CHEMFERT TRADERS (BOMBAY) P.LTD, MUMBAI V. ADDL CIT 1(1), MUMBAI

ITA 720/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88429 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 25-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: M RAJSHIRKE
• Keywords: Reasonable cause
• Section: 273B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER ITA NO. 720/MUM/2011(A.Y. 2003-04) ITA NO. 721/MUM/2011(A.Y. 2004-05) CHEMFERT TRADERS (BOMBAY) PVT. LTD. 169, VINOD VILLA, 11 TH ROAD, KHAR (EAST), MUMBAI 400 052 PAN: AAACC1557K (APPELLANT ) VS. THE ACIT 1(1), MUMBAI. (RESPONDENT) APPELLANT BY : SHRI M. RAJSHIRKE RESPONDENT BY : SHRI NE IL PHILIP DATE OF HEARING : 18/02/2015 DATE OF PRONOUNCEMENT : 18 /02/2015 ORDER PER I.P.BANSAL, J.M: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AND ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) DATED 20/08/20 10 FOR ASSESSMENT YEARS 2003- 04 AND 2004-05. GROUNDS OF APPEAL READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A)S ERRED IN CONFIRMING THE PENALTY OF RS.50, 000/- LEVIED BY THE ASSESSING OFFICER, U/S. 271D OF THE I.T. ACT, 1961 ON ACCOUNT OF CONTRAVENTION OF PROVISIONS OF SECTION 269SS OF THE I.T.ACT, 196 1. ITA NO. 720/MUM/2011(A.Y. 2003-04) ITA NO. 721/MUM/2011(A.Y. 2003-04) 2 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINES S OF MANUFACTURING AND TRADING OF FERTILIZERS. FERTILIZERS MANUFACTURED B Y THE ASSESSEE ARE SOLD IN SATARA, SANGHLI AND KOLHAPUR DISTRICTS OF MAHARASHTRA TO F ARMERS AND VARIOUS FARMERS CO- OPERATIVE SOCIETIES. THE SALES ARE DONE BY SALESMA N APPOINTED BY THE COMPANY DISTRICT WISE. ACCORDING TO THE SUBMISSIONS MADE B Y THE ASSESSEE BEFORE THE AO, FOR THE PURPOSE OF RUNNING THE BUSINESS, THE ASSESS EE COMPANY WAS ACCEPTING LOANS FROM VARIOUS PARTIES DUE TO SUDDEN REQUIREMENT OF THE BUSINESS, WHICH INCLUDE RELATIVES OF ONE OF THE SALESMAN. IN RESPECT OF AS SESSMENT YEAR 2003-04 THE FOLLOWING LOANS WERE OBTAINED BY THE ASSESSEE FROM THE RELATIVES OF SALESMAN NAMELY MR. SOPAN BHOITE. SR.NO. NAME OF THE PARTY TRANSACTION DATE OF TRANACTION AMOUNT (RS.) 1. R.D.BHOITE LOAN TAKEN 14.10.2002 25,000/- 2. VIKAS S. BHOITE LOAN TAKEN 14.10.2002 25,000/ - TOTAL 50,000/- THE AFOREMENTIONED LOANS WERE RETURNED BACK IN THE ASSESSMENT YEAR 2004-05 AS FOLLOWS: SR.NO. NAME OF THE PARTY TRANSACTION DATE OF TRANACTION AMOUNT (RS.) 1. R.D.BHOITE LOAN REPAID 10.03.2004 25,000/- 2. VIKAS S. BHOITE LOAN TAKEN 10.03.2004 25,000/ - TOTAL 50,000/- 2.1 AS AFOREMENTIONED AMOUNT EXCEEDED A SUM OF RS. 20,000/-, THE AO APPLYING THE PROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT, 1961 (THE ACT), WHICH WAS VIOLATED, LEVIED PENALTY UNDER SECTION 271D OF THE ACT OF THE EQUAL AMOUNT FOR A.Y 2003-04 AND FOR THE A.Y. 2004-05 FOR THE VIOLA TION OF SECTION 269T, PENALTY UNDER SECTION 271E OF EQUAL AMOUNT IS IMPOSED. IT W AS EXPLAINED THAT THE ASSESSEE HAS PAID INTEREST ON THE LOANS TO THE SAID PARTIES AND THE SAME HAS ALSO BEEN ITA NO. 720/MUM/2011(A.Y. 2003-04) ITA NO. 721/MUM/2011(A.Y. 2003-04) 3 ACCOUNTED FOR IN THE BOOKS. THE REASONS , WHY THE LOAN WAS ACCEPTED AND REPAID IN CASH IS THAT BOTH THE ABOVE PARTIES ARE FARMERS AND NEITHER THEY HAVE ANY BANK ACCOUNT NOR THERE IS ANY BANK IN THEIR VILLAGE, THE REFORE, THE LOAN WAS ACCEPTED IN CASH AS WELL AS WAS REPAID IN CASH. IT WAS SUBMITT ED THAT ACCORDING TO THE EXCEPTIONS LAID DOWN IN THE SECTION, WHERE THE LOAN IS ACCEPTED AND REPAID TO AGRICULTURIST, WHO DID NOT HAVE BANK ACCOUNT NO PEN ALTY SHOULD BE LEVIED AS THE DEFAULT WOULD BE MAINLY TECHNICAL IN THE NATURE. THUS, IT WAS PLEADED BEFORE AO THAT NO PENALTY SHOULD BE LEVIED. HOWEVER, AO DID NOT ACCEPT SUCH SUBMISSION OF THE ASSESSEE AND LEVIED THE PENALTY. LD. CIT(A) HA S ALSO CONFIRMED THE SAME. AGGRIEVED BY THIS, ASSESSEE FILED AFOREMENTIONED AP PEALS. 3. APART FROM REITERATING THE CONTENTIONS RAISED BE FORE AO AND LD. CIT(A), LD. AR OF THE ASSESSEE HAS PLACED RELIANCE ON THE DEC ISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. BALAJI TRADERS, 303 IT R 312 (MAD), IN WHICH IT HAS BEEN HELD THAT WHERE MONEY WAS RECEIVED FOR COMMER CIAL EXPEDIENCY AND NECESSITATED BY BUSINESS AND THERE WAS NO REVENUE L OSS, LEVY OF PENALTY UNDER SECTION 271D WOULD NOT BE JUSTIFIED. 3.1 RELIANCE WAS ALSO PLACED ON THE DECISION OF HO NBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MAHESHWARI NIRMAN UDYOG (200 8) 302 ITR 201 (RAJ), ITAT CHANDIGARH BENCH IN THE CASE OF DCIT VS. FLAT AND H OUSING PROMOTERS, 303 ITR (AT) 453(CHD), WHEREIN IT HAS BEEN HELD THAT WHERE CREDITORS WERE AGRICULTURISTS IN REMOTE VILLAGES AND THEY DID NOT HAVE ANY BANK ACCO UNT BEFORE MAKING DEPOSIT WITH THE ASSESSEE, THEN IT SHOULD BE ACCEPTED AS RE ASONABLE EXPLANATION AND PENALTY SHOULD NOT BE LEVIED. REFERENCE WAS ALSO MADE TO T HE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SAINI M EDICAL STORES,, 277 ITR 420 (P&H) TO CONTEND THAT BONAFIDE AND GENUINE TRANSACT IONS WOULD CONSTITUTE ITA NO. 720/MUM/2011(A.Y. 2003-04) ITA NO. 721/MUM/2011(A.Y. 2003-04) 4 REASONABLE CAUSE FOR NOT INVOKING THE PROVISIONS OF SECTION 271D AND 271E OF THE ACT. 3.2 REFERENCE WAS ALSO PLACED ON THE DECISION OF H ONBLE BOMBAY HIGH COURT PRONOUNCED ON 12/6/2012 IN THE CASE OF CIT VS. TRI UMPH INTERNATIONAL FINANCE (I) LIMITED (I) LTD., IN INCOME TAX APPEAL NO.5746 OF 2 010, COPY OF WHICH WAS PLACED ON OUR RECORD TO CONTEND THAT IN ABSENCE OF ANY FINDING RECORDED IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER TO THE EFF ECT THAT REPAYMENT OF LOANS/DEPOSIT WAS NOT UNDER A BONAFIDE TRANSACTION AND WAS MADE WITH A VIEW TO EVADE TAX, THE CAUSE SHOWN BY THE ASSESSEE WAS A RE ASONABLE CAUSE AND IN VIEW OF SECTION 273B NO PENALTY COULD BE IMPOSED. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. IN THE PRESENT CASE, IN ASSESSMENT Y EAR 2003-04 CASH LOANS WERE OBTAINED AND IN A.Y 2004-05 THEY WERE REPAID. ACCO RDING TO THE PLEA RAISED BEFORE AO AS WELL AS LD. CIT(A), THE PERSONS WHO HA VE ADVANCED THESE LOANS TO THE ASSESSEE ARE RELATIVES OF A SALESMAN WHO RESIDE IN A VILLAGE AND WERE HAVING NO BANK ACCOUNT. SUCH CONTENTION OF THE ASSESSEE HAS NOT BEEN DISCARDED OR DISPROVED. IT IS ALSO NOT MENTIONED IN THE PENALTY ORDER THAT THE AFOREMENTIONED AMOUNT TAKEN BY THE ASSESSEE IN VIOLATION OF SECTIO N 269SS AND REPAYMENT THEREOF IN VIOLATION OF SECTION 269T WAS NOT BONAFIDE TRANS ACTION AND THE SAME WAS MADE WITH A VIEW TO EVADE TAX. IF IT IS SO, THEN ACCORD ING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TRIUMPH IN TERNATIONAL FINANCE (I) LTD. (SUPRA), NO PENALTY IS IMPOSABLE EITHER UNDER SECTI ON271D OR UNDER SECTION 271E AS ITA NO. 720/MUM/2011(A.Y. 2003-04) ITA NO. 721/MUM/2011(A.Y. 2003-04) 5 THE EXPLANATION SUBMITTED BY THE ASSESSEE WOULD BE CONSIDERED TO BE REASONABLE CAUSE UNDER SECTION 273B OF THE ACT. FOR THE SAKE OF COMPLETENESS THE OBSERVATIONS OF THEIR LORDSHIPS FROM PARA-25 OF THE SAID DECISION ARE REPRODUCED BELOW: 25. IN THE RESULT, WE HOLD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT REPAYMENT OF LOAN/DEPOSIT THROUGH JOURNAL ENTRIES D ID NOT VIOLATE THE PROVISION OF SECTION 269T OF THE ACT. HOWEVER, IN THE ABSENCE OF ANY FINDING RECORDED IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER TO THE EFFECT THAT THE REPAYMENT OF LOAN/DEPOSIT WAS NOT A BONAFIDE TRANSA CTION AND WAS MADE WITH A VIEW TO EVADE TAX, WE HOLD THAT THE CAUSE SH OWN BY THE ASSESSEE WAS A REASONABLE CAUSE AND, THEREFORE, IN VIEW OF SECTI ON 273B OF THE ACT, NO PENALTY UNDER SECTION 271E COULD BE IMPOSED FOR CON TRAVENING THE PROVISIONS OF SECTION 269T OF THE ACT. 5.1 IN VIEW OF ABOVE DISCUSSIONS, WE HOLD THAT IT I S NOT A FIT CASE WHERE LEVY OF PENALTY EITHER UNDER SECTION 271D OR UNDER SECTION 271E IS JUSTIFIED. THE SAME ARE DELETED AND THE APPEALS FILED BY ASSESSEE ARE ALLOW ED. 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 6/02/2015 ! ' #$% & '() 16/02/2015 $ ' * + SD/- SD/- ( /CHANDRA POOJARI ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL EMBER MUMBAI; '( DATED 16/02/2015 ITA NO. 720/MUM/2011(A.Y. 2003-04) ITA NO. 721/MUM/2011(A.Y. 2003-04) 6 ! ! ! ! ' '' ' ,-. ,-. ,-. ,-. /.%- /.%- /.%- /.%- / COPY OF THE ORDER FORWARDED TO : 1. 01 / THE APPELLANT 2. ,201 / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. .4* ,-( , , / DR, ITAT, MUMBAI 6. *5 6 / GUARD FILE. !( !( !( !( / BY ORDER, 2.- ,- //TRUE COPY// 7 77 7 / 8 8 8 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ( . ./ VM , SR. PS