ACIT, Trichur V. Abutty A. M, Trichur

ITA 889/COCH/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4519 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 04-07-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 10-10-2008
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Bonafide belief; Reasonable cause; Commercial expediency
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.BARATHVAJA SANKAR, V.P.(BZ) AND SHRI N.VIJAYAKUMARAN, JUDICIAL MEMBNER I.T.A.NO.889/COCH/2008 ASSESSMENT YEAR:1998-99 THE ASST . COMMISSIONER OF INCOME-TAX, CIRICLE-2(1), RANGE-2, TRICHUR. VS. ABUTTY A.M., CONTRACTOR, AYYAPPANKODADH HOUSE, P.O.VYLATHUR, TRICHUR. (APPELLANT) ( RESPONDENT ) APPELLANT BY MS. VIJAYAPRABHA, JR.DR RESPONDENT BY SHRI T.M.SREEDHARAN, ADV. O R D E R PER N.BARATHVAJA SANKAR, V.P: THIS APPEAL IS FILED BY THE REVENUE. APPEAL IS D IRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS)-V, KOCHI, DATED 30- 6-2008. THIS APPEAL ARISES OUT OF THE PENALTY LEV IED BY THE ASSESSING OFFICER U/S.271D OF THE I.T.ACT,1961. THE ASSESSMENT YEAR INVOLVED IS 1998-99. 2. THE SOLITARY ISSUE FOR OUR CONSIDERATION IN THIS APPEAL IS WHETHER THE LD. CIT(APPEALS) IS JUSTIFIED IN QUAS HING THE IMPUGNED PENALTY LEVIED BY THE ASSESSING OFFICER. ITA NO. 889/COCH/2008 2 3. THE FACTS OF THE CASE IN BRIEF AS GATHERED FROM THE RECORDS ARE THAT THE ASSESSEE FILED HIS RETURN OF I NCOME ON 30-11-1998 DECLARING TOTAL INCOME OF RS.7,00,200/-. THIS RETURN WAS PROCESSING U/S.143(1)(A) ON 19-03-1999. A SURVEY OPERATION U/S.133A(5) WAS CONDUCTED BY THE DEPARTMENT ON 18-04-1998. ON THE BASIS OF MATERIA L FACTS DETECTED DURING THE COURSE OF SURVEY, A NOTICE U/S .148 WAS ISSUED FOR REOPENING THE ASSESSMENT U/S.147. IN R ESPONSE TO THE NOTICE U/S.148, ASSESSEE FILED HIS RETURN OF INCOME SHOWING THE SAME INCOME, WHICH WAS SHOWN IN THE ORI GINAL RETURN. THE ASSESSMENT WAS FRAMED U/S.143(3) R.W. S.147 ON 30-3-2002 BY MAKING AN ADDITION OF RS.9,60,000/- AS APPEARING IN THE NAME OF SHRI SAMEER MOHAMMED. A GAINST THIS ADDITION, ASSESSEE FILED APPEAL BEFORE THE LD. CIT(APPEALS) WHO DELETED THIS ADDITION VIDE HIS ORD ER DATED 10-08-2004. AGAINST THIS APPELLATE ORDER, DEPARTM ENT APPROACHED THE INCOME-TAX APPELLATE TRIBUNAL AND TH E TRIBUNAL UPHELD THE FINDINGS OF THE LD. CIT(APPEALS ) VIDE ITS ORDER IN ITA NO.1281/COCH/2004. WHILE UPHOLDING T HE FINDINGS OF THE LD. CIT(APPEALS), THE TRIBUNAL MADE A CASUAL OBSERVATION OF THE FINDINGS OF THE LD. CIT(APPEALS ) THAT IN FACT, THE ACT ITSELF PROVIDES FOR ACTION U/S.269SS R.W.S.271D IN CASE ANY LOAN ADVANCED IS EXCEEDING RS.20,000/-. ITA NO. 889/COCH/2008 3 THEREAFTER, ON THE ABOVE FINDINGS OF THE LD. CIT(AP PEALS) AND THAT OF THE TRIBUNAL, THE ADDL.CIT., INITIATED PENA LTY PROCEEDINGS U/S.271D BY ISSUING A NOTICE ON 26-3-20 07 AND LEVIED A PENALTY OF RS.9,60,000/- U/S.271D ON 13-08 -2007. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS). BEFORE THE LD. CIT(APPEALS), SHRI K. KITTU, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT ASSESSEE WAS UNDER BONAFIDE BELIEF T HAT THE PENALTY PROCEEDINGS WOULD BE DROPPED IN THE LIGHT O F THE REASONS GIVEN IN REPLY DATED 9-4-2007 TO PENALTY NO TICE AND THEREAFTER NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO EXPLAIN THE COMMERCIAL EXPEDIENCY IN TAKING LOAN . THE LD. COUNSEL FURTHER SUBMITTED BEFORE THE LD. CIT(AP PEALS) THAT IN THE STATEMENT OF FACTS ENCLOSED WITH THE GR OUNDS OF APPEAL IT WAS STATED THAT THERE WAS NO ATTEMPT TO E VADE TAX AND LOAN WAS ACCEPTED IN CASH DUE TO COMMERCIAL EXP EDIENCY AND THE ENTIRE AMOUNT WAS WITHDRAWN FROM NRE ACCOUN T NO.536 WITH CORPORATION BANK. THE AO WAS OF THE V IEW THAT AS NO EXPLANATION WAS OFFERED WITH REGARD TO REASON ABLE CAUSE FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269SS, LEVY OF PENALTY U/S.271D WAS ATTRACTED. HO WEVER, THE LD. CIT(APPEALS) AFFORDED AN OPPORTUNITY OF BEI NG HEARD ITA NO. 889/COCH/2008 4 TO THE ASSESSEE TO PRESENT HIS CASE WITH REGARD TO REASONABLE CAUSE. THE ASSESSEE FURNISHED A REPLY DATED 27- 6-2008 ELABORATING THE REASONS. THE CRUX OF THE PO INTS ARE THAT THE ASSESSEE BEING A PWD CONTRACTOR, HE HAD TO RECEIVE CONTRACT AMOUNT FROM KERALA PWD TO THE TUNE OF RS.86,80,000/- AS ON 31-3-1998. SINCE THE ASSESSE E WAS HARD PRESSED FOR MONEY HE HAD NO OTHER ALTERNATIVE BUT TO APPROACH HIS FRIENDS AND RELATIVES FOR RAISING FUND S. SHRI SAMEER MOHAMMED, IS ONE OF SUCH RELATIVES OF THE AS SESSEE. IN THIS PROCESS, SHRI SAMEER MOHAMMED GAVE CASH CHE QUES. THIS WAS IN 1997, AT THAT TIME CLEARING OF OUTSTATI ON CHEQUES AND GETTING MONEY WAS A TIME CONSUMING, I.E. IT WIL L TAKE MINIMUM 10 DAYS FOR THE ASSESSEE BY PRESENTING AT CHAVAKKAD BANK ACCOUNT, SEND TO VADAKKEKAD AND GETT ING IT COLLECTED BACK AT CHAVAKKAD. SINCE THE ASSESSEE W AS BADLY IN NEED OF MONEY TO SURVIVE IN THE FIELD AND NOT TO DAMAGE THE REPUTATION OF THE ASSESSEE, HE EN-CASHED THE CH EQUE AT VADAKKEKAD BANK COUNTER. FURTHER, THE ASSESSING O FFICER HIMSELF HAS OBSERVED IN PARA-4 AT PAGE-7 OF THE ASS ESSMENT ORDER WITH REGARD TO THE NECESSITY OF URGENT NEED O F MONEY BY OBSERVING THAT ASSESSEE WAS ASKED TO EXPLAIN WHY THE OUTSTANDING AMOUNT OF RS.86,80,000/-, BEING BILLS R ECEIVABLE SHOULD NOT BE INCLUDED AS HIS INCOME, IT WAS HIS AN SWER THAT ITA NO. 889/COCH/2008 5 THESE AMOUNTS WERE RECEIVED ONLY SUBSEQUENTLY AND T HAT AS HE IS MAINTAINING THE ACCOUNTS ON CASH BASIS, THE A MOUNTS RECEIVED HAVE BEEN ACCOUNTED IN THE RESPECTIVE YEAR S AFTERWARDS ON RECEIPT BASIS. ACCORDINGLY, THE AO DID NOT MAKE ANY ATTEMPT TO BRING TO TAX THIS AMOUNT FOR TH E ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS THE PR IMARY DUTY OF THE ASSESSEE NOT TO GET DIS-HONOURED THE CH EQUES, OTHERWISE THE REPUTATION OF THE ASSESSEE WILL GET D AMAGED. TO AVOID SUCH A SITUATION, THE ASSESSEE HAD NO OTHE R ALTERNATIVE BUT TO GET CASH CHEQUES FROM SHRI SAMEE R MOHAMMED. THE LD. CIT(APPEALS) RELYING ON THE JUDG MENT OF THE APEX COURT IN 53 ITR 225 CIT VS. KANPUR COAL SYNDICATE, WAS OF THE VIEW THAT HIS POWERS ARE COTE RMINOUS WITH THAT OF THE ASSESSING OFFICER AND IN FACT HE C AN DO WHAT THE ITO CAN DO AND EVEN DIRECT THE ITO TO DO WHAT H E FAILED TO DO. ACCORDINGLY, THE LD. CIT(APPEALS) ACCEPTED THE REASONS ADDUCED BY THE ASSESSEE AS A REASONABLE CAU SE. 5. FURTHER, BEFORE THE LD. CIT(APPEALS) THE L D. COUNSEL RELIED ON THE DECISION OF THE TRIBUNAL IN ITA NO.996/COCH/2004 FOR ASSESSMENT YEAR 1996-97, DATED 28- 1-2005 IN THE CASE OF MOLLY JOHN VS. DCIT, CIR.I, A LWAYE AND IN ITA NO.431/COCH/2004 DATED 7-10-2005 (A.Y.1999-2 000) ITA NO. 889/COCH/2008 6 IN THE CASE OF ITO VS. M/S. POLSONS DISTILLERY. TH E LD. CIT(APPEALS) FOUND THAT THE TRIBUNAL IN THE CASE OF MOLLY JOHNS IN PARA-11 HAS HELD THAT WHEN THE GENUINENES S AND THE REASONABLE CAUSE IS ESTABLISHED, THE OFFENCE CO MMITTED BY THE ASSESSEE HAS TO BE SEEN ONLY AS A TECHNICAL OR VENIAL BREACH OF LAW. IT IS AN ACCEPTED PRINCIPLE OF TAX ATION LAW THAT PENALTY SHOULD NOT BE LEVIED FOR TECHNICAL OR VENIAL BREACH OF LAW. EVEN-THOUGH SECTION 269SS IS NOT A PROCEDURAL LAW, IT IS A REGULATORY PROVISION RATHER THAN A SUBSTANTIVE PROVISION OF ASSESSMENT. A TECHNICAL OR VENIAL BREACH OF LAW IN A CASE OF REGULATORY PROVISION DOE S NOT IPSO FACTO MANDATE LEVY OF PENALTY. FURTHER THE LD. CI T(APPEALS) REFERRED TO THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN THE CASE OF CIT VS. BOMBAY CONDUCTORS & ELEECTRICALS LTD.- 301 ITR 328 (GUJ.) WHEREIN IT HAS BEEN HELD THAT WHILE INTRODUCING SECTION 269SS OF THE INCOME-TAX ACT,196 1, SECTION 273B WAS ALSO INCORPORATED IN THE STATUTE ACCORDING TO WHICH NO PENALTY SHALL BE IMPOSABLE ON A PERSON OR AN ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFER RED TO IN THE SAID PROVISION IF THE ASSESSEE PROVES THAT THER E WAS REASONABLE CAUSE FOR SUCH FAILURE. IN OTHER WORDS PENALTY IS