Income-tax Officer, V. Shri Mohd. Habib Mohd. Usman, Nanded

ITA 780/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9349 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV BATHAM
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 780 /PUN/2015 / ASSESSMENT YEAR : 20 09 - 10 INCOME TAX OFFICER, WARD 4, NANDED ....... / APPELLANT / V S. SHRI MOHD. HABIB MOHD. USMAN, PROP. M/S. SHARIF AGENCIES, H. NO. 6 - 2 - 87, GUMAD BASE, DEGLOOR, DISTT. NANDED PAN : ABNPM8779Q / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : S HRI GAURAV BATHAM / DATE OF HEARING : 13 - 06 - 2017 / DATE OF PRONOUNCEMENT : 16 - 0 6 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL HAS BEEN FILED BY THE DEPARTMENT ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1, AURANGABAD DATED 26 - 03 - 2015 FOR THE ASSESSMENT YEAR 2009 - 10 IN DELETING PENALTY LEVIED U/S. 271 E O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2 ITA NO . 780/PUN/2015, A.Y. 2009 - 10 2. SHRI GAURAV BATHAM REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ASSESSEE IS A STOCKIEST OF HINDUSTAN LEAVER LIMITED. THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,32,130/ - . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER MADE ADDITION OF RS.15,00,000/ - ON ACCOUNT OF REPAYMENT OF LOAN IN CASH FROM THE UNDISCLOSED SOURCES. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS FOR VIOLATING THE PROVISIONS OF SECTION 269T OF THE ACT. THE ASSESSING OFFICER VIDE ORDER DATED 10 - 01 - 2014 LEVIED PENALTY OF RS.15,00,000/ - U/.S 271E OF THE ACT. AGGRIEVED BY THE ORDER LEVYING PENALTY , THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CANCELLED THE PENALTY ON THE PREMISES THAT RS.15,00,000/ - WAS RECEIVED BY THE ASSESSEE FROM SHRI GANGARAM MISALE AS HIS CAPITAL CONTRIBUTION FOR THE PARTNERSHIP FIRM. THE AMOUNT OF RS.15,00,000/ - REPAID BY THE ASSESSEE IN CASH REPRESENTS REFUND OF CAPITAL IN THE PARTNERSHIP FIRM TO A PARTNER AND NOT LOAN. 2.1 THE LD. DR SUBMITTED THAT A PERUSAL OF DOCUMENTS ON RECORD CLEARLY SHOW THAT THE ASSESSEE HAD TAKEN HAND LOAN FROM SHRI GANGARAM MISALE. THIS FACT IS FURTHER FORTIFIED BY THE AUDIT ED ACCOUNTS OF T HE ASSESSEE FURNISHED WITH THE RETURN OF INCOME. THE LD. DR CONTENDED THAT STATEMENT OF SHRI GANGARAM MISALE U/S. 131 OF THE ACT WAS RECORDED ON OATH ON 03 - 12 - 2012 DURING THE ASSESSMENT PROCEEDINGS. HE ADMITTED THAT THE AMOUNT ADVANCED AS HAND LOAN HAS BEEN RECEIVED BACK IN CASH DURING THE PERIOD 11 - 08 - 2008 TO 09 - 12 - 2008. THE LD. DR PRAYED FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND CONFIRMING THE LEVY OF PENALTY U/S. 271E OF THE ACT. 3 ITA NO . 780/PUN/2015, A.Y. 2009 - 10 3. ON THE OTHER HAND SHRI KISHOR PHADK E APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE PENALTY. THE ASSESSEE IS A STOCKIEST OF HINDUSTAN LEAVER LIMITED AND WAS CARRYING ON THE BUSINESS UNDER THE NAME AND STYLE AS M /S. SHARIF AGENCIES. SUBSEQUENTLY, HE DECIDED TO CONTROVERT THE PROPRIETORSHIP BUSINESS INTO PARTNERSHIP FIRM AND THUS, DECIDED TO INDUCT SHRI GANGARAM MISALE AS A PARTNER. THE PARTNERSHIP DEED WAS DULY EXECUTED ON 08 - 04 - 2008 . THE LD. AR REFERRED TO TH E COPY OF PARTNERSHIP DEED AT PAGES 17 TO 23 OF THE PAPER BOOK. SHRI GANGARAM MISALE CONTRIBUTED RS.15,00,000/ - AS HIS SHARE OF CAPITA L IN THE PARTNERSHIP FIRM. THE AMOUNT WAS PAID BY SHRI GANGARAM MISALE TO THE ASSESSEE BY WAY OF 3 CHEQUES OF RS.5,00,00 0/ - EACH. THE ASSESSEE HAD OBTAINED PAN CARD IN THE NAME OF PARTNERSHIP FIRM AND ALSO OBTAINED CERTIFICATE UNDER BOMBAY SHOP ACT, 1948. A COPY OF THE PAN CARD AND CERTIFICATE UNDER BOMBAY SHOP ACT IS AT PAGES 15 AND 16 , RESPECTIVELY OF THE PAPER BOOK. D UE TO CERTAIN UNAVOIDABLE REASONS THE PARTNERSHIP PROJECT HAD TO BE DROPPED AND THUS, THE ASSESSEE REFUNDED THE AMOUNT RECEIVED FROM SHRI GANGARAM MISALE AS HIS CONTRIBUTION TOWARDS CAPITAL OF THE PARTNERSHIP FIRM. THE SAID AMOUNT WAS REFUNDED BY THE ASSE SSEE IN CASH OVER THE PERIOD OF TIME. THE PARTNERSHIP VENTURE WAS DROPPED BEFORE IT COULD TAKE OFF AND THUS NO SEPARATE BANK ACCOUNT WAS OPENED IN THE NAME OF FIRM. THE CAPITAL CONTRIBUTED BY SHRI GANGARAM MISALE WAS RECEIVED IN THE BANK ACCOUNT OF THE A SSESSEE AND WAS REPAID BY THE ASSESSEE IN CASH. 3.1 IN RESPECT OF BOOK ENTRIES INDICATING THAT THE AMOUNT HAS BEEN RECEIVED AS LOAN , THE LD. AR SUBMITTED THAT IT IS WELL SETTLED LAW THAT BOOK ENTRIES DOES NOT REFLECT THE TRUE NATURE OF TRANSACTIONS. THE LD. AR SUBMITTED THAT THE DEPARTMENT HAS ERRED IN MIS READING THE STATEMENT OF SHRI GANGARAM MISALE. 4 ITA NO . 780/PUN/2015, A.Y. 2009 - 10 4. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . IN PRESENT CASE, THE DEPARTMENT HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING LEVY OF PENALTY U/S . 271E OF THE ACT. THE CONTENTION OF THE DEPARTMENT IS THAT THE ASSESSEE HAD RECEIVED HAND LOAN OF RS.15,00,000/ - FROM SHRI GANGARAM MISALE BY WAY OF 3 CHEQUES , AND THE LOAN AMOUNT WAS REPAID BY THE ASSESSEE TO SHRI GANGARAM MISALE IN CASH IN VIOLATION OF PROVISIONS OF SECTION 269T OF THE ACT. HENCE, THE PENALTY U/S. 271E OF THE ACT IS LEVIED. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE LEVY OF PENALTY BY OBSERVING AS UNDER : 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTE NTIONS. ON PERUSAL OF THE SAME, IT HAS BEEN NOTICED THAT THE AMOUNT OF ALLEGED LOAN OF RS.15,00,000/ - HAS BEEN REPAID BY THE APPELLANT OUT OF BOOKS I.E. BY NOT RECORDING THE SAID REPAYMENT IN THE BOOKS OF ACCOUNTS. THE SAID AMOUNT HAS BEEN SHOWN IN THE BOO KS OF ACCOUNTS OF THE PROPRIETARY BUSINESS AS LOAN, THOUGH THE SAME HAS BEEN ACTUALLY COLLECTED AS CAPITAL CONTRIBUTION IN THE FIRM BY SHRI GANGARAM HANMANTRAO MISALE. THE A.O. HAS, THEREFORE, MADE ADDITION TREATING THE SAID AMOUNT OF RS .15,00,000/ - AS LOA N AND HAS LEVIED PENALTY U/S. 271E. IT IS SETTLED LAW THAT MERE PASSING OF ENTRIES OR ABSENCE OF THE SAME IN THE BOOKS OF ACCOUNT DOES NOT ALTER THE FACTS OF THE CASE AND ACTUAL FACT. THE ABOVE PROPOSITION OF LAW IS SUPPORTED BY FOLLOWING DECISIONS (1) KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT (1971) 82 ITR 363 (SC) (2) CIT VS. PACLMAVATI RAJE COTTON MILLS LTD. (1993) 203 ITR 375 (CAL.) (3) STAR PAPER MILLS VS. CIT (2001) 252 ITR 337 (CAL.) (4) ASSOCIATED BANKING CORPORATION OF INDIA VS. CIT (1965) 56 ITR 1 (SC) (5) CIT VS; HIRALAL MITTAL & SONS (1972) 86 ITR 463 (ALL.) FURTHER, ON PERUSAL OF THE STATEMENT SHRI GANGARAM HANMANTRAO MISALE DATED 09/01/2014 AND ALSO THE STATEMENT ON OATH OF THE APPELLANT DATED 18/02/2013, IT HAS BEEN NOTICED THAT SHRI GANGARAM HANMANTRAO MISALE HAS PAID THE AMOUNT OF RS.15,00,000/ - BY BANK C HEQUES TOWARDS HIS CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRM WITH THE APPELLANT. THE REPAYMENT OF THE SAID AMOUNT HAS ALSO BEEN STATED TO BE REPAYMENT OF CAPITAL IN THE ABOVE MENTIONED STATEMENTS. FURTHER, THE PARTNERSHIP FIRM HAS APPLIED FOR PAN AND H AS ALSO BEEN REGISTERED UNDER SHOP ACT AND AS PER LICENCE ISSUED BY SHOP ACT AUTHORITY, THE NAMES OF THE TWO PARTNERS AND 5 ITA NO . 780/PUN/2015, A.Y. 2009 - 10 PARTNERSHIP FIRM HAS APPEARED IN THE SHOP ACT LICENCE. IN VIEW OF THE ABOVE FACTS, IT IS EVIDENT THAT FACTUALLY THE AMOUNT OF RS.15,00 ,000/ - HAS BEEN RECEIVED BY THE APPELLANT FROM SHRI GANGARAM HANMANTRAO MISALE AS HIS CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRM. THE FIRM DID NOT CARRY ON ANY BUSINESS IN PARTNERSHIP AND THE CAPITAL HAS BEEN DEMANDED BACK BY SHRI GANGARAM HANMANT RAO MIS ALE IN THE YEAR UNDER APPEAL. THEREFORE, THE AMOUNT OF RS.15,00,000/ - REPAID BY THE APPELLANT IN THE CASH REPRESENTS REFUND OF CAPITAL IN THE PARTNERSHIP FIRM TO A PARTNER. IT IS SETTLED POSITION OF LAW THAT PROVISIONS OF SECTION 269T ARE APPLICABLE IN RE SPECT OF REFUND OF LOAN OR DEPOSIT AND NOT IN RESPECT OF REFUND OF CAPITAL TO A PARTNER. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN LEVYING PENALTY OF RS.15,00,000/ - U/S 271E OF THE ACT AND HEN CE THE SAME IS CANCELLED. THE A.O. IS DIRECTED ACCORDINGLY. 5. UNDISPUTEDLY, THE ASSESSEE IN BOOKS OF ACCOUNT HAD SHOWN RS.15,00,000/ - RECEIVED FROM SHRI GANGARAM MISALE AS LOAN. HOWEVER, THERE ARE OTHER DOCUMENTS ON RECORD VIZ. PARTNERSHIP DEED, CE RTIFICATE IN THE NAME OF PARTNERSHIP FIRM UNDER BOMBAY SHOP ACT, PAN CARD IN THE NAME OF PARTNERSHIP ETC. WHICH INDICATE THAT THE ASSESSEE AND SHRI GANGARAM MISALE HAD INTENTION TO START BUSINESS THROUGH THE PARTNERSHIP FIRM. OSTENSIBLY, THE PARTNERSHIP V ENTURE HAD TO ABANDON BEFORE ANY BUSINESS WAS CARRIED OUT BY THE ASSESSEE AND SHRI GANGARAM MISALE UNDER THE BANNER OF PARTNERSHIP FIRM . THE DOCUMENTS ON RECORD INDICATE THAT THE AMOUNT OF RS.15,00,000/ - PAID BY SHRI GANGARAM MISALE TO THE ASSESSEE COULD BE ON ACCOUNT OF CONTRIBUTION TOWARDS THE CAPITAL OF PARTNERSHIP FIRM. AS HAS BEEN POINTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT DETERMINATIVE IN THE NATURE OF TRANSACTION THEREFORE THE AMOUNT RS.15,00,000/ - R ECEIVED BY ASSESSEE FROM SHRI GANGARAM MISALE COULD BE HIS CONTRIBUTION TOWARDS CAPITAL OF PARTNERSHIP BUSINESS. PENALTY U/S. 271E CANNOT BE LEVIED MERELY ON SUSPICION. THE LD. AR HAS DRAWN OUR ATTENTION TO LETTER DATED 09 - 01 - 2014 AT PAGES 36 AND 37 OF T HE PAPER BOOK, WHEREIN SHRI GANGARAM MISALE HAS 6 ITA NO . 780/PUN/2015, A.Y. 2009 - 10 CLARIFIED THAT HAND LOAN IN HIS STATEMENT REFERS TO THE AMOUNTS BORROWED BY HIM FROM SUB - PARTNERS FOR CONTRIBUTION TOWARDS CAPITAL OF PARTNERSHIP FIRM. THEREFORE, THE STATEMENT OF SHRI GANGARAM MISALE RECORD ED U/S. 131 OF THE ACT CANNOT BE READ IN ISOLATION. SINCE, THE TRANSACTION S BETWEEN THE ASSESSEE AND SHRI GANGARAM MISALE ARE NOT IN THE NATURE OF LOANS/DEPOSITS, THE AMOUNT REPAID BY ASSESSEE IN CASH WOULD NOT ATTRACT THE PROVISIONS OF SECTION 269T OF TH E ACT. AS THERE IS NO VIOLATION OF SECTION 269T, THERE CANNOT BE ANY PENALTY U/S. 271E OF THE ACT. WE CONCUR WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE PENALTY LEVIED U/S. 271E OF THE ACT. ACCORDINGLY, THE IMPUGNED ORDER I S UPHELD AND THE APPEAL OF THE DEPARTMENT IS DISMISSED BEING DEVOID OF ANY MERIT. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 16 TH DAY OF JUNE, 201 7 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 16 TH JUNE, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1, AURANGABAD 4. THE PR. CIT - 1, AURANGABAD 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / ASSISTANT REGISTRAR , , / ITAT, PUNE