Jagrut Motors, Ratnagiri V. Joint Commissioner of Income-Tax, Ratnagri Range, , Ratnagiri

ITA 534/PUN/2022

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The case involves M/s Jagrut Motors appealing against a penalty imposed by the Joint Commissioner of Income Tax, Ratnagiri, which was confirmed by the National Faceless Appeal Centre, Delhi. The penalty was levied under section 271D for alleged violations of section 269SS, which prohibits accepting or repaying loans or deposits in cash exceeding Rs. 20,000. The appellant argued that the transactions were between sister concerns and involved payments for tax liabilities, thus not constituting a violation. The Tribunal agreed with the appellant, noting the familial and business relationship between the parties and the nature of the transactions as current account dealings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136329 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-12-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 14-07-2022
• Other Referred Cases: ADA Investigation Vs Kumar AB Shanti, CIT Vs RM Chidambaram Pillai
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 273B; 271D; 250

Judgement Text

॥ आयकर अपीलीय न्यायाधिकरण, पुणे “सी” न्यायपीठ, पुणे में ॥ ITAT-Pune Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE“C” BENCH, PUNE BEFORE HON’BLE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपऩल सं. / ITA No.534/PUN/2022 ननधधारण वषा / Assessment Year : 2012-13 M/s Jagrut Motors, D-25, MIDC, Mirjole, Ratnagiri– 415 639 PAN : AADFJ1431D . . . . . . . अपऩलधथी / Appellant बनधम / V/s. Jt. Commissioner of Income Tax, Ratnagiri Range, Ratnagiri . . . . . . . प्रत्यथी / Respondent द्वारा / Appearances Assessee by : Shri M.K. Kulkarni & Mrs. J.R. Chandekar Revenue by : Shri Suhas Kulkarni सपनवधई की तधरऩख / Date of conclusive Hearing : 27/12/2022 घोषणध की तधरऩख / Date of Pronouncement : 20/01/2023 आदेश / ORDER PER G.D. PADMAHSHALI, AM; The present appeal of the assessee for the assessment year [for short “AY”] 2012-13 is assailed against the first appellate order of National Faceless Appeal Centre, Delhi [for short “CIT(A) /NFAC”] dt. 30/03/2022 passed u/s 250 of the Income-tax Act, 1961 [for short “the Act”], which ascended out of order of penalty dt. 13/03/2019 passed u/s 271D by the JCIT Ratnagiri Range, Ratnagiri [for short “AO”] M/s Jagrut Motors, ITA No.534 /PUN/2022 AY: 2012-13 ITAT-Pune Page 2 of 8 2. Before advancing the matter, here are the grounds challenged by the appellant; “1.On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the levy of penalty under S. 271D of Rs. 72,58,500/- in the absence of violations of the provisions of S. 269SS of the Act. The acceptor and giver are both sister concerns, partnership firms whose partners are family members. They cannot be stated to have contravened the provisions of S. 269SS of the Act. The penalty levied be quashed and set aside. 2. On the facts and in the circumstances of the case and in law the payments made by partnership firms inter-se were not in cash but through banking channels. The provisions of S. 271D are not applicable as there is no contravention of S. 269SS of the Act. The penalty under S. 271D is not leviable. The penalty levied be cancelled. 3. On the facts and in the circumstances of the case and in law when S. 271D is read with section 273B which being with non obstante clause, will have its full operation and under S. 273B, a judicial discretion is left with the authority not to levy a penalty under S. 271D if the authority is satisfied that there was a reasonable cause for not complying the provisions of S. 269SS of the Act. In view of this and since the assessee had reasonable cause within the meaning of S. 273B no penalty is leviable. The penalty levied be quashed. 4. On the facts and in the circumstances of the case and in law the assessee has received cash from sister concern to pay the Government dues like VAT etc. In this view of the matter also there was no contravention of S. 269SS of the Act. It has been judicially held the amount was deposited to save the hour of crisis, it M/s Jagrut Motors, ITA No.534 /PUN/2022 AY: 2012-13 ITAT-Pune Page 3 of 8 amounts to reasonable cause within the meaning of S. 273B of the Act. In any case and in the absence of contravention of S. 269SS no penalty is leviable u/s 271D of the Act. The penalty levied u/s 271D be set aside. 5. On the facts and in the circumstances of the case and in law this appeal is delayed by few days. The assessee was prevented by sufficient cause in not filing the appeal within the limitation. The delay be condoned and the appeal be admitted for adjudication in accordance with the provisions of law. The application for condonation of delay is filed supported by sworn affidavit. 6. The appellant craves to leave, add/amend or alter any of the above grounds of appeal.” 3. It shall suffice to articulate that, the appellant challenged the action of both the tax authorities below on twofold substantive ground; (i) in the facts and circumstances the provisions of section 269SS have no application and (ii) if the transaction considered as falling within the ambit of section 269SS, then there exist reasonable cause in terms of section 273B of the Act. In adjudicating the matter we shall first be dealing to decide whether transactions undertaken are capable of attracting the provisions of section 271D and if the answer is affirmative, then M/s Jagrut Motors, ITA No.534 /PUN/2022 AY: 2012-13 ITAT-Pune Page 4 of 8 only we shall deal with the circumstances to vouch whether there was any reasonable cause existed behind the contravention of provisions of section 269SS of the Act. 4. During the course of physical hearing, the learned senior counsel for the assessee Mr M K Kulkarni [in short “AR”] adverting to case records pleaded that, both the authorities failed to appreciate the facts that the impugned transaction had taken place between two partnership firms whose partners are undoubtedly the husband and wife, hence provision of section 269SS cannot be put to service when no third party is in-fact involved as there is no apparent intent to evade the taxes. The Ld. AR highlighted the financial predicament which triggered the appellant to undertake such cash transaction which can ultimately finds place in the shelter of ‘reasonable cause’ as envisaged by section 273B of the Act and hence penalty u/s 271D was unwarranted. Au contraire, the learned departmental representative [in short “DR”] strongly relied on the order of tax authorities below. M/s Jagrut Motors, ITA No.534 /PUN/2022 AY: 2012-13 ITAT-Pune Page 5 of 8 5. After hearing to rival contentions of both the parties; and subject to the provisions of rule 18 of ITAT, Rules perused the material placed on record; case laws relied upon and duly considered the facts of the case in the light of settled legal position forewarned to parties present. 6. We note that, the Registry has endorsed the present appeal as delayed by 47 days. We, having regard to facts & circumstance, find force in the submission of the appellant in establishing the sufficiency of reasons which caused the belated filing; consequently in the larger of interest of justice, the delay is condoned. 7. From the records, it transpired that; 7.1 The appellant is a partnership firm where husband Mr Rajendra Joshi and his spouse Mrs Resham Joshi are the only partners who commonly also constituted another partnership firm namely “The Jagrut Motors” a ‘sister concern’, dealing in identical and like business of automobile dealership, trading in accessories and spare-parts etc. M/s Jagrut Motors, ITA No.534 /PUN/2022 AY: 2012-13 ITAT-Pune Page 6 of 8 7.2 During the year under consideration, the appellant undisputedly received cash amounting to ₹72,58,500/- from its sister concern against the payment towards discharged Maharashtra Value Added Tax [in short “MVAT”] Liability honoured by the appellant owning to non-availability of online banking facility with the sister concern at given point of time. 7.3 The Ld. AO however after perusal of submission, dislodged the claim of appellant of having paid the MVAT on behalf of its sister concern, and treating such cash receipts as acceptance of loans and advances in contravention of section 269SS in the hands of appellant, imposed a penalty of equivalent amount loan and advance u/s 271D of the Act, which the Ld. NFAC perfunctory confirmed reciting the observations of his tax authority below. 7.4 We notice that, the Hon’ble Apex Court in “ADA Investigation Vs Kumar AB Shanti” reported in 255 ITR 258 explained the object behind insertion of section 269SS of the Act, as; M/s Jagrut Motors, ITA No.534 /PUN/2022 AY: 2012-13 ITAT-Pune Page 7 of 8 "The object of introducing section 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called leader also to manipulate his records later to suit the plea of the taxpayer. The main object of section 269SS was to curb this menace". (Emphasis supplied) 7.5 Keeping in mind the aforestated judicial precedents, we are finding it difficult to digest how a transaction between oneself can be coloured as loan / advances, where both appellant and its sister concern are constituted as FIRM exclusively by same partners from a single family, and where the transactions between them were exclusively on account of current transaction i.e. in the nature of current account wherefore no interest has been found charged. 7.6 Since the members constituting firm are referred individually as partners and collectively as firm, the transaction between two sister concern firms M/s Jagrut Motors, ITA No.534 /PUN/2022 AY: 2012-13 ITAT-Pune Page 8 of 8 are noting but transaction between partners themselves, and thus between oneself in the present case because constituents of both these firms are same person from a family i.e. Husband & wife, for the reason provisions of section 269SS cannot be made applicable and same finds force in Hon’ble Supreme Court decision in “CIT Vs RM Chidambaram Pillai” reported in 106 ITR 272. In the light of the above reasoning, we find the orders of both the tax authorities below as erroneous, consequently we set- aside the order of Ld. NFAC and quash the order of penalty as unwarranted. 8. Resultantly, the appeal of the appellant ALLOWED in terms of aforestated observation. In terms of rule 34 of ITAT Rules, 1963 the order is pronounced in the open court on this Friday 20 th day of January, 2023. -S/d- -S/d- S. S. GODARA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; दिन ांक / Dated : 20 th day of January, 2023. आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : 1. अपऩलधथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The NFAC, Delhi (India) 4. The CIT(A) Kolhapur (Mah-India) 5. DR, ITAT, Pune “C” Bench, Pune. 6. गधर्ाफ़धइल / Guard File. आदेशधनपसधर / By order. वररष्ठ ननजऩ सनिव / Sr. Private Secretary आयकर अपऩलऩय न्यधयधनधकरण, पपणे / ITAT, Pune.