Mohd.Saleem, Hyderabad V. ADDL.CIT, Hyderabad

ITA 833/HYD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1365 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2003-2004
• Appeal Filed On: 06-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E NAGENDRA PRASAD
• Assessee Lawyers: VASANT KUMAR
• Keywords: Reasonable cause
• Section: 271D

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.833/HYD/2008 : ASSTT. Y EAR : 2003-04 SHRI MOHAMMED SALEEM, HYDERABAD (AFJPM2196P) VS. ACIT, RANGE 5, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VASANT KUMAR RESPONDENT BY : SHRI E. NAGENDRA PRASAD O R D E R PER CHANDRA POOJARI , ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE BY THE REVENUE IS DIRECTE D AGAINST THE ORDER PASSED BY THE LEARNED CIT(A)-V, HYD ERABAD DATED 26.02.08 AND IT PERTAINS TO ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH FACTS AND IN LAW IN SO FAT IT IS PREJUDICIAL TO THE ASSESSEE. 2. THE CIT(A) ERRED IN CONFIRMING PENALTY U/S 271 D OF RS.40,000/- 3. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE TRANSAC TION IS BETWEEN WIFE AND HUSBAND AND THE PROVISIONS OF SEC.269SS WILL HAVE NO APPLICATION FOR SUCH TRANSACTIONS AND THEREBY ERRED IN CONFIRMING THE PENALTY. 4. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS OF PROVING BUSINESS EXIGENCY FOR USE OF THE MONEY OF W IFE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE HAS FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 8.4.2004 SHOWING INCOME OF RS.51,69,460/-. DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER 2 NOTICED THAT THE ASSESSEE HAS ACCEPTED LOAN IN CASH OF RS.4,00,000 DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2003- 04 FROM SMT. NUSRATH, 1-9-937, ADIKMET, VIDYANAGAR, HYDERABAD, IN CONTRAVE NTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. FURTHER, HE HAS INTIM ATED THIS FACT OF ACCEPTANCE OF CASH LOAN BY THE ASSESSEE VIDE HIS LE TTER DATED 17.8.2006 TO THE ADDL. CIT, RANGE-5, HYDERABAD. ON THE BASIS OF THE ABOVE INFORMATION, THE ACIT VIDE HIS LETTER DATED 22.8.2006, HAS ASKED THE ASSESSEE TO EXPLAIN AS TO WHY FOR CONTRAVENTION OF PROVISIONS OF SECTIO N 269SS OF THE ACT PENALTY SHOULD NOT BE LEVIED U/S 271 D OF THE ACT. 3. IN RESPONSE TO THE ABOVE NOTICE, THE ASSESSEE HAS FILED HIS EXPLANATION ON 6.10.2006. THE ASSESSEE HAS SUBMITT ED THAT HE HAS ALREADY FILED A DETAILED SUBMISSION BEFORE THE ASSESSING OF FICER. IN HIS EXPLANATION FILED BEFORE THE ASSESSING OFFICER, THE ASSESSEE HA S SUBMITTED THAT THE AMOUNT WAS TAKEN FROM HIS WIFE WAS INTEREST FREE AN D THEREFORE, NOT A LOAN. IT WAS STATED THAT THE PROVISIONS OF SECTION 269SS APPLIES ONLY TO LOANS TAKEN AND NOT FOR THIS TYPE OF TRANSACTIONS. IN THIS CON NECTION, THE ASSESSEE HAS RELIED ON THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF DILLU CINE ENTERPRISE REPORTED IN 80 ITD 484. HOWEVER, THE ACI T HAS NOT ACCEPTED SUCH EXPLANATION OF THE ASSESSEE. HE OBSERVED THAT THE A SSESSEES CONTENTION THAT THE AMOUNT IS NOT A LOAN IS NOT TENABLE. IN HIS RE PLY DATED 24.2.2006, THE LEARNED AR LF THE ASSESSEE CATEGORICALLY MENTIONED THAT AN AMOUNT OF RS.6,18,000 (WHICH INCLUDES RS.4,00,000 GIVEN DURIN G THE YEAR) IS UNSECURED LOAN TAKEN FROM MRS. SALEEM. THE SAME AMOUNT HAS B EEN SHOWN IN THE BALANCE SHEET FILED BY THE ASSESSEE AS UNSECURED LO AN FROM MRS. SALEEM. HE FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 269 SS HAVE NEVER TAKEN AWAY THE LOAN TRANSACTIONS BETWEEN WIFE AND HUSBAND AND ANY EXCEPTION CAN BE MADE ONLY BY AMENDING THE PROVISIONS. ONCE THE ASS ESSEE HAS ADMITTED THE TRANSACTION AS A LOAN, THE VIOLATIONS OF PROVISIONS OF SECTION 269SS ARE TO BE EXAMINED IN THE CONTEXT OF THE LANGUAGE USED IN THE PROVISION ITSELF. OBSERVING AS ABOVE AND FURTHER OBSERVING THAT THE A SSESSEE HAS FAILED TO ESTABLISHES ANY REASONABLE CAUSE FOR CONTRAVENING T HE PROVISIONS OF SECTION 3 269SS BY ACCEPTING LOANS IN EXCESS OF RS.20,000, TH E ACIT HELD THAT THE ASSESSEE IS LIABLE FOR PENALTY U/S 271D OF THE ACT. ACCORDINGLY, HE IMPOSED PENALTY OF RS.4,00,000 U/S 271 D OF THE ACT VIDE HI S ORDER DATED 29.11.2006. ON FURTHER APPEAL, CIT(A) WAS CONFIRMED THE SAME. AS AGAINST THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE. THE LEARNE D AR SUBMITTED THAT ORIGINALLY NOTICE U/S 271D DATED 28.2.2006 WAS ISSU ED TO THE ASSESSEE FOR WHICH THE ASSESSEE REPLIED VIDE HIS LETTER DATED 25 .4.2006. HE SUBMITTED THAT AS PER PROVISIONS OF S.275, THE PENALTY COULD BE LEVIED BEFORE THE END OF THE FINANCIAL YEAR DURING WHICH THE ASSESSMENT IS M ADE (IN THIS CASE ASSESSMENT ORDER DATED 28.2.2006) ARE WITHIN SIX MO NTHS FROM THE END OF THE MONTH IN WHICH PENALTY PROCEEDINGS IS INITIATED . HE SUBMITTED THAT IN THIS CASE, PENALTY PROCEEDINGS WERE INITIATED ON 28 .2.2006 BY THE ASSESSING OFFICER AND SIX MONTHS FROM THIS DATE ENDED ON 31.8 .2006. HOWEVER, THE PENALTY ORDER WAS PASSED ON 29.11.2006 AS SUCH THE PENALTY ORDER IS TIME BARRED. HE RELIED ON THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHHAJER PACKING AND PLASTICS (P) LTD. (300 ITR 180). 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE PENALTY PROCEEDINGS WAS TO BE IN ITIATED BY THE ADDL. COMMISSIONER AND AS SUCH HE INITIATED THE SAME BY I SSUING A SHOW CAUSE NOTICE ON 22.8.2006 AND PENALTY ORDER WAS PASSED ON 29.11.2006 BEFORE THE EXPIRY OF SIX MONTHS FROM THE MONTH OF AUGUST, 2006 IN WHICH THE PROCEEDINGS HAVE BEEN INITIATED AND THIS IS WITHIN THE TIME LIMIT PRESCRIBED BY THE S.275 (1) ( C ) OF THE IT ACT. HE RELIED ON TH E ORDER OF TRIBUNAL, CHANDIGARH, SPECIAL BENCH, IN THE CASE OF DIWAN CHA ND AMRITLAL VS. DCIT (283 ITR (AT) 203) 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. IN THE PRESENT CASE, THE PENALTY PROCEEDIN GS TO BE INITIATED BY THE ADDL. COMMISSIONER AND HE HAS INITIATED THE SAME VI DE SHOW CAUSE NOTICE DATED 22.8.2006 AND PENALTY ORDER PASSED ON 29.11.2 006 AND THE NOTICE ISSUED BY THE ASSESSING OFFICER VIDE NOTICE DATED 2 8.2.2006 IS HAVING NO LEGAL 4 CONSEQUENCE SINCE THIS WOULD BE WITHOUT ANY JURISDI CTION SINCE HE IS HAVING NO AUTHORITY UNDER LAW TO INITIATE THE PENALTY PROC EEDINGS U/S 271D OF THE IT ACT. AS SUCH, NOTICE ISSUED BY THE ADDL. COMMISSIO NER TO BE CONSIDERED FOR COMPUTING THE TIME LIMIT TO LEVY PENALTY U/S 271D O F THE IT ACT. THE JUDGEMENTS CITED SUPRA ARE SUPPORTING OUR VIEW. AC CORDINGLY, THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEES COUNSEL ON THIS ISSUE. REGARDING THE OTHER ARGUMENTS OF THE ASSESSEES COUNSEL THAT THE MONEY BORROWED FROM HIS WIFE AND THERE WAS ONLY TECHNICAL AND VENIAL BR EACH. THE TRANSACTION BETWEEN HUSBAND AND WIFE CANNOT BE CONSTITUTE AS A LOAN TRANSACTION, LAW DOES NOT TAKE INTO ACCOUNT TRIVIALITIES. IN RESPEC T OF THE LOAN TAKEN FROM THE WIFE, THE SAID BORROWING CARRIES NO INTEREST AND NO CONDITION REGARDING THE REPAYMENT. IT WAS TAKEN ON ACCOUNT OF URGENT BUSIN ESS COMMITMENT. IT CANNOT BE CONSTRUED TO BE A TRANSACTION BORROWER AN D THE LENDER. GENUINENESS OF THE TRANSACTION WAS NOT DOUBTED. AP ROPOS THE RELATION OF HUSBAND AND WIFE, IT IS SAID IN THE BIBLE WHAT GOD HATH JOINED TOGETHER MAN CANNOT CAST ASUNDER. AS SUCH, THERE EXISTED MITIG ATING CIRCUMSTANCES. IN OUR OPINION, PENALTY CANNOT BE MAINTAINED IN RESPEC T OF LOAN FROM WIFE. ACCORDINGLY, PENALTY IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON: 20.11. 2009. SD/- SD- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER. DT/- 20 TH NOVEMBER, 2009. 5 COPY FORWARDED TO: 1. MOHAMMED SALEE,. 5-5-295 TO 310, EK MINAR MASJID , NAMPALLY, HYDERABAD 2 THE ACIT RANGE-5, HYDERABAD 3. 4 CIT(A)-V CIT, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. NP/