M/S UPKAR SANSTHAN , ALWAR V. ADDITIONAL COMMISSIONER OF INCOME TAX (EXEMPTION)), JAIPUR

ITA 707/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2836 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 23-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT A
• Keywords: Income from undisclosed sources; Permanent establishment
• Section: 143(3); 12AA; 271D; 271E; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S B, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 707 & 1035/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14 M/S UPKAR SANSTHAN H. NO. 46, VILLAGE-DERA, TEHSIL - THANAGAZI, ALWAR. CUKE VS. THE ADD.CIT(E), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAJU 0112 D VIHYKFKHZ@ APPELL ANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT) A LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 24/10/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT :29/10/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T THE SEPARATE ORDERS OF LD. CIT(A), ALWAR DATED 13.03.2018 AND DA TED 08.05.2018 FOR ASSESSMENT YEAR 2013-14 WHEREIN THE ASSESSEE HAS CH ALLENGED THE CONFIRMATION OF PENALTY OF RS. 1,30,700 U/S 271D OF THE IT ACT AND RS. 86,700/- U/S 271E OF THE IT ACT. ITA NO. 707/JP2018 ITA NO. 707 & 1035/JP/2018 M/S UPKAR SANSTHAN VS. ADD.CIT(E) 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A TRUST REGISTERED U/S 12AA OF THE INCOME TAX ACT, 1961 VID E ORDER DATED 29.06.1999 EFFECTIVE FROM 01.04.1998. IT FILED ITS RETURN OF INCOME ON 19.09.2013 DECLARING NIL INCOME AFTER CLAIMING EXEM PTIONS U/S 11 & 12. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 29.02.20 16 AT NIL INCOME AFTER ALLOWING EXEMPTION U/S 11. DURING THE ASSESSM ENT, THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED CASH OF RS. 67,000/- FROM SHRI PHOOL CHAND AND RS. 63,700/- FROM SHRI DUNGER SINGH MEENA WHICH IS IN VIOLATION OF PROVISIONS OF SECTIONS 269SS AND 26 9T AND THEREFORE, REFERRED THE MATTER TO THE ADDL. CIT FOR INITIATING PENALTY PROCEEDINGS U/S 271D AND 271E OF THE ACT. 3. THE ADDL. CIT ACCORDINGLY INITIATED PENALTY PROC EEDINGS U/S 271D ON 09.08.2016. THE ASSESSEE IN RESPONSE TO THE SAME EXPLAINED THAT SHRI PHOOL CHAND AND SHRI DUNGER SINGH MEENA ARE EM PLOYEES OF THE TRUST WHO ARE SUPERVISING INTEGRATED WATER RESOURCE MANAGEMENT (IWRM) PROJECT IN THE VILLAGES OF DISTRICT PALI WHI CH WAS CONDUCTED 400 KMS AWAY FROM ALWAR WHERE THE ASSESSEE IS LOCATED. THEREFORE, THESE PERSONS IN COURSE OF CARRYING OUT SUCH ACTIVITY HAV E MADE PAYMENT TO THE FARMERS / VILLAGERS FOR EXECUTION OF THE WORK U NDER THE PROJECT. THE AMOUNT SO PAID BY THEM HAS BEEN CREDITED TO THEIR A CCOUNT IN THE BOOKS OF ACCOUNTS WHICH LATER ON WAS PAID BACK TO THEM BY THE ASSESSEE. THEREFORE, THE TRANSACTION IS NOT IN THE NATURE OF LOAN / DEPOSIT SO AS TO ATTRACT SECTION 269SS OF THE ACT. THE ADDL. CIT DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE BY HOLDING THAT THE DIST ANCE DOES NOT EXEMPT THE ASSESSEE FROM THE VIOLATION AND THAT THE ASSESSEE HAS NOT COME OUT WITH ANY COMPULSIONS FOR MAKING THE PAYMEN T IN CASH. ITA NO. 707 & 1035/JP/2018 M/S UPKAR SANSTHAN VS. ADD.CIT(E) 3 ACCORDINGLY, HE IMPOSED PENALTY OF RS.1,30,700/-. T HE LD. CIT(A) CONFIRMED THE LEVY OF PENALTY AGAINST WHICH THE ASS ESSEE IS IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE TRANSACTION IN QUESTION IS NOT A TRANSACTION OF LOAN BUT RATHER THAT OF REIMBURSEMENT OF EXPENSES BORNE BY THE EMPLOYEES OF THE TRUST. THE ASSESSEE TRUST IS INVOLVED IN CHA RITABLE ACTIVITIES. IT CONDUCTED AN INTEGRATED WATER RESOURCE MANAGEMENT(I WRM) PROJECT IN VILLAGES OF PALI DISTRICT WHICH IS 400 KMS AWAY FROM THE PERMANENT PLACE OF BUSINESS OF THE TRUST I.E., ALWAR. THIS PR OJECT WAS BEING HEADED BY SHRI PHOOL CHAND AND SHRI DUNGER SINGH MEENA. WH ILE CONDUCTING THE PROJECT, THEY HAD TO MAKE PAYMENTS TO FARMERS, LABOURERS AND OTHER PERSON IN CASH AS THEY DID NOT HAVE BANK ACCOUNTS. THIS PAYMENT WAS MADE BY THE PROJECT IN-CHARGES FROM THEIR OWN FUNDS AND WAS CREDITED IN THE BOOKS OF THE ASSESSEE IN THEIR NAME AND LATE R ON PAID BACK TO THEM. THUS, THESE TRANSACTIONS DO NOT AMOUNT TO ACC EPTANCE OF ANY LOAN/ DEPOSIT AND THEREFORE, SECTION 269SS IS NOT A TTRACTED. 5. IT WAS FURTHER SUBMITTED THAT THERE IS NO DISPUT E AS TO THE GENUINENESS OF THE TRANSACTION INVOLVING THE INCURR ING OF EXPENDITURE BY THE EMPLOYEES IN CASH. THE ASSESSEE WAS UNDER THE B ONAFIDE BELIEF THAT SUCH CASH TRANSACTION IS NOT HIT BY THE PROVISIONS OF SECTION 269SS. THUS, THE VIOLATION, IF AT ALL ANY, IS ONLY TECHNIC AL. THE SCOPE AND RATIONALE BEHIND THE PRODUCTION OF SECTION 269SS WA S EXPLAINED IN CIRCULAR NO.387 DATED 07.07.1984 STATING THAT UNACC OUNTED CASH FOUND IN COURSE OF SEARCHES CARRIED OUT BY INCOME TAX DEP ARTMENT IS OFTEN ITA NO. 707 & 1035/JP/2018 M/S UPKAR SANSTHAN VS. ADD.CIT(E) 4 EXPLAINED BY TAX PAYERS AS REPRESENTING LOANS TAKEN FROM OR DEPOSITS MADE BY VARIOUS PERSONS. UNACCOUNTED INCOME IS ALSO BROUGHT IN THE BOOKS OF ACCOUNT IN THE FORM OF SUCH LOANS AND DEPO SIT AND TAXPAYERS ARE ALSO ABLE TO GET CONFIRMATORY LETTERS FROM SUCH PERSONS IN SUPPORT OF THEIR EXPLANATIONS. WITH A VIEW TO COUNTERING THIS DEVICE, WHICH ENABLES TAX PAYERS TO EXPLAIN AWAY UNACCOUNTED CASH OR UNAC COUNTED DEPOSITS, SECTION 269SS IS INSERTED. THE PRESENT CASE IS NOT A CASE OF EXPLAINING ANY UNACCOUNTED CASH OR DEPOSITS NOR IS A CASE OF L OANS TAKEN. THE TRANSACTION IS OF A NATURE WHERE THE SUPERVISORS OF THE PROJECT HAVE MADE PAYMENT OF THEIR VIOLATION WHICH LATER ON WAS PAID BACK TO THEM. THE TRANSACTION HAS BEEN ACCEPTED BY AO AS GENUINE. THERE IS NO TAX PLANNING OR TAX EVASION IS INVOLVED. THEREFORE, FOR SUCH TECHNICAL BREACH, PENALTY SHOULD NOT BE LEVIED. 6. IN SUPPORT, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- CIT VS. HISSARIA BRO. (2007) 291 ITR 244 (RAJ.) (HC ) KUSUM DHAMANI VS. ADDITIONAL CIT (2015) 152 ITD 048 1 (JAIPUR TRIB.) DCIT VS. SURESH KUMAR BHIKAMCHAND JAIN (2016) CCH 5 07 (TRIB.) (PUNE) CIT VS. SAINI MEDICAL STORE (2005) 276 ITR 79 (P&H) (HC) 7. IT WAS FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, THE PENALTY LEVIED U/S 271D AT RS.1,30 ,700/- IS INCORRECT IN AS MUCH AS NO PENALTY CAN BE LEVIED WHERE THE AMOUN T OR THE AGGREGATE OF AMOUNT ACCEPTED IS LESS THAN RS.20,000 /-. IF THESE TRANSACTIONS ARE DIARISED DATE WISE, IT CAN BE SEEN IN CASE OF SHRI PHOOL ITA NO. 707 & 1035/JP/2018 M/S UPKAR SANSTHAN VS. ADD.CIT(E) 5 CHAND, SECTION 269SS WOULD BE APPLICABLE ONLY ON TH E AMOUNT CREDITED ON 14.01.2013 & 01.03.2013 I.E., FOR RS.37,000/- AN D NOT IN RESPECT OF THE AMOUNT OF RS.67,000/-. SIMILARLY, IN CASE OF SH RI DUNGER SINGH MEENA, SECTION 269SS WOULD BE APPLICABLE ONLY ON TH E AMOUNT CREDITED ON 28.08.2012, 10.10.2012 & 24.01.2013 I.E., FOR RS .44,000/- AND NOT IN RESPECT OF THE AMOUNT OF RS.63,700/-. THEREFORE, THE PENALTY LEVIED AT RS.1,30,700/- IS OTHERWISE INCORRECT. IN VIEW OF ABOVE PENALTY IMPOSED BY THE AO AND CONFIRMED BY LD. CIT(A) BE DE LETED. 8. IN ITA NO. 1035/JP/2018, UNDER IDENTICAL FACTS A ND CIRCUMSTANCES, THE ADDL. CIT HAS LEVIED PENALTY U/S 271E ON REPAYMENT OF THE ABOVE AMOUNTS IN VIOLATION OF SECTION 269T O F THE ACT. SIMILAR CONTENTIONS HAVE BEEN RAISED BY THE LD AR AND THE S AME ARE NOT BEEN RECORDED AGAIN. 9. THE LD. DR IS HEARD WHO HAS RELIED ON THE FINDIN GS OF THE LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PENALTY UNDER SECTION 271D AND SECTION 271E ARE LEVIABLE FOR VIOLATION OF THE PROVISIONS OF SEC TION 269SS AND 269TT OF THE ACT. IT IS A SETTLED PROPOSITION IN LAW THA T PENALTY PROVISIONS NEED TO BE CONSTRUED STRICTLY. IT IS THEREFORE IMPERATI VE THAT BEFORE SUCH PENALTY PROVISIONS ARE INVOKED, THE TRANSACTION SHO ULD QUALIFY AS IN THE NATURE OF LOANS AND/OR DEPOSITS AND ONCE IT IS ESTA BLISHED THAT THE TRANSACTION IS IN THE NATURE OF LOANS AND/OR DEPOSI TS, WHERE SUCH TRANSACTIONS ARE CARRIED OUT IN CASH BEYOND THE PRE SCRIBED THRESHOLD, ITA NO. 707 & 1035/JP/2018 M/S UPKAR SANSTHAN VS. ADD.CIT(E) 6 THERE WOULD BE VIOLATION OF SECTION 269SS AND 269T OF THE ACT. IN THAT CONTEXT, THE EXPLANATION OF THE ASSESSEE AS TO THE REASONS, THE NECESSITY AND THE BUSINESS EXIGENCY OF MAKING OR RE CEVING SUCH CASH PAYMENTS NEEDS TO BE EXAMINED ON THE PRINCIPLES OF REASONABILITY. 11. IN THE INSTANT CASE, THE ASSESSEE TRUST WAS CAR RYING OUT AN INTEGRATED WATER RESOURCE MANAGEMENT PROJECT IN VIL LAGES OF PALI DISTRICT WHICH IS AROUND 400 KMS AWAY FROM ALWAR WH ERE THE ASSESSEE IS HAVING ITS OFFICE AND THIS PROJECT WAS BEING HAN DLED BY THE EMPLOYEES OF THE TRUST SHRI PHOOL CHAND AND SHRI DUNGER SINGH MEENA. IN THAT FACTUAL BACKGROUND, THE ASSESSEE HAS STATED BEFORE THE LOWER AUTHORITIES THAT WHILE CONDUCTING THE PROJECT, THES E PERSONS AT TIMES HAD TO MAKE PAYMENTS TO FARMERS, LABOURERS AND OTHE R PERSON IN CASH AS THEY DID NOT HAVE BANK ACCOUNTS AND THEY COULD N OT HAVE WAITED FOR THE PAYMENT TO COME FROM THEIR OFFICE LOCATED 400 K MS AWAY. THE PAYMENTS WERE THEREFORE MADE BY THEM FROM THEIR OWN FUNDS FROM TIME TO TIME AND SUBSEQUENTLY REIMBURSED TO THEM BY THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT IN THE BOOKS OF ACCOUNTS WHICH WERE MAINTAINED IN TRADITIONAL FORM AND WHICH MAY LACK T HE NECESSARY ACCOUNTING CLARITY, INITIALLY THE AMOUNT WAS SHOWN AS CREDITED IN THE BOOKS OF THE ASSESSEE IN THEIR INDIVIDUAL NAME AND LATER ON, WHEN THE SAME WAS PAID TO THEM, THE SAME WAS DEBITED FROM TH EIR ACCOUNT WHICH WAS, HOWEVER, HELD BY THE ADD. CIT AS TRANSACTIONS IN NATURE OF LOANS/DEPOSITS TAKEN AND SUBSEQUENTLY REPAID IN CAS H. WE ARE OF THE VIEW THAT WHERE THE REVENUE HAS NOT DISPUTED THE IN CURRENCE OF EXPENDITURE ON THE WATER PROJECTS SO COORDINATED BY THEIR TWO EMPLOYEES ON BEHALF OF THE ASSESSEE, THE BASIC NATU RE AND CHARACTER OF ITA NO. 707 & 1035/JP/2018 M/S UPKAR SANSTHAN VS. ADD.CIT(E) 7 THE TRANSACTION IS THAT OF REIMBURSEMENT OF EXPENSE S. HOWEVER, THE WAY THE SAME HAS BEEN REFLECTED IN THE BOOKS OF ACC OUNTS DUE TO LACK OF ACCOUNTING CLARITY ON PART OF THE ASSESSEE, THOU GH IT MAY GIVES AN IMPRESSION OF TAKING MONEY INITIALLY AND SUBSEQUENT LY REPAYING THE SAME, MERE AN ACCOUNTING ENTRY BY ITSELF CANNOT REP LACE THE FACTUM OF THE ACTUAL TRANSACTION WHICH IS IN NATURE OF REIMBU RSEMENT OF EXPENSES. IN LIGHT OF THE SAME, WE ARE OF THE VIEW THAT THE B ASIC CONDITIONS OF INVOKING SECTION 269SS AND 269T ARE NOT SATISFIED I N THE INSTANT CASE AND HENCE, THE CONSEQUENT LEVY OF PENALTY UNDER SEC TION 271D AND SECTION 271E ARE HEREBY DELETED. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/10/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29/10/2018. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S UPKAR SANSTHAN, ALWAR. 2. IZR;FKHZ@ THE RESPONDENT- ADD.CIT(E), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 707 & 1035/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR