Northern India Chemical Works (P) Ltd., Meerut V. Addl. CIT, Meerut

ITA 5074/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81654 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 02-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KR SHARMA
• Assessee Lawyers: M P RASTOGI ADV VIRENDER KR
• Keywords: Reasonable cause
• Section: 143(3); 154

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI B.C.MEENA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 5074 /DEL/ 2013 (ASSESSMENT YEAR: 2006 - 07 ) NORTHERN INDIA CHEMICAL WORKS (P) LTD. NEAR SARDHANA ROAD RAILWAY CROSSING, MEERUT PAN:AAACN4794M VS. ADDL. CIT RANGE - 2 MEERUT (APPELLANT) (RESPONDENT) APPELLANT BY : M.P. RASTOGI, ADV VIRENDER KR, ADV. RESPONDENT BY : SUNIL KR SHARMA, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE ARISES FROM THE ORDER OF THE LD CIT(A), NOIDA DATED 10.06.2013 FOR ASSESSMENT YEAR 2006 - 07. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE RELATES TO IMPOSITION OF PENALTY OF RS.2,94,086/ - . 3. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF MEDICINES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED TH AT THE ASSESSEE HAS REPAID LOAN OF RS.2,94,086/ - BY WAY OF BOOK ADJUSTMENT. BASED ON THE SAID FINDING THE AO HELD IT WAS A FIT CASE TO LEVY PENALTY U/S 271(E) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT). THE LD CIT(A) HAS SUSTAINED THE PENALTY BY CONCLUDING THAT THE ASSESSEE HAS BREACHED THE PROVISION OF SECTION 269(T) OF THE ACT BY REPAYING THE LOANS, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR DRAFT IN ORDER EARN PEACE OF MIND BEING UNDER PRESSURE FROM LENDER FOR PAGE NO. 2 TRANSFER OF LOAN ACCOUNT BY WAY OF BOOK ADJUSTMENT CANNOT CONSTITUTE REASONABLE CAUSE AS ENVISAGED U/S 273 B TO AVOID IMPOSITION OF PENALTY . 4. BEING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR CONTENDED THAT THE APPELLANT TOO K AN UNSECURED LOAN FROM M/S MONARCH FINANCERS PVT. LTD. LONG AGO AND CLOSING BALANCE OF THE LOAN ACCOUNT AS ON 31.03.2005 STOOD AT RS.2,99,086/ - WHICH WAS TRANSFERRED DURING THE ASSESSMENT YEAR 2006 - 07 TO ONE OF THE DIRECTORS OF THE COMPANY MR. AMBHUJ GOPAL MATHU R WHO TOOK OVER THIS LIABILITY ON HIMSELF TO BE DIS CHARGED BY HIM PERSONALLY. 5. IT WAS FURTHER SUBMITTED THAT AS A RESULT OF CLOSURE OF LENDER FINANCE COMPANY, THE LOAN GIVEN BY THE FINANCE COMPANY TO THE ASSESSEE COMPANY WAS MADE THE LIABILITY OF ITS DIRECTOR MRS. PROMILLA RASTOGI WHO FORCED THE DIRECTOR OF THE ASSESSEE COMPA NY SH. AMBHUJ GOPAL MATHUR TO TAKE OVER TH E LOAN LIABILITY PERSONALLY INSTEAD OF KEEPING IT THAT OF THE ASSESSEE COMPANY. A LETTER FROM MRS. PROMILA RASTOGI IN THIS REGARD TO THE ASSESSEE COMPANY HAS ALSO BEEN FURNISHED BY THE APPELLANT. 6. IT WAS THUS CONTENDED THAT TRANSFER OF LOAN ACCOUNT BY W AY OF BOOK ADJUSTMENT THROUGH JOURNA L ENTRY DOES NOT WARRANT ANY BREACH AS PER THE LAW AS COMPUTED BY THE AUTHORITIES BELOW AND THEREFORE LEVY OF PENALTY U/S 271(E) OF THE ACT. APART FROM THE ABOVE, HE BROUGHT TO OUR NOTICE THAT BY AN ORDER DATED 26 TH FEBRUARY 2009 PASSED BY THE AO U/S 154 OF THE ACT WHEREBY SUM OF RS.2, 9 9,090/ - WAS ASSESSED AS INCOME OF THE ASSESSEE AND TAX WAS DULY LEVIED FROM IT. AS SUCH IT WAS PRAYED THAT EVEN ON THIS BASIS NO PENALTY IS LEVIABLE. ON THE OTHER HAND, THE LD DR, SUPP ORTED THE ORDER OF THE AUTHORITIES BELOW AND CONTENDED THAT THE PENALTY LEVIED MAY BE SUSTAINED. 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULLY PERUSED THE RECORDS OF THE CASE. THE UNDISPUTED FACTUAL MATRIX IS THAT SUM OF RS.2,99,090/ - WAS PAYABLE B Y PAGE NO. 3 THE ASSESSEE TO M/S. MONARCH FINANCE PVT. LTD. THE LIABILITY DURING THE YEAR WAS TRANSFERRED TO SHRI AMBUJ GOPAL MATHU R DIRECTOR OF THE COMPANY IN THE INSTANT YEAR. AS SUCH THE AO HELD LIABILITY TOWARDS M/S. MONARCH FIANCE RS PVT LTD HAS BEEN RE - PAID BY W AY OF BOOK ADJUSTMENT BY THE ASSESSEE COMPANY WHICH IS AN INFRINGEMENT OF SECTION 269 (T) OF THE ACT AND THUS PENALTY U/S 271(E) OF THE ACT IS LEVIABLE. WE HAVE NOTICED THAT THIS SUM HAS BEEN ADDED AS INCOME OF THE ASSESSEE UNDER SECTION 28(IV) OF THE ACT , BY AN ORDER DATED 24 TH NOVEMBER 2008 U/S 143(3) OF THE ACT READ WITH ORDER DATED 26 TH FEBRUARY 2009 U/S 154 OF THE ACT. THUS SINCE THE SAID SUM HAVING BEEN ALREADY ASSESSED AS INCOME IN THE HANDS OF THE ASSESSEE, IN OUR OPINION, FOR THE SAME AMOUNT THE RE VENUE COULD NOT RESORT TO PROCEEDINGS U/S 269(T) READ WITH SECTION 271(E) OF THE ACT. 8. SIMILAR VIEW WAS EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STANDARD BRANDS LTD. 285 ITR 295. AS SUCH THE PENALTY LEVIED IS NOT SUSTAINABLE IN THE EYES OF LAW AND WE ARE INCLINED TO DELETE THE SAME. 9. THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 . 08. 2014. - S D / - - S D / - ( B.C.MEENA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED : 2 7 / 08 / 2014 A K KEOT / A.K. VERMA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI