M/S GOPAL DAS KHANDELWAL, Jaipur V. ACIT, Jaipur

ITA 807/JPR/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5316 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 16-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY MALIK CIT DHK
• Assessee Lawyers: G G MUNDRA
• Keywords: Bonafide belief; Deemed dividend
• Section: 143(3)

Judgement Text

RAVK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 807/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2005-06 M/S GOPAL DAS KHANDELWAL, P/O- M/S. SUMANGAL GEMS, 1839, BARA GANGORE KA RASTA, JAIPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ADRPK 5823 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.G. MUNDRA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/03/2016. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/03/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 21/09/2012 OF THE LEARNED C.I.T.(A)-I, JAIPUR FOR A. Y. 2005-06. THE SOLE EFFECTIVE GROUND OF APPEAL IS AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW I N CONFIRMING PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT, 1961 ON ALLEGED 2 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT FURNISHING OF INACCURATE PARTICULARS OF INCOME IN RESPECT OF DEEMED DIVIDEND OF RS. 50,00,000/- ASSESSED U/S 2(22)(E) IN THE HANDS OF ASSESSEE. 2. THE SOLE GROUND OF THE APPEAL IS AGAINST CONFIRMI NG THE PENALTY ON ADDITION OF RS. 50,00,000/- IMPOSED U/S 271(1)(C) O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE IS HAVING INCOME FROM BUSINESS. THE CASE FOR A.Y. 2005-06 WAS SCRUTINIZED U /S 143(3) OF THE ACT. THE INCOME WAS ASSESSED AT RS. 37,58,830/-. DURI NG ASSESSMENT PROCEEDINGS, THE LD ASSESSING OFFICER HAD NOTICED F ROM PERUSAL OF THE BANK ACCOUNT OF SMT. VIMALA DEVI SONKIA, WIFE OF THE ASSESSEE IN ICICI BANK THAT OUT OF SUMS RECEIVED FROM M/S VASANT VATI KA P. LTD., SUM OF RS. 62,00,000/- WERE TRANSFERRED TO THE ASSESSEES A CCOUNT. SMT. VIMALA DEVI SONKIA ON RECEIPT OF CHEQUE FROM M/S VASANT VA TIKA P. LTD., DEPOSITED IN HER ACCOUNT AND IN TURN SHE ISSUED CHE QUES IN FAVOUR OF THE ASSESSEE. THE ASSESSEE IS BENEFICIAL OWNER OF SHARE WI TH NOT LESS THAN 10% OF VOTING POWER IN THE SAID COMPANY I.E. M/S VAS ANT VATIKA P. LTD., AND COMPANY HAD RESERVES OF RS. 2.16 CRORES. THE ASS ESSEE ROUTED FUNDS THROUGH ACCOUNT OF HIS WIFE SMT. VIMALA DEVI SONKIA AS A CONDUIT FOR HIS INDIVIDUAL BENEFIT. THE AMOUNT GIVEN BY WIFE FROM HE R BANK ACCOUNT TO THE ASSESSEE WAS CONSIDERED AS DEEMED DIVIDEND IN TH E HANDS OF THE 3 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT ASSESSEE OUT OF ACCUMULATED PROFIT OF THE COMPANY WI THIN THE MEANING OF SECTION 2(22)(E) OF THE ACT AND ACCORDINGLY ADDITIO N OF RS. 62,00,000/- WAS MADE. THE LD ASSESSING OFFICER RELIED UPON THE D ECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS MUKUND RAY K. SH AH (2007) 290 ITR 433 (SC) AS WELL AS KALYAN M. GUPTA VS. JCIT 29 3 ITR (AT) 249 (MUM). THIS ADDITION HAS BEEN CONFIRMED BY THE LD CI T(A) AS WELL AS THE HONBLE ITAT. THE LD ASSESSING OFFICER INITIATED PENA LTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME/FILI NG OF INACCURATE PARTICULARS OF INCOME. 2.1 THE LD ASSESSING OFFICER BEFORE IMPOSING THE PEN ALTY HAS GIVEN SHOW CAUSE NOTICE TO THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THAT THE ASSES SEE RECEIVED CHEQUE THROUGH HIS WIFE SMT. VIMALA DEVI SONKIA FROM THE CO MPANY AND WITHIN A SHORT SPAN OF TIME, PART OF IT WAS GIVEN TO THE ASSE SSEE BY WAY OF ISSUING CHEQUES. THUS, THERE WAS A DIRECT NEXUS BETWEEN THE FU NDS OF THE COMPANY BORROWED BY SMT. VIMALA DEVI SONKIA AND FUND S RECEIVED BY THE ASSESSEE. THEREFORE, WIFE OF ASSESSEE BECAME CON DUIT TO OBTAIN LOAN FROM THE COMPANY. THE ASSESSEE HAD NOT RECEIVED LOAN /ADVANCES DIRECTLY FROM THE COMPANY AS WHO IS BENEFICIAL SHARE HOLDER B UT HAD RECEIVED FUNDS THROUGH HIS WIFE SMT. VIMALA DEVI SONKIA. THERE FORE, IT IS A 4 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT VIOLATION OF SECTION 2(22)(E) OF THE ACT AND THESE LOANS ARE DEEMED DIVIDEND UNDER THIS SECTION. ACCORDINGLY, SHE IMPOS ED MINIMUM PENALTY AT RS. 20,82,787/-, WHICH IS 100% OF TAX SOUGHT TO BE EVADED. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD DISMISSED THE ASSESSEES APPEAL BY OBSERVING AS UNDER:- I HAVE PERUSED THE CASE LAWS RELIED ON BY THE AR OF THE ASSESSEE AND FIND THAT THEY ARE DISTINCT ON FACTS F ROM THE CASE OF THE ASSESSEE. IN CIT V/S RAJ OVERSEAS IT WAS OBSERVED BY THE HONBLE COURT THAT THE ISSUE WAS DEB ATABLE AND SO PENALTY U/S 271(1)(C) COULD NOT BE IMPOSED O N IT. SIMILARLY IN THE CASE OF CIT V/S RELIANCE PETROPRODU CTS IT WAS OBSERVED THAT MAKING AN INCORRECT CLAIM IN LAW WOULD NOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. HOWEVER, THE FACTS OF THE CASE OF THE ASSESSEE ARE T HAT HE INDULGED IN A DELIBERATE ACT OF COMMISSION BY MAKIN G HIS WIFE A CONDUIT FOR TRANSFERRING OF THE ACCUMULATED P ROFITS OF THE COMPANY, M/S VASANT VATIKA PVT. LTD. WHERE HE WAS A MAJOR SHAREHOLDER, TO HIS ACCOUNT FOR HIS BENEFIT. DIRECT NEXUS BETWEEN THE TRANSFER OF THESE FUNDS FROM THE COMPANY THROUGH HIS WIFE TO HIS ACCOUNT WAS BROUGHT O N RECORD. THEREFORE, UNLIKE THE CASE OF RELIANCE PETRO PRODUCTS LTD. IT IS NOT A CASE OF A SIMPLE INCORRECT CLAIM O F EXPENDITURE 5 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT BUT A DELIBERATE ACT OF SIPHONING OF THE ACCUMULATE D PROFITS OF THE COMPANY THROUGH HIS WIFE FOR HIS OWN BENEFIT. THE HONBLE ITAT JAIPUR BENCH HAS ALSO GIVEN A FINDING O F FACT THAT THE FUNDS WERE ROUTED THROUGH SMT. VIMLA DEVI SONKHIYA WIFE OF THE ASSESSEE FOR HIS BENEFIT. THE HO NBLE APEX COURT HAS EMPHASIZED IN LIC V/S ESCORTS LTD. ( 1986) 59 COMP CAS 548 (SC); AIR 986 SC 1370 (PARAS 90-91) THAT REGARD MUST BE HAD TO THE SUBSTANCE AND NOT THE FOR M OF A TRANSACTION. THE CORPORATE VEIL MAY BE LIFTED WHERE A STATUTE ITSELF CONTEMPLATES LIFTING THE VEIL, OR FRAUD OR IMPROPER CONDUCT IS INTENDED TO BE PREVENTED, OR A TAXING STATUTE OR A BENEFICENT STATUTE IS SOUGHT TO BE EVADED OR WHERE ASSOCIATED COMPANIES ARE INEXTRICABLY CONNECTED AS TO BE, IN REALITY, PA RT OF ONE CONCERN. IN THE CASE OF THE ASSESSEE DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE SUBSTANCE OF THESE TRANSACTIONS WERE UNVEILED TO ESTABLISH THAT THE ASSESSEE HAD DELIBER ATELY ADOPTED THE DEVICE OF ADVANCING THE ACCUMULATED PRO FITS OF THE COMPANY IN WHICH HE WAS 50% SHAREHOLDER TO HIS WI FE WHO WAS A CONDUIT FOR TRANSFER OF THE FUNDS FROM THE COMPANY FOR HIS OWN BENEFIT WITH THE OBJECT OF EVADIN G PAYMENT OF TAXES ON ACCUMULATED PROFITS BY THE COMP ANY. THUS THE FACTS OF CASE ARE NOT COVERED BY THE JUDIC IAL PRONOUNCEMENT OF THE APEX COURT IN THE CASE OF RELI ANCE PETROPRODUCTS PVT. LTD BECAUSE IT WAS NOT A SIMPLE M ATTER OF MAKING AN INCORRECT CLAIM BUT PERFORMING AN ACT OF 6 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT COMMISSION FOR MANIPULATING THE FUNDS OF THE COMPAN Y THROUGH HIS WIFE FOR HIS BENEFIT AND NOT DECLARING T HESE TRANSACTIONS U/S 2(22)(E). SIMILARLY, THE RELIANCE OF THE AR ON THE FINDING OF THE HIGH COURT IN THE CASE OF RAJ OVERSEAS (2011) 366 ITR 26 1 THAT PENALTY CANNOT BE IMPOSED WHEN PRIMA FACIE THE ISSUE IS DEBATABLE IS ALSO NOT APPLICABLE TO THE FACTS OF TH E CASE OF ASSESSEE BECAUSE AS DISCUSSED ABOVE THE MATTER IS N OT DEBATABLE AT ALL. IN FACT THE CASE OF THE ASSESSEE IS CLEARLY COVERED BY FINDING OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V/S L. ALAGUSUNDARAM CHETTIAR, (1977) 10 9 ITR 508, 512 (MAD). IT HAS BEEN HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S SPLENDOR CONSTRUCTION ITA NO. 1977 (2010) THAT THE TRIBUNAL HAD SIDE TRACKED THE MAIN ISSUE WHILE DE LETING THE PENALTY IMPOSED BY THE AO U/S 271 (1)(C) ON THE GROUND THAT THE ISSUED WAS DEBATABLE. IT WAS HELD THAT WHEN THE ORDER OF THE AO IN QUANTUM PROCEEDINGS WAS SUSTAINED BY ALL SUCCESSIVE AUTHORITIES IN CANNOT BE SAID THAT THE I SSUE WAS DEBATABLE. WITH THESE OBSERVATIONS THE HONBLE HIGH COURT CONFIRMED THE IMPOSITION OF PENALTY U/S 271(1)(C). ON PERUSAL OF THE FACTS OF THE CASE OF THE ASSESSEE IT IS SEEN THAT IN THE QUANTUM PROCEEDINGS THE ADDITION U/S 2( 22)(E) MADE BY THE AO HAS BEEN SUSTAINED BY ALL THE SUCCES SIVE APPELLATE AUTHORITIES NAMELY CIT (A), HONBLE ITAT, J AIPUR. 7 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT THEREFORE IT CANNOT BE SAID THAT THE ISSUE WAS DEBATA BLE. THE OBSERVATIONS OF THE HONBLE DELHI HIGH COURT MAD E IN THE CASE OF SPLENDOR CONSTRUCTION ARE THEREFORE APP LICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN VIEW OF THE FACTS OF THE CASE OF THE ASSESSEE AND THE LAW APPLICABLE TO THESE FACTS AS DISCUSSED IN DETAIL AB OVE, THE PENALTY U/S 271(L)(C) ON THE ASSESSEE FOR FURNISHIN G INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS.50,00,000/- AS CONFIRMED BY THE HONBLE ITAT IS U PHELD. THE AO IS DIRECTED TO CALCULATE THE TAX ON THIS INCO ME AND MINIMUM PENALTY U/S 271(L)(C) IS DIRECTED TO BE IMP OSED @ 100% OF THE TAX SOUGHT TO BE EVADED ON RS. 50,00,00 0/- BEING INCOME NOT DECLARED BY ASSESSEE U/S 2(22)(E) 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT IT WILL BE FOUND FROM ASSESSMENT ORDER AND APPEAL ORDERS THAT THE CONTENTION OF ASSESSEE COULD NOT FI ND FAVOUR WITH THE A.O. AND APPELLATE AUTHORITIES DUE TO HONBLE SUPREME CO URT JUDGMENT DATED 10-4-2007 IN CASE OF CIT VS. MUKUNDRAY K. SHAH (2007 ) 290 ITR 433 (S.C.) AND JUDGMENT OF HONBLE MADRAS HIGH COURT IN CASE O F CIT VS. ALAGUSUNDARAM CHETTIAR (L) (1977) 109 ITR 508 ETC . IT IS CLEAR THAT JUDGMENT OF HONBLE SUPREME COURT WAS DELIVERED MUCH AFTER THE TRANSACTIONS IN CASE OF ASSESSEE WHICH TOOK PLACE IN FINANCIAL YEAR 2004- 8 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT 05 AND RETURN WAS ALSO FILED PRIOR TO THE DATE OF SA ID JUDGMENT TILL THEN JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF MUKUNDRAY K. SHAH V. CIT (2005) 277 ITR 129 (WHICH LATER ON REVERSED BY HONBLE S.C.) WAS AVAILABLE WHEREIN ALL THE JUDGMENT CITED BY THE A.O. OR APPELLATE AUTHORITIES WERE CONSIDERED AND ISSUE WAS D ECIDED IN FAVOUR OF ASSESSEE. THUS THE INTERPRETATION PLACED BY ASSESSE E TO THE SAID TRANSACTIONS DID NOT LACK BONAFIDES. HE FURTHER SUBMITTED THAT THE LD. A.O. IN PENALTY ORDER RELIED ON JUDGMENT IN CASE OF DHARMENDRA TEXTILE PROCESSORS & OTHERS (2008) 306 ITR 277 (SC) WHICH IS NOT APPLICABLE. IN THIS CONNEC TION IT IS SUBMITTED THAT WHILE THE ADDITION IS MADE TO THE RETURNED INCO ME, NEITHER IT IS ESTABLISHED, OR CAN BE REASONABLY INFERRED, THAT TH E ADDITION MADE TO THE INCOME IS ON ACCOUNT OF CONTUMACIOUS CONDUCT OF THE ASSESSEE NOR IT IS ESTABLISHED, OR CAN BE REASONABLY INFERRED, THAT TH E ASSESSEES CONDUCT AND EXPLANATION IS NOT BONA FIDE, IN SUCH A SITUATION, IN THE LIGHT OF THE SUPREME COURTS JUDGMENT IN THE CASE OF DILIP N. SH ROFF V. CIT [2007] 291 ITR 11 (SC), PENALTY UNDER SECTION 271(L)(C) COU LD NOT HAVE BEEN LEVIED, SINCE THE ONUS OF ESTABLISHING MENS REA ON PART OF THE ASSESSEE COULD NOT HAVE BEEN DISCHARGED BY REVENUE. HOWEVER, AS THE LAW STANDS NOW AND IN THE LIGHT OF THE SUPREME COURTS JUDGMEN T IN THE CASE OF 9 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS (SUPRA) , FOR LEVYING OF PENALTY UNDER SECTION 271(1)(C) IT IS NOT NECESSARY FOR THE TAX AUTHORITIES TO ESTABLISH MENS REA OF THE ASSESSEE. THIS IS THE A REA IN WHICH LEGAL POSITION HAS CHANGED. BUT WHERE AN ADDITION IS MADE TO THE INCOME BUT IT IS ESTABLISHED, OR CAN BE REASONABLY INFERRED, THAT THE ASSESSEES CONDUCT AND EXPLANATION IS BONA FIDE AND IF THE ASSESSEE IS ABLE TO ESTABLISH HIS INNOCENCE NEITHER THE PENALTY WAS LEVIABLE PRIOR TO THE SUPREME COURTS JUDGMENT IN THE CASE OF DILIP N. SHROFF (SUPRA), NO R IT IS LEVIABLE AFTER THE JUDGMENT IN THE CASE OF DHARMENDRA TEXTILE PROCESSOR S (SUPRA). IN THE LIGHT OF THE ABOVE POSITION OF LAW, MERELY BE CAUSE AN ADDITION IS MADE TO THE INCOME DECLARED BY THE ASSE SSEE, PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOSED. THE SUPRE ME COURTS JUDGMENT IN THE CASE OF DHARMENDRA TEXTILE PROCESSOR S (SUPRA) DOES NOT BRING ABOUT ANY RADICAL CHANGE IN THE SCHEME OF SECTION 271 (1)(C), THOUGH IT NULLIFIES THE EARLIER DECISION OF THE DIV ISION BENCH OF THE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA ) TO THE EXTENT IT HELD THAT THE ONUS WAS ON THE TAX AUTHORITIES TO EST ABLISH MENS REA BEFORE A PENALTY UNDER SECTION 271(1)(C) CAN BE IMP OSED. THE LAW LAID DOWN IN DILIP SHROFF (SUPRA) AS TO THE MEANINGS OF T HE WORDS CONCEAL AND INACCURATE CONTINUES TO BE GOOD LAW BECAUSE WHA T WAS OVERRULED 10 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT IN DHARMENDRA TEXTILE PROCESSORS (SUPRA) WAS ONLY THA T PART IN DILIP SHROFF (SUPRA) WHERE IT WAS HELD THAT MENS REA WAS AN ESSENTIAL REQUIREMENT FOR PENALTY UNDER SECTION 271(1)(C) . SUBSEQUENTLY, THE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODU CTS [2010] 322 ITR 458, MADE THE FOLLOWING OBSERVATION - THE ARGUMENT OF THE REVENUE THAT SUBMITTING AN IN CORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCU RATE PARTICULARS OF SUCH INCOME IS NOT CORRECT. BY NO S TRETCH OF IMAGINATION CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY I TSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF THE RE VENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLA IM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASO N, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(L)(C ). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. IT IS SUBMITTED THAT ASSESSEE WAS IN BONAFIDE BELIEF THAT LOAN ADVANCED BY VASANT VATIKA P. LTD. TO HER WIFE ON INT EREST @ 12% P.A. WHICH AMOUNT SHE DEPOSITED IN HER BANK ACCOUNT WHERE HER OTHER BUSINESS FUNDS ARE ALSO DEPOSITED AND FROM THERE TH E ASSESSEE RECEIVED LOANS FROM WIFE ON INTEREST @ 12% P.A. WHICH DO NOT CO ME WITHIN THE PURVIEW OF SECTION 2(22)(E) THE ACT TO BE CONSIDERED AS DEEMED DIVIDEND IN HIS HANDS. IT IS HELD IN VARIOUS JUDICIAL DECISI ONS THAT BONAFIDE BELIEF THAT ON AMOUNT IS NOT TAXABLE IN LAW WILL NOT ATTRACT PENALTY U/S 271 (1) 11 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT (C) AS LAID DOWN IN CIT VS. ORIENT POWER CABLE LTD. (2 008) 303 ITR 49 (RAJ.). THE ASSESSEE RELIES ALSO ON THE ABOVE SAID DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. RELIANCE PETRO-PROD UCTS LTD. (2010) 322 ITR 458 AND PRAYS THAT IN VIEW OF THE TOTALITY O F FACTS AND CIRCUMSTANCES OF THE CASE AND POSITION OF LAW THE AS SESSEE IS NOT LIABLE TO ANY PENALTY U/S 271(1)(C) OF THE ACT. IN FOLLOWIN G JUDGMENTS DELIVERED BY HON'BLE ITAT, MUMBAI BENCH IT WAS HELD THAT BONAFI DE IGNORANCE OF THE LAW REGARDING APPLICABILITY OF SECTION 2(22)(E) IS A VALID GROUND FOR NOT IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. THE A SSESSEE RELIES ON THEM. GITANJALI GHATE V S . DCIT - ITA NO. 6560/MUM/2010 ORDER DATED 23-5-2012 SUNIL CHAND VOHRA VS. ACIT - ITA NO. 4963/MUM/2006 ORDER DATED 23-6-09. THE HON'BLE ITAT DELHI BENCH IN THE CASE OF I.T.O. VS. SHRI PRAKASH NARAIN SINGH (ITA NO. 2691/DEL/2013 ORDER D ATED 22-11-2013) ALSO HELD THE SAME VIEW WHICH ASSESSEE RELIES. IT IS THUS SUBMITTED THAT THE LD. CIT (A) IS WRONG AND HAS ERRED IN LAW IN CON FIRMING PENALTY OF RS. 16,83,000/- ON THE ASSESSEE WHICH DESERVES TO BE DELETED AND THE PENALTY ORDER MAY KINDLY BE CANCELLED. 12 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT 5. AT THE OUTSET THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AD DITION U/S 2(22)(E) OF THE ACT IS ALWAYS ARE DEBATABLE AS THE ASSESSEE T REATED THIS LOAN AND ADVANCES FOR BUSINESS PURPOSES. HOWEVER, ON TECHNIC AL GROUND, THE REVENUE AFTER VERIFYING THE VARIOUS CONDITIONS PRES CRIBED U/S 2(22)(E) I.E. THE ASSESSEE RECEIVED ANY AMOUNT BY WAY OF ADVANCE O R LOAN, HE SHOULD BE A SHARE HOLDER, HOLDING NOT LESS THAN 10% OF VOT ING POWER, OR TO ANY CONCERN, ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHARE HOLDER AND DE EMED DIVIDEND UP TO ACCUMULATED PROFITS; BUT DIVIDEND DOES NOT INCLUDE ANY ADVANCE OR LOAN MADE TO A SHARE HOLDER BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. THE ASSESSEE ALWAYS CLAIMED BEFORE TH E LOWER AUTHORITY THAT HE HAS PAID THE INTEREST ON THE BORROWINGS MADE FROM HIS WIFE WHICH WERE HER OWN FUND. IT IS UNDISPUTED FACT THAT SHE HAS MIXED FUND IN THE SAME BANK ACCOUNT AND RECEIVED LOAN ADVANCES FROM T HE COMPANY, THEREAFTER SHE PAID TO HER HUSBAND. THEREFORE, FOR Q UANTUM ADDITION, THE 13 ITA NO. 807/JP/2012 M/S GOPAL DAS KHANDELWAL VS. ACIT LD CIT(A)S FINDING ARE RELEVANT BUT BEING A DEBATAB LE ISSUE. THE ASSESSEES EXPLANATION IS BONAFIDE. THE CASE LAWS RE LIED UPON BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS OF TH E CASE. ACCORDINGLY, WE DELETE THE PENALTY CONFIRMED BY THE LD CIT(A). 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/03/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 ST MARCH, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S GOPAL DAS KHANDELWAL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ACIT, CIRCLE-1, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.807/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR