CLASSIC FASTENING SYSTEMS P.LTD, MUMBAI V. ADDL CIT RG 6(2), MUMBAI

ITA 4785/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70911 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 19-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D H VADIVALLA IZRFKHZ DH LS
• Keywords: Bonafide belief; Reasonable cause

Judgement Text

M/S CLASSIC FASTENING SYSTEMS PVT LTD - 1 - VK;DJ VIHYH; VF/KDJ.K LH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI JH ,P- ,Y- DKJOK] V/;{K ,OA JH JKTSUNZ FLAG YS[KK L NL; DS LE{K BEFORE HONBLE PRESIDENT SHRI H.L. KARWA AND SHRI R AJENDRA SINGH ACCOUNTANT MEMBER VK;DJ VIHY LA[;K /ITA NO.4785/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2006-07 M/S CLASSIC FASTENING SYSTEMS PVT LTD, GALA NO. 25/26, PWD SHED, RAMCHANDRA BHATT MARG, OPP. HOLY CROSS CHURCH, BABULA TANK ROAD, NOOR BAUG, MUMBAI 400 009. CUKE@ VS. ADDITIONAL COMMISSIONER OF INCOME TAX,-RANGE 6 (2), AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. PAN:- AACCC6428M VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ APPELLANT BY SHRI D.H. VADIVALLA IZR;FKHZ DH VKSJ LS @ RESPONDENT BY SHRI DEEPAK SUTARIYA VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.4.2012 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07 . THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING LEVY OF PENALTY U/S 271E OF THE INCOME TAX ACT . 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE AS SESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD REPAID THE BELOW MENTIO NED AMOUNTS IN CASH TO ITS DIRECTOR SHRI SHABBIR SHAIKH AGAINST THE LOA NS RECEIVED. LQUOKBZ DH RKJH[K @ DATE OF HEARING 29-08-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 4-09-2013 M/S CLASSIC FASTENING SYSTEMS PVT LTD - 2 - RS. 10,151/- ON 17.10.2005 RS. 4,000/- ON 14.1.2006 RS. 20,000/- ON 25.01.2006 RS. 10,300/- ON 25.01.2006 RS. 11,200 ON 28.03.2006 RS. 55,651/- 3. THE AO OBSERVED THAT THE ASSESSEE HAD REPAID THE AMOUNTS OF LOAN EXCEEDING RS. 20,000/- IN AGGREGATE IN CASH IN VIOL ATION OF THE PROVISIONS OF SECTION 269T OF THE INCOME TAX ACT AND, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY U/S 271E SHOULD NOT BE IM POSED. THE ASSESSEE SUBMITTED THAT THE DIRECTOR HAD WITHDRAWN MONEY FOR HIS PERSONAL USES AND THE REPAYMENTS WERE MADE TOWARDS SUCH CASH LOAN S. IT WAS ALSO SUBMITTED THAT CASH REPAYMENT WAS NOT DELIBERATE. T HE AO HOWEVER DID NOT ACCEPT THE EXPLANATION GIVEN. IT WAS OBSERVED BY HI M THAT THERE WAS NO REASONABLE CAUSE FOR MAKING REPAYMENT OF LOANS IN C ASH. HE, THEREFORE, LEVIED PENALTY U/S 271E AT RS. 55,651/-. 4. IN APPEAL THE ASSESSEE STATED THAT THIS WAS THE FIRST YEAR OF OPERATION OF THE COMPANY IN INDIA AND PROMOTER DIRECTOR WAS N RI WHO WAS UNAWARE OF INDIAN TAX LAWS. HE HAD WITHDRAWN THE MONEY FROM THE COMPANY FOR THE PERSONAL USES WHICH HAD LATER BEEN REPAID. CIT( A) OBSERVED THAT THE CONTENTIONS THAT IT WAS THE FIRST YEAR OF OPERATION OF THE COMPANY WAS ACCEPTABLE BUT THE CLAIM THAT THE DIRECTOR WAS NOT AWARE OF THE INDIAN TAX LAWS COULD NOT BE ACCEPTED AS HE WAS SUPPOSED TO KN OW THE PREVAILING LAWS OF THE LAND. THERE WAS ALSO NO EXCEPTIONAL SIT UATION BROUGHT ON RECORD WHICH COMPELLED THE CASH PAYMENT. CIT(A), THEREFORE , CONFIRMED THE PENALTY LEVIED BY AO, AGGRIEVED BY WHICH THE ASSESS EE IS IN APPEAL BEFORE TRIBUNAL. 5. BEFORE US THE LEARNED AR FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT IT WAS THE FIRST YEAR OF OPERATION OF THE COMPANY IN INDIA AND THE DIRECTOR BEING AN NRI WAS NOT AWARE OF THE M/S CLASSIC FASTENING SYSTEMS PVT LTD - 3 - INDIAN TAX LAWS. THEREFORE VIOLATION, IF ANY, WAS O NLY BONAFIDE. IT WAS ACCORDINGLY URGED THAT THE PENALTY LEVIED SHOULD BE DELETED. LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDING GIVEN IN THE RESPECTIVE ORD ERS. 6. WE HAVE PERUSED THE RECORDS AND CONSIDERED MATTE R CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY U/S 271E FOR V IOLATION OF PROVISIONS OF SECTION 269T AS PER WHICH ANY REPAYMENT OF LOAN OR DEPOSIT IF THE AMOUNT OF LOAN OR DEPOSIT OR THE AGGREGATE OF SUCH LOAN/DE POSIT ON THE DATE OF SUCH REPAYMENT TOGETHER WITH INTEREST IS RS. 20,000/- OR MORE, IN CASH IS PROHIBITED AND ANY VIOLATION IS LIABLE FOR PENALTY U/S 271E. THEREFORE, IT IS REQUIRED TO BE SEEN WHETHER ON THE DATE OF REPAYMEN T, THE AGGREGATE LOANS AND DEPOSITS WERE RS. 20,000/- OR MORE. THE AO HAS NOT BROUGHT ON RECORD THE DETAILS OF AGGREGATE LOANS AND DEPOSITS OUTSTAN DING ON THE DATE OF REPAYMENT. HE HAS ONLY GIVEN THE DETAILS OF THE PAY MENT WHICH ARE MOSTLY BELOW RS. 20,000/- EXCEPT IN ONE CASE WHERE IT IS 2 0,000/-. THEREFORE, VIOLATION OF SECTION 269T HAS NOT BEEN CLEARLY BROU GHT ON RECORD. MOREOVER, IT IS AN UNDISPUTED FACT THAT THE PROMOTER OF THE C OMPANY IS AN NRI AND IT WAS THE FIRST YEAR OF OPERATION OF THE COMPANY IN I NDIA. THE CASE OF THE ASSESSEE IS THAT THE DIRECTOR WAS NOT AWARE OF THE INDIAN REGULATIONS WHICH RESULTED INTO VIOLATION WHICH WAS NOT INTENTIONAL. CIT(A) HAS ACCEPTED THAT THE CASE BEING FIRST YEAR OF OPERATION DESERVES CON SIDERATION BUT HE DID NOT ACCEPT THE CLAIM THAT THE DIRECTOR WAS NOT AWARE OF INDIAN REGULATIONS. IN OUR VIEW THE VIOLATION IN THE FIRST YEAR PARTICULAR LY WHEN THE PROMOTER IS AN NRI STARTING BUSINESS IN INDIA HAS TO BE CONSIDERED AS BONAFIDE. THERE IS NO DISPUTE ABOUT GENUINENESS OF THESE TRANSACTIONS WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT. IT IS A SETTLED LEGAL P OSITION THAT BONAFIDE BELIEF DOES CONSTITUTE A REASONABLE CAUSE. IN OUR V IEW, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE EXPLANATION GIVE N FOR THE VIOLATION HAS TO BE CONSIDERED AS BONAFIDE AND THUS THERE BEING A REASONABLE CAUSE, LEVY OF PENALTY IS NOT JUSTIFIED. WE ACCORDINGLY SET ASI DE THE ORDER OF CIT(A) AND DELETE THE PENALTY LEVIED. M/S CLASSIC FASTENING SYSTEMS PVT LTD - 4 - 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 4-9-2013 SD/- SD/- (H.L. KARWA) (RAJENDRA SINGH) HONBLE PRESIDENT ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 4.9.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI