The DCIT Cent Circle Rajahmyndry, Rajahmundry V. M/s. Aravindam Explorers, Rajahmundry

ITA 460/VIZ/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2772 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 09-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T L PETER
• Keywords: Bonafide belief; Reasonable cause

Judgement Text

ITA NO.460 OF 2009 ARAVINDAM EXPLORERS RAJAHMUNDRY PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.460/VIZAG/2009 ASSESSMENT YEAR: 2005-06 DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, RAJAHMUNDRY VS. ARAVINDAM EXPLORERS, ARAVINDAM ORTHOPEDIC & PHYSIO THERAPY CENTRE, RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO:ABQPG 1227 L APPELLANT BY: SHRI T.L. PETER, DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 2-7-2009 PASSED BY LEARNED CIT(A), RAJAHMUNDRY AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. THE PENALTY OF RS.11,50,0 00/- LEVIED UNDER SECTION 271D OF THE ACT, HAVING BEEN DELETED BY THE LEARNED CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A PARTNERSHIP FIRM FORMED ON 30-1-2005. SHRI GRANDHI ARAVINDAM & SMT. GRANDHI LALITHA ARE THE TWO PARTNERS OF THE FIRM. T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE FIRM HAD BORROWED FUNDS I N CASH FROM BOTH OF ITS PARTNERS IN VIOLATION OF PROVISIONS OF SECTION 269S S OF THE ACT. THE ITA NO.460 OF 2009 ARAVINDAM EXPLORERS RAJAHMUNDRY PAGE 2 OF 4 ASSESSEE EXPLAINED THAT THE AMOUNTS RECEIVED FROM T HE PARTNERS ARE TOWARDS INVESTMENT AND HENCE THEY SHOULD BE TREATED AS CAPITAL ONLY. FURTHER IT WAS EXPLAINED THAT THE ASSESSEE WAS UNDE R BONAFIDE BELIEF THAT THE TRANSACTIONS BETWEEN THE FIRM AND PARTNERS WOUL D NOT ATTRACT THE PROVISIONS OF SEC. 269SS. IN THIS REGARD THE ASSESSE E RELIED ON THE FOLLOWING CASE LAW: I) CIT VS. LOKPATH FILM EXCHANGE 212 CTR 371 (2007) II) DCIT VS. VIGNESH FLAT HOUSING PROMOTERS 105 ITD 359 THE ASSESSING OFFICER WAS, HOWEVER, NOT CONVINCED W ITH THE EXPLANATION OF THE ASSESSEE AND LEVIED PENALTY OF RS.11.50 LAKHS U NDER SECTION 271D OF THE ACT. THE SAID PENALTY WAS DELETED BY THE LEARNED CI T (A), INTER ALIA, WITH THE FOLLOWING OBSERVATIONS: IT COULD BE OBSERVED THAT THE CLAIM OF BONAFIDE BE LIEF THAT THE APPELLANT WOULD NOT INFRINGE THE PROVISIONS OF SECTION 269SS OF THE ACT IN THE LIGHT OF THE PRIOR KNOWLEDG E OF THE PARTNERS ABOUT THE DECISION OF THE TRIBUNAL TO THE EFFECT THAT CASH TRANSACTIONS EXCEEDING THE SPECIFIED LIMIT BET WEEN A FIRM AND THE PARTNERS WOULD NOT FALL UNDER THE MISCHIEF OF SECTION 269SS OF THE ACT, APPEARS PLAUSIBLE AND, ACCORDINGL Y, INSPIRES CONVICTION SINCE SUCH DECISION HAD ALREADY BEEN REN DERED PRIOR TO THE DATE OF COMMISSION OF THE DEFAULT BY T HE APPELLANT, AND THAT SUCH DECISION BY A HIGHER APPEL LATE AUTHORITY WOULD ORDINARILY INFLUENCE THE APPELLANT PLACED IN A RELATIONSHIP OF A FIRM VIS--VIS PARTNERS AND VICE VERSA INTO ENTERTAINING THE BELIEF THAT THE INTERPRETATION OF LAW IN RESPECT OF SECTION 269SS HAS BEEN CLARIFIED BY AN APPELLATE AUTHORITY SO AS TO EXCLUDE FROM ITS AMBIT THE CASH TRANSACTIO NS BETWEEN A FIRM AND ITS PARTNERS AND VICE VERSA. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE O N THE DECISION DATED 29- ITA NO.460 OF 2009 ARAVINDAM EXPLORERS RAJAHMUNDRY PAGE 3 OF 4 4-2008 PASSED BY THIS BENCH IN THE CASE OF SHRI AMM ANNA ESTATE IN ITA NO.65/V/2008 WHEREIN AN IDENTICAL ISSUED WAS ADJUDI CATED. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE SAID ORDER: 11. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS RECEIVED THE AMOUNT FROM ONE OF ITS PARTNERS. THE HON'BLE APEX COURT IN THE CASE OF R.M. CHIDAMBARAM PILLAI (1977) (106 ITR 292) (SUPRA ) HAS DECIDED THE NATURE AND STATUS OF FIRM VIS--VIS ITS PARTNER. AS PER THE DECISION OF THE HON'BLE APEX COURT, IN THE EYES OF GENERAL LAW, A FIRM IS NOT A JURISTIC PERSON AND TE RM FIRM IS A COLLECTIVE NOUN, A COMPENDIOUS EXPRESSION TO DESIGN ATE AN ENTITY, NOT A PERSON. THE INCOME TAX ACT IS A SPECI AL PROVISION UNDER WHICH THE FIRM IS A UNIT OF ASSESSMENT, BUT I T IS NOT A FULL PERSON. HENCE THE TRANSACTION BETWEEN FIRM AND ITS PARTNER CANNOT BE TREATED AS A TRANSACTION BETWEEN TWO SEPA RATE PERSONS. APART FROM THIS LEGAL POSITION OF TRANSACT ION BETWEEN THE FIRM AND ITS PARTNER, IN THE PRESENT CASE, IT W AS SUBMITTED THAT THE PENALTY UNDER SECTION 271D HAS BEEN LEVIED FOR THE FIRST TIME, THOUGH THE ASSESSEE HAS BEEN ENTERING I NTO SUCH TRANSACTIONS REGULARLY. IT WAS ALSO SUBMITTED THAT T HE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT IMPUGNED TRANSACTION S FALL OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 269SS/ 269T AS IT HAS NOT BEEN VISITED WITH SUCH PENAL PROCEEDINGS EA RLIER. AS HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CAS E OF LOKPAT FILM EXCHANGE (CINEMA),(2007) (212 CTR 371) (SUPRA) , SUCH BONAFIDE BELIEF CONSTITUTES A REASONABLE CAUSE FOR NOT LEVYING THE PENALTY. IN VIEW OF THE LEGAL DECISION ON THE R ELATIONSHIP BETWEEN THE FIRM VIS--VIS PARTNER, ON THE TRANSACT IONS BETWEEN THE FIRM AND PARTNER AND BONAFIDE BELIEF EN TERTAINED BY THE PARTNER, WE ARE OF THE OPINION THAT THE PENA LTY LEVIED U/S271D, IN THE PRESENT CASE, IS LIABLE TO BE DELET ED AND ORDER ACCORDINGLY. 4. THUS WE NOTICE THAT THE DECISION RENDERED BY THE LEARNED CIT (A) THAT THE BONAFIDE BELIEF ENTERTAINED BY THE ASSESSE E WOULD CONSTITUTE REASONABLE CAUSE IS IN ACCORDANCE WITH THE DECISION OF THE HON'BLE ITA NO.460 OF 2009 ARAVINDAM EXPLORERS RAJAHMUNDRY PAGE 4 OF 4 RAJASTHAN HIGH COURT IN THE CASE OF LOKPATH FILM EX CHANGE (CINEMA), WHICH WAS FOLLOWED BY THIS BENCH IN THE CASE OF SREE AMMA NNA ESTATE (SUPRA). HENCE THE DECISION RENDERED BY LEARNED CIT(A) IS IN ACCORDANCE WITH THE VIEW EXPRESSED BY THIS BENCH. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LEARNED CIT (A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 8 TH OCTOBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 8 TH OCTOBER, 2010 COPY TO 1 THE DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, RAJAHMUNDRY 533105 2 M/S ARAVINDAM EXPLORERS, ARAVINDAM ORTHOPEDIC & P HYSIO THERAPY CENTRE D.NO.6-18-3, KOKKONDA VARI STREET, RAJAHMUND RY 3 4. THE CIT(A), RAJAHMUNDRY THE CIT, CENTRAL, HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM