ADDL.C.I.T.-8(2), MUMBAI V. OM SIDDIVINAYAK CREATIONS PVT. LTD., MUMBAI

ITA 5464/MUM/2012

• Counselvise Citation: 546419914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M P SHARMA
• Keywords: Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.5464/M/2012 ASSESSMENT YEAR:2008-09 INCOME TAX OFFICER 8(2)-4, ROOM NO.213/216A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. OM SIDDIVINAYAK CREATIONS PVT. LTD. 6 TH FLOOR, GAZEBO HOUSE,52, GULMOHAR ROAD, VILE PARLE (W), MUMBAI 400 049 PAN:AAACO7488F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. SHARMA REVENUE BY : SHRI AARSI PRASAD, D.R. DATE OF HEARING : 03.02.2014 DATE OF PRONOUNCEMENT : 12.02.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE CONTESTING THE DELETION OF PENALTY OF RS.5,00,000/- BY THE COMMISS IONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)] VIDE IMPUGNED ORDER DATED 14.06.12 WHICH WAS LEVIED BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO) UNDER SECTION 271E OF THE INCOME TAX ACT (HEREI NAFTER REFERRED TO AS THE ACT). 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD REPAID THE LOAN AMOUNT OF RS.5,00,000/ - TO ITS DIRECTOR, SHRI M.S. BAHRA IN CASH. OBSERVING THAT THE SAID PAYMENT WAS IN VIOLATION OF THE PROVISIONS OF SECTION 269T, AO INITIATED PENALTY PR OCEEDINGS. THE ASSESSEE ITA NO. 5464/M/2012 M/S. SIDDIVINAYAK CREATIONS PVT. LTD. 2 EXPLAINED THAT THE DIRECTOR SH. BAHRA, WAS OUT OF S TATION DURING THE PERIOD 23.12.2007 TO 2.1.2008 AND DUE TO SOME URGENCY, TH E MONEY WAS REQUIRED IN DIRECTORS ACCOUNT, THE SAME WAS WITHDRAWN FROM HIS PERSONAL ACCOUNT WITH THE COMPANY AND DEPOSITED IN HIS BANK ACCOUNT. THER E WAS NO MOTIVE OF MONEY LAUNDERING AND THAT THE TRANSACTION WAS GENUI NE. THE AO HOWEVER DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAD FAILED TO PROVE THE EXISTENCE OF REASONABLE CAUSE F OR MAKING THE CASH PAYMENT OF LOAN BY OBSERVING THAT THE MONEY WAS NOT IMMEDIA TELY DEPOSITED OR USED AS PER CONTENTION OF THE ASSESSEE. THE LD. CIT(A) DELETED THE PENALTY OBSERVING AS UND ER: 3.8 NOW IN THE INSTANT CASE, THERE IS NO ALLEGATION THA T THE AMOUNT WITHDRAW FROM THE BOOKS OF THE COMPANY WAS NOT ACCO UNTED FOR. IN FACT, IN THE BOOKS THE APPELLANT HAS DEBITED THIS AMOUNT TO THE ACCOUNT OF THE MD AND NOT TO ANY EXPENSE. THE APEX COURT IN HINDUS TAN STEEL LTD. V. STATE OF ORISSA[1972] 83 ITR 26, HAD LONG AGO SETTL ED THE LAW THAT PENALTY IS NOT TO BE ORDINARILY IMPOSED UNLESS THE PARTY EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW AND WAS GUILTY OF C ONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATIONS. PENALTY WILL ALSO NOT BE IMPOSED MERELY BECAUSE IT IS LAWFU L TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EX ERCISED JUDICIALLY AND ON CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. TH E AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO DO SO, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF T HE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFEN DER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. HENCE, THI S IS NOT A CASE WHERE THE REPAYMENT OF LOAN IN CASH IS HAVING ANY NEXUS W ITH UNACCOUNTED TRANSACTIONS. HENCE, EVEN FROM THAT ANGLE, NO PENAL TY U/S. 271 E CAN BE IMPOSED. 3. BEFORE US THE LD. D.R. HAS RELIED UPON AN AUTHOR ITY OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF KASI CONSULTANT C ORPORATION VS. DCIT (2009) 311 ITR 419 (MAD) WHEREIN THE HONBLE HIGH C OURT OBSERVING THAT THE ASSESSEE HAD NOT PRODUCED ANY MATERIAL WHATSOEVER T O SUSTAIN THE PLEA OF ITA NO. 5464/M/2012 M/S. SIDDIVINAYAK CREATIONS PVT. LTD. 3 REASONABLE CAUSE, HAD CONFIRMED THE LEVY OF PENALTY . HE HAS FURTHER RELIED UPON A THIRD MEMBER DECISION OF THE CO-ORDINATE BEN CH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VINMAN FINANCE & LEASING LTD. [( 2008) 115 ITD 115 (VISK.) TM], WHEREIN THE TRIBUNAL HAS HELD THAT MER ELY BECAUSE A TRANSACTION IS GENUINE, IT CAN NOT BE TAKEN OUT OF SWEEP OF SEC TION 269T/271E. 4. ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON AN ANOTHER AUTHORITY OF THE HONBLE MADRAS HIGH COU RT IN THE CASE OF CIT VS. T.R. RENGARAJAN [(2005) 279 ITR 587 (MAD)] AND FUR THER THAT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SAINI MEDICAL STORE [(2005) 277 ITR 420 (P & H)] WHEREIN THE HONBLE HI GH COURTS HAVE UPHELD THE DELETION OF THE PENALTY, WHILE ACCEPTING THE EX PLANATION OF THE ASSESSEE AS TO THE REASONABLE CAUSE JUSTIFYING THE ADVANCEMENT OF LOAN/REPAYMENT OF LOAN IN CASH. 5. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY BOTH THE PARTIES. THE CASE OF THE REVENUE IS THAT THE ASSESSEE HAS VI OLATED THE PROVISIONS OF SECTION 269T OF THE ACT AND HENCE PENALTY UNDER SEC TION 271E IS ATTRACTED. WHEREAS THE CASE OF THE ASSESSEE IS THAT THERE IS N O WILLFUL VIOLATION OF THE PROVISIONS OF SECTION 269T, PENALTY IS NOT IMPOSABL E IN THE LIGHT OF PROVISIONS OF SECTION 273B. 6. IT MAY BE OBSERVED THAT SECTION 269T OF THE ACT PROVIDES FOR MODE OF REPAYMENT OF CERTAIN DEPOSITS. IT STIPULATES THAT N O COMPANY INCLUDING A BANKING COMPANY, COOPERATIVE SOCIETY OR FIRM SHALL REPAY TO ANY PERSON ANY DEPOSIT MADE WITH IT OTHERWISE THAN BY AN ACCOUNT P AYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT DRAWN IN THE NAME OF THE PERSON WH O HAD MADE THE DEPOSIT IF, THE AMOUNT OF DEPOSIT TOGETHER WITH INTEREST IS RS. 20,000 OR MORE. SECTION 271E DEALS WITH PENALTIES IMPOSABLE FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269T. SECTION 273B OF THE ACT PROVIDES T HAT NO PENALTY IS IMPOSABLE ITA NO. 5464/M/2012 M/S. SIDDIVINAYAK CREATIONS PVT. LTD. 4 FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS, IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. T HEREFORE, A COMBINED READING OF THE PROVISIONS OF SECTIONS 271E AND 273B OF THE ACT MAKES IT CLEAR THAT IF THE ASSESSEE SHOWS REASONABLE CAUSE FOR THE FAILURE TO COMPLY WITH ANY PROVISION REFERRED TO THEREIN, THE PENALTY FOR ITS VIOLATION SHALL NOT BE IMPOSABLE ON THE ASSESSEE. 7. IN THE CASE IN HAND, THE ASSESSEE HAS OFFERED TH E EXPLANATION THAT THE DIRECTOR OF THE COMPANY WAS OUT OF STATION AND THER E WAS SOME URGENCY FOR DEPOSITING OF MONEY IN HIS ACCOUNT AND AS SUCH THE MONEY WAS WITHDRAWN FROM HIS PERSONAL ACCOUNT WITH THE COMPANY AND DEPO SITED IN HIS BANK ACCOUNT. THE TRANSACTION WAS A GENUINE TRANSACTION AND THE S AME WAS RECORDED IN THE BOOKS OF ACCOUNT. THE REVENUE HAS NOT SUFFERED ANY LOSS AND THERE WAS NO ATTEMPT OF ANY MONEY LAUNDERING OR EVASION OF TAX O R CONCEALMENT OF INCOME. THE AO HAS OBSERVED THAT THE MONEY WAS NOT IMMEDIAT ELY DEPOSITED/WITHDRAWN FROM THE ACCOUNTS AS THERE WAS SOME DELAY OF TWO TO THREE DAYS IN DEPOSIT/USE OF MONEY. IN OUR VIEW, THE AO HAS TAKEN A TOO CONSTRICTIVE A PPROACH OF THE MATTER. A PERSON MAY APPREHEND THE IMMEDIATE REQUIREMENT OF M ONEY BUT DUE TO SOME CIRCUMSTANCES, THAT REQUIREMENT MAY BE DELAYED OR E VEN MAY CEASE TO EXIST. HENCE, THE IMMEDIATE NEED CANNOT ALWAYS BE CORRELAT ED WITH THE IMMEDIATE USE. IT IS ALSO NOT UNUSUAL THAT THERE MAY TAKE SO ME TIME FOR THE CLEARANCE OF THE CHEQUES ETC. THROUGH BANKING CHANNEL. HENCE TH E EXPLANATION OF THE ASSESSEE THAT IN URGENT CIRCUMSTANCES, THE MONEY WA S WITHDRAWN FROM THE ACCOUNT OF THE DIRECTOR WITH THE COMPANY AND DEPOSI TED IN HIS BANK ACCOUNT AND THE TRANSACTION WAS RECORDED IN THE BOOKS OF TH E ACCOUNT OF THE COMPANY AND THE SAME WAS ALSO FOUND TO BE GENUINE AND FURTH ER NO LOSS TO THE REVENUE HAS OCCURRED, CAN BE SAID TO BE REASONABLE EXPLANAT ION. ITA NO. 5464/M/2012 M/S. SIDDIVINAYAK CREATIONS PVT. LTD. 5 8. IN THE CASE OF KASI CONSULTANT CORPORATION VS. DCIT (SUPRA) RELIED UPON BY THE LD. D.R., IT HAS BEEN OBSERVED BY THE H ONBLE MADRAS HIGH COURT THAT NO PENALTY SHALL BE IMPOSABLE ON THE ASSESSEE IN THE LIGHT OF PROVISIONS OF SECTION 273B OF THE ACT, WHERE THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE FAILURE. THE HONBLE HIGH COURT UPHE LD THE FINDING OF THE TRIBUNAL THAT THE ASSESSEE HAD FAILED TO PROVE ANY REASONABLE CAUSE FOR MAKING THE TRANSACTIONS IN QUESTION IN CASH. HOWEVER, IN THE CASE OF ACIT VS. VINMAN FINANCE & LEASING LTD. (SUPRA) THE TRIBUNAL HAD ACCEPTED THE EXPLANATION OF REASONABLE CAUSE OFFERED BY THE ASSE SSEE AND THUS DELETED THE PENALTY. SO THE PROPOSITION OF LAW IN ALL THE CASE S EITHER RELIED UPON BY THE LD. A.R. OR BY THE REVENUE REMAINS THE SAME THAT IF THE ASSESSEE IS ABLE TO OFFER A REASONABLE EXPLANATION OF HIS FAILURE IN NOT COMPLA INING WITH THE PROVISIONS OF SECTION 269T, THEN THE PENALTY SHALL NOT BE IMPOSED IN THE LIGHT OF THE PROVISIONS OF SECTION 273B. 9. IN THE CASE IN HAND, THE EXPLANATION PUT FORTH B Y THE ASSESSEE-COMPANY, IN OUR VIEW, FALLS WITHIN THE SCOPE OF PHRASE 'REAS ONABLE CAUSE' AS PROVIDED UNDER SECTION 273B OF THE INCOME TAX ACT, 1961. SO, IN VIEW OF OUR OBSERVATIONS MADE ABOVE, THE PENALTY IMPOSED UPON T HE ASSESSEE BY THE AO AND FURTHER CONFIRMED BY THE CIT(A) IS HEREBY ORDER ED TO BE DELETED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.02. 2014. SD/- SD/- (N.K. SAINI) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12 TH FEBRUARY, 2014. * KISHORE ITA NO. 5464/M/2012 M/S. SIDDIVINAYAK CREATIONS PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.