Joint commissioner of Income tax, Calicut V. M/s.Narayanan & Co., Calicut

ITA 655/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73843 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: TYPE MATHEW
• Keywords: Opportunity of being heard; Period of limitation; Initiation of penalty proceedings; Reasonable cause; Time period of passing order
• Section: 68

Judgement Text

ITA NO . 655 /C OCH/ 2013 1 IN THE INCOME TAX APPELA TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 655/ COCH/ 2013 (ASST YEAR 2007 - 08 ) THE JT COMMISSIOENR OF INCOME TAX RANGE 1 KOZHIKODE VS M/S NARAYANAN & CO SATHRAM ROAD CALICUT ( APPELLANT) (RESPONDENT) PAN NO. AAEFN4185B ASSESSEE BY SRI TYPE MATHEW REVENUE BY SMT LATHA V KUMAR, JR DR DATE OF HEARING 15 TH JAN 2014 DATE OF PRONOUNCEMENT 17 TH JAN 2014 OR D ER PER N R S GANESAN, JM : THIS APPEAL OF THE REVENUE IS DIRE CTED AGAINST THE ORDER OF THE CIT(A), KOZHIKODE DATED 18.7.2013 CONFIRMING THE PENALTY LEVIED U/S 271D OF THE ACT. 2 SMT LATHA V KUMAR, THE LD REPRESENTATIVE FOR THE REVENUE SUBMITTED THAT THE AO LEVIED PENALTY SINCE THE ASSESSEE RECEIVED CASH EXCEEDING RS. 20,000/ - . REFERRING TO THE ORDER OF THE CIT(A), THE LD REPRESENTATIVE SUBMITTED THAT THE CIT(A) DELETED THE ADDITION ON THE BASIS OF THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF CIT VS P K SHAMSUDDIN IN ITA NO. 237 OF 2010 DATED 4.2.2011 ON T HE GROUND THAT THE GENUINENESS OF TRANSACTION WAS NOT DOUBTED. REFERRING TO THE PROVISIONS OF SECTION 271D AND 269SS, THE LD REPRESENTATIVE SUBMITTED THAT PENALTY U/S 271D WOULD BE LEVIED ONLY ON GENUINE TRANSACTION. IF THE TRANSACTION IS NOT GENUINE, THE N THE AMOUNT SHOWN TO HAVE BEEN RECEIVED HAS TO BE TREATED AS ASSESSEES OWN INCOME AND ADDITION SHOULD BE MADE U/S 68 OF THE ACT AND PENALTY WOULD BE LEVIED U/S 271C OF THE ACT FOR ITA NO . 655 /C OCH/ 2013 2 CONCEALING INCOME OF THE ASSESSEE. IN THIS CASE, ACCORDING TO THE LD REPR ESENTATIVE, THE AO FOUND THAT THE TRANSACTION OF RECEIVING CASH WAS GENUINE AND HENCE THERE WAS VIOLATION OF PROVISIONS OF SEC. 269SS; ACCORDINGLY, PENALTY WAS LEVIED U/S 271D OF THE A CT BY THE JOINT COMMISSIONER OF INCOME TAX. 2.1 REFERRING TO THE JUDG MENT OF THE KERALA HIGH COURT IN THE CASE OF K V GEORGE VS CIT DATED 18.12.2013, A COPY OF WHICH IS AVAILABLE ON THE FILE, THE LD REPRESENTATIVE SUBMITTED THAT AFTER CONSIDERING ITS EARLIER JUDGMENT IN THE CASE OF SHAMSUDDEEN (SUPRA), THE KERALA HIGH COU RT FOUND THAT IN THE CASE OF SH P K SHAMSUDDEN (SUPRA), IT WAS FOUND THAT THE ASSESSEE TOOK CASH FROM RELATIVES AND FRIENDS, WHO HAD TAKEN LOAN FROM BANKS FOR HELPING THE ASSESSEE AND SUCH PERSONS COULD NOT HAVE ISSUED CHEQUES. IN THOSE CIRCUMSTANCES, TH E KERALA HIGH COURT FOUND THAT THERE WAS NO TAX EVASION. THAT IS NOT THE SITUATION HERE; THEREFORE, THE LATEST JUDGMENT OF THE KERALA HIGH COURT, IN THE CASE OF K V GEORGE (SUPRA), IS APPLICABLE IN THIS CASE. 2.2 REFERRING TO THE QUESTION OF LIMITATION, THE LD REPRESENTATIVE SUBMITTED THAT THE JT COMMISSIONER OF INCOME TAX PASSED THE OR DER WITHIN SIX MONTHS FROM THE DATE OF INITIATION OF PENALTY PROCEEDINGS ; THEREFORE, IN VIEW OF THE JUDGMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT S GUPTA MILLS STOR ES (2009) 184 TAXMAN 230 , T HE IMPUGNED ORDER OF PENALTY WAS PASSED WITHIN THE PERIOD OF LIMITATION. 2.3 ON THE CONTRARY, S RI IYPE MATHEW, THE LD REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED ITSELF IN SALE OF PETROL AND PETROLEUM PRODUCTS. THE CUSTOMERS OF THE ASSESSEE ARE MAINLY GOVERNMENT DEPARTMENTS. ACCORDING TO THE LD REPRESENTATIVE, THE GOVERNMENT AND ITS DEPARTMENT USED TO BUY PETROL AND PETROLEUM PRODUCTS ON CREDIT; ITA NO . 655 /C OCH/ 2013 3 THEREFORE, THE ASSESSEE HAS TO PAY TO THE PETROLEUM COM PANIES FOR THE PURCHASE OF PETROL AND PETROLEUM PRODUCTS BY BORROWING FUNDS WHENEVER IT IS NECESSARY. ACCORDING TO THE LD REPRESENTATIVE, FUNDS WERE BORROWED WHENEVER THERE IS A SHORTAGE OF FUNDS WITH THE ASSESSEE FOR TAKING DEMAND DRAFTS FOR MAKING PAYM ENTS TO OIL COMPANIES. ACCORDING TO THE LD REPRESENTATIVE, THE PARTNER OF THE ASSESSEE COMPANY IS ALSO THE PARTNER OF BABY MARINE EXPORTS. WHENEVER THE ASSESSEE REQUIRES THE FUNDS, BABY MARINE EXPORTS TRANSFER THE FUNDS TO THE CURRENT ACCOUNT OF SHRI K C BABU AND SHRI K C BABU TRANSFER THE FUNDS TO THE ACCOUNT OF THE ASSESSEE COMPANY. THIS WAS EXPLAINED TO THE AO. THEREFORE, ACCORDING TO THE LD REPRESENTATIVE, THERE WAS A REASONABLE CA U SE IN RECEIVING THE CASH EXCEEDING RS. 20,000/ - . MOREOVER, THE GENUIN ENESS OF THE TRANSACTION IS NOT QUESTIONED; THEREFORE, THERE IS NO QUESTION OF LEVY OF PENALTY U/S 271D OF THE ACT IN VIEW OF THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF SHAMSUD I N (SUPRA). 2.4 THE LD REPRESENTATIVE FURTHER SUBMITTED THAT THE AO ISSUED SHOW CAUSE NOTICE FOR INITIATING PROCEEDINGS U/S 271D ON 23.11.2009. ACCORDING TO THE LD REPRESENTATIVE, THOUGH THE AO IS NOT COMPETENT TO LEVY PENALTY, THERE IS NO BAR FOR INITIATING PENALTY PROCEEDINGS BY THE AO. HENCE, THE PENALTY HAS TO BE LEV IED WITHIN 6 MONTHS FROM THE DATE OF INITIATION OF PENALTY PROCEEDINGS . BUT THE PENALTY WAS LEVIED AFTER EXPIRY OF 6 MONTHS LIMITATION PERIOD. ACCORDING TO THE LD REPRESENTATIVE, THE JCIT HAS ISSUED ANOTHER SHOW CAUSE NOTICE AFTER EXPIRY OF 6 MONTHS PER IOD. THE LD REPRESENTATIVE SUBMITTED THAT ONCE THE PENALTY PROCEEDINGS WAS INITIATED U /S 271D CALLING FOR EXPLANATION OF THE ASSESSEE, THE JCIT CANNOT INITIATE THE PROCEEDINGS ONCE AGAIN. THEREFORE, THE JCIT IS EXPECTED TO LEVY PENALTY WITHIN A PERIOD O F 6 MONTHS. THE LD REPRESENTATIVE HAS RELIED UPON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF SHANBHAG RESTAURANT V. DEPUTY COMMISSIONER OF INCOME - TAX (266 ITR 393). ITA NO . 655 /C OCH/ 2013 4 3 ON A QUERY FROM THE BENCH, WHEN THE CIT(A) HAS NOT DISCUSSED ANYTHING ABO UT THE REASONABLE CAUSE FOR RECEIVING THE MONEY EXCEEDING RS. 20,000/ - AND ALLOWED THE CASE OF THE ASSESSEE ONLY ON THE BASIS OF JUDGMENT OF THE KERALA HIGH COURT IN SHAMSHUD I N (SUPRA) , WHICH WAS SUBSEQUENTLY FOUND BY THE VERY SAME HIGH COURT A S NOT APPLIC ABLE, WHY THE MATTER SHOULD NOT BE REMANDED BACK TO THE CIT(A) FOR RECONSIDERATION IN THE LIGHT OF THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF K V GEORGE (SUPRA), THE LD REPRESENTATIVE SUBMITTED THAT THE QUESTION OF LIMITATION BEING A LEGAL ISSUE, THIS TRIBUNAL CAN VERY WELL ADJUDICATE THIS ISSUE. THEREFORE, THERE CANNOT BE ANY NECESSITY TO REMAND BACK THE MATTER TO THE FILE OF THE CIT(A). 4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE C IT(A) DELETED THE PENALTY ONLY ON THE BASIS OF THE JUDGMENT OF THE KERALA HIGH C OURT IN THE CASE OF P K SHAMSUDI N (SUPRA). AS FOUND BY THE KERALA HIGH COURT IN THE CASE OF K V GEORGE (SU PRA) IN THE CASE OF SHAMSUDEEN (SUPRA), THE SITUATION UNDER WHICH TH E CASH WAS RECEIVED WAS EXPLAINED AND IT WAS EXPLAINED THAT THE CREDITORS BORROWED LOANS FROM THE BANKS FOR HELPING THE ASSESSEE AND SUCH PERSON COULD NOT HAVE ISSUED CHEQUES. THIS EXPLANATION OF THE ASSESSEE WAS FOUND TO BE REASONABLE IN ACCEPTING CASH E XCEEDING RS. 20,000/ - . THEREFORE , THE JUDGMENT OF THE KERALA HIGH COURT IN SHAMSHUDIN (SUPRA) MAY NOT BE APPLICABLE TO THE FATS OF THIS CASE AS EXPLAINED BY THE VERY SAME HIGH COURT IN THE CASE OF K V GEORGE (SUPRA) REASONABLE CAUSE FOR RECEIVING THE CAS H EXCEEDING RS. 20,000/ - HAS TO BE EXPLAINED SATISFACTORILY. THEREFORE, THE CIT(A) IS NOT CORRECT IN DELETING THE PENALTY PLACING RELIANCE ONLY ON THE JUDGMENT OF KERALA HIGH COURT IN THE CASE OF P K SHAMSHUDEEN (SUPRA). THE LATEST JUDGMENT OF THE KERAL A HIGH COURT WAS DELIVERED ON 18.12.2013 . T HE CIT(A) PASSED THE ORDER ON 18.7.2013; THEREFORE, THE CIT(A) HAS NO OCCASION TO CONSIDER THE JUDGMENT IN THE ITA NO . 655 /C OCH/ 2013 5 CASE OF K V GEORGE (SUPRA). ACCORDINGLY , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS TO CONSIDER THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF K V GEORGE (SUPRA) BEFORE TAKING A DECISION. 4.1 MOREOVER, THE ASSESSEE HAS SPECIFICALLY RAISED THE ISSUE WITH REGARD TO NECESSITY FOR RECEIVING CASH EXCEEDING RS. 20,000/ - . WHEN THE ASSESSEE CLAIMS THAT FOR TAKING DEMAND DRAFT IT NEEDS MONEY URGENTLY, THE EXPLANATION OF THE ASSESSEE HAS TO BE EXAMINED WITH REGARD TO THE AVAILABILITY OF THE CASH AS ON THE DATE OF TAKING THE DEMAND DRAFT AND SHORTAGE, IF ANY, AND THE REQUIREMENT OF THE ASSESSEE FOR TAKING THE DEMAND DRAFT AS CLAIMED, HAS TO BE EXAMINED BY THE CIT(A). UNFORTUNATELY, THE CIT(A) HAS NOT EXAMINED THE SAME. 4.2 MOREOVER, THE ASSESSEE HAS SPECIFICALLY RAISED THE ISSUE OF LIMITATION BEFORE THE CIT(A). HOWEVER, THE CIT(A) HAS NOT DISPOSE OF THAT GROUND. NO DOUBT, THE ISSUE OF LIMITATION IS A LEGAL ISSUE AND GOES TO THE ROOT OF THE MATTER. HOWEVER, BOTH PARTIES RELIED UPON TWO DIFFERENT JUDGMENT OF THE HIGH COURT. THIS JUDGMENT WAS NOT CONSIDERED BY THE LOWER AUTHORITIES. 5 T HE REVENUE PLACED ON RECORD A JUDGMENT OF ALLAHABAD HIGH COURT CONTENDING THAT THE AO IS NOT COMPETENT TO INITIATE THE PROCEEDINGS AND THE PERIOD OF LIMITATION HAS TO BE COMPUTED FROM THE DATE OF INITIATION OF PROCEEDINGS BY THE JCIT. ON THE CONTRARY, THE ASSESSEE CONTENTS THAT IN VIEW OF THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF SHANBHAG RESTAURANT (SUPRA) LIMITATION HAS TO BE COMPUTED FROM THE ISSUE OF NOTICE BY THE AO. IN VIEW OF THE TWO JUDGMENT OF DIFFERENT HIGH COURTS AND THE CIT(A) HA S NO OCCASION TO CONSIDER THE SAME, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS TO CONSIDER BOTH THE JUDGMENTS OF KARNATAKA HIGH COURT AND ALLAHABAD HIGH COURT BEFORE TAKING A ITA NO . 655 /C OCH/ 2013 6 DECISION. APPARENTLY, THE DECISIONS WERE NOT BROUGHT TO THE NOTICE OF THE CIT(A) WHEN THE APPEAL WAS HEARD . THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) SHALL RECONSIDER THE ENTIRE ISSUE AFRESH AFTER HEARING THE A SSESSEE. ACCORDINGLY, THE ORDER OF THE LOWER AUTHORI TY IS SET ASIDE AND TH E ENTIRE ISSUE IS REMANDED BACK TO THE FILE OF THE CIT(A), WHO SHALL RECONSIDER THE MATER AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 6 IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JAN 2014 . SD/ - SD/ ( B.R. BASKARAN ) ( N.R.S. GANESAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 17 TH JAN 201 4 RAJ* COPY TO: 1. APPELLANT JT COMMR OF INCOME TAC, RANGE 1 KOZHIKODE 2. RESPONDENT M/S NARAYANAN &CO, SATHRAM ROAD, CALICUT 3. CIT(A) 4. CIT , KOZHIKODE 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN