARAYANMURTH Y DOES NOT CONSTITUTE LOAN OR DEPOSIT CANNOT BE CONSIDERED AS AN ALTOGETH ER FALSE VIEW. IF PUT TO DEBATE, IT IS POSSIBLE THAT IT WOULD GENERATE DIFFE RENT KINDS OF VIEWS, BOTH FOR AND AGAINST THE VIEW ENTERTAINED BY THE ASSESSE E. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE EXPLANATION OF THE ASSESSEE WOULD CONSTITUTE REASONABLE CAUSE IN TERMS OF SEC. 273B O F THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE. ITA NO.362/VIZ/2011 SRI M.V. RAGHAVULU, KAKINADA PAGE 6 OF 6 13. SINCE, WE HAVE SET ASIDE THE ENTIRE ORDER OF LD CIT(A), WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S 271E OF THE ACT, REFERRED SUPRA. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE STANDS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13.05.2013. SD/- SD/- (D MANMOHAN) (B R BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER VISAKHAPATNAM, DATE: 13 TH MAY, 2013. VG/SPS COPY TO 1 J.S. SUNDARAM & CO., CHARTERED ACCOUNTANTS, DR.NO .10-4-56/2, RAMARAOPETA, SESHAGIRIRAO STREET, KAKINADA-4. 2 ADDL. CIT, KAKINADA RANGE, KAKINADA 3 4. THE CIT, RAJAHMUNDRY THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM