M/s. Ropa Plastic Pvt. ltd., Pune V. ACIT, Range-6, Pune

ITA 513/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56519 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA SR

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JM AND SHRI D. KARUNAKARA RAO, AM ITA NO.513/PN/2010 ASST.YEAR: 2004-05 M/S ROPA PLASTIC PVT.LTD., GAT NO.837/2, VILLAGE SANASWADI, TAL.SHIRUR, PUNE NAGAR ROAD PUNE 412 028. PAN AACCR4678J APPELLANT VS. ADDL .COMMISSIONER OF INCOME TAX, RANE-6, PUNE RESPONDENT APPELLANT BY : SHRI KISHORE PHADKE, AR RESPONDENT BY : MS S.PRAVEENA, SR AR ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) III, PUNE DT. 3-2-2010 FOR THE ASSESSMENT YEAR 2004-05. 2. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE MENTIONED THAT THE ASSESSEE IS AGGRIEVED WITH THE DECISION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PEN ALTY U/S 271D OF THE INCOME TAX ACT, 1961 (THE ACT), LEVIED BY THE ASSES SING OFFICER. IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE MENTIO NED THAT THE ASSESSEE 2 IS A MANUFACTURER OF PLASTIC CAPS. DURING THE PENA LTY PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY U/S 271D OF THE ACT SHOULD NOT BE LEVIED IN RESPECT OF THE AMOUNT OF RS.18,35,700, WHICH IS SAID TO BE THE LOAN TAKEN BY THE ASSESSEE- COMPANY FROM A DIRECTOR OF THE COMPANY VIZ., SHRI H ITEN PATEL. IN RESPONSE, THE ASSESSEE EXPLAINED STATING THAT THE S AID AMOUNT, IN FACT, SHOULD NOT CONSTITUTE LOAN IN THE LEGAL SENSE AS IT IS MERELY A CASE OF CURRENT ACCOUNT ADJUSTMENT AND A CASE OF JOURNAL EN TRY. FACTUALLY, IT IS AN AGGREGATE AMOUNT INCURRED DIRECTLY BY THE DIRECTOR FOR THE COMPANY ON HIS OWN AND THE SAID AMOUNT IS DEBITED TO THE ACCOU NTS OF THE ASSESSEE AS AMOUNTS PAYABLE TO THE DIRECTOR. 3. THE REVENUE DID NOT ACCEPT THE SAID EXPLANATION AND PROCEEDED TO LEVY THE PENALTY. DURING THE FIRST APPELLATE PROCE EDINGS BEFORE THE CIT(A), ASSESSEE COULD NOT SUCCEED AS THE CIT(A) CO NFIRMED THE SAME FOR THE REASONS DISCUSSED IN PARAGRAPH 6.2 TO 6.5 OF HI S ORDER. THE ASSESSEES CORE AND LEGAL SUBMISSION REVOLVES AROUN D THE ONE THAT THERE IS NO LOAN ARRANGEMENT BUT IT IS MERELY A CURRENT A CCOUNT ARRANGEMENT WAS NOT ACCEPTED AND IT IS A UNILATERAL TRANSACTION . AGGRIEVED WITH THE ABOVE, THE ASSESSEE IS IN APPEAL BEFORE US. 4. DURING THE PROCEEDINGS, THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THE ABOVE FACTS WITH WHICH THERE IS NO DI SPUTE, FILED A PAPER BOOK CONTAINING A COMPILATION OF VARIOUS DECISIONS. RELYING ON THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF M/S CHANDRA CEMENT LTD . V. DCIT, 68 TTJ 35, LD COUNSEL FOR THE ASSESSEE ARGUED STATI NG THAT MONEY RAISED BY THE DIRECTOR FROM HIS OWN RESOURCES FROM TIME TO TIME FOR MEETING THE PROMOTION AND OTHER EXPENSES OF THE COMPANY AND FOR FINANCING ON-GOING CONSTRUCTION AND OTHER ACTIVITIES WITH THE HOPE OF TAKING IT BACK BEING UNILATERAL TRANSACTIONS WERE NOT LOANS OR DEPOSITS ATTRACTING THE PROVISIONS OF SEC.269SS OF THE ACT. THEREFORE, PEN ALTY U/S 271D OF THE ACT COULD NOT BE LEVIED. TAKING ANALOGY OF THE SAI D PROPOSITION, THE 3 COUNSEL FOR THE ASSESSEE STATED THAT IN THE PRESENT CASE ALSO, THE MONEY WAS BROUGHT IN