M/s Sprint Exports PVT Ltd., Visakhapatnam V. The ACIT, Range-4, Visakhapatnam, Visakhapatnam

ITA 53/VIZ/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72727 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 27-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B BABU RAO
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO.53/VIZ/2013 ASSESSMENT YEAR : 2006 - 07 SPRINTS EXPORTS PVT LTD., 10 - 50 - 84/C.SUN TOWERS, WALTAIR MAIN ROAD, VISAKHAPATNAM - 530002 VS. ACIT, RANGE - 4, VISAKHAPAT NAM PAN/GIR NO. : AAHCS 0766M ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.V.N.HARI RESPONDENT BY : SHRI B BABU RAO DATE OF HEARING : 12 /12/2013 DATE OF PRONOUNCEMENT : 13 /12/2013 O R D E R PER SAKTIJIT DEY, JM THE ASSESEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2006 - 07 AGAINST ORDER DATED 30.11.2011 OF LD CIT(A). 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMPOSITION OF PENALTY UNDER SECTION 271D OF THE ACT 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN EXPORT BUSINESS OF PRAWN AND DIMENSIONAL GRANITE BLOCKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS ACCEPTED CASH LOANS ON TWO OCCASION S OF RS.2,50,000/ - EACH FROM SMT. G.BHARGAVI, THE WIFE OF ONE OF THE DIRECTORS. THE AO WAS OF THE VIEW THAT THE SAID CASH LOANS WERE IN VIOLAT ION OF PROVISIONS OF SECTION 269SS AND, ACCORDINGLY, REFERENCE WAS MADE TO THE ADDL. CIT TO ISSUE NOTICE UNDER SECTION 274 OF THE ACT DIRECTING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPOSED U/S.271D OF THE ACT. IN RESPONSE TO SHOW CAU SE NOTICE , IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAD TAKEN AN ADVANCE OF RS.2,50,000/ - ON 2 3.9.2005 BY DRAWING THE SAID SUM BY WAY OF A CHEQUE NO.207777 FROM PERSONAL ACCOUNT OF SMT. G BHARGAVI. SIMILARLY, ANOTHER AMOUNT OF RS.2,50,000/ - WAS DRAWN ON 5 .1.2006. IT WAS FURTHER STATED IN THE E XPLANATION THAT THESE ARE TEMPORARY ADVANCE AND NOT LOAN S. THE ASSESSEE FURTHER STATED THAT LOAN OF RS.2,50,000/ - WAS REPAID TO SMT. G.BHARGAVI THROUGH A/C PAYEE CHEQUE ON 10.10.2005. IT WAS THUS CONTENDED BY THE A SSESSEE THAT THE MONEY IS WITHDRAWN FROM THE PERSONAL ACC OUNT OF SMT. G.BHARGAVI AND WAS GIVEN T O THE ASSESSEE AS TEMPORARY ADVANCE , WHICH IS NOT IN THE NATURE OF LOAN. IT WAS FURTHER SUBMITTED THAT SINCE THE CHEQUE TRANSFER FROM ONE BA NK TO ANOTHER BANK WOULD TAKE 2 TO 3 DAYS, THE TEMPORARY ADVANCE WAS DRAWN TO FACILITATE A QUICK TRANSFER OF MONEY. THE ADDL. CIT WAS NOT CONVINCED WITH THE EXPLANATION OFFERED BY THE ASSESSEE AND HELD THAT THE LEDGER ACCOUNT COPY OF G. BHARGAVI IN THE B OOKS OF THE ASSESSEE C LEARLY SHOWS THE AMOUNT TAKEN AS UNSECURED LOAN. HE FURTHER OBSERVED THAT IF THE EXPLANATION OF THE ASSESSEE TO THE EFFECT THAT THE FUNDS TRANSFER FROM ONE BANK TO ANOTHER BANK TAKES 2/3 DAYS, WILL BE ACCEPTED, THEN THE PROVISIONS OF SECTION 269SS WOULD HAVE NO MEANING. HE WAS OF THE VIEW THAT THE DELAY IN TRANSFER OF MONEY THROUGH BANK S CANNOT BE THE REASON FOR ACCEP TING CASH LOAN AS THERE HAS TO BE SUFFICIENT REASON WHICH COMPELS THE ASSESSEE TO ACCEPT THE CASH LOANS. THE A DDL. CI T THEREFORE HELD THAT SINCE THE ASSESSEE FAILED TO ESTABLISH A REASONABLE CAUSE, PENALTY OF RS.5,00,000/ - EQU IVALENT TO THE AMOUNT OF LOAN RECEIVED IN CASH IS IMPOSABLE ON THE ASSESSEE. ACCORDINGLY, HE PASSED THE ORDER IMPOSING THE PENALTY UNDER SECTION 2 71D OF THE ACT. THE ASSESSEE BEING AGGRIEVED OF SUCH IMPOSITION OF PENALTY, PREFERRED APPEAL BEFORE THE CIT(A). 4. IN THE COURSE OF HEARING BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THERE IS NO CASE FOR IMPOSITION OF PEN ALTY UNDER SECTION 271D, BECA USE IT IS A GENUINE TRANSACTION AND HAS NEVER BEEN DOUBTED BY THE AO. IT WAS FURTHER SUBMITTED THAT MONEY IS TAKEN ONLY AS TEMPORARY ADVANCE, HENCE, PROVISIONS OF SECTION 269SS IS NOT ATTRACTED. IT WAS FURTHER CONTENDED THAT SINCE THE TRANSFER OF CHEQUE WOULD HAVE TAKEN 2 TO 3 DAYS AND CONSIDERING THE URGENCY BUSINESS NEEDS, CASH WAS ACCEPTED. THE CIT(A) , HOWEVER, DID NOT FIND ANY OF THE CONTENTION RAISED BY THE ASSESSEE ACCEPTABLE AND IN VIEW OF THE CLEAR PROVISIONS OF SECTION 269SS, HELD THAT ASSESSEE HAS NO REASONABLE CAUSE FOR VIOLATION OF SECTION 269SS AND, ACCORDINGLY, SUSTAINED THE IMPOSITION OF PENALTY. 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS OF THE CASE. IT IS THE CONTENTION OF LD A.R. THAT SO FAR AS FIRST ADVANCE OF RS.2 ,50,000/ - TAKEN ON 3.9.2005 IS CONCERNED, THE SAME WAS TAKEN TO MEET THE IMMEDIATE REQUIREMENTS AND REPAID THROUGH ACCOUNT PAYEE CHEQUE ON 10.10.2005. SINCE THE ASSESSEE WAS IN URGENT NEED OF MONEY FOR BUSINESS PURPOSES, IT TOOK TEMPORARY LOAN OF RS.2,50, 000/ - . SO FAR AS SECOND AMOUNT OF RS.2,50,000/ - TAKEN ON 5.1.2006 IS CONCERNED, LD A.R. CONTENDED THAT ASSESSEE HAD ISSUED SOME CHEQUES TO PARTIES, HOWEVER, SINCE THE ASSESSEE WAS NOT HAVING SUFFICIENT FUNDS IN ITS BANK AC COUNT, IT TOOK CASH LOAN OF RS .2.50 LAKHS FROM SMT. G. BHARGAVI, WHO IS WIFE OF ONE OF THE DIRECTORS ON 5.1.2006 AND DEPOSITED IT IN ITS BANK ACCOUNT O N 6.1.2006 TO FACILITATE THE CLEARANCE OF CHEQUES ISSUED BY IT. IN THIS CONTEXT, LD A.R. REFERRED TO THE EXTRACT OF THE CASH BOOK SUBM ITTED AT PAGE 7 OF PB SHOWING THE ENTRY RELATING TO DEPOSIT OF RS.2.50 LAKHS IN THE STATE BANK OF INDIA A/C NO.62067 ON 6.1.2006. 6. ID D.R. ON THE OTHER HAND, CONTENDED THAT THERE IS VIOLATION OF PROVISIONS OF SAID SECTION BY THE ASSESSEE IS NOT DENIED. FURTHER, NO REASONABLE CAUSE HAS BEEN SHOWN BY THE ASSESSEE, WHICH COMPELLED IT TO VIOLATE THE STATUTORY PROVISIONS. IN THESE CIRCUMSTANCES, IMPOSITION OF PENALTY IS JUSTIFIED. 7. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES, WE FIND THAT SO FAR AS A DVANCE OF RS.2.50 LAKHS ON 3.9.2005 IS CONCERNED, APART FROM STATING THAT THE TRANSFER OF CHEQUE WHICH COULD HAVE TAKEN 2 TO 3 DAYS, ASSESSEE HAD NOT BEEN ABLE TO SHOW ANY URGENT BUSINESS NEED OR ANY OTHER COMPELLING CIRCUMSTANCES FOR TAKING ADVANCE IN C ASH OF RS.2,50,000/ - . THEREFORE, IN ABSENCE OF REASONABLE CAUSE SHOWN BY THE ASSESSEE, CASH LOAN OF RS.2,50,000/ - TAKEN ON 3.9.2005 CAN BE SAID TO BE CLEARLY IN VIOLATION OF SECTION 269SS AND, THEREFORE, LIABLE TO IMPOSITION OF PENALTY UNDER SECTION 271D OF THE ACT. T HE REPAYMENT OF THE AMOUNT BY ACCOUNT PAYEE CHEQUE OR THE FACT THAT NO DOUBT HAS BEEN ENTERTAINED AS REGARDS GENUINENESS OF T HE LOAN WOULD NOT GIVE A HAND LE FOR VIOLATION OF SECTION 269SS, HENCE THE ASSESSEE IS LIABLE TO BE VISITED WITH PENALTY U/S.271D OF THE ACT ON THE CASH LOAN OF RS.2.50 LAKHS TAKEN ON 3.9.2005. 8. HOWEVER, SO FAR AS SECOND ADVAN CE OF RS.2.50 LAKHS ON 5.1.2006 IS CONCERNED, ON PERUSAL OF THE ENTRY DATED 6.1.2006 MADE IN THE CASH BOOK, COPY OF WHICH IS PLACED 4 IN PB , DOE S INDICATE THAT THE ASSESSEE HA S D EPOSI TED THE AMOUNT OF RS.2,50,000 INTO HIS BANK ACCOUNT. THEREFORE, ASSESSEES EXPLANATION IN RESPECT OF THE CASH LOAN TAKEN ON 5.1.2006 APPEARS PLAUSIBLE. IN THESE CIRCUMSTANCES , IT IS TO BE ACCEPTED THAT ASSESSE E HAS SHOWN A REASONABLE CAUSE FOR TAKING THE CASH LOAN, WHICH IN OUR VIEW DOES NOT ENTAIL IMPOSITION OF PENALTY U/S.271D OF THE ACT. IN THE AFORESAID VIEW OF THE MATTER, OUT OF THE TOTAL PENALTY OF RS.5,00,000/ - IMPOSED U/S.271D OF THE ACT, WE SUSTAIN AN AMOUNT OF RS.2,50,000/ - AND DIRECT THE AO TO DELETE PENALTY OF THE BALANCE AMOUNT OF RS.2,50,000/ - . 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/12/2013 . SD/ - S D/ - (B.RAMAKOTAIA H ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKHAPATNAM DATED 13 / 12/2013 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : SPRINTS EXPORTS PVT LTD., 10 - 50 - 84/C.SUN TOWERS, WALTAIR MAIN ROAD, VISAKHAPATNAM - 530002 2. THE RESPONDENT. : ACIT, RANGE - 4, VISAKHAPAT NAM 3. THE CIT(A) - VISAKHAPAT NAM 4. CIT , VISAKHAPAT NAM 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//