Dy.Director of Incometax, Cochin V. Sri.Parayil Balan Nair, Kannur

ITA 460/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69041 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 03-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 25-06-2013
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: K KITTU
• Keywords: Income from undisclosed sources; Search and seizure; Reasonable cause
• Section: 273B; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 460/COCH/2013 ASSESSMENT YEAR : 2008-09 THE DEPUTY DIRECTOR OF INTERNATIONAL TAXATION, KOCHI. VS. SHRI PARAYIL BALAN NAIR, XI/291, RAMKRIPA, P.O. ALAVIL, KANNUR-670 002. [PAN: ABIPN 8694G] (REVENUE -APPELLANT) (REVENUE-R ESPONDENT) REVENUE BY SMT. LATHA V. KUMAR, JR. DR ASSESSEE BY SHRI K. KITTU, ADV. DATE OF HEARING 03/10/2013 DATE OF PRONOUNCEMENT 22/11/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 17-01-2013 PASSED BY LD CIT(A)-I, KOCHI AND IT RELATES TO THE ASSESSM ENT YEAR 2008-08. THE PENALTY OF RS.15,00,000/- LEVIED U/S 271D OF THE ACT, HAVING B EEN DELETED BY LD CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US. 2. THE FACTS RELATING TO THE SAID ISSUE ARE SET OUT IN BRIEF. THE ASSESSEE IS A NON- RESIDENT AND IS HAVING BUSINESS IN DUBAI, ABUDHABI AND ALSO IN INDIA. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS U/S 132 O F THE ACT IN THE HANDS OF THE ASSESSEE. DURING THE COURSE OF SEARCH ASSESSMENT P ROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS ACCEPTED A LOAN OF RS.15.00 LAKHS BY WAY OF CASH DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2008-09. HENC E, HE REFERRED THE MATTER OF VIOLATION OF PROVISIONS OF SEC. 269SS OF THE ACT TO THE JOINT COMMISSIONER OF INCOME TAX (JCIT), WHO INITIATED PENALTY PROCEEDINGS U/S 271D OF THE ACT. I.T.A. NO.460/COCH/2013 2 3. BEFORE LD JCIT, IT WAS SUBMITTED THAT THE ABO VE SAID AMOUNT OF RS.15.00 LAKHS WAS GIVEN BY ONE SHRI K.C. BASHEER, WHO PAID THE SAME O N BEHALF OF HIS NRI BROTHER NAMED SHRI K.C. USAMAN. IT WAS FURTHER STATED THAT THE S AID CASH WAS HANDED OVER TO ONE SHRI SREEDHARAN NAIR ON BEHALF OF THE ASSESSEE HEREIN. THE ASSESSEE ALSO FILED A CONFIRMATION LETTER DATED 13.12.2010 OBTAINED FROM SHRI K.C. BASHEER, STATED ABOVE, WHEREIN HE CONFIRMED ABOUT THE PAYMENT OF RS.15.00 LAKHS AS LOAN BY HIS BROTHER TO THE ASSESSEE HEREIN AND SUBMITTED THE SAME TO THE A SSESSING OFFICER. SUBSEQUENTLY, DURING THE COURSE OF PENALTY PROCEEDINGS BEFORE JCI T, SHRI K.C. BASHEER GAVE ANOTHER LETTER DATED 04.03.2011, WHEREIN IT WAS STATED THAT THE ABOVE SAID AMOUNT OF RS.15.00 LAKHS REPRESENTS ADVANCE GIVEN BY HIS BROTHER FOR P URCHASE OF A PROPERTY. 4. THE ASSESSEE SUBMITTED THAT HIS FOUR CHILDREN HAD AGREED TO SELL A PROPERTY TO SHRI K.C. USMAN FOR A CONSIDERATION OF RS.50.00 LAKHS AN D IN THIS CONNECTION; HE RECEIVED A SUM OF RS.15.00 LAKHS AS ADVANCE. THE ASSESSEE SUB MITTED THAT THE IMPUGNED AMOUNT OF RS.15.00 LAKHS REPRESENTS THIS ADVANCE AND HENCE THE PROVISIONS OF SEC. 269SS DOES NOT APPLY TO THIS AMOUNT. THE JCIT NOTICED THAT THE AGREEMENT WAS VALID FOR A PERIOD OF SIX MONTHS FROM 21.1.2008 AND FURTHER THE AGREEM ENT WAS NOT FOUND REGISTERED WITH THE REGISTRAR OFFICE. FURTHER THE ASSESSEE HAS CLA IMED TO HAVE RETURNED THE ABOVE SAID AMOUNT ONLY DURING OCTOBER, 2010 TO DECEMBER, 2010. THE ASSESSEE ALSO DID NOT EXPLAIN AS TO WHY HE KEPT THE AMOUNT FOR ABOUT 2 YE ARS. ACCORDINGLY, THE JCIT REJECTED THE EXPLANATIONS GIVEN BY THE ASSESSEE AND LEVIED A PENALTY OF RS.15.00 LAKHS U/S 271D OF THE ACT. 5. THE LD CIT(A), HOWEVER, DELETED THE PENALTY M AINLY HOLDING THAT THE EXPLANATIONS GIVEN BY THE ASSESSEE FIT IN NORMAL HUMAN PROBABILI TIES AND HENCE THE PROVISIONS OF SEC. 269SS, WHICH DEALS WITH THE ACCEPTANCE OF LOAN OR D EPOSIT, COULD NOT BE APPLIED TO THE ADVANCE TAKEN FOR SALE OF PROPERTY. ACCORDINGLY, H E DELETED THE PENALTY OF RS.15.00 LAKHS LEVIED U/S 271D OF THE ACT. AGGRIEVED, THE R EVENUE HAS FILED THIS APPEAL BEFORE US. I.T.A. NO.460/COCH/2013 3 6. THE LD D.R SUBMITTED THAT THE ASSESSEE HAS F AILED TO PROVE THAT THE IMPUGNED AMOUNT REPRESENTS PROPERTY ADVANCE, AS THE CONFIRMA TION LETTERS GIVEN BY SHRI K.C. BASHEER ARE CONTRADICTORY. THE LD D.R FURTHER SUBM ITTED THAT THE SO CALLED SALE AGREEMENT WAS SIGNED BY ONE SHRI V.V. SREEDHARAN, O N BEHALF OF THE CHILDREN OF THE ASSESSEE AND FURTHER THE SALE AGREEMENT WAS NOT ALS O FOUND TO BE A REGISTERED ONE. HENCE THE AO HAS REJECTED THE CLAIM OF RECEIPT OF A DVANCE FOR SALE OF A PROPERTY. SHE FURTHER SUBMITTED THAT THE GENUINENESS OF RECEIPT O F LOAN WOULD NOT TAKE AWAY THE IMPUGNED TRANSACTION FROM THE PURVIEW OF THE PROVIS IONS OF SEC. 269SS/271D OF THE ACT. IN THIS REGARD, SHE PLACED RELIANCE ON THE THIRD ME MBER DECISION OF THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VINMA N FINANCE & LEASING LTD (115 ITD 115)(VISAK.)