VN PAREKH SECURITIES P. LTD, MUMBAI V. ADDL CIT CEN RG 6, MUMBAI

ITA 6083/MUM/2009

• Counselvise Citation: 608319914 RSA 2009
• Duration Of Justice: 3 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 13-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DANIAL
• Keywords: Opportunity of being heard; Reasonable cause
• Section: 2

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI .. , ! ' # $$, % ', & BEFORE SHRI R.S.SYAL, AM AND SHRI SANJAY GARG, JM ITA NOS.6082 & 6083/MUM/2009 : ASST.YEAR 2005-2006 M/S.V.N.PAREKH SECURITIES PVT.LTD. BHUPEN CHAMBERS, GROUND FLOOR 9 DALAL STREET, FORT, MUMBAI 400 023. PAN : AABCV0547M. THE ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 40 MUMBAI. ( '( / // / APPELLANT) * * * * / VS. ( +,'(/ RESPONDENT) '( - -- - . . . . / APPELLANT BY : SHRI RAJIV KHANDELWAL +,'( - . - . - . - . / RESPONDENT BY : DR.DANIAL * - /! / / / / DATE OF HEARING : 13.08.2013 012 - /! / DATE OF PRONOUNCEMENT : 16.08.2013 ' 3 ' 3 ' 3 ' 3 / / / / O R D E R PER R.S.SYAL (AM) : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE SUSTENANCE OF PENALTY IMPOSED U/SS 271D AND 271E OF THE INCOME-TAX ACT, 1961 IN RELATION TO THE ASSESSMENT YEAR 2005-2 006. FOR THE SAKE OF CONVENIENCE, WE HAVE CLUBBED THESE APPEALS FOR D ISPOSAL BY THIS CONSOLIDATED ORDER. ITA NO.6083/MUM/2009 : PENALTY U/S 271D 2. THE FACTS APROPOS THIS APPEAL ARE THAT THE ASSES SING OFFICER OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDING S THAT THE ASSESSEE HAD TAKEN FOLLOWING LOANS EXCEEDING THE LI MITS SPECIFIED IN ITA NO.6082 & 6083/MUM/2009. M/S.V.N.PAREKH SECURITIES PVT.LTD. 2 SECTION 269SS OTHERWISE THAN BY ACCOUNT PAYEE CHEQU ES OR BANK DRAFTS. (I) M/S.NAKSHATRA SOFTWARE PVT.LTD. ` 27,38,038 (II) M/S.GOLDFISH COMPUTER PVT.LTD. ` 13,21,167 (III) M/S.NARBHARAM HARAKHCHAND ` 46,000 -------------- ` 41,05,205 ========= 3. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE PE NALTY SHOULD NOT BE IMPOSED U/S 271D FOR VIOLATION OF PROVISIONS OF SECTION 269SS IN RESPECT OF THESE THREE LOANS, THE ASSESSEE STATE D THAT M/S.NAKSHATRA SOFTWARE PRIVATE LIMITED PAID EXPENSES ON ITS BEHAL F INCURRED DURING THE FINANCIAL YEAR 2004-2005 AND IT WAS BY WAY OF J OURNAL ENTRY THAT THE LOAN CAME TO BE REFLECTED IN THE ASSESSEES BOO KS OF ACCOUNT. AS REGARDS THE SECOND PARTY, NAMELY, M/S.GOLDFISH COM PUTER PVT. LTD., THE ASSESSEE STATED THAT THEY HAD PLEDGED SHARES OF VALIANT COMMUNICATION WITH M/S.VIDYUT INVESTMENTS LIMITED O N BEHALF OF THE ASSESSEE. VIDYUT INVESTMENTS LIMITED CREDITED T HE ACCOUNT OF THE ASSESSEE TOWARDS THE INVOCATION OF THE SAID SHARES AND, IN TURN, THE ASSESSEE CREDITED THE ACCOUNT OF M/S.GOLDFISH COMPU TERS PVT.LTD. IT WAS CLAIMED THAT THIS