M/s. B.P. Patel & Co., Baroda V. The Income Tax Officer, Ward-1(2)(1), Baroda

ITA 613/AHD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5026 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-04-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 10-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: M J SHAH
• Keywords: Competent authority
• Section: 271(1)(c); 143(3); 271E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD [CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD] BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO. 613/AHD/2017 (ASSESSMENT YEAR: 2012-13) M/S. B. P. PATEL AND CO. DIST. DASHARATH, BARODA- 391740 VS. ITO WARD-1(2)(1), BARODA [PAN NO. AAB FB1 000 G] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI M. J. SHAH , A R RESPONDENT BY : SHRI LALIT P. JAIN , SR. D.R. DATE OF HEARING 31.08.2020 DATE OF PRONOUNCEMENT 13.10.2020 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL IS DIRECTED AGAINST THE ORDER DA TED 05.12.2016 PASSED BY THE COMMISSIONER OF INCOME TAX(APPEALS) 2, VADODARA ARISING OUT OF THE PENALTY ORDER DATED 29.10.2015 PASSED BY THE JCIT, RANGE-1(2), VADODARA UNDER SECTION 271E OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) FOR ASSESSMENT YEAR 2012- 13. 2. WHEN THE MATTER WAS CALLED OUT FOR HEARING THE L D. AR FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE CONTROVER SY IN THE PRESENT CASE REVOLVES AROUND IMPOSITION OF PENALTY OF RS. 9,79,1 04/- UNDER SECTION 271E OF THE ACT FOR ALLEGED BREACH OF PROVISIONS OF SEC. 269T OF THE ACT. ADVERTING TO THE FACTS, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ITA NO.613/AHD/2017 M/S. B. P. PATEL & CO. VS. ITO ASST. YEAR 2012-13 - 2 - ASSESSMENT UNDER SECTION 143(3) DATED 20.02.2015 WA S CARRIED OUT IN THE INSTANT CASE WITHOUT ANY ADDITIONS. THEREAFTER IMP UGNED PENALTY ORDERUNDER SECTION 271E DATED 29.10.2015 WAS PASSED BY THE COM PETENT AUTHORITY NAMELY JOINT COMMISSIONER OF INCOME TAX (JCIT) WHER EBY IT IS ALLEGED THAT ASSESSEE HAS PAID AN AGGREGATE SUM OF RS. 8,77,252/ - IN CONTRAVENTION OF PROVISIONS OF SEC. 269T TO FOUR PERSONS AS NAMED IN THE PENALTY ORDER. WHILE IMPOSING PENALTY UNDER SECTION 271E, IT WAS O BSERVED THAT THE ASSESSEE REPAID OUTSTANDING LOANS IN CASH WHICH IS PROHIBITED IN LAW AND CONSEQUENTLY SUCH ACTION INVITES PENAL ACTION UNDER SECTION 271E OF THE ACT. IN THIS BACK DROP, THE LD. AR FOR THE ASSESSE E RAISED LEGAL OBJECTION AS WELL AS OBJECTION ON MERITS. ADVERTING TO THE LEGA L OBJECTION, THE LD. AR REFERRED TO THE ASSESSMENT ORDER AND POINTED OUT TH AT THERE IS NO MENTION OF INITIATION OF PENALTY UNDER SECTION 271E FOR ALLEGE D CONTRAVENTION OF SEC. 269T OF THE ACT. HE THEREAFTER REFERRED TO THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. JAI LAXMI RICE MILLS A MBALA CITY [2015] 379 ITR 521(SC) FOR THE PROPOSITION THAT IT IS INCUMBEN T UPON THE AO TO FORM SATISFACTION IN THE ASSESSMENT ORDER FOR LEVY OF PENALTY UNDER SECTION 271E OF THE ACT. IT WAS ALSO SUBMITTED THAT THE PROPOSI TION LAID DOWN BY THE HONBLE SUPREME COURT HAS BEEN FOLLOWED BY THE TRIB UNAL IN ITA 3109/AHD/2015, IN THE ORDER DATED 21.03.2017 IN THE CASE OF PRITHVI SINGH POONIA VS. JCIT. THE LD. AR THUS SUBMITTED THAT IN THE ABSENCE OF ANY SATISFACTION RECORDED BY THE AO, THE NOTICE FOR IMPOSITION OF PENALTY COULD NOT BE ISSUED AND THE ENTIRE PROCEEDINGS BY T HE DEPARTMENT TOWARDS IMPOSITION OF PENALTY IS VOID AB INITIO AT THE THRESHOLD AND THUS BAD IN LAW. ITA NO.613/AHD/2017 M/S. B. P. PATEL & CO. VS. ITO ASST. YEAR 2012-13 - 3 - 2.1 ADVERTING TO THE MERIT OF THE CASE, THE LD. AR REFERRED TO THE LEDGER ACCOUNT OF THE FOUR PARTIES AND POINTED OUT THAT TH E OUTSTANDING FOR THESE PARTIES ARE BEING CARRIED FORWARD FROM THE EARLIER YEARS ON ACCOUNT OF PURCHASE OF TOBACCO PRODUCTS FROM THE PARTNERSHIP F IRM IN WHICH THESE PARTIES ARE HAVING SUBSTANTIAL INTEREST. THE LD. A R SUBMITTED THAT PART OF THE PAYMENT WAS MADE IN THE EARLIER YEARS WHERE AS THE REMAINDER AMOUNT IN QUESTION WAS PAID IN CASH DURING THE YEAR. IT WAS, THUS, CONTENDED THAT THE PAYMENT SO MADE WAS ON ACCOUNT OF DISCHARGE OF LIAB ILITIES TOWARDS PURCHASE IN THE EARLIER YEARS WHICH CANNOT BE BRAND ED AS LOAN AND/OR DEPOSITS CONTEMPLATED UNDER SECTION 269T OF THE ACT . IN A REJOINDER TO THE ARGUMENT ON BEHALF OF THE REVENUE, THE LD. AR MENTI ONED THAT ALTHOUGH THE OUTSTANDING LIABILITY WAS SHOWN UNDER THE HEAD LOA NS IN THE BALANCE SHEET, SUCH DECLARATION BY ITSELF CANNOT BE TAKEN AS SACRO SANCT AND TRUE CHARACTER OF TRANSACTION HAS TO BE DETERMINED FROM FACTS INSTEAD OF NOMENCLATURE ASSIGNED. THE LD. AR ACCORDINGLY URGED FOR DELETIO N OF PENALTY BOTH ON LAW AS WELL AS ON MERITS. 3. THE LD. DR, ON THE OTHER HAND, STRONGLY RELIED U PON THE ORDER OF THE LOWER AUTHORITIES. ADVERTING TO THE LEGAL OBJECTIO N RAISED ON BEHALF OF THE ASSESSEE, THE LD. DR CONTENDED THAT THE LEGAL ARGUM ENTS PUT FORTH ON BEHALF OF THE ASSESSEE IS INTRINSICALLY OPPOSED TO THE SCH EME OF THE ACT. THE LD. DR REFERRED TO THE PROVISION OF SEC. 271 (1B) OF TH E ACT AND SUBMITTED THAT THE LAW REQUIRES THE SATISFACTION OF THE AO IN TH E COURSE OF THE ASSESSMENT PROCEEDING IS ONLY WITH REFERENCE TO THE INITIATION OF PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE ACT. IT WAS SUBMITT ED THAT PROVISIONS OF SEC. 271E IS TOTALLY DIFFERENT IN ITS NATURE AND SPIRIT AND HAS NO CONNECTION WITH ITA NO.613/AHD/2017 M/S. B. P. PATEL & CO. VS. ITO ASST. YEAR 2012-13 - 4 - THE ASSESSMENT PROCEEDINGS PER SE. IT WAS SUBMITTED THAT THE IMPOSITION OF PENALTY UNDER SECTION 271E IS NOT DEPENDENT UPON TH E ASSESSMENT UNDER SECTION 143(3) AT THE FIRST INSTANCE. SECONDLY, AS PER SUB-SECTION (2) OF SEC. 271E, THE PENALTY CAN BE IMPOSED ONLY BY A SENIOR O FFICER IN THE RANK OF JOINT COMMISSIONER. THE AO BELOW THE RANK OF JOINT COMMISSIONER, THUS, HAS NO LOCUS STANDI TO FORM HIS SATISFACTION FOR IMPOSITION OF PENAL TY EVEN IN THE COURSE OF ASSESSMENT AS THIS IS NOT WITHIN T HE DOMAIN OF THAT AO TO DECIDE. THUS, THE AO, IN THE INSTANT CASE, IN THE RANK OF ITO COULD NOT HAVE FORMULATED ANY SATISFACTION, EVEN IF, HE SO DESIR ED WHILE FRAMING THE ASSESSMENT ORDER. SUCH ORDER COULD HAVE BEEN CONT RARY TO THE VERY SCHEME OF THE ACT. THE LD. DR THEREAFTER POINTED OUT THAT , IN ANY CASE, AN OFFICE NOTE WAS PREPARED RECOMMENDING THE JOINT COMMISSIO NER WITH A PROPOSAL TO CONSIDER THE IMPOSITION OF PENALTY UNDER SECTION 271E OF THE ACT FOR ALLEGED DEFAULT AS OBSERVED BY HIM. THEREFORE, SUC H OFFICE NOTE WOULD PROVE THAT THE SATISFACTION CONTEMPLATED BY THE HON BLE SUPREME COURT AND THE CO-ORDINATE BENCH RELIED UPON ON BEHALF OF THE ASSESSEE WAS ACTUALLY PRESENT IN THIS CASE. IT WAS THUS, CONTENDED THAT LEGAL OBJECTION RAISED BY THE ASSESSEE FOR PENALTY ORDER UNDER SECTION 271E BEING BAD IN LAW FOR WANT OF SATISFACTION HAS NO LEG TO STAND. AS REGARDS MERITS, THE LD. DR STRONGLY HARPED THAT THE ASSESSEE IS MAINLY PRIVY TO THE FACT WHETHER IT WAS A LOAN OR DEPOSIT. THE ASSESSEE HAS HIMSELF DECLARED THE SAME AS LOAN IN ITS BOOK S OF ACCOUNTS AND, THEREFORE, THE ONUS CANNOT BE SHIFTED ON THE REVENU E ON THIS SCORE. IT WAS THEREAFTER SUBMITTED THAT THE PURCHASE TRANSACTIONS REFERRED TO THE EARLIER YEAR HAS NOT BEEN SCRUTINIZED BY THE DEPARTMENT. TH IS APART, THERE IS NO ITA NO.613/AHD/2017 M/S. B. P. PATEL & CO. VS. ITO ASST. YEAR 2012-13 - 5 - PROOF FOR SUCH PURCHASES MADE IN THE EARLIER YEARS. IT WAS THUS CONTENDED THAT THERE IS NO JUSTIFICATION IN THE ARGUMENTS OF THE ASSESSEE THAT THE TRANSACTION HAS BEEN ACCEPTED IN THE PAST. IT WAS THUS CONTENDED THAT THE DOCTRINE OF RES JUDICATA WOULD THUS NOT APPLY. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE IMPOSITION OF PENALTY UNDER SECTION 271E IS IN QUESTION. WE S HALL FIRST ADDRESS TO THE LEGAL OBJECTION RAISED BY THE ASSESSEE AS NARRATED IN THE PRECEDING PARAGRAPH. THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. JAI LAXMI RICE MILLS AMBALA CITY PROCEEDS ON TH E PREMISE THAT NO SATISFACTION HAS BEEN RECORDED BY THE AO IN THAT CASE. IN THE INSTANT CASE, THE AO BEING ITO AND INFERIOR TO THE JOINT COMMISSI ONER IS CLAIMED TO HAVE FORWARDED AN OFFICE NOTE TO THE JOINT COMMISSIONE R FOR ACTION WITH REFERENCE TO THE PROVISIONS OF SEC. 269TAND R.W.S. 271E OF THE ACT. IT IS ELEMENTARY TO SAY THAT THE SATISFACTION CAN ONLY BE FORMED BY