The DCIT, Hoshiarpur V. M/s. H.S. Raghav Construction P.Ltd., Hoshiarpur

ITA 51/ASR/2011

• Counselvise Citation: 5120914 RSA 2011
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDERSHAN KAPOORADV
• Keywords: Unexplained cash credit; Reasonable cause
• Section: 273B; 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.51(ASR)/2011 ASSESSMENT YEAR:2007-08 PAN :AABCH7334J DY.COMMR. OF INCOME TAX, VS. M/S. H.S. RAGHAV CONST RUCTION P. LTD; CIRCLE HOSHIARPUR. HOSHIARPUR. HOSHIAPUR. (APPELLANT) (RESPONDENT) C.O.NO.12(ASR)/2012 (ARISING OUT I.T.A. NO.51(ASR)/2011) ASSESSMENT YEAR:2007-08 PAN :AABCH7334J M/S. H.S. RAGHAV CONSTRUCTION P. LTD; VS. DY.COMMR. OF INCOME TAX, HOSHIARPUR. CIRCLE HOSHIARPUR. HOSHIAPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. MAHAVIR SINGH, DR RESPONDENT BY:SH.SUDERSHAN KAPOOR,ADV. DATE OF HEARING: 11/02/2014 DATE OF PRONOUNCEMENT:24/02/2014 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JALANDHAR, DATED 19.11.2010 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE 2 HAS ALSO FILED CROSS OBJECTION. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE PENALTY OF RS.25,87,475/- IMPOSED BY THE AO U/S 271D OF THE AC T. 2. THAT, IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE A.O. RESTORED. 2. IN THE C.O. THE ASSESSEE HAS RAISED SOLE GROUND WHICH READS AS UNDER: 1. THAT THE LD. CIT(A) HAS, IN VIEW OF FACTS AND C IRCUMSTANCES OF THE CASE, GROSSLY ERRED IN NOT TAKING COGNIZANCE OF THE FACT THAT THE AMOUNTS RECEIVED IN THE ACCOUNTS OF THE DIRECTO RS WERE NOT LOANS OR DEPOSITS U/S 58A OF THE COMPANIES ACT AND PENALTY WAS NOT LEVIABLE FOR THAT REASONABLE CAUSE U/S 273B OF THE ACT. 3. THE LD. COUNSEL FOR THE ASSESSEE, SH. SUDERSHAN KAPOOR, ADVOCATE AT THE OUTSET PRAYED TO WITHDRAW THE CROSS OBJECTION. THE PRAYER OF THE LD. COUNSEL HAS BEEN ACCEPTED AND THE C.O. FILED BY THE ASSESSEE IS DISMISSED AS WITHDRAWN. 4. NOW, WE TAKE UP THE APPEAL OF THE REVENUE. THE B RIEF FACTS OF THE CASE ARE THAT THE AO NOTICED CERTAIN DEPOSITS IN THE ASS ESSEES BANK ACCOUNT ON CD 1264 WITH THE ALLAHABAD BANK, HOSHIARPUR BRANCH, TOTALING RS.45,77,475/-, OUT OF WHICH THERE WERE CASH DEPOSI TS TOTALLING RS.25,77,475/- AS UNDER DATE MODE AMOUNT (RS.) 3 22.8.2006 CASH 10,000 4.9.2006 CASH 9,60,000 5.9.2006 CASH 9,50,000 6.9.2006 CASH 1,00,000 11.9.2006 CASH 5,67,475 IT WAS CLAIMED BEFORE THE AO THAT THESE AMOUNTS WER E RECEIVED AS LOAN FROM VARIOUS PERSONS. ON A REFERENCE MADE BY THE AO, THE REFORE, THE LD. ADDL. CIT ISSUED SHOW CAUSE NOTICE FOR LEVYING PENALTY U/ S 271D OF THE ACT FOR VIOLATING THE PROVISIONS OF SECTION 269SS OF THE AC T. VARIOUS CONTENTIONS WERE RAISED BY THE ASSESSEE BEFORE THE AO, WHICH WE RE CONSIDERED BY THE ADDL. CIT. THE ADDL. CIT ACCEPTED THE ASSESSEES C LAIM THAT PENALTY COULD NOT BE LEVIED IN RESPECT OF THE SUM OF RS.20,00,000 /- RECEIVED THROUGH CHEQUE BY THE ASSESSEE. HOWEVER, HE REJECTED THE OT HER CONTENTIONS RAISED BY THE ASSESSEE AND HELD THAT THE ASSESSEE HAD VIOLATE D THE PROVISIONS OF SECTION 269SS WITHOUT ANY REASONABLE CAUSE, AND LEVIED THE IMPUGNED PENALTY AMOUNTING TO RS.25,77,475/-. 5. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SU BMISSIONS AND THE LD. CIT(A) DELETED THE DISALLOWANCE AND THE RELEVANT F INDINGS ARE REPRODUCED HEREINBELOW: 4 7. HOWEVER, I FIND FORCE IN THE SUBMISSION OF THE APPELLANT WITH RESPECT TO THE ADDITIONAL GROUND OF APPEAL. PENALTY U/S 271D IS ATTRACTED WHEN A PERSON TAKES OR ACCEPTS A LOAN OR DEPOSIT IN VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. WHEN AN AMOUNT CREDITED IN THE ASSESSEES BOOKS AND CLAIMED TO BE A LOAN OR A DEPOSIT IS TREATED AS THE ASSESSEES INCOME BY THE AO, IT L OSES ITS CHARACTER OF A LOAN OR A DEPOSIT. A LOAN OR A DEPOSIT BELONGS T O SOME OTHER PERSON, OVER WHICH THE OTHER PERSON HAS A LIEN . ON THE OTH ER HAND, AN AMOUNT ADDED U/S 68 IS TREATED AS THE ASSESSEES OWN INCOM E AND MONEY. IT LOSES THE CHARACTER OF LOAN OR DEPOSIT RECEIVED FRO M SOME OTHER PERSON. IF THE AMOUNT CREDITED IN THE ASSESSEES BO OKS BECOMES THE ASSESSEES INCOME AND MONEY, THE QUESTION OF LEVY O F PENALTY U/S 271D FOR ACCEPTING A LOAN OR DEPOSIT IN CASH CANNOT ARI SE. THE OBSERVATIAONS OF THE HONBLE THIRD MEMBER OF JODHUR BENCH OF THE ITAT IN THE CASE OF NARAYAN RAM CHHABA VS. ITO REPO RTED IN 96 ITD 163 (JD) (TM) MAY BE USEFULLY REFERRED TO IN THIS R EGARD. THE RELEVANT PORTION OF THE DECISION IS AS UNDER: 12.I AM UNABLE TO SUBSCRIBE TO THE CONTENTION RA ISED ON BEHALF OF THE ASSESSEE THAT THE DELETION OF ADDITIO N U/S 68, LEADING TO THE UPHOLDING THE GENUINENESS OF THE TRA NSACTION OF LOAN, JUSTIFIES THE OBLITERATION OF PENALTY U/S 271 D AS WELL. IN MY OPINION, THE POSITION APPEARS TO BE RATHER CONVE RSE. WHEN AN ADDITION IS MADE U/S 68 BY NOT ACCEPTING THE GEN UINENESS OF THE CREDIT, THE CONCLUSION THAT FOLLOWS IS THAT, T HAT THE AMOUNT ALLEGEDLY SHOWN AS LOAN IS, IN FACT, THE INCOME OF THE ASSESSEE AND THE NAME OF THE BORROWER IS USED ONLY TO GIVE T HE COLOUR OF GENUINENESS TO THE ASSESSEES OWN UNDISCLOSED INVES TMENT IN THE BUSINESS. ADDITION U/S 68 PRESUPPOSES THAT NO G ENUINE TRANSACTION OF LOAN ACTUALLY TOOK PLACE. ON THE CON TRARY, SECTION 269SS IS ATTRACTED WHERE THE LOAN IS GENUINELY TAK EN AND THERE IS VIOLATION OF THE PROVISIONS OF ACCEPTING IT IN CASH BEYOND THE SPECIFIED LIMIT. IT IS ONLY IN RESPECT OF GENUINE L OANS THAT THE PROVISIONS OF SECTION 269SS CAN BE CONSIDERED. IF, ON THE OTHER HAND, THE LOAN SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT TURNS OUT TO BE INGENUINE, THAT CALLS FOR ADDITION U/S 68 AND HENCE THE FALSE NOMENCLATURE OF LOAN GIVEN TO THAT TRANSACTION SHEDS ITS CHARACTER. IT IS, ERGO CLEAR THAT ONLY WH EN THE LOAN IS GENUINE, THE PROVISIONS OF SECTION 269SS CAN BE CON SIDERED FOR APPLICATION. THIS VIEW HAS BEEN TAKEN BY THE DELHI BENCH OF THE 5 TRIBUNAL IN THE CASE OF ASSTT. CIT VS. RUCHIKA CHEM ICALS & INVESTMENT (P) LTD [2004] 88 TTJ (DELHI) 85. SIMILA RLY VIEW HAS BEEN TAKEN IN THE CASE OF ITO VS. NARSING RAM A SHOK KUMAR (1993) 47 ITD 38 (PAT.) AND UDAICHAND SANTOSH KUMAR JAIN V. ITO [2003] 79 TTJ (INDORE) 88. IN THE LIGHT OF THESE PRECEDENTS, I FIND THIS ARGUMENT OF THE LD. A R AS BEREFT OF ANY FORCE. 