TRANSACTION OF LOAN WAS ALSO THROUGH JOURNAL ENTRY. SIMILAR EXPLANATION WAS GIVEN ABOUT LOAN OF ` 46,000 TAKEN FROM M/S.NARBHERAM HARAKCHAND THROUGH JOURNAL VOUCH ER. THE ASSESSING OFFICER NOTICED THE FINDINGS OF THE HONB LE JOINT PARLIAMENTARY COMMITTEE OF LOK SABHA AND RAJYA SABH A IN WHICH KETAN PAREKH GROUP COMPANIES WERE INVOLVED. IN THE ABSENCE OF THE ITA NO.6082 & 6083/MUM/2009. M/S.V.N.PAREKH SECURITIES PVT.LTD. 3 ASSESSEE SHOWING ANY REASONABLE CAUSE IN TERMS OF S ECTION 273B, THE ASSESSING OFFICER IMPOSED PENALTY OF ` 41.05 LAKH U/S 271D OF THE ACT. THE LEARNED CIT(A) UPHELD THE PENALTY SO IMPOS ED BY THE A.O. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT SI MILAR PENALTIES IMPOSED IN OTHER GROUP CONCERNS CAME TO BE DELETED BY THE TRIBUNAL THROUGH VARIOUS ORDERS ON THE GROUND THAT WHERE A L OAN IS RECEIVED OR REPAID THROUGH JOURNAL ENTRY, THERE CAN BE NO PENAL TY U/S 271D OR SECTION 271E, AS THE CASE MAY BE. THE REVENUE PREFE RRED APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT IN CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD., (ONE OF THE GROUP CONCERNS OF THE ASSESSEE). VIDE JUDGMENT DATED 12 TH JUNE, 2012 THE HONBLE HIGH COURT IN CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD. [(201 2) 345 ITR 270 (BOM.)], HAS HELD : THAT THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT REPAYMENT OF LOAN / DEPOSIT THROUGH JO URNAL ENTRIES DID NOT VIOLATE THE PROVISIONS OF SECTION 269T OF THE A CT. HOWEVER CONSIDERING THE REASONABLE CAUSE IN THAT CASE, THE HONBLE HIGH COURT DELETED THE PENALTY. IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, IT IS APPARENT THAT THER E CAN BE NO DELETION OF PENALTY IF SIMPLY THERE IS A RECEIPT OF LOAN OR REPAYMENT OF LOAN THROUGH JOURNAL ENTRIES. EACH AND EVERY CASE IS REQ UIRED TO BE CONSIDERED AS TO WHETHER THERE WAS SOME REASONABLE CAUSE IN ACCEPTING SUCH LOANS OR REPAYING LOANS IN CONTRAVEN TION OF THE PROVISIONS OF SECTION 269SS / 269T. ITA NO.6082 & 6083/MUM/2009. M/S.V.N.PAREKH SECURITIES PVT.LTD. 4 5. THE LEARNED COUNSEL FOR THE ASSESSEE CONT ENDED THAT THE BUSINESS OPERATIONS OF THE ASSESSEE WERE HALTED BEC AUSE THE BANK ACCOUNTS WERE ATTACHED AND HENCE THERE WAS NO WAY O UT EXCEPT INCURRING EXPENSES ETC. THROUGH THESE CONCERNS. ON A SPECIFIC QUERY, THE LEARNED AR COULD NOT PLACE ON RECORD ANY MATERI AL TO INDICATE AS TO WHETHER THERE WAS ANY PROHIBITION ON THE ASSESSE E IN OPENING A FRESH BANK ACCOUNT. IT WAS HOWEVER MAINTAINED THAT DUE TO CLOSURE OF THE BUSINESS THE ASSESSEE WAS REQUIRED TO REPAY CER TAIN EXPENSES OVER THE YEAR WHICH WERE INCURRED BY M/S.NAKSHATRA SOFTW ARE PRIVATE LIMITED, ITS SISTER CONCERN AND THE LOAN CAME TO BE CREATED BY WAY OF TRANSFER ENTRY. OTHER REASONS WERE ADDUCED TO INDIC ATE THAT THE RECEIPT OF LOAN FROM OTHER PARTIES IN VIOLATION OF THE PROV ISIONS OF SECTION 269SS WAS FOR BONA FIDE REASONS. SINCE THERE IS NO MATERIAL ON RECORD TO INDICATE THE REASONABLE CAUSE IN RESPECT OF THES E LOAN TRANSACTIONS, WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF J USTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS S ET ASIDE AND THE MATTER RESTORED TO THE FILE OF A.O. WE ORDER ACCORD INGLY AND DIRECT HIM TO DECIDE THE SUSTENANCE OR OTHERWISE OF PENALT Y ON THE BASIS OF REASONABLE CAUSE TO BE DEMONSTRATED BY THE ASSESS EE IN SUCH FRESH PROCEEDINGS. ITA NO.6082/MUM/2009 : PENALTY U/S 271E 6. THIS APPEAL IS AGAINST THE CONFIRMATION OF PENAL TY U/S 271E OF THE ACT. HERE ALSO THE ASSESSEE CONTENDED THAT THE LOANS WERE REPAID BY WAY OF JOURNAL ENTRIES AND HENCE SECTION 271E CO ULD NOT HAVE BEEN IMPOSED. THIS CONTENTION RAISED BEFORE THE AUTHORIT IES BELOW DID NOT ITA NO.6082 & 6083/MUM/2009. M/S.V.N.PAREKH SECURITIES PVT.LTD. 5 FIND FAVOUR WITH THE AUTHORITIES WHO IMPOSED AND SU STAINED THE PRESENT PENALTY. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT HERE AGAI N THE ASSESSEE ARGUED BEFORE THE LEARNED CIT(A) AS WELL AS THE A.O . THAT SINCE THE TRANSACTIONS WERE ROUTED THROUGH JOURNAL ENTRIES NO PENALTY SHOULD BE IMPOSED. IN VIEW OF THE AFORE-NOTED JUDGMENT OF THE HONBLE BOMBAY HIGH COURT, THIS CONTENTION NO MORE STANDS. IN THESE CIRCUMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF A.O. FOR CONSIDERING AS TO WHETHER T HERE EXISTED A REASONABLE CAUSE IN REPAYING SUCH LOANS OTHERWISE T HAN THROUGH ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT. IF THE ASSESSEE SUCCEEDS IN PROVING SUCH REASONABLE CAUSE IN TERMS OF SECTIO N 273B, THEN, OF COURSE, NO PENALTY SHOULD BE IMPOSED. IN THE CONV ERSE SITUATION, THE ASSESSING OFFICER HAS EVERY RIGHT TO DECIDE THE FAT E OF THE ASSESSEE AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. 4 /5 6 7- 89 : ; / < - #/ => IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED ON THIS 16 TH DAY OF AUGUST, 2013. ' 3 - 012 ?'*5 1 - $ SD/- SD/- (SANJAY GARG) (R.S.SYAL) % ' % ' % ' % ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; ?'* DATED : 16 TH AUGUST, 2013. DEVDAS* ITA NO.6082 & 6083/MUM/2009. M/S.V.N.PAREKH SECURITIES PVT.LTD. 6 ' 3 - +%/;@ A @2/ ' 3 - +%/;@ A @2/ ' 3 - +%/;@ A @2/ ' 3 - +%/;@ A @2// COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. +,'( / THE RESPONDENT. 3. B () / THE CIT, MUMBAI. 4. B / CIT(A) CENTRAL-VII, MUMBAI. 5. @E$ +%/%* , , / DR, ITAT, MUMBAI 6. $F / GUARD FILE. ' 3* ' 3* ' 3* ' 3* / BY ORDER, ,@/ +%/ //TRUE COPY// 8 8 8 8/ // /= # = # = # = # ( DY./ASSTT. REGISTRAR) , ,, , / ITAT, MUMBAI