THE PERSON WHO IS COMPETENT TO IMPOSE PENALTY AND NOT A LOWER RANKING AUTHORITY. THE LAW PROVIDES FOR IMPOSITION OF PENALTY BY AN OFFICE R OF THE RANK OF THE JOINT COMMISSIONER. THUS, THE AO IS STATUTORILY DEBARRED FOR FORMING ANY SATISFACTION EITHER AT THE TIME OF ASSESSMENT ORD ER OR SUBSEQUENT THERETO. THE AO, HOWEVER, HAS SENT THE OFFICE NOTE TO THE CO MPETENT AUTHORITY FOR REQUISITE ACTION. THUS, THE ASSENT OF MIND OF AO I S DISCERNIBLE FROM SUCH CONDUCT. HENCE, THE RATIO OF DECISION OF THE HONB LE SUPREME COURT WOULD NOT APPLY TO THE FACTS OF THE CASE. THUS, WE FIND CONSIDERABLE MERIT IN ALL THE PLEA RAISED ON BEHALF OF THE REVENUE IN THIS REGARD AS NOTED IN PARAGRAPH 3 HEREINABOVE. WE, THUS, SEE NO MERIT IN THE LEGAL O BJECTION RAISED BY THE ASSESSEE. ITA NO.613/AHD/2017 M/S. B. P. PATEL & CO. VS. ITO ASST. YEAR 2012-13 - 6 - 5. WE NOW COME TO THE MERITS. THE ASSESSEE HAS NAR RATED THE CIRCUMSTANCES IN RELATION TO THE CASH PAYMENTS TO F OUR PARTIES. THE ASSESSEE HAS ATTEMPTED TO DEMONSTRATE FROM THE LEDGER ACCOUN T THAT THE OUTSTANDING HAS BEEN CARRIED FORWARD FROM THE EARLIER YEARS AND A PART PAYMENT WAS ALSO MADE IN THE PRECEDING YEARS AS A MEASURE OF DISCHAR GE OF LIABILITY ARISING FROM PURCHASE OF TOBACCO PRODUCTS. THE SIMILAR PAY MENT IN CASH HAS BEEN MADE IN THE EARLIER YEAR WHICH HAS NOT BEEN DISPUTE D BY THE REVENUE. THE PRESUMPTION OF BONA FIDE & GOOD FAITH WOULD, THUS, ARISE IN FAVOUR OF THE ASSESSEE. MERE NOMENCLATURE IN A PARTICULAR MANNER IN A BALANCE SHEET WILL NOT BE CONCLUSIVE FOR DETERMINATION OF NATURE OF TR ANSACTION. THE STAND OF THE ASSESSEE TOWARDS PURCHASE OF TOBACCO IS CONSIST ENT AND EMANATING FROM THE ORDERS OF THE LOWER AUTHORITIES. WE, THUS, ARE INCLINED TO APPRECIATE THE STAND OF THE ASSESSEE IN AFFIRMATIVE ON MERITS. CO NSEQUENTLY, ON MERITS, THE CASE OF THE ASSESSEE DESERVES TO BE ACCEPTED. HENC E, THE PENALTY IMPOSED UNDER SECTION 271E BY THE COMPETENT AUTHORITY (JCIT ) IS SET-ASIDE AND QUASHED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 13/10/2020 SD/- SD/- (PRADIP KUAMR KEDIA) (MS. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/10/2020 TANMAY, SR. PS TRUE COPY ITA NO.613/AHD/2017 M/S. B. P. PATEL & CO. VS. ITO ASST. YEAR 2012-13 - 7 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)- 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 31.08.2020 & 03.09.2020 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 01.09.2020 & 04.09.2020 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 01.09.2020 & 08.09.2020 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .09.2020 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 13.10.2020 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.10.2020 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER