ITO, SUMERPUR V. Shri Ashok Kumar Agarwal, SUMERPUR

ITA 558/JODH/2009

• Counselvise Citation: 55823314 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: U C JAIN
• Keywords: Principle of natural justice; Bonafide belief; Reasonable cause
• Section: 27

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NO.558 & 559/JU/2009 ASSESSMENT YEAR : 2006-07 PAN: AAROA 2003 Q THE ITO VS. SHRI ASHOK KUMAR AGARWAL SUMERPUR PROP M/S. GULABCHAND ANATRAM AGENCIES SUMERPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI G.R KOKANI ASSESSEE BY : SHRI U.C. JAIN DATE OF HEARING: 29-11-2011 DATE OF PRONOUNCEMENT: 09-12-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED APPEALS AGAINST THE ORDER O F THE LD.CIT(A), JODHPUR DATED 25-08-2009 FOR THE ASSESSMENT YEAR 2006-07. 2.1 FIRST OF ALL, WE TAKE UP THE APPEAL PERTAINING TO ITA NO.558/JU/09 FOR THE ASSESSMENT YEAR 2006-07 WHEREIN THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN CANCELLING THE PENALTY U/S 271D IMPOSE D BY JCIT. 2.2 THE AO NOTICED FROM TRADING ACCOUNT THAT THE AS SESSEE HAS ONLY MADE PURCHASES OF GOODS WITHOUT EFFECTING ANY SALES . FROM THE BOO KS OF ACCOUNT, THE AO ALSO NOTICED THAT THE ASSESSEE WAS HAVING NUMBER OF TRANSACTIONS WITH HIS FATHER SHRI ANANT RAM AGARWAL AS WELL AS HIS HUF M/S. ASHOK KUMAR AGARWA L. THE ASSESSEE CONTINUOUSLY GOT THE CHEQUES ISSUED FROM ACCOUNT OF HIS FATHER IN FA VOUR OF OTHER PARTIES INCLUDING HIS HUF. THE ASSESSEE ALSO CONTINUED TO GET CHEQUES ISS UED FROM THE HUF IN FAVOUR OF THE 2 PERSONS OF HIS CHOICE AND TO REGULARIZED THESE TRAN SACTIONS, HE MADE ADJUSTMENT ENTRIES IN HIS BOOKS OF ACCOUNT SHOWING HIMSELF AS DEBTOR TO T HE HUF AND CREDITOR TO THE PARTIES TO WHOM CHEQUES WERE GOT ISSUED. IN VIEW OF THE NATURE OF THEE TRANSACTIONS, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS VIOLATED TH E PROVISIONS OF SECTION 269SS. THE AO ISSUED NOTICE U/S 271D AND REFERRED THE CASE TO THE OFFICE OF JCIT, PALI. A SHOW CAUSE NOTICE WAS ISSUED BY JCIT, PALI. IN RESPONSE TO WHI CH, THE ASSESSEE FILED THE REPLY DATED 29-06-2009. THE REPLY HAS BEEN REPRODUCED IN THE PE NALTY ORDER AND THE SAME IS AS UNDER:- 1. THAT DURING THE YEAR THE A HAS SHOWN AS OPENIN G CREDIT BALANCE IN THE NAME OF ASHOK KUMAR HUF AND M/S. GUL AB CHAND ANAND RAM (SISTER CONCERN) IN THE BOOKS OF ACCOUNT AND OU T OF SUCH CREDIT BALANCE THE ASSESSEE HAS ISSUED CHEQUE DIRECTLY TO SHARE COMPANY ON THE BEHALF OF THE RESPECTIVE PARTIES AND ACCORDINGLY TH E ASSESSEE MADE ADJUSTMENT ENTRY IN HIS BOOKS OF ACCOUNT 2. THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSES SEE HAD PRODUCED BY BOOKS OF ACCOUNT AND ALSO FILED CONFIR MATION OF ACCOUNT OF ABOVE TWO PARTIES AND THE LD. AO HAS ACCEPTED THESE PARTY AS GENUINE. 2.3 THE AO ALSO RELIED ON THE FOLLOWING DECISIONS 1. CIT VS BOMBAY CONDUCTORS AND ELECTRICALS LTD. 301 I TR 328 2. ACIT VS LALA MURARILAL AND SONS, SOT 543 (LUCK) THE JCIT MENTIONED THAT ASSESSEES CONTENTION IS TH AT THE ACCOUNT PAYEE CHEQUE MAY NOT BE IN THE NAME OF BORROWER FOR MAKING COMPLIANCE U/ S 269SS OF THE ACT. THE JCIT WAS OF THE OPINION THAT SECTION 269SS DEALS WITH THE TR ANSACTIONS BETWEEN THE BORROWER AND THE DEPOSITOR. ACCORDING TO HIM, THE ASSESSEE SHOUL D HAVE RECEIVED LOAN OR ADVANCE IN 3 EXCESS OF RS. 20,000/- THROUGH ACCOUNT PAYEE CHEQUE IN HIS OWN NAME. THE JCIT ACCORDINGLY IMPOSED THE PENALTY OF RS. 53,11,067/-. 2.4 THE LD.CIT(A) AFTER CONSIDERING THE FACTS OF TH E CASE DELETED THE PENALTY AFTER OBSERVING AS UNDER:- AS REGARDS THE APPELLANTS CONTENTION THAT THE P ENALTY ORDER WAS PASSED WITHOUT PROVIDING REASONABLE OPPORTUNITY AND PRINCIPLE OF NATURAL JUSTICE, I FIND NO MERIT IN SUCH CONTENTION. AS HAS BEEN MENTIONED IN THE PENALTY ORDER, THE APPELLANT WAS GRANTED OPPORTUNIT IES IN RESPONSE TO WHICH HE HAD MADE ELABORATE SUBMISSIONS BEFORE THE ASSESSING OFFICER BY HIS REPLY DATED 2-4-2009, 22-6-2009 AND 29-6-2009; THESE FACTS HAVE NOT BEEN CONTROVERTED OR DENIED BY THE APPELLANT IN HIS WRITTEN SUBMISSION FILED DURING THE APPELLATE PROCEEDING. WHILE IT HAS BEEN CONTENDED THAT THE DETAILS OF THE TRANSACTIONS IN RESPECT OF WHICH THE ASSESSEE WAS HELD TO HAS VIOLATED THE PROVISIONS OF SEC. 269SS AND 269T WERE NOT PROVIDED TO HIM, THE ASSESSEE HAS NOT CONTENDED THAT HE HAD MADE ANY REPRESENTATION BEFORE THE ASSESSING OFFICER OR THE JCIT IN THIS REGARD. I NSTEAD, I FIND THAT THE APPELLANT MADE ELABORATE SUBMISSIONS DURING PENALTY PROCEEDING WHICH CLEARLY ESTABLISHES THAT THE ASSESSEE DID NOT ENTER TAIN ANY GRIEVANCE IN THIS REGARD. IT IS OBVIOUS THAT ANY SUCH GRIEVANCE IF IT HINDERS THE ASSESSEE FROM MAKING EFFECTIVE REPRESENTATION IN HIS DEFENCE IS R EQUIRED TO BE RAISED BEFORE THE ASSESSING OFFICER WHO ALONE COULD MEET T HE REQUIREMENTS OF THE ASSESSEE. FAILURE TO DO SO CLEARLY INDICATES THAT T HE ASSESSEE WAS NOT PROHIBITED FROM MAKING EFFECTIVE REPRESENTATION IN HIS DEFENCE WHICH ALONE IS A REQUIREMENT OF THE PRINCIPLE OF NATURAL JUSTICE. UNDER THESE CIRCUMSTANCES, NOT FINDING MERIT IN THE APPELLANTS CONTENTION THAT THE IMPUGNED ORDER WAS DEVOID OF PRINCIPLE OF NATURAL J USTICE AS THE SAME WAS PASSED WITHOUT PROVIDING REASONABLE OPPORTUNITY, TH E APPEAL IN THIS REGARD IS NOT ALLOWED. 4 AS REGARDS THE CONTENTION THAT NO PENALTY WAS IMPOS ABLE U/S 271D / 271E AS ASSESSEE DID NOT MAKE ANY CONTRAVENTION T O THE PROVISIONS OF SEC. 269SS AND 269T AND FURTHER THAT THE TRANSACTIONS WE RE UNDERTAKEN UNDER BONAFIDE BELIEF THAT THERE WAS NO CONTRAVENTION AS TRANSACTIONS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE OR DRAFT AND NO CASH T RANSACTION WAS INVOLVED WHICH INDICATES THAT REASONABLE CAUSE EXIS TED, I HAVE CONSIDERED THE RELEVANT FACTS, THE REASONS ADVANCED BY THE JCI T FOR LEVY OF PENALTY AND THE SUBMISSION OF THE APPELLANT. I FIND THAT THE MOOT QUESTIONS FOR DETERMINATION AR E WHETHER THE ASSESSEE HAD COMMITTED ANY DEFAULT OF THE PROVISION S OF SEC. 269SS / 269T AND FURTHER WHETHER, IN THE EVENT OF THERE BEING A CASE OF VIOLATION OF THE PROVISIONS OF SEC. 269SS / 269T, LEVY OF PENALTY WA S NOT JUSTIFIED BECAUSE THE TRANSACTIONS WERE GENUINE AND THERE WAS A REASO NABLE CAUSE FOR UNDERTAKING THE TRANSACTION. THE FUNDAMENTAL ISSUE INVOLVED IS WHETHER THE TRANS ACTIONS UNDERTAKEN BY THE ASSESSEE ATTRACTED THE PROVISIONS OF SEC. 269SS. THE RELEVANT FACTS PERTAINING TO THE TRANSACTIONS AS AP PEARING FROM THE IMPUGNED ORDER ARE THAT THE ASSESSEE GOT CHEQUES IS SUED BY HIS FATHER AND HUF IN FAVOUR OF OTHER PARTIES INCLUDING HIS HUF. T HUS, THE PAYMENTS WERE MADE ON ASSESSEES BEHALF BY HIS FATHER AND HU F. UNDER IDENTICAL FACTS AND CIRCUMSTANCES, IN THE CASE OF CIT V/S NOI DA TOLL BRIDGE CO. LTD. (262 ITR 260 DEL.), WHERE CERTAIN PAYMENTS MADE BY ILFS ON ASSESSEES BEHALF CREDITED IN THE ACCOUNTS OF THE ILFS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, IT WAS HELD THAT THE PROVISIONS OF SEC. 2 69SS WERE NOT ATTRACTED. THE FACTS IN THE APPELLANTS CASE, RELEVANT TO THE ISSUE ARE IDENTICAL TO THOSE IN THE CASE OF NOIDA TOLL BRIDGE CO. LTD. (SUPRA). THE RATIO OF THE JUDGMENT THEREFORE, IN THE CASE OF NOIDA TOLL BRIDG E CO. LTD. (SUPRA). THE RATIO OF THE JUDGMENT THEREFORE, IN THE CASE OF NOI DA TOLL BRIDGE CO. LTD. (SUPRA) APPLIES IN THE INSTANT CASE AS WELL. THE AP PELLANT HAS FURTHER PLACED 5 RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V/S GOVIND KUMAR (253 ITR 103 RAJ) IN WHICH IT WAS HELD THAT THERE WAS NO CONTRAVENTION OF PROVISIONS OF SEC. 269T WHE RE THE BOOK ENTRIES WERE MADE BY THE RESPONDENT WITH REFERENCE TO THE P AYMENT MADE ON ITS BEHALF BY OTHER PARTY. FOR THIS REASON, IT HAS TO B E HELD THAT THERE WAS NO VIOLATION OF THE PROVISIONS OF SEC. 269SS OR THAT O F 269T. AS REGARDS THE ISSUE WHETHER THE PENALTY U/S 271D / 271E IS JUSTIFIABLE IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, IT IS SETTLED POSITION THAT EVEN IF THERE IS CONTRAVENTION OF PROVISIONS O F SEC. 269SS / 269T, LEVY OF PENALTY U/S 271D / 271E IS NOT JUSTIFIABLE IF TH ERE IS REASONABLE CAUSE FOR UNDERTAKING SUCH TRANSACTION. LEVY OF PENALTY U/S 271D WAS HELD NOT JUSTIFIABLE WHERE ACCOUNTS OF THE SISTER CONCERN WE RE CREDITED BY THE ASSESSEE BY GENERAL ENTRIES ON ACCOUNT OF PAYMENT M ADE BY THE SISTER CONCERN ON BEHALF OF THE ASSESSEE FOR THE REASON TH AT THERE WAS NO VIOLATION OF SEC. 269SS ATTRACTING PENALTY U/S 271D (ACIT V/S GUJARAT AMBUJA PROTEINS LTD. 3 SOT 811 AHM). SIMILARLY, IN THE CAS E OF INCOME TAX OFFICER V/S AMARNATH SHIVRAJ HUF (1 SOT 346 AGR.), IT WAS HELD THAT PENALTY U/S 271D WAS NOT ATTRACTED WHERE DEBT IS AC KNOWLEDGED BY PASSING ENTRY IN THE BOOKS OF ACCOUNTS FOR THE REASON THAT THERE WAS NO VIOLATION OF SEC. 269SS WHERE CREDIT BALANCE IN THE BOOKS OF ONE WAS TRANSFERRED TO THE ACCOUNTS OF OTHERS THROUGH JOURNAL ENTRY. THUS, FROM THE VARIOUS JUDICIAL DECISIONS DISCUSSED ABOVE, THE PRINCIPLE THAT EMERGES IS THAT PAYMENT MADE BY OTHE RS ON BEHALF OF THE ASSESSEE WHICH IS SUBSEQUENTLY REFLECTED IN THE BOO KS OF ACCOUNTS OF THE ASSESSEE BY PASSING RELEVANT ENTRIES DOES NOT ATTRA CT THE PROVISIONS OF SEC. 269SS OR 269T. FOR THIS REASON, IT HAS TO BE HELD T HAT IN THE INSTANT CASE, THE FACTS DO NOT ATTRACTS THE PROVISIONS OF SEC. 26 9SS AND 269T. ACCORDINGLY, PENALTY U/S 271D AND 271E CANNOT NOT J USTIFIABLY BE LEVIED. 6 FURTHER, IT IS ALSO SETTLED LAW THAT PENALTY U/S 27 1D AND 271E CANNOT BE IMPOSED EVEN IF THERE IS VIOLATION OF THE PROVISIONS OF SEC. 269SS AND 269T IF THERE IS A FINDING THAT THE TRANS ACTIONS THOUGH ATTRACTING THE PROVISIONS OF SEC. 269SS AND 269T ARE GENUINE ( OMAC ENGINEERS V/S CIT 294 ITR 599 JHR., CHOUDHARY CO. BHUJIAWALA V/S ITO 89 TTJ 357 JD). IN THE INSTANT CASE, THERE IS NO FINDING THAT THE TRANSACTIONS WERE NOT GENUINE. IT HAS BEEN MENTIONED IN THE IMPUGNED ORDE R THAT AT THE STAGE OF THE ASSESSMENT THE ASSESSEE GOT RIDE OF FURTHER INV ESTIGATION MERELY ON ACCOUNT THAT THE LENDER WAS ASSESSED TO TAX AND THE MONEY CAME TO THE ASSESSEE THROUGH ADJUSTMENT ENTRY WAS ULTIMATELY TR AVELLING THROUGH ACCOUNT PAYEE CHEQUE TO THE THIRD PARTIES. THUS, IT IS CLEAR THAT THERE IS NO FINDING IN THE IMPUGNED ORDER THAT THE TRANSACTION S UNDERTAKEN BY THE APPELLANT WERE NOT GENUINE. UNDER THESE CIRCUMSTANC ES, EVEN IF IT IS REQUIRED TO BE HELD THAT TRANSACTIONS UNDERTAKEN BY THE ASSESSEE ATTRACTED THE PROVISIONS OF SEC. 269SS AND 269T, THE LEVY OF PENALTY U/S 271D / 271E IS NOT JUSTIFIABLE IN ABSENCE OF A FINDING THA T THE TRANSACTIONS WERE NOT GENUINE. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE TR ANSACTIONS UNDERTAKEN BY THE ASSESSEE DO NOT ATTRACT THE PROVI SIONS OF SEC. 269SS AND 269T. HENCE, THERE IS NO JUSTIFICATION TO LEVY PENA LTY INVOKING THE PROVISIONS OF SEC. 271D AND 271E. ACCORDINGLY, THE PENALTY IMPOSED BY THE JCIT AMOUNTING TO RS. 53,11,067/- U/S 271D BEIN G THE SUBJECT MATTER OF THE APPEAL NO. 84/2009-10 AND RS. 15,29,175/- U/ S 271E BEING THE SUBJECT MATTER OF THE APPEAL NO. 85/2009-10 IS CANC ELLED. 2.5 WE HAVE HEARD BOTH THE PARTIES. THE HON'BLE APE X COURT IN THE CASE OF ASSTT. DIRECTOR OF INSPECTION (INVESTIGATION) VS KUM. A.B. SHANTHI 255 ITR 258 HAS HELD THAT THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENAL TY U/S 271D HAS GOT DISCRETIONARY POWER. IF THERE IS A GENUINE AND BONA FIDE TRANSACT ION AND IF FOR ANY REASON THE TAX PAYER 7 COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE C HEQUE OR DEMAND DRAFT THEN FOR THE SAME BONAFIDE REASONS PENALTY SHOULD NOT BE IMPOSE D. THE ITAT JODHPUR BENCH IN THE CASE OF CHOUDHARY CO. BHUJIAWALA VS ITO, 89 TTJ 357 HELD THAT IN CASE THE DEFAULT FOR NOT ACCEPTING THE AMOUNT BY CHEQUE IS ON ACCOUNT O F BONAFIDE BELIEF AND THE TRANSACTION IS GENUINE THEN PENALTY U/S 271D CANNOT BE IMPOSED. IN THE INSTANT CASE THE LD.CIT(A) HAS REFERRED TO THE DECISION OF JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS GOVIND KUMAR, 253 ITR 102 IN WHICH IT HAS BEEN HELD THAT THERE IS NO CONTRAVENTION OF PROVISIONS OF SECTION 269T WHERE THE BOOK ENTRIES WERE MADE BY TH E RESPONDENT WITH REFERENCE TO THE PAYMENT MADE ON ITS BEHALF BY OTHER PARTY. MOREOVER , SECTION 269SS REFERS THAT A PERSON SHALL NOT ACCEPT LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE FROM ANY OTHER PERSONS. THE HUF ON WHICH THE ASSESSEE IS A C OPARTNER CANNOT BE CONSIDERED AS OTHER PERSON. ON IDENTICAL FACTS, HON'BLE DELHI HIG H COURT IN THE CASE OF CIT VS NOIDA TOLL BRIDGE CO. , 262 ITR 260 UPHELD THE FINDINGS O F THE TRIBUNAL THAT PROVISIONS OF SECTION 269SS WAS NOT ATTRACTED AS THE PAYMENT IN Q UESTION WAS MADE ON ASSESSEES BEHALF BY AN ACCOUNT PAYEE CHEQUE. WE THEREFORE, FE EL THAT THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY. 3.1 ANOTHER APPEAL BEARING ITA NO. 559/JU/09 IS IN RESPECT OF REPAYMENT OF DEPOSITS. 3.2 WE HAVE HEARD BOTH THE PARTIES. THE REPAYMENT O F DEPOSITS ARE ALSO FROM THE ACCOUNT OF THE FATHER OF THE ASSESSEE OR THE ACCOUN T OF HUF THROUGH CHEQUE RECEIVED FROM OTHER PARTY FROM WHOM THE ASSESSEE WAS TO RECE IVE THE AMOUNT. SINCE THE PAYMENTS ARE THROUGH ACCOUNT PAYEE CHEQUE BY PASSING GENERAL ENTRY, THEREFORE, WE FEEL THAT THE LD.CIT(A) WAS JUSTIFIED IN CANCELLING THE PENALTY. 8 4.0 IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 0 9-12-2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 09 /12/2011 MISHRA COPY TO: 1. THE ITO, SUMERPUR 2. SHRI ASHOK KUMAR AGARWAL 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO.558 & 559/JU/09) A.R.. ITAT: JAIPUR