Sri Sarada Jewellery Mart , Narasaraopet V. Income Tax Officer, Ward-1, Narasaraopet

ITA 412/VIZ/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2863 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 31-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Reasonable cause; Set aside
• Section: 271D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 412 / VIZ /201 8 (ASST. YEAR: 20 13 - 14 ) M/S. SRI SARADA JEWELLERY MART, D.NO. 6 - 1 - 271,MAIN ROAD, NARASARAOPET, GUNTUR. V S . IT O , WARD - 1, NARASARAOPET . PAN NO. AAPFS 6596 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SMT. SUMAN MALIK SR. DR DATE OF HEARING : 03 / 0 6 /201 9 . DATE OF PRONOUNCEMENT : 12 / 0 6 /201 9 . O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , GUNTUR , DATED 2 8 /0 5 /201 8 FOR THE ASSESSMENT YEAR 20 13 - 14 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT JOINT COMMISSIONER OF INCOME - TAX (JCIT) , RANGE - 2 , GUNTUR HAS LEVIED PENALTY UNDER SECTION 271D OF THE ACT FOR ACCEPTING THE CASH LOANS OF RS.6,90,000/ - FROM VARIOUS PERSONS OTHERWISE THAN BY ACCOUNT PAYEE CHEQUES . HENCE, T HE JCIT HAS ISSUED A SHOW - CAUSE NOTICE 2 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) DATED 11/03/2016 FOR INITIATION OF PENALTY UNDER SECTION 271D OF THE ACT . IN RESPONSE TO THE NOTICE ISSUED, THE ASSESSEE HAS FILED THE EXPLANATION VIDE ITS LETTER DATED 12/04/2016 . THE JCIT DID NOT SATISFY WITH THE EXPLANATION FILED BY THE ASSESSE E , HENCE, IMPOSED THE PENALTY OF RS. 6,90,000/ - UNDER SECTION 271D FOR VIOLATION OF THE PROVISIONS OF SECTION 269 SS OF THE ACT. THE JCIT IN HIS ORDER PASSED UNDER SECTION 271D HAS STATED THAT THE ASSESSEE HAD ADMITTED THE ACCEPTANCE OF CASH LOANS AND VOLUNTARILY PAID THE PENALTY OF RS.6,90,000/ - AND ENCLOSE D THE CHALLANS ALSO, HENCE , HELD THAT THE CASE IS A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. 3 . AGGRIEVED BY THE ORDER OF THE JCIT, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT HE DID NOT MAKE THE PAYMENT OF PENALTY OF RS. 6,90,000/ - AND ARGUED THAT THE RE WAS NO SATISFACTION REACHED BY THE LD. JCIT FOR LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. THE ASSESSEE FURTHER ARGUED THAT THE FINDING S OF THE LD. JCIT THAT THE PAYMENT OF PENALTY OF RS.6,90,000/ - WAS INCORRECT. HENCE ARGUED THAT THERE IS NO CASE FOR LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. THE LD. CIT(A) CALLED FOR REMAND REPORT FROM THE JCIT WITH REGARD TO THE FACTUAL POSITION OF PAYMENT OF RS.6,90,000/ - AND THE JCIT SUBMITTED HIS REMAND REPORT STATING THAT NO SUCH PAYMENT WAS MADE BY THE 3 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) ASSESSEE. THE LD. CIT(A) HAVING GONE THROUGH THE REMAND REPORT OBSERVED THAT THERE WAS A N APPARENT MISTAKE IN THE ORDER OF T HE JCIT WHILE IMPOSING THE PENALTY AND PENALTY WAS NOT LEVIED SOLELY ON THE BASIS OF ASSERTION THAT THE PAYMENT WAS MADE TOWARDS PENALTY. THE LD. CIT(A) FURTHER OBSERVED THAT NO PRUDENT PERSON WOULD PAY THE PENALTY WITHOUT AN ORDER AND VIEW ED , THAT IT WAS NOT THE SOLE REASON FOR IMPOSITION OF PENALTY . FROM THE ORDER OF THE LD. JCIT THE LD.CIT(A) OBSERV E D THAT THE JCIT HAD CONSIDERED THE MATERIAL PLACED BEFORE HIM AND FACTS BEFORE LEVYING THE PENALTY, WHICH IS EVIDENT FROM THE LAST PARAGRAPH OF THE PENALTY ORDER . T HUS, INFERRED THAT SINCE , THERE WAS NO REASON ABLE CAUSE FOR ACCEPTING THE CASH LOANS PENALTY WAS LEVIED U/S 271 D OF THE A CT. 3.1 THE LD.CIT(A) ALSO CONSIDERED THE EXPLANATION OFFERED BY T HE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS , WHEREIN IT HAS FURNISHED THE REPLY TO THE QUESTIONNAIRE, BEFORE THE ASSESSING OFFICER STATING THAT THE CASH LOANS OF RS. 6,90,000/ - WAS ACCEPTED FROM CLOSE RELATIVES OF THE PARTNERS FOR PURCHASE OF CAR AND ALL THE CREDITORS ARE ASSESSED TO TAX . THE LD. CIT(A) EXAMINED THE EXPLANATION FILED BY THE ASSESSEE AND OBSERVED THAT THE CAR WAS PURCHASED FROM THE HDFC LOAN AND THERE WERE SUFFICIENT FUNDS AVAILABLE WITH THE ASSESSE E, HENCE, THERE WAS NO EXIGENCY FOR 4 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) ACCEPTING THE CASH LOANS . THE ASSESSEES ALTERNATIVE CONTENTION THAT THE CASH LOANS IN FACT, WERE RECEIVED TOWARDS CAPITAL ACCOUNT WAS ALSO NOT ACCEPTED BY THE LD. CIT(A) SINCE IT WAS NOT SUBSTANTIATE D WITH THE ENTRIES IN THE BOOKS OF ACCOUNT S AND THUS OBSERVED THAT THERE IS NO BUSINESS EXPEDIENCY AS SUBMITTED BY THE LD.AR AT THE TIME OF HEARING. H ENCE, HELD THAT THE JCIT RIGHTLY LEVIED PENALTY AND ACCORDINGLY CONFIRMED THE ORDER OF THE JCIT AND DISMISSED THE APPEAL OF THE ASSESSEE. 4 . AGAINST THE ORDER OF THE L D. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 5. DURING THE APPEAL HEARING, LD.AR SUBMITTED THAT THE ASSESSEE HAD ACCEPTED THE CASH LOANS FROM NEAR RELATIVES - DR.GARLAPATI KRISHNA KANTH , DR.CH.V.RAMAKRISHNA , P.V.N.S. MURTHY AND ALL THEM ARE SONS - IN - LAW OF SRI K. VIJAYA KUMAR , MANAGING PARTNER AND THEIR SPOUSES ARE PARTNERS IN THE FIRM . ALL THE ABOVE PERSONS WHO HAVE GIVEN THE ADVANCES ARE HAVING SUFFICIENT SOURCE OF INCOME AND THEY ARE ASSESSED TO INCOME TAX AND THE SAID LOANS WERE REFLECTED IN THEIR INCOME TAX RETURNS . INITIALLY, THE ADVANCES WERE GIVEN TOWARDS CAPITAL THROUGH THEIR SPOUSES. DUE TO INADVERTENT MISTAKE COMMITTED BY THE ACCOUNTANT , THE CAPITAL CONTRIBUTION WAS SHOWN AS AN ADVANCE IN THE NAMES OF THE A BOVE PERSONS . THE LD.AR FURTHER SUBMITTED THAT 5 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) THE JCIT HAS SIMPLY LEVIED THE PENALTY UNDER THE MISTAKEN IMPRESSION THAT THE ASSESS E E HAD ACCEPTED THE CASH LOANS WITHOUT REASONABLE CAUSE AND PAID THE PENALTY VOLUNTARILY, WHICH WA S INCORRECT FINDING AND THE PENALTY WAS LEVIED WITHOUT APPLICATION OF MIND AND APPRECIATION OF FACTS . AS PER SECTION 273 B OF THE ACT, THE PENALTY IS LEVIABLE WHEN THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISF ACTORY. IN THE INSTANT CASE, THE LD. JCIT HAS NOT APPLIED HIS MIND AND EXAMINED THE EXPLANATION OFFERED BY THE ASSESSEE, HENCE, ARGUED THAT THERE IS NO CASE FOR CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. THE LD.AR FURTHER SUBMITTED THAT THE LD. CIT(A) TRIED TO IMPROVE THE FACTS AND SATISFACTION BUT IT IS THE JCIT WHO HAS TO SATISFY THE REASONS FOR LEVYING PENALTY, BUT NOT THE LD. CIT(A) , HENCE, REQUESTED TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND CANCEL THE PENALTY IMPOSED BY THE L D. JCIT. 6 . ON THE OTHER HAND, THE L D. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7 . WE HAVE HEAD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE JCIT ISSUE D A NOTICE UNDER SECTION 271D CALLING FOR EXPLANATION OF THE ASSESSEE AS TO WHY THE PENALTY SHOULD NOT BE LEVIED FOR VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT . IN RESPONSE TO THE NOTICE, THE 6 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) ASSESSEE HAS FILED THE EXPLANATION VIDE ITS LETTER DATED 12/04/2016 WHICH IS EX TRACTED IN PAGE NO.8 OF THE LD. CIT(A)S ORDER AND THE SAME READS AS UNDER: - 4) DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE A. O . DISCUSSED THE ISSUE OF ACCEPTING LOANS IN CASH AMOUNTING TO RS.6,90,000/ - AND A SHOW CAUSE LETTER WAS ISSUED ON 22.01.201 6 CALLING FOR OBJECTIONS FOR LEVY OF PENALTY U/S 271D OF THE ACT. IN COMPLIANCE, THE ASSESSEE'S WRITTEN OBJECTION AS UNDER. 'POINT NO.2: RE. ACCEPTANCE OF CASH : - WE HAVE TAKEN ADVANCES DURING THE YEAR FOR THEACQUISITION/PURCHASE OF CAR FROM THE FOLLOWING PERSONS, WHO WERE THE SPOUSES (HUSBAND) TO THE PARTNERS OF THE FIRM NAMELY: PARTNER SMT. GHANESWARI W/OGARLAPATIKRISHNAKANTH PARTNER SMT. VASAVI W/OCHINTARAMAKRISHNA PARTNER SMT. RAJANI W/O P. V.N.S.MURTHY FROM THE ALL THE ABOVE THREE PERSONS, WHO ARE RELATIVES TO THE PARTNERS, TAKEN ADVANCE OF RS. 6,90,000/ - AND THESE ADVANCES ARE REPAID DURING THE FINANCIAL YEAR 2015 - 16. WE PRAY THE INCOME TAX OFFICER, TO CONSIDER THE ABOVE ADVANCES AND NOT TO IMPOSE PENALTY U NDER THE PROVISIONS OF SEC.269SS OF THE INCOME TAX ACT.' THE A.O VERIFIED PURCHASE INVOICE OF THE CAR AND FOUND THAT THE CAR WAS PURCHASED BY THE FIRM AVAILING LOAN FROM HDFC BANK. THE A.O CONFRONTED ON THIS ISSUE OF ACCEPTING CASH LOAN FROM INDIVIDUALS FOR PURCHASE OF CAR AND PROPOSED FOR LEVY OF PENALTY OF PENALTY U/S 271D. A COPY OF PURCHASE INVOICE OF THE CAR IS SUBMITTED HEREWITH FOR KIND PERUSAL OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, GUNTUR.' AS PER THE EXPLANATION, THE ASSESSEE HAD REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. FURTHER IT IS OBSERVED FROM THE EXPLANATION THAT THE LOANS WERE ACCEPTED FROM THE CLOSE REL A TIVES FOR PURCHASE OF CAR AND THE SAID LOANS WERE REPAID DURING THE 7 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) FINANCIAL YEAR 2015 - 16, HENCE, REQUESTED NOT TO IMPOSE PENALTY UNDER SECTION 271D OF THE ACT. THE ASSESS E E ALSO FURNISHED THE CONFIRMATION LETTERS FROM THE CREDITORS CONFIRMING THE LOANS AND FURNISHING THEIR RELATIONSHIP WITH THE MA NAGING PARTNER OF THE FIRM AND THEIR INCOME TAX PARTICULARS WHICH IS EVIDENT FROM PAGE NO.11 TO 23 OF PAPER BOOK. THE JCIT HAS NOT CONSIDERED THE EXPLANATION OFFERED BY THE ASSESSEE AND MADE INCORRECT FINDINGS IN THE PENALTY ORDER STATING THAT THE ASSESS EE HAD ACCEPTED THE CASH LOANS AND VOLUNTARILY PAID THE PENALTY OF RS. 6,90,000/ - AND ENCLOSED THE CHALLANS . THE ABOVE FINDING OF THE JCIT IS INCORRECT AND AGAINST THE FACTS . AS PER PROVISIONS OF SECTION 273B, NO PENALTY UNDER SECTION S SPECIFIED INCLUDING UNDER SECTION 271D IS IMPOSABLE , IF THE ASSESSEE PROVES THAT THERE I S A REASONABLE CAUSE FOR SUCH FAILURE . IN THE INSTANT CASE, FROM A PLAIN READING OF THE PENALTY ORDER, IT IS OBSERVED THAT JCIT HAS NOT APPLIED HIS MIND WHILE IMPOSING THE PENAL TY AND DID NOT COME TO A CONCLUSION WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE WAS ACCEPTABLE OR NOT. ON SUCH WRONG IMPRESSIONS AND SURMISES THE PENALTY IS NOT LEVIABLE. THE LD.CIT(A) CANNOT IMP R OVE THE SATISFACTION REACHED BY THE JCIT FOR LEVYING PENALTY APPLYING HIS MIND . IN THE INSTANT CASE, JCIT HAS LEVIED THE PENALTY ON INCORRECT ASSUMPTION AND WITHOUT APPLICATION OF MIND HENCE, THE SAME IS UNSUSTAINABLE . FURTHER, IT IS ALSO 8 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) OBSERVED FROM THE LD. CIT(A)S ORDER THAT THE ASSESSEE HAD TAKEN THE CASH LOANS FOR PURCHASE OF CAR FROM THE CLOSE RELATIVES I.E. SONS - IN - LAW OF THE MANAGING PARTNER THROUGH THEIR SPOUSE S WHO ARE PARTNERS AND ALL OF THEM ARE ASSESSED TO INCOME TAX AND SUBMITTED THE CONFIRMATIONS. IT WAS STATED BY THE ASSESSEE THAT THE A MOUNTS WERE RECEIVED AS CAPITAL CONTRIBUTION AND DUE TO INADVERTENT MISTAKE OF THE ACCOUNTANT THE SAME WAS RECORDED AS LOANS. THIS ASPECT NEITHER EXAMINED BY THE JCIT N OR THE LD.CIT(A) BY MAKING CROSS VERIFICATION. NO PENALTY IS LEVIABLE WITHOUT APPLICATION OF MIND BY THE LEVYING AUTHORITY. IT IS INCUMBENT UPON THE JCIT TO APPRECIATE THE FACTS AND MERITS OF THE CASE AND TO REACH THE SATISFACTION FOR LEVY OF PENALTY. IN THE INSTANT CASE IT ESTABLISHED THAT THE JCIT HAS NOT CONSIDERED THE EXPLANATIO N OF THE ASSESSE E BEFORE LEVY OF PENALTY AND LEVIED THE PENALTY UNDER MISTAKEN IMPRESSION AND PRESUMPTIONS. THEREFORE, WE HOLD THAT THE JCIT HAS NOT MADE OUT CASE FOR LEVY OF PENALTY UNDER SECTION 271D OF THE A CT , HENCE, WE SET A SIDE THE ORDER OF THE LD. CIT(A) AND CANCEL THE PENALTY ORDER PASSED BY THE JCIT. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. 9 ITA NO. 412/VIZ/2018 ( M/S. SRI SARADAJEWELLERY MART ) 8 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 2 T H DAY OF JUNE , 201 9 . S D / - S D / - (V. DURGA RAO) ( D.S. SUNDER SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 2 T H JUNE , 201 9 . VR/ - COPY TO: 1. THE ASSESSEE M/S. SRI SARADA JEWELLERY MART, D.NO. 6 - 1 - 271, MAIN ROAD, NARASARAOPET, GUNTUR. 2. THE REVENUE ITO, WARD - 1, NARASARAOPET. 3. THE PR. CIT , GUNTUR. 4. THE CIT(A) - 1, GUNTUR. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.