NOT AUTOMATIC UNDER SECTION 271D OF THE ACT ON MERE VIOLATION OF THE PROVISIONS OF SECTION 269SS. ITA NO. 889/COCH/2008 7 6. IN VIEW OF THE ABOVE AND SINCE BOTH THE CIT(APPE ALS) AND THE TRIBUNAL HAS RENDERED A DECISION THAT THIS TRANSACTION TO BE GENUINE (IN QUANTUM PROCEEDINGS) AND DID NOT SUSTAIN ANY ADDITION U/S.68 AND CIRCULAR NO.387 DATED 6- 7-1984 OF THE CBDT, THE FIRST APPELLATE AUTHORITY H ELD THAT THE EXPLANATION OFFERED BY THE ASSESSEE CLEARLY EST ABLISHES THAT COMMERCIAL EXPEDIENCY DID INDEED LEAD THE ASSE SSEE TO ACCEPT THE CASH LOAN AND THEY ARE REASONABLE CAUSE AS PER SECTION 273B. 7. LASTLY THE LD. CIT(APPEALS) FOUND THAT IT WAS NO T THE CASE OF THE ASSESSING OFFICER THAT THE MONEY WITHDR AWN FROM THE BANK ACCOUNT OF SHRI SAMEER MOHAMMED WAS USED FOR NON-BUSINESS PURPOSES. THUS, CONSIDERING THE FACT S OF THE CASE, FINDINGS OF THE TRIBUNAL AND THAT OF THE DECI SION OF THE HONBLE GUJARAT HIGH COURT -301 ITR 328 IN ITS ENTI RETY, THE LD. CIT(APPEALS) HELD THAT PENALTY CANNOT BE IMPOSE D U/S.271D OF THE ACT. 8. AGAINST THE ABOVE FINDINGS OF THE LD. CIT(APPEAL S), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. JR.D.R. VEHEMENTLY ARGUED THAT THE ASSESSEE HAS TAKEN LOAN IN VIOLATION OF SECTION 269SS AND THE SITUATION WARRAN TING THE ITA NO. 889/COCH/2008 8 IMMEDIATE CAUSE FOR TAKING OF LOAN, WHICH ATTRACTS PENAL PROVISIONS U/S.271D. SHE SUBMITTED THAT LOANS WE RE TAKEN ON 5 DIFFERENT OCCASIONS AND WHETHER IN EACH TIME T HE SPECIFIC CIRCUMSTANCES WHICH RESULTED THE ASSESSEE IN ACCEPTING THE LOANS IN CASH AND THE INSTANCES OF SU BSEQUENT UTILIZATION OF THE CASH BORROWALS FOR DISCHARGE OF URGENT LIABILITIES BY MAKING PAYMENTS, AVOIDING DELAY OF B ANKING CHANNELS. 9. ON BEHALF OF THE ASSESSEE, SHRI T.M. SREEDHARAN, ADVOCATE, APPEARED AND ARGUED THE CASE. THE LD. C OUNSEL FIRSTLY REITERATED THE VERY SAME ARGUMENTS WHICH WE RE ADVANCED BEFORE THE LD. CIT(APPEALS), WHICH ARE INCORPORATED ELSEWHERE OF THIS ORDER. THEN, THE L D. COUNSEL INVITED OUR ATTENTION TO THE VARIOUS DECISIONS, COP IES OF WHICH ARE SUPPLIED AND TAKEN ON RECORD, VIZ. A) JITU BUILDERS (P) LTD. VS. ADDL.CIT (2010) 124 ITD 134; B) ORDER OF THE TRIBUNAL IN ITA NOS.296 TO TO 303/COCH/2008 IN THE CASE OF SHRI U. SALIM VS. JT. CIT., ERANKUALM; C) CIT VS. SPEEDWAYS RUBBER (P) LTD. (2010) 326 ITR 31 (P&H); ITA NO. 889/COCH/2008 9 D) CIT VS. SUNIL KUMAR GOEL (2009) 315 ITR 163(P&H); E) CIT VS.SAINI MEDICAL STORE (2005) 277 ITR 420(P&H); F) HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26(SC); G) MOTILAL PADAMPAT SUGAR MILLS CO.LTD. VS. STATE OF U .P. & OTRS. (1979) 118 ITR 326 (SC); THE LD. COUNSEL HAS ALSO FILED A WRITTEN ARGUMENT N OTE ALONG WITH COPY OF CONFIRMATION LETTER FROM SAMEER MOHAMM ED DATED 25-10-2003, COPY OF REMAND REPORT DATED 2-7-2 004 OF THE ASSESSING OFFICER AND COPY OF THE TRIBUNAL IN Q UANTUM APPEAL IN ITA NO.1281/COCH/2004 DATED 16-2-2007. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE MATERIALS FILED BEFORE US AND THE DECISIONS RELIED UPON BEFORE US. THE CASUAL OBSERVATION IN FACT, THE ACT ITSELF PROVIDES FOR ACTION U/S.269SS R.W.S.271D IN CASE AN Y LOAN ADVANCED IS EXCEEDING RS.20,000/- IS NOT THE OBSERVATION OR EVEN A CASUAL REMARK OF THE INCOME-TAX APPELLAT E TRIBUNAL AS CLAIMED BY THE ASSESSING OFFICER OR TH E LD. D.R. BUT WE FIND THAT IT IS ONLY AN OBSERVATION OF THE L D. CIT(APPEALS) IN THE QUANTUM APPEAL. WE FIND THAT ASSESSEE HAS ESTABLISHED THE GENUINE AND REASONABLE CAUSE FO R TAKING CASH CHEQUES. FURTHER IT IS PROVED THAT THEY WERE OBTAINED ITA NO. 889/COCH/2008 10 ONLY DUE TO COMMERCIAL EXPEDIENCY. TRIBUNAL IN ITA NO.996/COCH/2004 FOR ASSESSMENT YEAR 1996-97, DATED 28- 1-2005 IN THE CASE OF MOLLY JOHN VS. DCIT, CIR.I, A LWAYE AND IN ITA NO.431/COCH/2004 DATED 7-10-2005 (A.Y.1999-2 000) IN THE CASE OF ITO VS. M/S. POLSONS DISTILLERY HAS HELD THAT WHEN THE GENUINENESS AND THE REASONABLE CAUSE IS ESTABLISHED, THE OFFENCE COMMITTED BY THE ASSESSEE HAS TO BE SEEN ONLY AS A TECHNICAL OR VENIAL BREACH OF LAW AND SUCH TECHNICAL OR VENIAL BREACH CANNOT BE A REASON FOR L EVYING PENALTY UNDER SECTION 271D AND IT IS NOT AUTOMATIC TO LEVY PENALTY U/S.271D AND THE SCOPE OF SECTION 273B IS F OR NOT LEVYING PENALTY IF THERE ARE REASONABLE CAUSE. IN OUR CONSIDERED OPINION THE REASONS ATTRIBUTED BY THE AS SESSEE FOR TAKING THESE CHEQUES ARE REASONABLE AND HENCE I N VIEW OF SECTION 273B R.W.S.271D NO PENALTY CAN BE LEVIED IN THIS CASE AND THE LD. CIT(APPEALS) HAS RIGHTLY DELETED T HE LEVY OF PENALTY. THE VERY SAME VIEW HAS TAKEN BY THE COCHI N BENCH IN THE CASE OF SHRI U. SALIM VS. JT. COMMISSIONER O F INCOME- TAX IN ITA NOS.296 TO 303/COCH/2008 DATED 12-06-200 8. HENCE, WE ARE OF THE VIEW THAT THE LD. CIT(APPEALS) HAS RIGHTLY DELETED THE PENALTY. ACCORDINGLY, WE UPHO LD HIS FINDINGS. ITA NO. 889/COCH/2008 11 11. IN THE RESULT, THE APPEAL OF THE REVENUE FAILS AND SAME IS ACCORDINGLY DISMISSED. SD/- SD/- (N.VIJAYAKUMARAN) (N.BARATHVAJA SANKAR) JUDICIAL MEMBER VICE-PRESIDENT ERNAKULAM, DATED THE 08 TH JULY,2011. PM. COPY FORWARDED TO: 1. THE ACIT., CIRICLE-2(1), RANGE-2, TRICHUR. 2. ABUTTY A.M., CONTRACTOR, AYYAPPANKODADH HOUSE, P.O.VYLATHUR, TRICHUR. 3. CIT(A)-V, KOCHI. 4. CIT, TRICHUR. 5. D.R.