Ratnagar Estate & Investment P. Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 584/DEL/2011

• Counselvise Citation: 58420114 RSA 2011
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: R S AHUJA
• Keywords: Rectification of order; Assessment record
• Section: 154; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T. A. NO.584/DEL/2011 ASSESSMENT YEAR : 2006-07 RATNAGAR ESTATE & INVESTMENT P. LTD., ADDL. COMM ISSIONER OF INCOME-TAX, C-8/1A, VASANT VIHAR, VS. RANGE-15, NEW DE LHI. NEW DELHI. PAN: AAACR6331G (APPELLANT) (RESPONDENT ) APPELLANT BY : SHRI R.S. AHUJA, CA. RESPONDENT BY : SMT. PRATIMA KAUSHIK, SR. DR. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 0 1.12.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN THE MATTER OF A PENALTY AMOUNTING TO RS.2,85,000/- LEVIED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX, UNDER SEC. 271E OF THE INCOME-TAX ACT, 1961 (THE ACT) IN RESPECT OF THE PAYMENT MADE DURING THE ASSESSMENT Y EAR 2006-07. 2 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - (1) THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNED ADDL. CIT & CIT(A) ERRED IN (A) LEVYING A PENALTY U/S 271E OF RS.2,85,000 WHICH IS INITIATED BY THE ITO WHO IS NOT COMPETENT TO INITIATE THE SAM E. (B) LEVYING A PENALTY OF RS.2,85,000/- LEVIED U/S 271E ON ACCOUNT OF REPAYMENT OF LOAN IN CASH WHILE IGNORING THE FACT THAT IT IS A PAYMENT BETWEEN SISTER CONCERNS. (C) LEVYING A PENALTY WHEN THE INITIATING AUTHORITY IS NOT SURE OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND DOES SU O MOTO RECTIFICATION TWICE WITHOUT NOTICE TO THE ASSESSEE. (D) NOT APPLYING HIS MIND TO THE FACTS & CIRCUMSTANCES OF THE CASE AND CONFIRMING THE PENALTY IN A MECHANICAL MAN NER. 3. IN THIS CASE, THE ASSESSMENT UNDER SEC. 143(3) O F THE ACT WAS MADE BY THE INCOME-TAX OFFICER, WARD 15(3), NEW DELHI, ON 1 9.12.2008. IN THE BODY OF ASSESSMENT, THE AO HAS STATED THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND BY HIM THAT THE ASSESSEE HAD REPAID THE AMOUNT OF RS.9,80,000/- IN CASH ON ACCOUNT OF UNSECURED LOAN IN VIOLATION OF PROVISIONS OF SEC. 269T OF THE ACT. HE, THEREFORE, STATED THA T THE ASSESSEE IS LIABLE TO PENALTY UNDER SEC. 271E OF THE ACT. HE FURTHER STA TED IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS U/S 271E FOR VIOLATI NG THE PROVISIONS OF SEC. 269T, WERE INITIATED. THIS INFORMATION WAS GIVEN B Y THE ITO, WARD 15(3), NEW DELHI TO THE ADDITIONAL CIT, WHO THEN INITIATED PENALTY PROCEEDINGS UNDER SEC. 271E VIDE LETTER DATED 27.07.2009, WHERE IT WAS OBSERVED THAT THE 3 ASSESSEE HAD REPAID AN AMOUNT OF RS.9,80,000/- IN C ASH IN VIOLATION OF SEC. 269T OF THE ACT. HOWEVER, DURING THE COURSE OF PEN ALTY PROCEEDINGS INITIATED UNDER SEC. 271E BY THE ADDL. CIT, AND ON PERUSAL OF ASSESSMENT RECORD, IT WAS NOTICED BY THE ADDL. CIT THAT ONLY A N AMOUNT OF RS.2,85,000/- WAS REPAID IN CASH AS UNSECURED LOAN AND THIS OBSER VATION HAS ALSO BEEN MADE BY THE ASSESSING OFFICER IN HIS RECTIFICATION ORDER UNDER SEC. 154 VIDE ORDER DATED 15.11.2009. THE AFORESAID AMOUNT OF RS .2,85,000/- WAS PAID TO M/S. SIDH VINAYAK DEVELOPMENTS P. LTD. (RS.2,00,000 /-) AND M/S. SPARK BUILDCON LTD. (RS.85,000/-). IN RESPONSE TO THE SH OW CAUSE NOTICE ISSUED BY THE ADDL. CIT, THE ASSESSEES AUTHORIZED REPRESENTA TIVE APPEARED BEFORE HIM AND SUBMITTED A WRITTEN EXPLANATION VIDE LETTER DATED 13.11.2009. THE ASSESSEE CLAIMED THAT THE DEFAULT WAS MERELY TECHNI CAL. HOWEVER, THE ADDL. CIT DID NOT ACCEPT THE ASSESSEES SUBMISSION AND LE VIED PENALTY OF RS.2,85,000/- UNDER SEC. 271E OF THE ACT BY OBSERVI NG THAT AS PER SEC. 269T, THE ASSESSEE WAS SUPPOSE TO MAKE THE REPAYMENT OF L OAN OR DEPOSIT BY AN ACCOUNT PAYEE CHEQUE OR BY AN ACCOUNT PAYEE DRAFT, IN VIOLATION OF WHICH, THE ASSESSEE WOULD BE LIABLE TO PAY BY WAY OF PENAL TY, THE SUM EQUAL TO THE AMOUNT OF LOAN OR DEPOSIT SO REPAID. 4. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LEARNED CIT(A). 4 5. AFTER HEARING THE ASSESSEE AND PERUSING THE PENA LTY ORDER, THE LEARNED CIT(A) UPHELD THE PENALTY ORDER BY OBSERVING THAT T HE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT IT WAS MERELY A TECHNICAL DEFAUL T IN NATURE AND THAT THE ASSESSEE MADE THE PAYMENT IN CASH DUE TO BUSINESS E XIGENCIES. 6. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE HAS MADE THE PAYMENT OF RS.2,00,000/- IN CASH ON 23 RD JANUARY, 2006 TO M/S. SIDH VINAYAK DEVELOPMENTS P. LTD. THE ASSESSEE HAD A CREDIT OF RS.37,50,000/- AS ON 1.04.2005 I.E. AT THE BEGINNING OF THE FINANCIAL YE AR PAYABLE BY IT TO SIDH VINAYAK DEVELOPMENTS P. LTD. OUT OF THIS, THE SUM OF RS.10,00,000/- WAS PAID BY CHEQUE ON 07.07.2005. A FURTHER SUM OF RS. 2,00,000/- WAS PAID IN CASH ON 23 RD JANUARY, 2006 AND SUM OF RS.1,000/- WAS PAID TOWAR DS FILING FEES TO THE REGISTRAR OF COMPANIES (ROC). THE CLOS ING BALANCE WAS OF RS.25,49,000/- PAYABLE BY THE ASSESSEE AS ON 31 ST MARCH, 2006. SIDH VINAYAK DEVELOPMENTS P. LTD. IS A SUBSIDIARY OF TH E ASSESSEE COMPANY, HOLDING 9999 SHARES OF THE ASSESSEE COMPANY. THE N AMES OF SUBSIDIARY COMPANIES ARE GIVEN IN THE AUDIT REPORT. IN THE PRE SENT CASE, THE ASSESSEE HAD PAID THE SUBSTANTIAL AMOUNT OF RS.10,00,000/- BY CH EQUE AND A SUM OF RS.2,00,000/- WAS PAID IN CASH BEING THE TRANSACTIO N BETWEEN THE SUBSIDIARY 5 COMPANIES. THE AMOUNT PAID BY THE ASSESSEE IN CASH HAS BEEN CREDITED BY THE SUBSIDIARY COMPANIES IN THEIR BOOKS OF ACCOUNTS . THE AMOUNT HAS BEEN PAID OUT OF THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IT IS NOT THE CASE WHERE THE ASSESSEE HAS INTRODUCED SOME FRESH C ASH IN ITS BOOKS FOR MAKING THE PAYMENT OF RS.2,00,000/- TO ITS SUBSIDIA RY COMPANY, NAMELY, SIDH VINAYAK DEVELOPMENTS P. LTD. NO UNDISCLOSED INCOME OR EXPENDITURE ARE CLAIMED TO HAVE BEEN COVERED BY THE AFORESAID A MOUNT OF RS.2,00,000/-. THE ASSESSEE HAS MADE THIS OCCASIONAL PAYMENT OF RS .2,00,000/- JUST ON A BONA FIDE BELIEF THAT PAYMENT TO A SUBSIDIARY COMPA NY WOULD NOT ATTRACT THE PROVISIONS OF SEC. 269T OF THE ACT. 8. IN THE CASE OF M/S. SPARK BUILDCON LTD., AN AMO UNT OF RS.23,15,000/- WAS PAID BY THE ASSESSEE BY CHEQUE TO M/S. SPARK BU ILDCON LTD. ON 7.12.2005. THEREAFTER, THE ASSESSEE RECEIVED BY CH EQUE SUM OF RS.24,00,000/- ON 2 ND JANUARY, 2006. THUS, THE ASSESSEE HAD RECEIVED TH E SUM OF RS.85,000/- MORE, WHICH HAS BEEN REPAID BY T HE ASSESSEE IN CASH ON 17 TH FEBRUARY, 2006. THERE WAS NO INTEREST CHARGED EIT HER BY THE ASSESSEE OR BY M/S. SPARK BUILDCON LTD. THESE TRANSACTIONS WER E MADE BETWEEN THE ASSESSEE AND ITS SUBSIDIARY M/S. SPARK BUILDCON LTD ., WHICH HOLDS 9900 NUMBER OF SHARES IN THE ASSESSEE COMPANY. THE NAME OF M/S. SPARK BUILDCON LTD. IS APPEARING IN THE LIST OF SUBSIDIAR Y COMPANIES GIVEN IN THE 6 AUDIT REPORT. THE ASSESSEE HAS REPAID THE MEAGER A MOUNT OF RS.85,000/- AGAINST THE TOTAL TRANSACTION OF RS.24,00,000/- TO ITS SUBSIDIARY COMPANY UNDER THE BONA FIDE BELIEF THAT THE TRANSACTION WIT H SUBSIDIARY COMPANY MADE IN CASH IS NOT ATTRACTED BY SEC. 269T OF THE ACT. THE AMOUNT OF RS.85,000/- HAS BEEN PAID OUT OF THE BOOKS OF ACCOUNT MAINTAINE D BY THE ASSESSEE AND IT IS NOT THE CASE OF THE DEPARTMENT THAT ANY FRESH CA SH MONEY HAS BEEN INTRODUCED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE TO COVER THE PAYMENT OF RS.85,000/- MADE TO M/S. SPARK BUILDCON LTD. 9. WITHOUT GOING INTO THE MERIT, AS TO WHETHER THE TRANSACTIONS ENTERED INTO WITH SUBSIDIARY COMPANY ARE COVERED BY SEC. 26 9T OF THE ACT, WE HOLD THAT THE BELIEF OF THE ASSESSEE THAT THE TRANSACTIO NS OF PAYMENT OF SOME SMALL AMOUNTS WITH SUBSIDIARY COMPANY ARE NOT COVERED BY THE PROVISIONS OF SEC. 269T OF THE ACT, CAN SAID TO BE A BONA FIDE BELIEF, FOR WHICH NO PENALTY SHOULD BE IMPOSED. 10. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE, WE THEREFORE, HOLD THAT THE ASSESSEE HAD COMMITTED A DEFAULT WITHIN THE MEANING OF SEC. 269T OF THE ACT, BY MAKING PAYMENT OF RS.2,00,000/- AND RS.85,0 00/- IN CASH ONLY UNDER A BONA FIDE BELIEF THAT MEAGER TRANSACTION OF PAYME NT IN CASH WITH SUBSIDIARY COMPANY IS NOT COVERED BY THE PROVISIONS OF SEC. 26 9T OF THE ACT INASMUCH AS THE SAME WAS NOT PAID TOWARDS ANY LOAN AND ADVAN CES AS CONTEMPLATED 7 UNDER SEC. 269T OF THE ACT. SINCE THE ASSESSEE HAS COMMITTED A DEFAULT UNDER A BONA FIDE BELIEF AND IMPRESSION, WE ARE INC LINED TO DELETE THE PENALTY OF RS.2,85,000/- LEVIED BY THE REVENUE AUTHORITIES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 12. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 30 TH SEPTEMBER, 2011. SD/- SD/- (B.C. MEENA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH SEPTEMBER, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.