M/s Haryana Sanitaryware Industries Pvt. Ltd., Faridabad V. Addl. CIT, New Delhi

ITA 6198/DEL/2012

• Counselvise Citation: 619820114 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-01-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 14-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAHUL
• Assessee Lawyers: R B MATHUR
• Keywords: Source of fund
• Section: 68

Judgement Text

1 ITA 6198/DEL/12 HARYANA SANITARY WARE INDUSTRIES P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 6198/DEL/2012 A.Y. 2002-03 HARYANA SANITARYWARE INDUSTRIES PVT. LTD. VS. ADDL. CIT, RANGE-12, PLOT NO. 14, SECTOR-25, FARIDABAD. NEW DELHI. PAN: AAACH 3263 K ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI R.B. MATHUR CA RESPONDENT BY : SHRI ROBIN RAHUL SR. DR DATE OF HEARING : 21-01-2015 DATE OF ORDER : 30-01-2015. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIREC TED AGAINST THE ORDER DATED 11-10-2012, PASSED BY THE CIT(APPEALS)-X, NE W DELHI IN APPEAL NO. 235/09-10, SUSTAINING THE PENALTY OF RS. 2,22,197/- LEVIED BY THE AO U/S 271D OF THE I.T. ACT, 1961, RELATING TO A.Y. 2002 -03. 2. THE ASSESSEE COMPANY IN THE RELEVANT ASSESSMENT YEAR CARRIED ON MANUFACTURING OF BRICKS AND SW PIPES. IT HAD FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 2,87,978/-. THE ASSESSMENT WAS COMPLETE D AT A TOTAL INCOME OF RS. 2 ITA 6198/DEL/12 HARYANA SANITARY WARE INDUSTRIES P. LTD. 23,33,502/-, INTER ALIA, MAKING ADDITION OF RS. 2,7 2,917/- ON ACCOUNT OF UNEXPLAINED UNSECURED LOANS. 2.1. CONSEQUENT TO TRIBUNALS ORDER DATED 10-7-2009 , EXCEPT THE ADDITION IN RESPECT OF INTEREST INCOME ON FDR AMOUNTING TO RS. 4966/-, ALL OTHER ADDITIONS WERE DELETED. THE AO GAVE EFFECT TO TRIBUNALS ORDE R VIDE HIS ORDER DATED 30-12- 2010. THE AO INITIATE D PENALTY PROCEEDINGS ON 6-4- 2008 U/S 271D ON THE GROUND THAT ASSESSEE COMPANY HAD TAKEN UNSECURED LOAN IN C ASH FROM FOLLOWING PERSONS AND WHILE DOING SO HAD VIOLATED THE PROVISIONS OF S ECTION 269SS. S. NO. NAME OF PERSON AMOUNT (RS.) 1. SH. T.S. DAGER 75000/- 2. SMT. KAMLESH DAGER 25000/- 3. SH. MANBIR DAGAR 25,000/- 4. SMT. ANITA PAUL SINGH 25,000/- 5. SH. SURINDER SINGH 32197/- 6. SH. RANBIR SINGH 20000/- 7. SH. GIAN PRAKASH 20000/- 2.2. THE ASSESSEE COMPANY SUBMITTED BEFORE AO THAT UNDER ONE TIME SETTLEMENT THE ASSESSEE COMPANY WAS REQUIRED TO PAY ON OR BEFO RE 8-12-2001, AN AMOUNT OF RS. 35 LACS TO SBI, BALLABGARH. IN ORDER TO MEET TH IS DEADLINE, THE ASSESSEE RAISED MONEY FROM DIFFERENT SOURCES INCLUDING THE UNSECURE D LOANS NOTED ABOVE AND MADE THE PAYMENT TO BANK. THE PAYMENT TO BANK WAS MADE O N 7-12-2001 AND 8-12-2001. THUS, THE MAIN PLEA OF ASSESSEE WAS THAT ON ACCOUNT OF URGENCY OF CIRCUMSTANCES, THE LOAN WAS TAKEN IN CASH. THE AO EXAMINED THE CA SH BALANCE IN THE BOOKS OF ACCOUNT ON THE DATES WHEN ALLEGED LOAN FROM THE ABO VE PERSONS WAS TAKEN AND CONCLUDED THAT THERE WAS NO URGENCY FOR ENTERING IN TO CASH TRANSACTION. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL. 3 ITA 6198/DEL/12 HARYANA SANITARY WARE INDUSTRIES P. LTD. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE H AS TAKEN FOLLOWING ADDITIONAL GROUND OF APPEAL: THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CAS E THE ORDER U/S 271D PASSED BY THE LD. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-2 WAS BARRED BY LIMITATION AND TH US BAD IN LAW. THE LIMITATION FOR THE PURPOSES OF PENALTY U/S 271D IS TO BE DETERMINED WITH REFERENCE TO SECTION 275(1)(C) AND NOT SECTION 275(1)(A). IN VIEW OF THE ABOVE THE PENALTY U/S 271 D SHOULD BE DELETED. 3.1. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE ASSESSMENT ORDER WAS PASSED ON 28-2-2005 AND PENALTY NOTICE WAS ISSUED O N 6-4-2008 AND THE PENALTY ORDER WAS PASSED ON 4-6-2008. HE, THEREFORE, SUBMIT TED THAT LIMITATION IS TO BE RECKONED FROM 28-2-2005 WHEN THE AO PASSED THE ASSE SSMENT ORDER AND NOT FROM 6-4-2008. HE SUBMITTED THAT THE PENALTY ORDER IS B ARRED BY LIMITATION U/S 275(1)(C). 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. ADMITTEDLY, THE AO HAS NOT INITIATED PENALTY PROCEEDINGS U/S 271D WHILE PASSING THE ASSESSMENT ORDER ON 28-2-200 5 AND THE PENALTY PROCEEDINGS U/S 271D WERE FIRST INITIATED ON 6-4-20 08 AND THE PENALTY ORDER WAS PASSED WITHIN TWO MONTHS OF THE INITIATION OF PENAL TY PROCEEDINGS AND, THUS, THE PENALTY ORDER WAS NOT BARRED BY LIMITATION. ACCORDI NGLY, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS REJECTED. 5. ON MERITS, LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE LOWER REVENUE AUTHORITIES AND FURTHER PO INTED OUT THAT GENUINENESS OF LOANS IS NOT DOUBTED AS TRIBUNAL HAS DELETED THE AD DITION ON THIS COUNT. 4 ITA 6198/DEL/12 HARYANA SANITARY WARE INDUSTRIES P. LTD. 5.1. LD. COUNSEL SUBMITTED THAT ASSESSEE HAD DEFAUL TED IN PAYMENT OF LOAN AND, THEREFORE, HAD TO ENTER INTO ONE TIME SETTLEMENT AN D FOR MEETING THE LIABILITY, IT HAD TAKEN CASH LOANS FROM DIRECTOR/ SHAREHOLDERS/ EMPLO YEES. HE SUBMITTED THAT IT WAS UNDER THESE EXIGENCIES THAT THE LOAN WAS TAKEN IN CASH. IN THIS REGARD HE REFERRED TO PAGE 2 OF THE PB, WHEREIN THE BANK ACCOUNT OF SBI I S CONTAINED. HE FURTHER REFERRED TO PAGE 3 OF THE PB, WHEREIN THE COMPROMISE SETTLEM ENT UNDER ONE TIME SETTLEMENT DATED 9-12-2000 IS CONTAINED, WHEREIN, INTER ALIA, FOLLOWING TWO TERMS OF SETTLEMENT ARE MENTIONED: (I) 25% OF THE SETTLED AMOUNT (I.E. OF RS. 35.00 LACS) WILL BE DEPOSITED IMMEDIATELY IN THE ACCOUNT. (II) THE REMAINING AMOUNT OF RS. 26.25 LACS (RS. TWENTY SIX LACS AND TWENTY FIVE THOUSAND ONLY) WILL BE DEPOSIT ED BY YOU WITHIN 12 MONTHS FROM THE DATE OF SETTLEMENT I. E. FROM 9-12-200. 5.2. LD. COUNSEL ALSO REFERRED TO PAGE 1 OF THE PB WHEREIN DETAILS OF CASH LOANS RECEIVED DURING THE YEAR 2001-02 ARE CONTAINED, WHI CH IS AS UNDER: NAME DATE AMOUNT TOTAL 1. KAMLESH DAGAR 5-9-2001 5000.00 7-9-2001 10000.00 10-9-2001 10000.00 25000.00 2. T.S. DAGAR 29.8.2001 10000.00 1.9.2001 10000.00 2.9.2001 10000.00 3.9.2001 10000.00 10.9.2001 5000.00 11.9.2001 15000.00 25.9.2001 15000.00 75000.00 3. RANBIR SINGH 1.10.2001 10000.00 5.10.2001 10000.00 5 ITA 6198/DEL/12 HARYANA SANITARY WARE INDUSTRIES P. LTD. 4. SURENDRA SINGH 15.6.2001 2197.00 3.7.2001 10000.00 28.8.2001 10000.00 11.9.2001 10000.00 31197.00 5. GYAN PRAKASH 28.5.2001 10000.00 2.9.2001 10000.00 20000.00 6. MANBIR DAGAR 5.9.2001 10000.00 7.9.2001 10000.00 10.9.2001 5000.00 25000.00 7. ANITA PAUL SINGH 5.9.2001 10000.00 7.9.2001 10000.00 10.9.2001 5000.00 25000.00 TOTAL: 222197.00 5.3. LD. COUNSEL RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. LAKSHMI TRUST CO. 303 ITR 99, WHEREIN IT WAS HELD THAT WHERE THE TRANSACTIONS HAVE BEEN FOUND TO BE GENUINE AND THER E WAS NO INTENTION ON THE PART OF THE ASSESSEE TO AVOID TAX, THE CANCELLATION OF P ENALTY WAS JUSTIFIED. HE FURTHER REFERRED TO THE DECISIONS OF HONBLE PUNJAB & HARY ANA HIGH COURT IN THE CASES OF (I) CIT VS. SUNIL KUMAR GOEL 183 TAXMAN 53 (P&H), W HEREIN ALSO SIMILAR VIEW WAS TAKEN; AND CIT VS. SAINI MEDICAL STORE 277 ITR 420 246 (P&H), WHEREIN ALSO IT WAS HELD THAT BREACH OF PROVISION OF THE ACT WA S ON ACCOUNT OF BONA FIDE BELIEF OF THE ASSESSEE AND THE SAME WAS NOT WITHIN ANY INT ENTION TO AVOID OR EVADE TAX THEN CANCELLATION OF PENALTY WAS JUSTIFIED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. AFTER CONSIDERING THE FINDI NGS OF LD. CIT(A) AND THE 6 ITA 6198/DEL/12 HARYANA SANITARY WARE INDUSTRIES P. LTD. CONFIRMATIONS FILED BY CREDITOR, TRIBUNAL IN PARA 40 OF ITS ORDER DATED 10-7-2009, IN QUANTUM APPEAL, HAS OBSERVED AS UNDER: ON THE BASIS OF EVIDENCES AS DISCUSSED ABOVE, THE CIT(A) HELD THAT THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF T HE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS RESULTING I N THE RECEIPT OF LOANS FROM THOSE CREDITORS. THE CREDITWORTHINESS IN THE CONTEXT OF THE INDIVIDUAL CREDITORS HAS BEEN ESTABL ISHED WITH REFERENCE TO IDENTIFIED SOURCES OF INCOME IN EACH C ASE AND THEREAFTER DELETED THE ADDITION U/S 68 OF THE AMOUN TS OBTAINED AS LOANS FROM DIRECTORS SHARE HOLDERS AND OTHERS. T HE FINDING RECORDED BY CIT(A) REMAINED UNCONTROVERTED, WE THER EFORE, DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CI T(A) DELETING THE ADDITION OF RS. 2,72,917/- AND THE GROUND OF AP PEAL TAKEN BY THE REVENUE IS REJECTED. 6.1. ADMITTEDLY THE ASSESSEE HAD DISCHARGED ITS LI ABILITY TOWARDS BANK BY ENTERING INTO ONE TIME SETTLEMENT AND, THEREFORE, T HE BONA FIDE OF THE ASSESSEE IN ACCEPTING CASH LOANS FROM DIRECTORS/ SHAREHOLDERS A ND EMPLOYEES COULD NOT BE DOUBTED. THE ENTIRE EXERCISE WAS REVENUE NEUTRAL AN D NOT TO EVADE ANY TAX. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND C ANCEL THE PENALTY LEVIED BY THE AO U/S 271D OF THE I.T. ACT. 7. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30-01-2015. SD/- SD/- ( H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30-01-2015. MP COPY TO : 1. ASSESSEE 2. AO 7 ITA 6198/DEL/12 HARYANA SANITARY WARE INDUSTRIES P. LTD. 3. CIT 4. CIT(A) 5. DR