K.K. ENTERPRISES, MUMBAI V. JCIT 25(2), MUMBAI

ITA 4699/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71417 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 13-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Assessee Lawyers: JITENDRA SHAH
• Keywords: Reasonable cause
• Section: 273B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, A.M. AND SHRI SANJAY GAR G, J.M. ./ I.T.A. NOS. 4699 & 4700/MUM/2012 ( / ASSESSMENT YEAR: 2001-02) K. K. ENTERPRISES 5, SAI SADAN, ROSHAN NAGAR, CHANDAVARKAR LANE, BORIVALI (EAST), MUMBAI-400 067 / VS. JT. CIT, RANGE-25(2), PRATYAKSHAR BHAVAN, C-11, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 ./ ./PAN/GIR NO. AAAFK 1872 A ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ! $ / APPELLANT BY : SHRI JITENDRA SHAH '#! % $ / RESPONDENT BY : SHRI S. K. MADHUK & '( ) % * + / DATE OF HEARING : 21.08.2013 ,-. % * + / DATE OF PRONOUNCEMENT : 18.10.2013 / / O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE AGITAT ING THE SEPARATE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)-35, MUMBAI (C IT(A) FOR SHORT) OF EVEN DATE, I.E., 28.05.2012, DISMISSING THE ASSESSEES APPEAL CONTESTING THE LEVY OF PENALTY U/SS. 271D AND 271E OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2001-02. 2 ITA NOS. 4699 & 4700/MUM/2012 (A.Y. 2001-02) K. K. ENTERPRISES VS. JT. CIT 2. THE APPEALS RAISING COMMON ISSUES, WERE POSTED F OR HEARING AND, ACCORDINGLY, HEARD TOGETHER, AND ARE BEING DECIDED BY A COMMON, CONSOLIDATED ORDER. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FI RM, BEING A BUILDER AND DEVELOPER, WAS FOUND DURING THE COURSE OF THE ASSESSMENT PROCEEDIN GS BY THE ASSESSING OFFICER (A.O.) TO HAVE RECEIVED A SUM OF RS.4.35 LACS FROM ONE, M/S. SAHAKAR DEVELOPERS, IN CASH DURING THE RELEVANT YEAR, SO THAT THERE HAD BEEN A CLEAR V IOLATION OF SECTION 269SS OF THE ACT. THE ASSESSEE WAS, ACCORDINGLY, SHOW CAUSED IN THE MATTE R, WHEREAT IT WAS EXPLAINED THAT THE SUM RECEIVED WAS IN FACT NOT A LOAN OR DEPOSIT, B UT AMOUNTS RECEIVED TOWARD A LAND DEAL, THE PAYER-FIRM, WHICH IS ONLY A GROUP CONCERN, BEIN G ALSO IN THE SAME LINE OF BUSINESS. HOWEVER, AS NO DETAILS IN RESPECT OF THE SAID DEAL NOR EVIDENCE/S TO SUBSTANTIATE THE SAID CLAIM, STOOD FURNISHED, THE SAME WAS FOUND NOT ACCE PTABLE. NO OTHER EXPLANATION HAVING BEEN FURNISHED, SO THAT THE ASSESSEE WAS CLEARLY UN ABLE TO SHOW ANY REASONABLE CAUSE FOR TO THE IMPUGNED DEFAULT, PENALTY U/S.271D WAS LEVIE D, AND ALSO CONFIRMED BY THE FIRST APPELLATE AUTHORITY FOR THE SAME REASON. THE ASSESS EE HAD SIMILARLY ALSO PAID RS.1 LAC IN CASH TO THE SAID PAYER, I.E., M/S. SAHAKAR DEVELOPE RS, SO THAT THERE WAS ALSO A CONTRAVENTION OF SECTION 269T OF THE ACT. PENALTY U /S.271E, I.E., TOWARD THE DEFAULT OF THE SAID PROVISION, STOOD ATTRACTED, AND WAS ACCORDINGL Y LEVIED, AND CONFIRMED FOR THE SAME REASON; BOTH THE PENALTIES BEING IN TERMS OF THE RE LEVANT SECTIONS, I.E., THE AMOUNTS HAVING BEEN RECEIVED AND REPAID IN CASH, I.E., OTHER THAN BY WAY OF ACCOUNT-PAYEE CHEQUE OR ACCOUNT-PAYEE BANK DRAFT, THE PRESCRIBED MODES, AND THUS IN DEFAULT OF THE PROVISIONS. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 THE DEFAULT OF THE RELEVANT SECTIONS, BEING SS. 269SS AND 269T OF THE ACT, IS APPARENT. THE QUESTION BEFORE US, HOWEVER, IS THE M AINTAINABILITY IN LAW OF THE CORRESPONDING PENALTY U/SS.271D AND 271E OF THE ACT RESPECTIVELY UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEES CASE BEFO RE US AS WELL AS BEFORE THE AUTHORITIES BELOW WAS IN TERMS OF THE SUMS HAVING BEEN RECEIVED FROM A SISTER CONCERN, HAVING A COMMON PARTNER IN SHRI KAMLESH GANGAR, WITH BOTH TH E CONCERNS HAVING IN FACT OFFICES AT THE SAME PLACE AT BORIVALI, MUMBAI AND, TWO, OF HAV ING ACTED BONA FIDE , WITH NO ULTERIOR 3 ITA NOS. 4699 & 4700/MUM/2012 (A.Y. 2001-02) K. K. ENTERPRISES VS. JT. CIT MOTIVE, WITH THE TRANSACTIONS BEING RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF BOTH THE PARTIES, AND WHICH WOULD, THEREFORE, CONSTITUTE A R EASONABLE CAUSE U/S.273B OF THE ACT, SAVING PENALTY. WITH REFERENCE TO THE DECISION BY T HE APEX COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA [1972] 83 ITR 26 (SC), IT IS CLAIMED THAT THERE WA S NO DELIBERATE DEFIANCE OF LAW OR GUILT OF CONDUCT CONT UMACIOUS OR CONSCIOUS DISREGARD OF ITS OBLIGATION, SO AS TO ATTRACT THE LEVY OF PENALTY. F URTHER, QUA THE REPAYMENT OF LOAN OR DEPOSIT, THE EXTENDED DEFINITION OF THE LOAN OR DEP OSIT U/S.269T IS ONLY BY FINANCE ACT, 2003 W.R.E.F 01.06.2002, SO THAT THE SAME WOULD NOT APPLY FOR THE CURRENT YEAR; THE IMPUGNED REPAYMENT OF RS.1 LAC HAVING BEEN MADE ON 14.07.2000 (PB PG.14) AND, THUS, OUTSIDE THE AMBIT OF THE EXTENDED DEFINITION AS PRO VIDED AND APPLICABLE FROM 01.06.2002. THE REVENUES CASE, ON THE OTHER HAND, IS THAT NONE OF THE FOREGOING CONTENTIONS CONSTITUTE A REASONABLE CAUSE IN TERMS OF SECTION 2 73B OF THE ACT, AND WHICH IN ANY CASE HAS TO BE PROVED AS A FACT BY THE ASSEESSE. 3.2 THE PROVISION OF SECTIONS 269SS AND 269T, AS WE LL AS SECTIONS 271D AND 271E, PRESCRIBING PENALTY RESPECTIVELY FOR DEFAULT OF THE FORMER SECTIONS, HAVE BEEN HELD AS CONSTITUTIONALLY VALID BY THE APEX COURT IN THE CAS E OF ASSISTANT DIRECTOR OF INSPECTION VS. KUM. A.B. SHANTHI [2002] 255 ITR 258 (SC). TO SAY, THEREFORE, THAT T HE BREACH OF THE SAID PROVISIONS IS A MERE TECHNICAL OR VENIAL BREACH, SO THAT NO PENALTY ON THAT ACCOUNT WOULD BE EXIGIBLE, AS EXPLAINED BY THE APEX COURT IN HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (SUPRA), WOULD NOT OBTAIN. THE SAID DECISION, NO DO UBT FORMING PART OF THE JURISPRUDENCE ON PENAL PROVISIONS, PARTICULARLY IN THE CONTEXT OF FISCAL LEGISLATION, WE MAY CLARIFY, COULD ONLY BE APPLIED WITH REFERENCE TO THE FACTUAL CIRCU MSTANCES AND THE CONDUCT OF THE ASSESSE, AND NOT MERELY WITH REFERENCE TO A PRESCRI PTION OF LAW. AS EXPLAINED IN KUM. A.B. SHANTHI (SUPRA), WHERE THERE WAS A GENUINE AND BONA FIDE TRANSACTION AND THE TAX PAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT-PA YEE CHEQUE OR ACCOUNT-PAYEE DEMAND DRAFT FOR SOME REASON, THE AUTHORITY VESTED WITH TH E POWER TO IMPOSE THE PENALTY HAS THE DISCRETIONARY POWER NOT TO LEVY THE PENALTY. THIS W OULD THEN SUM UP OR DEFINE THE PARAMETERS UNDER WHICH THE APPLICABILITY OR OTHERWI SE OF THE DECISION IN THE CASE OF 4 ITA NOS. 4699 & 4700/MUM/2012 (A.Y. 2001-02) K. K. ENTERPRISES VS. JT. CIT HINDUSTAN STEEL LTD. (SUPRA) WOULD NEED TO BE CONSIDERED QUA THE PENALTIES UNDER REFERENCE. IN OTHER WORDS, THE TRANSACTION BEING GE NUINE OR BONA FIDE , THOUGH REPRESENTING AN ESSENTIAL CONDITION FOR SAVING PENALTY WOULD ITS ELF NOT BE SUFFICIENT. RATHER, NON- GENUINE TRANSACTION WAS HELD AS OUTSIDE THE SCOPE O F THE PENAL PROVISIONS INASMUCH AS THE SAME IS LIABLE TO BE CONSIDERED AS THE INCOME OF TH E ASSESSEE U/S. 68 OF THE ACT; THE TWO PROVISIONS OPERATING IN DIFFERENT FIELDS. REFERENCE IN THIS REGARD MAY BE MADE TO THE DECISION IN THE CASE OF CIT V. STANDARD BRANDS LTD . [2006] 285 ITR 295 (DEL), BESIDES SEVERAL BY THE TRIBUNAL. CONTINUING FURTHER, TRUE, THE PROVISIONS OF SS. 26 9SS AND 269T WERE ENACTED BY THE LEGISLATURE TOWARD PROVIDING A CHECK ON THE TAX PAY ERS GIVING FALSE EXPLANATION FOR THEIR UNACCOUNTED MONEY, OR MAKING FALSE ENTRIES IN ACCOU NTS, EXPLAINING THE CASH FOUND DURING SEARCHES, ETC. WITH REFERENCE THERETO, AS NO TED BY THE APEX COURT IN KUM. A. B. SHANTHI (SUPRA). HOWEVER, THAT WOULD NOT, EVEN AS EXPLAINE D BY THE APEX COURT THEREIN, CONSTRICT THE SCOPE OF THE PROVISIONS, CAST IN CLEA R AND UNAMBIGUOUS LANGUAGE, TO SUCH CASES OF SEARCH, ETC. ONLY. AS SUCH, WHERE A PERSON IS FOUND TO HAVE ACTED IN VIOLATION, HE IS BOUND TO SHOW REASONABLE CAUSE, FAILING WHICH TH E PENALTY IS IMPOSABLE. A REASONABLE CAUSE IS ALWAYS A MATTER OF FACT. IN THE SEVERAL CA SES CITED BY THE ASSESSEE, PENALTY HAS BEEN DELETED ON THE BASIS OF FINDING/S OF A REASONA BLE CAUSE WITH THE ASSESSEE-APPELLANT TOWARD THE IMPUGNED TRANSACTION. 3.3 WE NEXT EXAMINE THE FACTS AND CIRCUMSTANCES OF THE CASE. TO BEGIN WITH, HOWEVER, WE MAY CLARIFY THAT WHILE A LOAN OR DEPOSIT STANDS DEFINED TO MEAN LOAN OR DEPOSIT OF MONEY IN SECTION 269SS, I.E., PROVIDING FOR A COND ITIONALITY ON ITS ACCEPTANCE, AND FROM ITS VERY INCEPTION (I.E., 11.07.1981), THE SAID WOR DS WERE DEFINED IN SEC. 269T TO MEAN ANY LOAN OR DEPOSIT OF MONEY WHICH IS REPAYABLE AFT ER A NOTICE OR REPAYABLE AFTER A PERIOD. THE ENHANCEMENT IN THE SCOPE OF S. 269T, SO AS TO I NCLUDE LOAN OR DEPOSIT OF ANY NATURE, I.E., IN CASE OF A PERSON OTHER THAN A COMPANY, IS ONLY BY FINANCE ACT, 2003 W.E.F. 01.06.2002. CLEARLY, THE CASH RECEIVED BY THE ASSES SEE FROM ITS SISTER CONCERN CANNOT BE SAID TO BE REPAYABLE AFTER A NOTICE OR AFTER A PERI OD, I.E., IN TERMS OF THE DEFINITION 5 ITA NOS. 4699 & 4700/MUM/2012 (A.Y. 2001-02) K. K. ENTERPRISES VS. JT. CIT OBTAINING AT THE TIME OF ITS ACCEPTANCE (16.06.2000 ) OR REPAYMENT (14.07.2000). ITS REPAYMENT WOULD, THUS, STAND TO BE OUSTED AND, THUS , NOT HIT BY SECTION 269T. NO PENALTY U/S.271E OF THE ACT, ON AN OSTENSIBLE DEFAULT THERE OF, WOULD, THUS, HOLD. 3.4 AS REGARDS THE SUM OF RS.4.35 LACS RECEIVED BY THE ASSESSEE IN CASH ON DIFFERENT DATES DURING THE RELEVANT YEAR, THE SAME WOULD DEFI NITELY QUALIFY AS A LOAN OR DEPOSIT WITHIN THE MEANING OF THE TERM U/S.269SS OF THE ACT INASMUCH AS THE SAME STANDS WIDELY DEFINED AS LOAN OR DEPOSIT OF MONEY. THE SUM RECEIV ED BY THE ASSESSEE IS ADMITTEDLY PAYABLE TO THE PAYER, AS REFLECTED PER THE ACCOUNTS OF BOTH THE PARTIES (PB PGS.4, 14) AND, AS SUCH, IS ONLY A LOAN OR DEPOSIT OF MONEY FALLING WITHIN THE PURVIEW OF SECTION 269SS. THE ASSESSEE HAS CLEARLY BEEN UNABLE TO SUBSTANTIAT E ITS CLAIM OF THE SAID SUM AS HAVING BEEN RECEIVED IN RELATION TO A TRANSACTION/S IN LAN D OR HAVING ITS GENESIS IN BUSINESS TRANSACTION/S WITH THE SAID PARTY. IN FACT, RS.1 LA C OUT OF THE SUM RECEIVED STANDS REPAID IN CASH AND, AGAIN, WITHOUT REFERENCE TO, OR ANY UNDER LYING BUSINESS TRANSACTION BEING OTHERWISE EXHIBITED. IN FACT, THE ASSESSEE ITSELF S TATES OF THE ACCOUNT WITH THE SAID PARTY TO BE IN THE NATURE OF A CURRENT ACCOUNT, CONTRADICTIN G ITS SAID EXPLANATION. SO HOWEVER, IN OUR VIEW, THE ASSESSEE IS ENTITLED T O RELIEF U/S.273B. BOTH THE CONCERNS ARE SISTER CONCERNS, IN THE SAME BUSINESS; RATHER, HAVING THEIR OFFICE LOCATED IN THE SAME PREMISES, WITH A COMMON PARTNER. A FIRM UN DER NORMAL CIRCUMSTANCES ONLY ACTS THROUGH THE AGENCY OF ITS PARTNERS, WHO MAY BANK FO R THE CASH REQUIRED IN ONE FIRM ON THAT AVAILABLE WITH ANOTHER. WE MAY THOUGH CLARIFY THAT WE, IN SAYING SO, DO NOT IN ANY MANNER SUGGEST THAT WHERE CASH ENTRIES ARE DULY REC ORDED IN THE BOOKS OF ACCOUNTS OF BOTH THE RECIPIENT AND THE PAYER, I.E., REPRESENT GENUIN E TRANSACTIONS OF CASH PAID AND RECEIVED, THE SAME WOULD BY ITSELF CONSTITUTE A REASONABLE CA USE, EXCLUDING PENALTY U/S.271D / 271E OF THE ACT. THIS IS AS THIS IS PRECISELY WHAT STANDS BARRED BY SECTIONS 269SS AND 269T, WHICH, THEREFORE, ARE TO BE REGARDED AS SUBST ANTIVE PROVISIONS, PROSCRIBING ACCEPTANCE AND REPAYMENT OF LOAN OR DEPOSIT OF MONE Y OTHERWISE THAN BY ACCOUNT-PAYEE CHEQUE OR ACCOUNT-PAYEE BANK DRAFT WHERE THE THRESH OLD LIMIT IS EXCEEDED, AS IN THE INSTANT CASE. BUT ONLY THAT IN THE GIVEN CIRCUMSTAN CES OF THIS CASE, WHERE CASH HAS BEEN 6 ITA NOS. 4699 & 4700/MUM/2012 (A.Y. 2001-02) K. K. ENTERPRISES VS. JT. CIT ACCEPTED BY THE ASSESSEE-FIRM FROM ANOTHER CONSTITU TED BY THE FAMILY MEMBERS, BEING IN FACT RUN THROUGH THE AGENCY OF, AMONG OTHERS, A COM MON PARTNER, THE TRANSFER OF CASH BY ONE FROM TO ANOTHER WOULD OPERATE AS A REASONABLE C AUSE, SAVING PENALTY. TRUE, THE ASSESSEE HAS NOT BEEN ABLE TO SHOW OF BEING PREVENT ED BY ANY REASONABLE REASON IN NOT ACCEPTING THE SAME THROUGH ACCOUNT-PAYEE CHEQUE OR BANK DRAFT; RATHER, THERE HAS BEEN NO CONTENTION TO THAT EFFECT. EQUALLY, THE CONSTITUTIO N OF THE PAYER CONCERN, WHICH IS ONLY ANOTHER PERSON UNDER THE ACT, WOULD NOT BE OF MUCH IMPORT. HOWEVER, IT IS THE TOTALITY OF THE CIRCUMSTANCES THAT HAVE TO BE TAKEN INTO ACCOUN T. THE TRANSACTIONS BETWEEN FIRMS ARE, IN FACT, ONLY DONE BETWEEN INDIVIDUALS. IN THE PERC EPTION OF THE PARTNER, INASMUCH AS THE THINGS ARE TO BE VIEWED FROM THE STAND-POINT OF THE BUSINESSMAN, HE MAY ONLY BE TRANSFERRING THE MONEY FROM ONE POCKET TO ANOTHER. IN SO DECIDING, WE HAVE BEEN GUIDED BY THE DECISIONS BY THE HONBLE COURTS, WHERE THE T ERM REASONABLE CAUSE HAS BEEN EXPLAINED AS LIABLE TO BE LIBERALLY CONSTRUED WHERE THE BONA FIDES ARE NOT IN DOUBT, AND INDEED PENALTY HELD AS NOT EXIGIBLE UNDER SIMILAR C IRCUMSTANCES, AS IN CIT VS. NATVARLAL PURSHOTTAMDAS PAREKH [2008] 303 ITR 5 (GUJ)). AS EXPLAINED IN CIT V. SUNIL KUMAR GOEL [2009] 315 ITR 163 (P&H), WHERE THE TRANSACTIONS A RE BETWEEN TWO SISTER CONCERNS, BOTH WITHIN THE FAMILY, AND THE FUND TRANSFERS WERE FOR THE PURPOSES OF BUSINESS, WITH THE TRANSACTIONS ACCOUNTED FOR IN THE BOOKS, THE REQUIR EMENT OF REASONABLE CAUSE IS TO BE CONSIDERED AS SATISFIED IN SUCH CIRCUMSTANCES. ON T HE SAME FOOTING IS THE DECISION IN THE CASE OF CIT V. MAHESWARI NIRMAN UDYOG [2008] 302 ITR 201 (RAJ) AND CIT V. LAKSHMI TRUST CO . [2008] 303 ITR 99 (MAD). 4. IN VIEW OF THE FOREGOING, CONSIDERING THE TOTALI TY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, INCLUDING THE NUMBER AND VOLUME OF TRANSA CTIONS, IN OUR VIEW THE ASSESSEE HAS BEEN ABLE TO EXCLUDE ITS CASE ON THE GROUND OF REAS ONABLE CAUSE, SO THAT THE PENALTY IN THE INSTANT CASE IS SAVED BY SECTION 273B OF THE ACT, A S WELL AS ON THE GROUND OF APPLICABILITY OF THE UN-AMENDED PROVISION OF S. 269T OF THE ACT. WE DECIDE ACCORDINGLY. 7 ITA NOS. 4699 & 4700/MUM/2012 (A.Y. 2001-02) K. K. ENTERPRISES VS. JT. CIT 5. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSEE ARE ALLOWED. 0. *1 '2 0* % 3 ( 4 * % * 56 ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 18 TH , 2013 SD/- SD/- (SANJAY GARG) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & 7) MUMBAI; 8' DATED : 18.10.2013 (.'../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. & 9* ( ) / THE CIT(A) 4. & 9* / CIT - CONCERNED 5. <(= '*'>2 , + >2. , & 7) / DR, ITAT, MUMBAI 6. ? @ ) / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , & 7) / ITAT, MUMBAI