The DCIT, Vijayawada V. M/s E-Zone Security Solutions (India) Pvt.Ltd., Vijayawada

ITA 426/VIZ/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6578 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 24-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 143(3)

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. 426 / VIZ /201 6 (ASST. YEAR : 20 12 - 13 ) DCIT, CIRCLE - 2(1), VIJAYAWADA. V S . M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD., D.NO. 6 - 1 - 7/1, NEAR SIDDHARTHA ARTS COLLEGE, SIDDHARTHA NAGAR, VIJAYAWADA. PAN NO. AACCP 4479 P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FC A. DEPARTMENT BY : SHRI M.N. MURTHY NAIK SR. DR DATE OF HEARING : 21 / 0 8 /201 7 . DATE OF PRONOUNCEMENT : 18 / 1 0 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA , DATED 2 8 /0 7 /201 6 FOR THE ASSESSMENT YEAR 20 12 - 12 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE - M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD. , IS COMPANY DERIVING INCOME BY SALE OF ELECTRONIC SECURITY, SURVEILLANCE , AUTOMATION SYSTEMS AND PROVIDING ELECTRONIC SECURITY SERVICES. IT FILED ITS RETURN OF INCOME BY ADMITTING NIL INCOME . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 2 ITA NO. 426/VIZ/2016 ( M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD. ) THE 'ACT') THEREAFTER, ASSESSMENT IS COMPLETED UNDER SECTION 143(3) OF THE A CT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE - COMPANY HAS VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER HAD BROUGHT THE SAME TO THE NOTICE OF THE ADDITIONAL COMMISSIONER , RANGE - 2, VIJAYAWADA, WHO ISSUED A NOTICE UNDER SECTION 271D OF THE ACT DIRECTING THE ASSESSEE WHY PENALTY SHOULD NOT BE IMPOSED FOR THE CONTRAVENED PROVISIONS OF SECTION 269SS OF THE ACT. IN RESPONSE, IT WAS SUBMITTED BEFORE THE ADDITIONAL COMMISSIONER THAT ASSESSEE - COMPANY HAS ACCEPTED A LOAN OF 12 LAKHS FROM SRI CHENNUPATI JAGANMOHAN RAO, WHO IS ONE OF THE DIRECTORS OF THE ASSESSEE - COMPANY UNDER INEVITABLE CIRCUMSTANCES DUE TO EXCEEDING OF OVERDRAFT LIMIT WITH STATE BANK O F INDIA (SBI) . HOWEVER, THE ADDITIONAL COMMISSIONER HAS NOT AGREED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND LEVIED PENALTY UNDER SECTION 271D OF THE ACT BY OBSERVING THAT SRI CHENNUPATI JAGANMOHAN RAO IS THE DIRECTOR OF THE ASSESSEE - COMPANY. THE DA Y TO DAY AFFAIRS OF THE COMPANY ARE MANAGED BY NONE OTHER THAN SRI CHENNUPATI JAGANMOHAN RAO. AS SUCH, SRI CHENNUPATI JAGANMOHAN RAO IS WELL AWARE OF THE FINANCIAL STRENGTH AND AFFAIRS OF THE COMPANY . THE PLEA OF EXCEEDING THE OVERDRAFT WITH SBI , IS NOT A SUDDEN FALL TO ACCEPT LOAN IN CASH. THUS, ASSESSEE FAILED TO ESTABLISH THE REASONABLE CAUSE. THERE WAS NO BUSINESS EXIGENCY FOR TAKING CASH LOAN SINCE THE COMPANY CAN POSTPONE THE PAYMENT IN VIEW OF THE ASSESSEES EXPLANATION SUBMITTED. 3 ITA NO. 426/VIZ/2016 ( M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD. ) 3 . ON APPEAL BEFORE THE LD. CIT(A) , A DETAILED SUBMISSION WAS MADE, WHICH IS REPRODUCED AS UNDER: - APPELLANT IS A PRIVATE LIMITED COMPANY DERIVED INCOME FROM SALE OF ELECTRONIC SECURITY, SURVEILLANCE AUTOMATION SYSTEMS AND PROVIDING ELECTRONIC SECURITY S ERVICES. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 ON 14/08/2012 ADMITTING NIL INCOME AFTER CLAIMING SET OFF OF CARRIED FORWARD LOSS OF 78,06,130/ - . THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. ON 21/11/2011 APPELLANT RECEIVED A SUM OF 13,00,000/ - FROM ITS DIRECTOR SRI CHENNUPATI JAGANMOHAN RAO THROUGH ACCOUNT PAYEE CHEQUE NO. 123667 ISSUED ON CANARA BANK, GOVERNMENT BRANCH, VIJAYAWADA . THIS GURUNANAK NAGAR, VIJAYAWADA AND THE SAME WAS CREDITED ON 22/11/2011 BY THE APPELLANTS B ANK BEFORE CLEARANCE. HOWEVER, ON CLEARING IT WAS RETURNED ON 22.11.2011 ITSELF AS EVIDENCED BY THE BANK STATEMENT ENCLOSED HEREWITH. THE REASON FOR THE DISHONOR OF CHEQUE IS IT IS A NON MICR CHEQUE. THIS FACT WAS CAME TO KNOW TO THE APPELLANT ON 23.11.20 11. AS THERE WERE IMMEDIATE COMMITMENTS TO BE HONOURED APPELLANT TOOK CASH FROM THE DIRECTOR A SUM OF RS. 12,00,000/ - ON 23.11.2011 BY WITHDRAWING THE SAME FROM THE DIRECTORS BANK ACCOUNT WITH CANARA BANK, GOVERNORPET, VIJAYAWADA. COPY OF THE CANARA BANK A CCOUNT OF THE DIRECTOR IS ENCLOSED HEREWITH. OUT OF THE SUM RECEIVED A SUM OF RS. 11,50,000/ - WAS DEPOSITED INTO THE APPELLANT'S BANK ACCOUNT ON THE SAME DAY, AFTER KEEPING RS. 50,000/ - IN CASH FOR OTHER PURPOSES. FROM THE ABOVE IT IS CLEAR THAT APPELLANT TRIED TO HONOUR THE LAW BY RECEIVING THE ACCOUNT PAYEE CHEQUE AND DEPOSITED THE SAME INTO THE BANK. ON COMING TO KNOW ITS DISHONOR DUE TO TECHNICAL REASON TO MEET THE IMMEDIATE REQUIREMENTS IT BORROWED THE AMOUNT IN CASH TO MITIGATE THE BUSINESS EXIGENCIES. THE AMOUNT BORROWED WAS A GENUINE TRANSACTION BEING WITHDRAWAL OF AMOUNT FROM THE DIRECTOR'S BANK ACCOUNT ON 23.11.2011 ITSELF AND USED FOR DEPOSIT INTO APPELLANT'S BANK ACCOUNT FOR THE SIMPLE REASON THAT THE DIRECTOR'S AND APPELLANT'S BANK ACC OUNTS ARE NOT IN SAME BANK. THIS CONSTITUTE REASONABLE CASE U/$.273B OF THE INCOME TAX ACT AND GOODSELVES ARE REQUESTED TO DELETE THE PENALTY LEVIED U/S.271D OF THE INCOME TAX ACT. APPELLANT WISH TO BRING TO YOUR KIND NOTICE THAT THE FOLLOWING LEGAL DECISI ONS IN ITS FAVOUR: 1. SHRISTI LIFE NEEDS PRIVATE LIMITED VS. ADD!. CIT (2015) TAXPUB (DT) 764 (HYD - TRIB) 4 ITA NO. 426/VIZ/2016 ( M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD. ) 2. CHAWALA CHEMTECH PRIVATE LIMITED VS. JOINT COMMISSIONER OF INCOME TAX, GOBINDGARH (2016) 158 ITD 48 (CHANDIGARH) 3. VALLEY EXTRACTION PRIVATE LIMITED VS. JOINT COMMISSIONER OF INCOME TAX, RANGE, SHIMLA (2016) 158ITDS 976 (CHANDIGARH - TRIB) 4. CIT VS. BALAJI TRA303 ITR 312 (MAD) 5. CIT VS. SUNIL KUMAR GOEL 315 ITR 163(P&H) I N VIEW OF THE ABOVE SUBMISSIONS, YOUR APPELLANT PRAYS DELETION OF PENALTY OF RS. 12,00,000/ - LEVIED BY THE LEARNED ASSESSING OFFICER U/S.271D OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2012 - 16. 4 . THE LD. CIT(A) AFTER CONSIDERING THE SAME , CANCELLED THE PENALTY LEVIED BY THE ADDITIONAL COMMISSIONER BY OBSERVING THAT THE EXCEEDING OVERDRAFT , THOUGH MAY NOT BE SUDDEN, IS DEFINITELY A COMPELLING CIRCUMSTANCES AND REASONABLE CAUSE FOR OBTAINING LOAN , B Y CASH , FROM THE DIRECTOR AND T HE EXPEDIENCY OF THE ACTION IS NOT FOR THE REVENUE TO CONSIDER AND THE MATTER IS ENTIRELY LEFT TO THE JUD GMENT OF THE ASSESSEE. 5. ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 6 . LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER , WHEREAS AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 7 . THE ASSESSEE IS A PRIVATE LIMITED COMPANY HAVING ACCOUNT WITH SBI WITH OVERDRAFT FACILITY. THE CHEQUE ISSUED BY THE ASSESSEE - COMPANY WAS NOT HONOURED BY THE SBI DUE TO EXCEEDING LIMIT OF OVERDRAFT FACILITY PROVIDED BY THE BANK. ONE OF THE DIRECTORS SRI CHENNUPATI JAGANMOHAN RAO HAS WITHDR A W N THE CASH FROM HIS PERSONAL ACCOUNT WITH C A NARA BANK AND THE SAME IS DEPOSITED IN SBI ACCOUNT TO HONOUR THE BUSINESS COMMITMENTS OF THE ASSESSEE - COMPANY . THESE FACTS ARE NOT DISPUTED 5 ITA NO. 426/VIZ/2016 ( M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD. ) BY THE DEPARTMENT. THE ONLY OBJECTION RAISED BY THE ADDITIONAL COMMISSIONER IS THAT THE DIRECTOR OF THE COMPANY IS WELL AWARE OF THE FINANCIAL POSITION OF THE ASSESSEE AND ALSO OBSERVED THAT THE ASSESSEE - COMPANY CAN POSTPONE THE COMMITMENTS, THEREFORE, ACCEPTING CASH IS NOT A REASONABLE CAUSE AND THERE IS NO BUSINESS EXIGENCY , HENCE EXPLANATION GIVEN BY THE ASSESSEE IS REJECTED AND PENALTY UNDER SECTION 271D WAS IMPOSED. 8 . THE LD. CIT(A) BY CONSIDERING THE FACTS, HE IS OF THE OPINION THAT IT IS A FACT THAT OVERDRAFT FACILITY OF THE ASSESSEE - COMPANY WITH SBI IS EXCEEDED AND THEREFORE, CHEQUE ISSUED BY THE COMPANY WAS DISHONOURED AND THEN ONLY , THE DIRECTOR OF THE COMPANY WITHDREW THE CASH FROM HIS PERSONAL ACCOUNT WITH CANARA BANK AND DEPOSITE D THE MONEY IN ASSESSEES ACCOUNT TO COMPLETE WITH THE DAY TO DAY COMMITMENT S AS IT IS FOR THE BUSINESS EXPEDIENCY AND ALSO REASONABLE CAUSE FOR THE ASSESSEE TO ACCEPT MONEY IN CASH. WE FIND THAT WHEN THE CHEQUE ISSUED BY THE ASSESSEE - COMPANY IS DISHONOUR ED ON THE GROUND OF EXCEEDING THE OVERDRAFT LIMITS, IT IS A MINIMUM NECESSITY TO CARRY OUT THE ACTIVITY OF THE ASSESSEE AND THE RE F O RE SRI CHENNUPATI JAGANMOHAN RAO , WHO IS ONE OF THE DIRECTORS OF THE COMPANY WITHDREW THE CASH FROM HIS PERSONAL ACCOUNT AND DEPOSITED THE SAME IN THE COMPANYS ACCOUNT. THEREFORE, UNDER THOSE FACTS AND CIRCUMSTANCES OF THE CASE , LOAN TAKEN FROM SRI CHENNUPATI JAGANMOHAN RAO FOR THE PURPOSE OF HONOUR THE COMMITMENTS IS A REASONABLE CAUSE. IN VIEW OF THE ABOVE, WE FIND NO 6 ITA NO. 426/VIZ/2016 ( M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD. ) INFIR M ITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 1 8 T H DAY OF OCTOBER , 201 7 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 8 T H OCTOBER , 201 7 . VR/ - COPY TO: 1. THE ASSESSEE - M/S. E - ZONE SECURITY SOLUTIONS (INDIA) PVT. LTD., D.NO. 6 - 1 - 7/1, NEAR SIDDHARTHA ARTS COLLEGE, SIDDHARTHA NAGAR, VIJAYAWADA. 2. THE REVENUE DCIT, CIRCLE - 2(1), VIJAYAWADA. 3. THE PCIT, VIJAYAWADA. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM . 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.