(TM). ACCORDINGLY THE LD D.R SUBMITTED THAT THE NON-GENUINE CASH CREDITS SHALL BE ASSESSED AS THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 7. ON THE CONTRARY, THE LD A.R PLACED HEAVY REL IANCE ON THE ORDER PASSED BY LD CIT(A). HE FURTHER SUBMITTED THAT THE ASSESSEE HAD BROUGHT IN ABOUT RS.3.00 CRORES FROM ABROAD AND HENCE THERE WAS NO NECESSITY FOR HI M TO TAKE THE LOAN IN CASH. HE SUBMITTED THAT THE SAID AMOUNT REPRESENTS PROPERTY ADVANCE AND HENCE THE PROVISIONS OF SEC. 269SS SHALL NOT APPLY TO THE SAME. REFERRI NG TO THE CIRCULAR NO. 387 DATED 6.7.1984 ISSUED BY CBDT (153 ITR (ST.) 22), THE LD A.R SUBMITTED THAT THE CBDT HAS EXPLAINED THAT THE PROVISIONS OF SEC. 269SS SHALL B E APPLICABLE TO CASES WHERE UNACCOUNTED INCOME UNEARTHED BY THE DEPARTMENT, BUT COULD NOT ASSESSED ON ACCOUNT OF THE DEVICES ADOPTED BY THE ASSESSEE SUBSEQUENT T O THE SEARCH ACTION. THE LD A.R SUBMITTED THAT THE IMPUGNED AMOUNT OF RS.15.00 LAKH S WAS NOT TREATED AS THE INCOME OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE GEN UINENESS OF THE RECEIPT OF RS.15.00 LAKHS WAS NOT DOUBTED BY THE ASSESSING AUTHORITIES. ACCORDINGLY, HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN CANCELLING THE PENALTY. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. IN THE FIRST PLACE, WE NOTICE THAT THE THEORY OF RECEIPT OF RS.1 5.00 LAKHS AS PROPERTY ADVANCE DOES NOT FIND TO BE A CONVINCING ONE TO US FOR THE FOLLO WING REASONS. I.T.A. NO.460/COCH/2013 4 (A) THE PROPERTY WAS SAID TO BELONG TO THE FOUR CH ILDREN OF THE ASSESSEE. FROM THE RECITALS MADE IN THE AGREEMENT, IT IS SEEN THAT TWO PERSONS ARE RESIDING IN INDIA AND OTHER TWO PERSONS ARE DOING BUSINESS ABRO AD. HOWEVER, THE SAID AGREEMENT WAS SIGNED BY ONE SHRI V.V. SREEDHARAN, O N BEHALF OF THE FOUR CHILDREN OF THE ASSESSEE. IT IS NOT EXPLAINED AS T O HOW A THIRD PERSON COULD ENTER INTO SUCH AN AGREEMENT, THAT TOO FOR SALE OF A PROP ERTY. THE REASON WHY THE FOUR CHILDREN OR AT LEAST THE TWO PERSONS WHO ARE R ESIDING IN KATHIRUR VILLAGE, TELLICHERRY TALUK, DID NOT SIGN THE SAID AGREEMENT IS ALSO NOT EXPLAINED. (B) THE PROPERTY, THAT WAS PROPOSED TO BE SOLD IS DESCRIBED AS UNDER IN THE AGREEMENT:- 0.20 CENTS OF LAND WITH OLD BUILDING NO. IV/308 AND WELL IN OLD SURVEY 4/3 AND RESURVEY 577W1B11 KORAMBATH SOUTH AMSAM PAR AMBA WITH USUFRUCTS. IT IS SEEN THAT THE DESCRIPTION OF THE PROPERTY IS INCOMPLETE, I.E., THE USUAL PRACTICE OF DESCRIBING THE SURROUNDING PROPERTIES O N THE FOUR SIDES OF THE IMPUGNED PROPERTY IS ABSENT HERE. FURTHER THE AREA OF THE PROPERTY WAS MENTIONED AS 0.20 CENTS, WHICH CONVERTS INTO JUST A BOUT 86 SQ. FT. THE SALE VALUE OF RS.50.00 LAKHS MENTIONED IN THE AGREEMENT FOR SUCH A SMALL PROPERTY IS HIGHLY DISPROPORTIONATE. (C) THE REASON FOR NOT EXECUTING THE SALE DEED WIT HIN THE PERIOD OF SIX MONTHS FROM THE DATE OF THE AGREEMENT, VIZ., 21.1.2008 WAS NOT GIVEN. (D) NO FURTHER MATERIALS IN THE FORM OF CONFIRMATI ON LETTERS FROM THE BUYER OR THE CHILDREN OF THE ASSESSEE WERE FURNISHED TO SUBSTANT IATE THE EXPLANATIONS. (E) THE REASON FOR THE DELAY OF ABOUT TWO YEARS IN RETURNING THE ADVANCE AMOUNT OF RS.15.00 LAKHS WAS NOT EXPLAINED. (F) THE AGENT OF THE BUYER SHRI K.C. BASHEER GAVE A LETTER DT. 13.12.2010 BEFORE THE AO, WHEREIN THE TRANSACTION WAS MENTIONED AS LO AN TRANSACTION. HOWEVER, BEFORE THE JCIT THE SAID PERSON HAS CHANGED HIS STA ND AND HAS STATED THE SAME AS PROPERTY ADVANCE IN HIS LETTER DATED 04.03.2011 FILED WITH JCIT. IT IS TO BE NOTED HERE THAT THE ASSESSEE HEREIN HAS STARTED REP AYING THE AMOUNT FROM 20.10.2010 ONWARDS, I.E., DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. HOWEVER, THE LETTERS FURNISHED BY SHRI K.C. BASHEER DID NOT MENTION ABOUT THE REPAYMENTS NOR DID IT STATE ABOUT THE REASONS FOR C ANCELLATION OF THE SALE AGREEMENT. THE NAMES OF CHILDREN OF THE ASSESSEE O R THE DETAILS OF PROPERTY ALSO DO NOT FIND PLACE IN THE SAID LETTERS. (G) IF THE AMOUNT OF RS.15.00 LAKHS WAS RECEIVED A S ADVANCE FOR SALE OF PROPERTY BELONGING TO FOUR CHILDREN OF THE ASSESSEE, THEN TH E SAID AMOUNT BELONG TO THEM I.T.A. NO.460/COCH/2013 5 ONLY AND THE ASSESSEE SHALL BE DEEMED TO HAVE RECEI VED THE AMOUNT FROM HIS CHILDREN ONLY. HOWEVER, THE LETTERS WRITTEN BY SHR I K.C. BASHEER DO NOT MENTION ABOUT THE CHILDREN OF THE ASSESSEE. THE ASSESSEE H AS ALSO FAILED TO FURNISH ANY CONFIRMATION LETTERS FROM HIS CHILDREN. FURTHER THE LD COUNSEL FOR THE ASSESSEE HAD ADMITTE D BEFORE JCIT THAT THE ASSESSEE DID NOT MAINTAIN ANY ACCOUNTS FOR LAND TRANSACTIONS AND HE COULD NOT FURNISH THE DETAILS OF UTILISATION OF RS.15.00 LAKHS. HENCE, WE ARE OF TH E VIEW THAT THE CLAIM OF THE ASSESSEE THAT IT REPRESENTS THE ADVANCE RECEIVED FOR SALE OF PROPERTY BELONGING TO HIS FOUR CHILDREN DOES NOT STAND SUBSTANTIATED AND HENCE THE SAID EXPLANATION IS LIABLE TO BE REJECTED. HENCE, IN OUR VIEW, THE AO WAS JUSTIFIED IN REJECTING THIS CLAIM AND ACCORDINGLY, IN OUR VIEW, THE LD CIT(A) WAS NOT JUS TIFIED IN ACCEPTING THE CONTENTIONS OF THE ASSESSEE WITHOUT CONDUCTING FURTHER ENQUIRIES T O ASCERTAIN ABOUT THE VERACITY OF THE SAID CLAIM. 9. THE LD COUNSEL SUBMITTED THAT THE GENUINENESS OF THE RECEIPT OF RS.15.00 LAKHS HAS BEEN ACCEPTED AND HENCE THERE IS NO QUESTION OF UNA CCOUNTED INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY HE CONTENDED THAT THERE IS NO JURISDICTION TO THE JCIT TO LEVY PENALTY U/S 271D OF THE ACT. IN THIS REGARD, WE MA Y NOTICE THAT THE PROVISOS TO SEC. 269SS LIST OUT CERTAIN EXCEPTIONS AND THE TRANSACTI ONS FALLING WITHIN THOSE PROVISIONS WILL NOT BE HIT BY THE PROVISIONS OF SEC. 269SS OF THE A CT. FURTHER, THE PROVISIONS OF SEC. 273B PROVIDE THAT THE PENALTY U/S 271D MAY NOT BE L EVIED, IF A REASONABLE CAUSE IS SHOWN. WE NOTICE THAT THE AO HAS DULY EXAMINED TH E CASE OF THE ASSESSEE WITH REGARD TO THE ABOVE SAID PROVISIONS, WHICH IS EVIDENT FROM THE FOLLOWING OBSERVATIONS MADE BY HIM:- 7. IT CANNOT BE A CASE WHERE THE LENDERS DID NOT HAVE ANY BANK ACCOUNT OR A CASE WHERE THERE WAS COMPELLING CIRCUMSTANCE O R A CASE WHERE THE ASSESSEE IS LOCATED IN A RURAL AREA OR A CASE WHERE THE ASSESSEE DEALING IN CRORES WAS NOT AWARE OF THE LEGAL ASPECT OF RECE IPT OF A CASH LOAN OR THERE WAS ANY REASONABLE CAUSE FOR RECEIPT OF THIS LOAN. IT CANNOT BE FOR THE EXIGENCIES OF THE BUSINESS BECAUSE AS NOTED IN THE ORDER SHEET THROUGH HIS REPRESENTATIVES, THE ASSESSEE IS UNABLE TO STATE THE UTILIZATION OF THE FUNDS. UNDER THE CIRCUMSTANCES IN VIEW OF THE FACT THAT T HE ASSESSEE CLEARLY CONTRAVENED THE PROVISIONS OF SECT ION 269SSHE SHALL BE LIABLE FOR PENALTY U/S. 271D. SECTION 271D STATES IF A PERSON TAKES OR ACCEPTS ANY LOAN OR I.T.A. NO.460/COCH/2013 6 DEPOSIT IN CONTRAVENTION OF THE PROVISIONS OF SECTI ON 269SS HE SHALL BE LIABLE TO PAY BY WAY OF PENALTY A SUM EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. 10. IN THE CASE OF VINMAN FINANCE & LEASING LTD (SUPRA), IT HAS BEEN HELD THAT THE GENUINENESS OF THE LOAN DOES NOT TAKE WAY THE SAID LOAN FROM THE SWEEP OF THE PROVISIONS OF SEC. 269SS OF THE ACT. HENCE, WE ARE UNABLE TO AGREE WITH THE SUBMISSIONS MADE BY LD A.R IN THIS REGARD. WE HAVE ALREADY NOTICED THAT THE ASSESSEE HAS FAILED TO SHOW THAT THE IMPUGNED TRANSACTION WI LL FALL IN THE CATEGORY OF TRANSACTIONS PRESCRIBED UNDER THE PROVISO TO SEC. 269SS OF THE A CT. THE ASSESSEE HAS ALSO FAILED TO SHOW THAT THERE EXISTED A REASONABLE CAUSE IN ACCEP TING THE IMPUGNED LOAN AMOUNT IN CASH. HENCE, WE ARE UNABLE TO SUSTAIN THE DECISION RENDERED BY LD CIT(A). ACCORDINGLY, WE SET ASIDE HIS ORDER AND RESTORE THE PENALTY LEVIED BY THE AO. 11. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 22-11-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 22ND NOVEMBER, 2013 GJ COPY TO: 1. SHRI PARAYIL BALAN NAIR, XI/291, RAMKRIPA, P.O. ALAVIL, KANNUR-670 002. 2. THE DEPUTY DIRECTOR OF INTERNATIONAL TAXATION, K OCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . 4.THE COMMISSIONER OF INCOME-TAX, KANNUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN I.T.A. NO.460/COCH/2013 7