Asstt. Commissioner of Income Tax, Lucknow V. Smt. Sabri Mehta, Lucknow

ITA 542/LKW/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7987 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N KAPOOR
• Keywords: Bonafide belief; Reasonable cause; Tax effect
• Section: 273B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.542/LKW/2012 ASSESSMENT YEAR:2008 - 09 A.C.I.T., RANGE - I, LUCKNOW. VS. SMT. SABRI MEHTA, 79 - 80, ELDECO GREEN, GOMTI NAGAR, LUCKNOW. PAN:ADZPM4898E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY SHRI S. N. KAPOOR, C.A. DATE OF HEARING 17/07/2014 DATE OF PRONOUNCEMENT 2 9 /08/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - I, LUCKNOW DATED 07/08/2012 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1.A THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CANCELING THE PENALTY U/S 271E AMOUNTING TO RS.14,92,727/ - WITHOUT APPRECIATING THAT THERE WAS NO REASONABLE CAUSE FOR NOT COMPLYING WITH THE LETTER OF THE LAW AND THE CLEAR LANGUAGE OF SECTION 269T PARTICULARLY AS THE ASSESSEE IS A BIG TAX PAYER WHO IS ADVISED BY CA. 1.B IN SO DOING THE LD. CIT (A) FURTHER FAILED TO APPRECIATE THAT GENUINENESS OF THE TRANSACTION OR IGNORANCE OF THE LAW OR CONVENIENCE OF THE PARTIES CANNOT BE GROUNDS FOR JUSTIFYING THE DEFAULT U/S 269T. 2 2. APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUND OF APPEAL, AS STATED ABOVE AS AND WHEN NEED OF DOING SO ARISES WITH THE PRIOR PERMISSION OF THE HON'BLE BENCH. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE PENALTY ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED TH E ORDER OF CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THIS CASE , PENALTY HAS BEEN IMPOSED BY THE ASSESSING OFFICER FOR THE REASON THAT REPAYMENT OF LOAN WAS MADE BY THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUE BUT THE SAID ACCOUN T PAYEE CHEQUES WERE NOT IN THE NAME OF LENDER WHO ADVANCED THE LOAN BUT THE ASSESSEE HAVE ISSUED CHEQUES IN THE NAME OF THE THIRD PARTY. PENALTY WAS IMPOSED BY THE ASSESSING OFFICER ON THE BASIS THAT SUCH REPAYMENT IS NOT IN LINE WITH THE REQUIREMENT OF PROVISIONS OF SECTION 269T OF THE ACT. THIS ISSUE HAS BEEN DECIDED BY THE CIT(A) AS PER PARA 5 OF HIS ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE CONTENTIONS RAISED BY THE APPELLANT. I FIND THAT THERE WAS ONLY A TECH NIC AL AND VENIAL BREACH OF THE PROVISIONS OF SECTION 269T IN THIS CASE AND IT DID NOT CALL FOR AN EXTREME ACTION IN THE FORM OF LEVY OF PENALTY AMOUNTING TO THE ENTIRE AMOUNT OF PAYMENTS. THE TRANSACTIONS WERE BONAFIDE AND T HE Y WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS AND THEY DID NOT HAVE ANY TAX EFFECT OR ANY RAMIFICATION WHICH WERE SOUGHT TO BE CURBED BY THE STATUTE BY ENACTMENT OF THE PROVISIONS OF SECTION 269T - . FROM THE CONDUCT OF THE APPELLANT IT CAN BE REASONABLY INFERRED THAT SHE HAD A 'REASONABLE CAUSE IN AS MUCH AS SHE HAD A BONAFIDE BELIEF THAT THE PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUES FROM THE ACCOUNTS OF THE LENDERS AT THEIR REQUESTS/INSTRUCTIONS WOULD TANTA MOUNT TO THE REPAYMENTS TO THE LENDERS THEMSELVES. IT IS WELL SETTLED THAT PENALTY PROCEEDINGS ARE QUASI - CRIMINAL PROCEEDINGS AND THE PROVISIONS DEALING WITH THE PENALTY MUST BE STRICTLY CONSTRUED. AN ORDER OF IMPOSING PENALTY FOR FAILURE TO CARRY OUT AN S TATUTORY OBLIGATION IS A RESULT OF QUASI CRIMINAL PROCEEDINGS 3 AND PENALTY WILL NOT BE ORDINARILY IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGAR D TO THIS OBLIGATION. (HINDUSTAN STEEL LTD. VS. STATE OF ORISSA, 83 ITR 26 SC) BESIDES, A PENALTY WILL NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. IN THE INSTANT CASE THE AO HAS FAILED TO APPRECIATE THE FACT THAT THE BREACH OF THE PROVISIONS OF SE CTION 269T WAS MERELY TECHNICAL AND VENIAL AND IT DID NOT HAVE SUCH GRAVITY AS WOULD WARRANT TO BE VISITED BY AN EXTREME ACTION LIKE IMPOSITION OF PENALTY. BESIDES, THE AO ALSO FAILED TO APPRE CIATE THAT THE APPELLANT'S BONAFIDE BELIEF THAT THE PAYMENTS MAD E ON BEHALF OF THE LENDERS AT THEIR INSTRUCTIONS IMPLIED REPAYMENTS TO THE LENDERS THE MSELVES , CONSTITUTED A REASONABLE CAUSE WITHIN THE MEANING AND SCOPE OF SECTION 273B. THE AO ALSO FAILED TO APPRECIATE THE FACT THAT THE TRANSACTIONS WERE HONESTLY RECOR DED IN THE BOOKS OF ACCOUNTS AND THE PAYMENTS MADE FROM THE LENDERS' ACCOUNT WERE ACKNOWLEDGED BY THE RESPECTIVE RECIPIENTS IN THE NAMES OF THE LENDERS THEMSELVES. THE APPELLANT HAS PRODUCED COPIES OF RECIPIENTS FROM ELDECO HOUSING LTD., HDFC BANK, BIR L A S UN LIFE INSURANCE LTD. WHEREIN THE PAYMENTS RECEIVED VIA APPELLANT HAVE BEEN ACKNOWLEDGED AS PAYMENTS RECEIVED FROM THE MS SHAEENA KHULLAR AND SHRAVINI MEHTA, THE TWO LENDERS. IN VIEW OF THE LEGAL AND FACTUAL POSITION AS DISCUSSED ABOVE, I, IN MY CONSIDERE D VIEW, HOLD THAT THE PENALTY IS NOT TENABLE IN THIS CASE AND ACCORDINGLY THE PENALTY LEVIED IS DIRECTED TO BE CANCELLED. 4.1 FROM THE ABOVE PARA FROM THE ORDER OF CIT(A) AND FROM PARA 4 OF HIS ORDER , IN WHICH HE HAS NOTED DOWN THE SUBMISSIONS BEFORE HIM, WE FIND THAT RELIANCE WAS PLACED BY LEARNED A.R. OF THE ASSESSEE ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF DCIT VS. EMESKAY FINANCIAL SERVICES LTD. 124 ITD 435. THIS IS NOT IN DISPUTE THAT THE PROVISIONS OF SECTION 273B OF THE ACT ARE APPLICABLE IN RESPECT OF PENALTY IMPOSED U/S 271E OF THE ACT ALSO . AS PER THE PROVISIONS OF SECTION 273B, NO PENALTY IS IMPOSABLE FOR ANY FAILURE REFERRED TO IN THE PROVISIONS OF THE CONCERNED SECTION IF THE ASSE SSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. IN THE PRESENT CASE, THIS IS THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE 4 WAS UNDER BONAFIDE BELIEF THAT THE PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUES FOR AND ON BEHALF OF THE LENDER S TANTAMOUNT TO THE PAYMENT TO THE LENDERS THEMSELVES. IT IS ALSO SEEN THAT IN THE PRESENT CASE THE ASSESSEE HAS PRODUCED COPIES OF THE LETTERS FROM THE RECIPIENTS SUCH AS ELDECO HOUSING LTD., HDFC BANK AND BIRLA SUN LIFE INSURANCE LTD. WHEREIN THE PAYM ENT RECEIVED FROM THE ASSESSEE HAVE BEEN ACKNOWLEDGED AS PAYMENT RECEIVED FROM MS SHAEENA KHULLAR AND SHRAVINI MEHTA , THE TWO LENDERS. CONSIDERING ALL THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT IN THE PRESENT CASE , IT HAS TO BE ACCEPTED THAT THER E WAS REASONABLE CAUSE FOR THE FAILURE OF THE ASSESSEE TO FOLLOW THE PROVISIONS OF SECTION 269T OF THE ACT BECAUSE IT HAS TO BE ACCEPTED THAT ALTHOUGH THE CHEQUES WERE DRAWN IN FAVOUR OF DIFFERENT PERSONS BUT THOSE CHEQUES WERE RECEIVED BY THE CONCERNED PE RSONS ON BEHALF OF THESE TWO LENDERS ONLY AND HENCE, IN OUR CONSIDERED OPINION, THE PENALTY HAS BEEN RIGHTLY DELETED BY CIT(A) AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (O RDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 9 /08/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR