ACIT 12(2)(2), MUMBAI V. GUJARAT GAURAV INN HOTELS P.LTD, MUMBAI

ITA 4406/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0266 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Source of fund; Reasonable cause
• Section: 273B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4406/MUM/2016 ASSESSMENT YEAR: 2011 - 12 ASST. CIT - 12(2)(2), ROOM NO. 145, 1 ST FLOOR, AAYAKAR BHAVAN M.K. ROAD, MUMBAI - 400020 VS. M/S GUJRAT GAURAV INN HOTELS PVT. LTD. RAJ NAGAR, W.E. HIGHWAY, OPP. RAJ NAGAR, BEFORE CHECKNAKA, DAHISAR (E), MUMBAI - 400066. PAN NO. AAACG4095J APPELLANT RESPONDENT REVENUE BY : MR. V. VIDHYADHAR, DR ASSESSEE BY : MR. PRAKASH G. JHUNJHUNWALA , AR DATE OF HEARING : 24/01/2018 DATE OF PRONOUNCEMENT : 14/02/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2011 - 12 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 20 , MUMBAI AND ARISES OUT OF PENALTY ORDER U/S 271E OF THE INCOME TAX ACT 1961, (THE ACT). THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY U/S 271E, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE MADE REPAYMENT OF LOAN TO THE EXTENT OF RS.27,00,000/ - IN CASH, THUS VIOLATING THE PROVISIONS OF SECTION 269T OF THE ACT. M/S GUJRAT GAURAV INN HOTELS ITA NO. 4406/MUM/2016 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE APPELLANT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31.03.2013 DECLARING A TOTAL LOSS OF RS.43,14,659/ - . THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 27.03.2014 DETERMINING THE INCOME AT RS.11,74,138/ - . NO ADDITION WAS MADE BY HIM IN THE ASSESSMENT ORDER ON ACCOUNT OF LOANS OR DEPOSITS ACCEPTED AND/OR REPAID BY THE APPELLANT. HOWEVER, THE ADDL. CIT, RANGE - 9(1), MUMBAI VIDE ORDER DATED 29.09.2014 LEVIED PENALTY OF RS.1,14,88,049/ - U/S 271E IN RESPECT OF THE FOLLOWING JOURNAL ENTRIES AND CASH PAYMENTS: SR. NO. DATE PARTICULARS AMOUNT NATURE OF ENTRY 1. 31.03.2011 JIBRAN CHAMADIA PRAKASH H. SHETYE TO RS.5,00,000/ - JOURNAL ENTRY 2. 31.03.2011 SURJETSINGH P. MANCHANDA JIBRAN CHAMADIA TO RS.30,00,000/ - JOURNAL ENTRY 3. 31.03.2011 JIBRAN CHAMADIA RS.3,00,000/ - CASH PAYMENT 4. 31.03.2011 LATE SULEMAN CHAMADIA B.D. VASANI TO RS.1,19,435/ - JOURNAL ENTRY 5. 31.03.2011 LATE SULEMAN CHAMADIA B.D. VASANI TO RS.50,000/ - JOURNAL ENTRY 6. 31.03.2011 LATE SULEMAN CHAMADIA PRAKASH H. SHETYE TO RS.4,17,500/ - JOURNAL ENTRY 7. 31.03.2011 LATE SULEMAN CHAMADIA HDFC BANK LOAN TO RS.29,671/ - JOURNAL ENTRY 8. 31.03.2011 LATE SULEMAN CHAMADIA BARCLAYS BANK LOAN TO RS.2,66,477/ - JOURNAL ENTRY 9. 31.03.2011 LATE SULEMAN CHAMADIA RELIANCE CAPITAL FINANCE LOAN TO RS.56,031/ - JOURNAL ENTRY 10. 31.03.2011 LATE SULEMAN CHAMADIA RS.3,00,000/ - CASH PAYMENT M/S GUJRAT GAURAV INN HOTELS ITA NO. 4406/MUM/2016 3 11. 01.04.2010 KOTAK MAHINDRA BANK RUKSANA CHAMADIA TO RS.44,204/ - JOURNAL ENTRY 12. 23.11.2010 JANSEVA SAHAKARI BANK LOAN RUKSANA CHAMADIA TO RS.1,91,283/ - JOURNAL ENTRY 13. 18.01.2011 CITI BANK LOAN RUKSANA CHAMADIA TO RS.35,299/ - JOURNAL ENTRY 14. 23.03.2011 KOTAK MAHINDRA BANK RUKSANA CHAMADIA TO RS.9,27,526/ - JOURNAL ENTRY 15. 23.03.2011 RELIGARE FINVEST LTD. RUKSANA CHAMADIA TO RS.1,82,500/ - JOURNAL ENTRY 16. 25.03.2011 RELIGARE FINVEST LTD. RUKSANA CHAMADIA TO RS.3,05,000/ - JOURNAL ENTRY 17. 31.03.2011 GULBANU CHAMADIA SHRI PRAKASH H. SHETYE TO RS.5,00,000/ - JOURNAL ENTRY 18. 31.03.2011 GULBANU CHAMADIA RS.3,00,000/ - CASH PAYMENT 19. 31.03.2011 RUKSANA CHAMADIA RS.18,00,000/ - CASH PAYMENT 20. 31.03.2011 RUKSANA CHAMADIA FIXED ASSETS (A.C., ETC) TO RS.21,63,123/ - JOURNAL ENTRY ------------------- TOTAL RS.1,14,88,049/ - JOURNAL ENTRIES RS.87,88,049/ - CASH RS.27,00,000/ - ============ 3. AGGRIEVED BY THE ORDER OF THE ADDL. CIT, THE APPELLANT FILED AN APPEAL BEFORE THE LD. C IT(A). THE LD. CIT(A) HELD THAT (I ) NEITHER THE GENUINENESS OF THE REPAYMENT OF LOAN/DEPOSIT NOR THE TRANSACTION OF REPAYMENT OF LOAN BY WAY OF ADJUSTMENT THROUGH BOOK ENTRIES CARRIED OUT IN THE ORDINARY COURSE OF BUSINESS HAD BEEN DOUBTED IN THE REGULAR ASSESSMENT WHERE THESE TRANSACTIONS WERE ACCEPTED AS GENUINE, (II) THERE IS NOTHING ON RECORD TO SUGGEST THAT THE AMOUNTS ADVANCED BY DIRECTORS OF THE COMPANY TO THE ASSESSEE REPRESENTED THE UNACCOUNTED M/S GUJRAT GAURAV INN HOTELS ITA NO. 4406/MUM/2016 4 MONEY OF THE DIRECTORS OR THE ASSESSEE WHICH WAS BEING BROUGHT IN THE BOOK S DISGUISED AS LOANS OR DEPOSIT, (III) THOUGH THERE IS A TECHNICAL BREACH OF PROVISIONS OF SECTION 269T, THE ASSESSEE HAS SHOWN REASONABLE CAUSE AS PER PROVISIONS OF SECTION 273B WHICH WAS DEMONSTRATED DURING THE PENALTY PROCEEDING, (IV) THE ASSESSEE HAD A REASONABLE CA USE FOR ENTERING INTO THE TRANSACTIONS, WHICH WERE DONE IN THE NORMAL COURSE OF BUSINESS. THE LD. CIT(A), THEN FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD. (2012) 345 ITR 270 (BOM) ALLOWED THE A PPEAL FILED BY THE ASSESSEE. 4. BEFORE US, THE LD. DR SUPPORTS THE ORDER PASSED BY THE ADDL. CIT IN RESPECT OF REPAYMENT OF LOAN TO THE EXTENT OF RS.27,00,000/ - IN CASH THUS VIOLATING THE PROVISIONS OF SECTION 269T OF THE ACT. 5. ON THE OTHER HAND, THE L D. COUNSEL OF THE APPELLANT SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) AND SUBMITS THE FOLLOWING EXPLANATION. SR. NO. AMOUNT PARTICULARS BONAFIDE EXPLANATION/REASONABLE 1. RS.18,00,000/ - (15,00,000/ - + 3,00,000/ - ) RUKSANACHAMADIA A. AFTER DEATH OF MR. SULEMAN CHAMADIA ON 21.04.2010, THE NASIK HOTEL PROJECT WAS ABANDONED AND WAS TAKEN - OVER BY OTHER DIRECTORS/RELATIVES IN THEIR OVERDUE BANK LOANS AND INTEREST WERE REPAID BY THE DIRECTORS. ALSO, CASH EXPENDITURE INCURRED BY THE ASSESSEES HOTEL WAS TRANSFE RRED TO DIRECTORS ACCOUNT; B. THE EMI, BANK INTEREST AND BANK LOANS WERE IMMEDIATELY REQUIRED TO BE PAID ON 2. RS.3,00,000/ - JIBRANCHAMADIA 3. RS.3,00,000/ - SULEMAN CHAMADIA M/S GUJRAT GAURAV INN HOTELS ITA NO. 4406/MUM/2016 5 4. RS.3,00,000/ - GULBANUCHAMADIA URGENCY BASIS AND SINCE APPELLANT DID NOT HAVE ADEQUATE RESOURCES TO PAY SUCH BANK LOANS, THUS, THE DIRECTORS/RELATIVES MADE THE PAYMENTS OUT OF THEI R PERSONAL FUNDS AND APPELLANT REIMBURSED SUCH MONEY TO THEM; C. IT IS NOT A CASE OF REPAYMENT OF LOAN IN CASH BUT IN A CASE OF REIMBURSEMENT OF MONEY IN CASH TO THE DIRECTOR WHO HAD REPAID THE BANK LOANS ON URGENCY BASIS OUT OF THEIR PERSONAL SOURCE OF FUND S; D. THE GENUINENESS OF THE TRANSACTIONS IS NOT DOUBTED IN ASSESSMENT. RELIANCE IS PLACED BY HIM ON THE DECISION IN ADIT (INV.) V. KUM . A.B. SHANTI 255 ITR 258 (SC), CIT V. DIMPAL YADAV/AKHILESH KUMAR YADAV 379 ITR 177 (ALL - HC), CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD . 345 ITR 270 (BOM - HC), CIT V. SHREE AMBICA FLOUR MILLS CORPORATION 76 CCH 554 (GUJ - HC), CIT V. M. RAMAKRISHNAN 63 T A XMANN.COM 321 (MAD - HC) AND CIT V. T. PERUMAL (IN DL.) 53 TAXMANN.COM 17 (MAD - HC). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN TRIUMPH INTERNATIONAL FINANCE (I) LTD . (SUPRA), THE HONBLE BOMBAY HIGH COURT HAS HELD: HOWEVER, IN THE ABSENCE OF ANY FINDING RECORDED IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER TO THE EFFECT THAT THE REPAYMENT OF LOAN/DEPOSIT WAS NOT A BONAFIDE TRANSACTION AND WAS MADE WITH A VIEW TO EVADE TAX, WE HOLD THAT THE CAUSE SHOWN BY THE ASSESSEE WAS A REASONABLE CAUSE AND THEREFORE, IN VIEW OF SECTION 273B OF THE ACT, NO PENALTY U/S 271E COULD BE IMPOSED FOR CONTRAVENING THE PROVISIONS OF S. 269T OF THE ACT. M/S GUJRAT GAURAV INN HOTELS ITA NO. 4406/MUM/2016 6 IN THE INSTANT CASE, WE FIND THA T NEITHER THE AO NOR THE ADDL. CIT HAS RECORDED A FINDING IN THE ASSESSMENT ORDER OR THE PENALTY ORDER TO THE EFFECT THAT THE REPAYMENT OF LOAN/DEPOSIT WAS NOT A BONAFIDE TRANSACTION AND WA S MADE WITH A VIEW TO EVADE TAX. IN T. PERUMAL (INDL.) (SUPRA), TH E HONBLE MADRAS HIGH COURT HELD THAT RECEIPT AND REPAYMENT OF LOAN IN CASH DUE TO IMMEDIATE BUSINESS NECESSITY WOULD AMOUNT TO REASONABLE CAUSE FOR NOT LEVYING PENALTY U/S 271D AND 271E. WE FIND THAT IN THE PRESENT CASE THE RECEIPT AND REPAYMENT OF LOAN IN CASH WAS DUE TO IMMEDIATE BUSINESS NECESSITY OF THE APPELLANT. AS NOTED EARLIER, WE ARE CONCERNED IN THIS APPEAL WITH THE PENALTY U/S 271E ON REPAYMENT OF LOAN IN CASH TO THE EXTENT OF RS. 27,00,000/ - ONLY. IN VIEW OF THE FACTUAL SCENARIO IN THE PRESENT CASE, FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISION S, WE UPHOLD THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/02/2018. SD/ - SD/ - ( D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 14/02/2018 RAHUL SHARMA, SR. P.S. M/S GUJRAT GAURAV INN HOTELS ITA NO. 4406/MUM/2016 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI