S.A.Thooyamani, Coimbatore V. JCIT, Coimbatore

ITA 584/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6293 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A ARJUNARAJ
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B; 143(3); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 584/MDS/2014 ( / ASSESSMENT YEAR: 2003-04) MR. S.A.THOOYAMANI, 64, BALASUNDARAM ROAD, COIMBATORE-18. VS JOINT COMMISSIONER OF INCOME TAX, CENTRAL RANGE, COIMBATORE. PAN: AAGPT1806M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.ARJUNARAJ, CA /RESPONDENT BY : MR. SHAJI P.JACOB, ADDL. CIT / DATE OF HEARING : 7 TH MAY, 2014 /DATE OF PRONOUNCEMENT : 20 TH JUNE, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, COI MBATORE DATED 17.01.2014 FOR THE ASSESSMENT YEAR 2003-04 I N SUSTAINING THE ORDER OF THE JOINT COMMISSIONER OF I NCOME TAX, CENTRAL RANGE, COIMBATORE LEVYING PENALTY OF ` 22,50,000/- UNDER SECTION 271D OF THE ACT. 2. BRIEF FACTS ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT ASSESSE E HAS RECEIVED LOANS IN CASH AMOUNTING TO ` 22,50,000/- FROM MR. 2 ITA NO. 584/MDS/20 14 DINESH GUPTA, MR. N.RAJAGOPAL, MR. S.SANTHARAM AND WIFE OF THE ASSESSEE MRS. VIMALA. ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS EXAMINED ALL THESE CREDITORS STATEMENTS WERE RECORDED AND FOUND THAT ALL THE CAS H LOANS ARE GENUINE AND NO ADDITION WAS MADE UNDER SECTION 68 OF THE ACT WHILE COMPLETING THE ASSESSMENT ON 30.11.20 10. HOWEVER, PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT WERE INITIATED FOR THE CASH LOANS RECEIVED BY THE A SSESSEE. IN THE COURSE OF PENALTY PROCEEDINGS, ASSESSEE SUBMITT ED BEFORE THE JOINT COMMISSIONER OF INCOME TAX THAT TH E SAID AMOUNT OF ` 22,50,000/- WAS RECEIVED IN CASH AS LOANS TO ARRANGE FOR VISA OF HIS DAUGHTER TO PURSUE HIGHER S TUDIES IN FOREIGN UNIVERSITY. THE JOINT COMMISSIONER OF INCOM E TAX DID NOT APPRECIATE THIS SUBMISSION OF THE ASSESSEE AND LEVIED PENALTY UNDER SECTION 271D OF THE ACT. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE PENALTY ON THE GROUND THAT NO EVIDENCE HAS BEEN FILED TO SH OW THAT APPLICATION WAS INDEED MADE FOR GETTING VISA TO UNI TED STATES. 3 ITA NO. 584/MDS/20 14 3. COUNSEL FOR THE ASSESSEE REFERRING TO THE BANK STATEMENT WHICH IS PLACED AT PAGE 7 OF THE PAPER BO OK SUBMITS THAT A DEMAND DRAFT FOR AN AMOUNT OF ` 4,900/- WAS ISSUED TO AMERICAN CONSULATE GENERAL ON 11.4.2003 T OWARDS FEE FOR APPLYING VISA. REFERRING TO PAGE 6 OF THE P APER BOOK, WHICH IS A COPY OF PASSPORT OF THE ASSESSEES DAUGH TER, COUNSEL SUBMITS THAT PASSPORT COPY AND APPLICATION FOR OBTAINING VISA WAS SUBMITTED ON 16 TH APRIL, 2003 BEFORE THE AMERICAN CONSULATE. THE COUNSEL SUBMITS THAT ALL T HESE DETAILS WERE FILED BEFORE THE LOWER AUTHORITIES CON TENDING THAT LOANS WERE RECEIVED IN CASH SO AS TO MAINTAIN THE B ALANCE IN ACCOUNT FOR THE PURPOSE OF VISA AUTHORITIES TO SHOW FINANCIAL STRENGTH OF THE ASSESSEE. THEREFORE, COUNSEL SUBMI TS THAT THERE IS A REASONABLE CAUSE FOR OBTAINING CASH LOAN S AND THE LOANS ARE GENUINE WHICH WERE ACCEPTED BY THE ASSESS ING OFFICER AND NO ADDITION WAS MADE UNDER SECTION 68 O F THE ACT WHILE COMPLETING THE ASSESSMENT AND THUS LEVY OF PE NALTY UNDER SECTION 271D OF THE ACT IS NOT WARRANTED. C OUNSEL PLACES RELIANCE ON THE FOLLOWING DECISIONS IN SUPPO RT OF HIS SUBMISSIONS THAT WHEN THE TRANSACTIONS OF CASH LOAN S ARE GENUINE AND WHEN THERE IS A BONA FIDE AND GENUINE R EASONS 4 ITA NO. 584/MDS/20 14 FOR ACCEPTING CASH LOANS, PENALTY UNDER SECTION 271 D OF THE ACT IS NOT EXIGIBLE:- I) CIT VS. LAKSHMI TRUST CO. (303 ITR 99)(MAD) II) CIT VS. M.YESODA (351 ITR 265) (MAD) III) CIT VS. KUNDATHUR FINANCE & CHIT CO. (283 ITR 329) IV) OMEC ENGINEERS VS. CIT (294 ITR 599) V) CIT VS. SAINI MEDICAL STORE ( 277 ITR 420 )(P& H) 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE LOWER AUTHORITIES IN LEVYING PENALTY U NDER SECTION 271D OF THE ACT. DEPARTMENTAL REPRESENTATIVE REFERR ING TO ASSESSMENT ORDER SUBMITS THAT THE PROCESS OF OBTAIN ING VISA TAKES CONSIDERABLE TIME AND THERE IS NO URGENCY FO R OBTAINING CASH LOANS BY THE ASSESSEE AND THEREFORE PENALTY WA S PROPERLY LEVIED. HE PLACES RELIANCE ON THE DECISION S OF HONBLE MADRAS HIGH COURT IN THE CASES OF P.BASKAR VS. CIT (340 ITR 560) AND KASI CONSULTANT CORPORATION VS. D CIT (311 ITR 419). 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES, SUBMISSIONS AND PAPER BOOK FILED BEFORE US AND THE 5 ITA NO. 584/MDS/20 14 DECISIONS RELIED ON. THE ASSESSING OFFICER WHILE C OMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE DURING THE ASS ESSMENT YEAR 2003-04 HAS OBTAINED CASH LOANS OF ` 22,50,000/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE CREDITORS AND THEY WERE EXAMINED AND STATEMENTS WERE ALSO REC ORDED FROM THEM AND FOUND THAT ALL THESE LOANS ARE GENUIN E AND WHILE COMPLETING THE ASSESSMENT ASSESSING OFFICER H AS ACCEPTED THAT THESE LOANS ARE GENUINE AND NO ADDITI ON UNDER SECTION 68 OF THE ACT WAS MADE. HOWEVER, ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT FOR ACCEPTING CASH LOANS AND WITHOUT APPRECIATING T HE SUBMISSIONS OF THE ASSESSEE THAT CASH LOANS HAD TO BE TAKEN FROM WIFE AND THREE OTHER PARTIES FOR THE PURPOSE O F VISA PROCESSING FOR HIGHER STUDIES OF THE ASSESSEES DAU GHTER. THE COMMISSIONER OF INCOME TAX (APPEALS) ALSO SUSTA INED THE PENALTY OBSERVING THAT IN ALL THE CASES RELIED ON BY THE ASSESSEE THERE WAS SOME SITUATION WHERE COURTS FOU ND THAT THERE WERE COMPELLING AND UNAVOIDABLE CIRCUMSTANCES BUT HERE IN THE ASSESSEES CASE REASON FOR GETTING LOAN S IN CASH WAS TO ESTABLISH SOUND FINANCIAL CONDITION TO ENABL E THE ASSESSEES DAUGHTER TO GET VISA TO UNITED STATES AN D NO 6 ITA NO. 584/MDS/20 14 EVIDENCE HAS BEEN FILED TO SHOW THAT APPLICATION WA S INDEED MADE FOR GETTING VISA TO UNITED STATES. THE PAPER BOOK FILED BY THE ASSESSEE BEFORE US CLEARLY SHOWS THAT ASSESS EE HAS PAID FEES TO AMERICAN CONSULATE BY WAY OF DEMAND DR AFT AND THERE WAS AN ACKNOWLEDGEMENT BY AMERICAN CONSULATE ON THE PASSPORT OF THE ASSESSEES DAUGHTER SHOWING THA T APPLICATION WAS RECEIVED BY THEM WHICH SHOWS THAT OBSERVATION OF THE COMMISSIONER OF INCOME TAX (APPE ALS) IS NOT CORRECT. ALL THESE DOCUMENTS WERE ALSO AVAILABL E IN THE COURSE OF PENALTY PROCEEDINGS WITH THE ASSESSING OF FICER. THE ASSESSING OFFICER HAS NOT DOUBTED GENUINENESS OF THE LOANS RECEIVED BY THE ASSESSEE IN CASH. THE JOINT COMMISSIONER OF INCOME TAX WHILE IMPOSING PENALTY U NDER SECTION 271D OF THE ACT WAS OF THE VIEW THAT THE VI SA PROCEDURES ARE TIME CONSUMING VENTURES AND ASSESSEE WOULD HAVE HAD KNOWLEDGE ABOUT THE REQUIREMENT OF MAINTAINING CASH BALANCE WELL IN ADVANCE, SO ASSESS EE SHOULD HAVE RECEIVED LOANS IN CHEQUES. THE ASSESSI NG OFFICER MAY BE CORRECT IN SAYING SO BUT ON THIS REA SONING ALONE PENALTY CANNOT BE IMPOSED UNDER SECTION 271D OF THE ACT. IT IS EASY FOR THE ASSESSING OFFICER TO SAY TH AT WHEN THE 7 ITA NO. 584/MDS/20 14 ASSESSEE SHOULD OBTAIN LOAN, WHEN THE ASSESSEE SHOU LD GO FOR VISA AND FROM WHICH TIME ASSESSEE SHOULD MAINTA IN BANK BALANCE FOR VISA PURPOSE. PROCESS OF APPLYING AND ATTENDING INTERVIEW FOR VISA FOR HIGHER STUDIES MIGHT HAVE GO T DELAYED FOR VARIOUS REASONS AND THIS DELAY CANNOT BE A REAS ON FOR LEVY OF PENALTY FOR ACCEPTING LOANS IN CASH. WHAT HAS TO BE LOOKED INTO IS WHETHER THERE IS BONA FIDE AND GENUINE REAS ON AND REASONABLE CAUSE FOR ACCEPTING CASH LOANS ESPECIALL Y WHEN LOANS ARE PROVED TO BE GENUINE AND NO ADDITION WAS MADE WHILE COMPLETING THE ASSESSMENT BY THE ASSESSING OF FICER. 6. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. LAKSHMI TRUST CO. (303 ITR 99) IN PARA 8 HELD AS U NDER:- THIS COURT IN CIT VS. KUNDRATHUR FINANCE AND CHIT CO. (SUPRA) FOLLOWING THE DECISION OF THE APEX COURT IN ASSITANT DIRECTOR OF INSPECTION (INV) VS. KUM. A.B.SHANTHI (2002 174 CTR (SC 513 : 255 ITR 258 (SC) HELD THAT IF THERE WAS GENUINE AND BONAFIDE TRANSACTION AND THE TAX PAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONA FIDE REASON, THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETION NOT TO LEVY PENALTY. 7. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. M.YESODA (351 ITR 265) HELD AS UNDER:- 8 ITA NO. 584/MDS/20 14 EVEN THOUGH THE ASSESSEE HAD NOT TAKEN A SPECIFIC PLEA OF REASONABLE CAUSE, IT MUST BE CONSIDERED AS APPLIED TO HUMAN ACTION WHERE THE TRANSACTIONS ARE BONAFIDE, PENALTY CANNOT BE IMPOSED. 8. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KUNDRATHUR FINANCE & CHIT CO. (283 ITR 329) HELD A S UNDER:- THE APEX COURT INTERPRETING THE POWERS CONFERRED ON THE REVENUE UNDER SECTION 273B OF THE ACT IN ASSISTANT DIRECTOR OF INSPECTION (INV ) VS. A.B.SHANTHI (2002) 174 CTR (SC) 513: (2002) 255 ITR 258 (SC) HELD THAT IF THERE WAS A GENUINE AND BONA FIDE TRANSACTION AND THE TAXPAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONA FIDE REASON, THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETION NOT TO LEVY PENALTY. 9. THE HONBLE JHARKHAND HIGH COURT IN THE CASE OF OMEC ENGINEERS VS. CIT (294 ITR 599) HELD AS UNDER :- THERE BEING NO FINDING OF ASSESSING OFFICER, CIT(A) OR TRIBUNAL THAT THE TRANSACTIONS IN VIOLATION OF SECTION 269SS WERE NOT GENUINE, ASSESSEES RETURN HAVING BEEN ACCEPTED UNDER SECTION 143(3) AFTER SCRUTINY, THERE BEING ALSO NO FINDING THAT TRANSACTIONS WERE MALA FIDE AIMED AT DISCLOSING CONCEALED MONEY, IMPOSITION OF PENALTY UNDER SECTION 271D MERELY FOR TECHNICAL MISTAKE COULD NOT BE SUSTAINED. 9 ITA NO. 584/MDS/20 14 10. THE HONBLE PUNJAB & HARYANA HIGH COURT IN TH E CASE OF CIT VS. SAINI MEDICAL STORE (277 ITR 420) IN P ARA 12 HELD AS UNDER:- 12. IN THE PRESENT CASE, THE CIT(A) WHILE DELETING THE PENALTY IN ITS ORDER DATED 18 TH JANUARY, 1999 HAD ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT BREACH OF THE PROVISIONS OF THE ACT WAS ON ACCOUNT OF BONA FIDE BELIEF OF THE ASSESSEE AND THE SAME WAS NOT WITH ANY INTENTION TO AVOID OR EVADE THE TAX. THE OBSERVATIONS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARAS 6 AND 6.1. ARE RELEVANT AND ARE REPRODUCED AS UNDER:- '6. I HAVE CAREFULLY CONSIDERED THE CONSPECTUS OF THIS MATTER AND FACTS ON RECORD . NO LOSS OF REVENUE HAS OCCURRED IN THIS CASE AND THE GENUINENESS OF THE TRANSACTION HAS NOT BEEN DOUBTED. THE APEX COURT IN HINDUSTAN STEEL LTD., VS . STATE OF ORISSA (1972) 83 ITR 26 (SE) HAD LONG AGO SETTLED THE LAW THAT PENALTY IS NOT TO BE ORDINARILY IMPOSED UNLESS THE PARTY EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW AND WAS GUILTY OF CONDUCT CONTUMACIOUS OR D I SHONEST OR ACTED IN CONSCIOUS DISREGARD OF I TS OBLIGATIONS. PENALTY WILL ALSO NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL 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 EXERC I SED JUDICIALLY AND ON A CONSIDERATIO N OF ALL THE RELEVANT CIRCUMSTANCES. THE 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 THE ACT OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 6 .1 . AS POINTED OUT EARLIER , THERE IS NO DOUBT ABOUT THE GENUINENESS OF THE TRANSACTIONS WHICH HAVE BEEN FULLY ACCEPTED IN THE ASSESSMENT MADE FOR THE YEAR UNDER 10 ITA NO. 584/MDS/2 014 CONSIDERATION. EVEN IF, THERE IS ANY IGNORANCE, WHICH RESULTED IN THE INFRACTION OF LAW, THE DEFAULT IS TECHNICAL OR VENIAL WHICH DID NOT PREJUDICE THE INTERESTS OF THE REVENUE AS NO TAX AVOIDANCE OR TAX EVASION WAS INVOLVED. TO MY MIND, BONA FIDE BELIEF COUPLED WITH THE GENUINENESS OF THE TRANSACTIONS WOULD CONSTITUTE REASONABLE CAUSE UNDER S. 273B FOR NOT INVOKING THE PROVISIONS OF S. 271E OF THE ACT. THE IMPUGNED ORDER OF PENALTY IS CANCELLED.' 11. IN THE CASE OF THE ASSESSE, WE FIND THAT THERE IS A REASONABLE CAUSE IN ACCEPTING CASH LOANS AS THE LOA NS WERE OBTAINED BY THE ASSESSEE FOR THE PURPOSE OF MAINTA INING CASH BALANCE FOR VISA PROCEDURES AND FOR HIGHER STU DIES OF THE ASSESSEES DAUGHTER. WE ALSO FIND THAT TRANSACT IONS WERE ALL GENUINE AND THIS WAS ACCEPTED BY THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT AS NO ADDITION WAS MADE UNDER SECTION 68 OF THE ACT. STATEMENTS WERE ALSO RECORDE D FROM THE CREDITORS WHO HAVE CONFIRMED THAT THEY HAVE GI VEN LOANS TO THE ASSESSE. IT IS ALSO NOT DETECTED BY THE REVE NUE THAT THESE CASH LOANS OBTAINED BY THE ASSESSEE ARE UNAC COUNTED MONEY OF THE ASSESSE. IN SUCH CIRCUMSTANCES AND IN VIEW OF THE ABOVE DECISION OF THE HONBLE HIGH COURT, WE HO LD THAT THERE IS NO CASE FOR LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. THE DECISIONS RELIED ON BY THE DEPARTMENTAL 11 ITA NO. 584/MDS/2 014 REPRESENTATIVE IN THE CASE OF P.BASKAR VS. CIT AN D KASI CONSULTANT CORPORATION VS. DCIT (SUPRA) HAVE NO APP LICATION TO THE FACTS OF THE CASE. THE HONBLE HIGH COURT HELD THAT THERE WAS NO REASONABLE EXPLANATION FROM THE ASSESS EE IN BOTH THESE CASES THAT CASH DEPOSITS WERE RECEIVED I N THE COURSE OF BUSINESS AND EXCEPT FOR THE SUBMISSION TH AT CASH WAS RECEIVED FOR BUSINESS PURPOSES, IT WAS NOT DEMO NSTRATED THE EXIGENCY OF BUSINESS FOR RECEIVING CASH DEPOSIT S. IN SUCH CIRCUMSTANCES, THE HONBLE HIGH COURT HELD THAT THE RE WAS NO REASONABLE EXPLANATION BY THE ASSESSEE. THUS THE CA SE LAWS RELIED ON BY THE DEPARTMENTAL REPRESENTATIVE ARE NO T APPLICABLE TO THE FACTS OF THE PRESENT APPEAL. IN S UCH CIRCUMSTANCES, WE DELETE THE PENALTY LEVIED UNDER S ECTION 271D OF THE ACT. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 20 TH DAY OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) . ( ' )* ) ACCOUNTANT MEMBER / , JUDICIAL MEMBER/ ) , ) /CHENNAI, - /DATED, 20 TH JUNE, 2014 SOMU 12 ITA NO. 584/MDS/2 014 /0 10 /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. 0 6 /DR 6. /GF .