BY THE PROMOTER-DIRECTOR FROM OWN SO URCES AND SPENT DIRECTLY FOR MEETING THE EXPENSES OF THE ASSESSEE C OMPANY AND RAISED THE LIABILITY VIDE THE JOURNAL ENTRIES. THERE IS NO LOA NEE AND LOANER OR DEPOSITEE OR DEPOSITOR ARRANGEMENT IN THIS TRANSACT ION. AS PER THE ASSESSEES COUNCIL, IT CONSTITUTES UNILATERAL TRAN SACTION AND THEREFORE, IT IS OUTSIDE THE SCOPE OF THE PROVISIONS OF SECTIONS 269 SS R W S 271D OF THE ACT. LD COUNSEL ALSO MENTIONED THAT THERE IS NO DI SPUTE ABOUT THE GENUINENESS OF THE EXPENDITURE AND EXPENDING FOR TH E BUSINESS PURPOSES OF THE COMPANY. IN SUCH CIRCUMSTANCES, THE SAID TR ANSACTION CONSTITUTES AN UNILATERAL TRANSACTION AND, THEREFORE, IT IS NEI THER A LOAN NOR A DEPOSIT. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE REAL N ATURE OF THE TRANSACTIONS INVOLVED. THE IMPUGNED AMOUNTS WERE IN FACT RAISED BY THE DIRECTOR AND SPENT THE SAME FOR THE BUSINESS PURPOS ES OF THE ASSESSEE- COMPANY. SUBSEQUENTLY, EXPENSES WERE BOOKED TO THE COMPANYS ACCOUNTS BY DEBITING THE RESPECTIVE EXPENSES AND CR EDITING TO THE ACCOUNT OF MR HITEN PATEL. THE COMPANY NEVER HAD THE OCCASI ON TO POSSESS THE SAID MONEY PHYSICALLY IN THEIR BOOKS EITHER IN THE BANK OR IN THE CASH BOOK FOR APPROPRIATION BY THE COMPANY. IT IS MR HITEN PA TEL, WHO RAISED THE FUNDS, TOOK POSSESSION OF THEM, AND APPROPRIATED TH EM, OF COURSE, NOT FOR HIM BUT FOR THE PURPOSES OF THE ASSESSEE-COMPANY. O N HEARING BOTH THE PARTIES, WE FIND THAT THE ASSESSEE NEVER PHYSICALLY RECEIVED THE IMPUGNED LOAN/DEPOSIT. IN THAT SENSE, THIS IS A CASE WHERE T HERE ARE NO PAYEE AND PAYER INVOLVED INVOLVING THE ASSESSEE COMPANY AND I N THAT SENSE, QUA THE AMOUNTS INVOLVED, THE IMPUGNED TRANSACTIONS ARE UNI LATERAL IN NATURE. IT IS A TRITE LAW THAT ANY LOAN TRANSACTION INVOLVES T WO PERSONS IE LOAN RECEIVER AND LOAN GIVER IE A BILATERAL TRANSACTION. IN THE INSTANT TRANSACTIONS, THE ASSESSEE COMPANY NEVER RECEIVED L OAN LITERALLY AND 4 THEREFORE THE TRANSACTION DOES NOT CONSTITUTE BILAT ERAL TRANSACTION. ACCOUNTING WISE, THIS IS A CASE OF CURRENT ACCOUNT ADJUSTMENT BY WAY OF RAISING JOURNAL ENTRIES IN THE BOOKS OF THE ASSESSE E INVOLVING THE ASSESSEE AND THE HETEN PATEL. THEREFORE, AS STATED IN THE O RDER OF THE TRIBUNAL RELIED UPON BY THE COUNSEL, SUCH TRANSACTIONS ARE A LREADY HELD TO BE UNILATERAL TRANSACTIONS AND ACCORDINGLY, SUCH MONEY DOES NOT TANTAMOUNT TO LOAN OR DEPOSIT AT LEAST FOR THE PURPOSES OF SEC TION 269SS/271D OF THE ACT. WE HAVE FOLLOWED THE JAIPUR BENCH OF THE TRIBU NAL IN THE CASE OF M/S CHANDRA CEMENT LTD (SUPRA). CONSEQUENTLY, THE PROVISIONS OF SEC. 269SS OF THE ACT HAVE NO APPLICATION IN THIS CASE. HENCE , THE PROVISIONS OF SEC.271D ARE ALSO NOT APPLICABLE. THEREFORE, THE O RDER OF THE CIT(A) REQUIRES TO BE SET ASIDE . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 0 5-10-2011. SD/- SD/- (I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE, DATED THE 05 TH OCTOBER, 2011 *VNR COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEES AS MENTIONED IN THE CAUSE TITLE 2. ADDL.CIT, RANGE-6, PUNE. 3. CIT (A)-III, PUNE. 4. CIT CONCERNED, 5. D.R. ITAT B BENCH, PUNE. 6. GUARD FILE BY ORDER 5 ASSISTANT REGISTRAR I.T.A.T PUNE