7.1. IN THE PRESENT CASE, IT IS SEEN THAT THE AO H AD ADDED THE ENTIRE DEPOSITS, INCLUDING THE CASH DEPOSITS OF RS.25,77,4 75/-, TOTALING RS.45,77,475/- TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT ORDER U/S 143(3) DATED 24.12.2009. THESE ADDITIONS HAVE BEEN UPHELD BY THE CIT(A) IN HIS ORDER DATED 15.9.2010 IN APPE AL NO.456/09- 10/CIT(A)/JAL. SINCE THE CASH DEPOSITS HAVE BEEN HE LD TO BE ASSESSEES INCOME AS UNEXPLAINED CASH CREDIT, I ACCEPT THE APP ELLANTS CONTENTION THAT THESE DEPOSITS TOTALING RS.25,77,475/- COULD N OT BE THE SUBJECT MATTER OF LEVY OF PENALTY U/S 271D OF THE ACT. THE IMPUGNED PENALTY LEVIED BY THE AO, IS THEREFORE, CANCELLED. 6. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESSN G OFFICER. 7. THE LD. COUNSEL FOR THE ASSESSEE, SH. SUDERSHAN KAPOOR, ADVOCATE AT THE OUTSET RELIED UPON THE ORDER OF THE LD. CIT(A). BUT AT THE SAME, HE INVITED OUR ATTENTION THAT THE QUANTUM ADDITIONS WHICH HAVE BEEN DELETED BY THE LD. CIT(A) AND THE REVENUE FILED APPEAL BEFORE THE ITAT , AMRITSAR BENCH, WHICH APPEAL HAS BEEN DISMISSED THE ITAT, AMRITSAR BENCH VIDE ORDER DATED 19.10.2012 IN ITA NO.45(ASR)/2012 IN ASSESSEES OWN CASE. A COPY OF ORDER HAS BEEN PLACED ON RECORD. HE ARGUED THAT THE SAID DEPOSIT HAS BEEN TREATED AS GENUINE BY THE ITAT, AMRITSAR BENCH VIDE ITS ORD ER DATED 19.10.2012. 6 7.1. THE LD. COUNSEL, MR. SURDERSHAN KAPOOR, ADVOCA TE FURTHER ARGUED THAT THE REVENUE HAS NOT ESTABLISHED WHETHER THIS IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS. UNDER THE COMPANIES (ACCEPTANCE & DEPOSITS) RULES, 1975, UNDER RULE 2(B)(IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A SHAREHOLDER OF A PRIVATE LIMITED COMPANY. HE RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD. REPOR TED IN [2006] 285 ITR 221 (MAD.) DATED 23 RD JANUARY, 2006. ACCORDINGLY, THE SAID AMOUNT DID NO T FALL UNDER THE PROVISIONS OF SECTION 269SS AND NO P ENALTY CAN BE LEVIED UNDER SECTION 271D. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE SAID AMOUN T HAS BEEN HELD TO BE GENUINE BY OUR ORDER IN THE CASE OF ASSESSEE IN IT A NO.45(ASR)/2012 DATED 19.10.2012. BUT AT THE SAME TIME, KEEPING IN VIEW T HE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ID HAYAM PUBLICATIONS LTD. (SUPRA), THE REVENUE HAS NOT ESTABLISHED WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS OF THE ACT. THEREFORE, UNDER THE COMPANIES (ACCEPTANCE & DEPOS ITS) RULES, 1975, UNDER RULE 2(B)(IX), DEPOSIT DOES NOT INCLUDE ANY A MOUNT RECEIVED FROM A DIRECTOR OR A SHAREHOLDER OF A PRIVATE LIMITED COMP ANY. ACCORDINGLY, PENALTY 7 LEVIED BY THE AO CANNOT BE SUSTAINED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) THOUGH FOR OTHER REASONS HAVE CANCELLED THE PENALTY AND WE ARE OF THE VIEW THAT NO PENALTY CAN BE LEVIE D AND AS SUCH THE APPEAL OF THE REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO.51(ASR)/2011 IS DISMISSED AND C.O. NO.12(ASR)/2012 OF THE ASSESS EE IS DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S. H.S.RAGHAV CONSTRUCTION PVT. LTD . HOSHIARPUR. 2. THE DCIT, HOSHIARPUR. 3. THE CIT(A), JLR 4. THE CIT, JLR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR