Agarwal Kejriwal & Co, Kolkata V. Addl C.I.T Rg - 54,kolkata, Kolkata

ITA 897/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83100 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 23-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU
• Assessee Lawyers: H V BHARDWAJ
• Keywords: Question of law; Reasonable cause
• Section: 273B; 143(3)

Judgement Text

I.T.A. NO.: 897/ KOL. / 2013 ASSESSMENT YEAR : 2006-07 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER I.T.A. NO.: 897/ KOL./ 2013 ASSESSMENT YEAR : 2006-2007 AGARWAL KEJRIWAL & CO.,............................ .................APPELLANT CHARTERED ACCOUNTANTS, 1, GANESH CHANDRA AVENUE, 4 TH FLOOR, KOLKATA-700 013 [PAN : AADFA 8682 P] -VS.- ADDITIONAL COMMISSIONER OF INCOME TAX...RESP ONDENT RANGE-54, KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 APPEARANCES BY: SHRI H.V. BHARDWAJ, A.R., FOR THE APPELLANT SHRI DAVID Z. CHAWNGTHU, ADDL.CIT, SR. D.R., FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : AUGUST 19, 2014 DATE OF PRONOUNCING THE ORDER : 2 ND SEPTEMBER, 2014 O R D E R PER SHRI MAHAVIR SINGH, JUDICIAL MEMBER : THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA IN APPEAL NO. 27/CIT(A)-XXXVI/KOL.ED-54(1)/KOL/06-07 DATED 05.04. 2013 FOR THE ASSESSMENT YEAR 2006-07 CONFIRMING THE LEVY OF PENA LTY UNDER SECTIONS 271D AND 271E FOR VIOLATION OF THE PROVISIONS OF SE CTIONS 269SS AND 269T OF THE ACT FOR ACCEPTING AND REPAYMENT OF LOAN OR D EPOSIT IN CASH OTHERWISE THAN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYE E DRAFT. 2. BRIEFLY STATED THE FACTS ARE THAT FOR THE RELEVA NT ASSESSMENT YEAR 2006-07, THE ASSESSEE, A FIRM OF CHARTERED ACCOUNTA NT WAS ASSESSED UNDER SECTION 143(3) VIDE ORDER DATED 31.12.2008. D URING THE COURSE OF I.T.A. NO.: 897/ KOL. / 2013 ASSESSMENT YEAR : 2006-07 PAGE 2 OF 5 ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT ONE OF THE PARTNERS MR. M. AGARWAL HAS GIVEN CASH LOAN TO THE ASSESSEE-FIRM AS UNDER:- DATE AMOUNT (RS.) 01.08.2005 30,000.00 19.09.2005 11,000.00 TOTAL 41,000.00 HE ALSO NOTICED THAT THE AMOUNT WAS REPAID BY THE A SSESSEE-FIRM TO MR. M. AGARWAL AS UNDER:- DATE AMOUNT 03.01.2006 20, 000.00 31.03.2006 21,000.00 TOTAL 41,000.00 AS PER THE ASSESSING OFFICER THESE AMOUNTS WERE ENC ASHED I.E. ACCEPTANCE OF LOAN AS WELL AS REPAYMENT OF LOAN. HENCE HE INIT IATED PENALTY PROCEEDINGS UNDER SECTIONS 271D AND 271E FOR VIOLAT ION OF THE PROVISIONS OF SECTIONS 269SS AND 269T OF THE ACT AND REFERRED THE MATTER TO ADDITIONAL CIT, RANGE -54, KOLKATA, WHO LEVIED THE PENALTY UNDER BOTH THE PROVISIONS. 3. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(APPEALS) AND LD. CIT(APPEALS) ALSO CONFIRMED THE ACTION OF THE A SSESSING OFFICER VIDE PARA 3 OF THE APPELLATE ORDER AS UNDER:- 3. THE SUBMISSION OF AR, GROUND OF APPEAL AND ASSESSMENT ORDERS WERE DULY CONSIDERED. THOUGH APPELLANT HAS TAKEN FIVE GROUNDS OF APPEAL, ALL REV OLVE AROUND IMPOSITION OF PENALTY U/S 271D & 271E FOR TA KING CASH LOAN AND ITS REPAYMENT. AR HAS AGAIN AND AGAIN CONTESTED THAT THE PENALTY IS NOT APPLICABLE IN CAS E OF TRANSACTION BETWEEN FIRM AND PARTNERS. HE RELIED ON THE JUDGMENT OF APEX COURT IN CASE OF CIT VS.- R.M. CHIDOMBARAM PILLAI (1997) 106 ITR 292(SC) AND CIT VS.- LOKHPAT FILM EXCHANGE (2008) 304 ITR 172. HOWEVER, ON I.T.A. NO.: 897/ KOL. / 2013 ASSESSMENT YEAR : 2006-07 PAGE 3 OF 5 CLOSE READING OF THIS JUDGMENT IT CLEAR THAT PROVIS IONS OF 271D AND 271E WILL NOT APPLY WHERE ASSESSEE IS ABLE TO ESTABLISH THAT THERE WAS REASONABLE CAUSE FOR FAILU RE TO COMPLY WITH 269SS & 269T. IN THE PRESENT CASE, APPE LLANT IS WELL QUALIFIED CA FIRM DEALING WITH VARIOUS CLIE NTS AND WELL AWARE OF PROVISIONS OF SECTION 269SS & 269T. W HEN THEY ARE ADVISING CLIENTS NOT TO ACCEPT CASH LOAN O F RS.20,000/- AND MORE AND REPAY IN CASH OF RS.20,000 /- OR MORE, WHEY THEY CANT TAKE PRECAUTION IN HIS OWN CA SE. HENCE AO HAS RIGHTLY IMPOSED PENALTY U/S 269SS & 26 9T AS THERE WAS NO REASONABLE CAUSE. CASE LAW MENTIONE D BY AR IS NOT APPLICABLE IN CASE OF APPELLANT NATURE OF PROFESSION AND CIRCUMSTANCES OF CASE. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE ME. 5. I HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE ME, LD. COUNSEL F OR THE ASSESSEE FILED COPY OF THE JUDGMENT OF HONBLE MADRAS HIGH COURT I N THE CASE OF CIT VS.- V. SIVAKUMAR [262 CTR (MAD) 109] WHEREIN EXACT LY ON IDENTICAL FACTS HONBLE HIGH COURT HAS NOTED THAT PARTNER HAS NO IN DEPENDENT IDENTITY FROM THAT OF THE FIRM AND IS ENTITLED TO USE THE FU NDS OF THE FIRM AND DELETED THE PENALTY BY FOLLOWING THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS.- R.M. CHIDAMBARAM PIL LAI (1997) 106 ITR 292(SC). HONBLE MADRAS HIGH COURT IN THE CASE OF V . SIVAKUMAR (SUPRA) HAS OBSERVED AS UNDER:- 5. THE ASSESSEE HAD TAKEN THE AMOUNTS FROM FOUR FI RMS WHICH WERE FOUND TO BE IN CASH AND THE AO HAS CONSI DERED THESE PAYMENTS WERE IN VIOLATION OF S. 269SS OF THE ACT. STAND OF ASSESSEE IS THAT THE AMOUNTS WERE TAKEN IN HIS C APACITY AS PARTNER AND IT CANNOT BE TAKEN AS AN INDEPENDENT TRANSACTION AND THERE IS NO VIOLATION OF S. 269SS O F THE ACT. THE PARTNERSHIP FIRM HAS NO SEPARATE LEGAL ENTITY. THERE IS NO SEPARATE IDENTIFICATION BETWEEN THE FIRM AND THE PARTNER. TRIBUNAL RELIED UPON THE DECISION IN CIT VS.- R.M. CHIDAMBARAM PILLAI 1977 CTR (SC) 71 : (1977) 106 IT R 292(SC) WHEREIN THE HONBLE SUPREME COURT HELD THAT THERE CANNOT BE A CONTRACT OF SERVICE IN STRICT LAW BETWE EN A FIRM AND ONE OF ITS PATNERSE, SO AS TO CONSIDER THE SALA RY PAID TO THE PARTNER AS INCOME FROM THE SALARY AND HELD THAT FOR THE PURPOSE OF SS. 269SS AND 269T, THE FIRM AND PARTNER S CANNOT I.T.A. NO.: 897/ KOL. / 2013 ASSESSMENT YEAR : 2006-07 PAGE 4 OF 5 BE CONSIDERED TO BE SEPARATE ENTITY. THE HONBLE S UPREME COURT FURTHER HELD THAT PAYMENT OF SALARY TO A PART NER REPRESENTS A SPECIAL SHARE OF THE PROFITS AND SALAR Y PAID TO A PARTNER RETAINS THE SAME CHARACTER OF THE INCOME OF THE FIRM AND DELETED THE PENALTY. 6. ................................ 7. RELYING UPON THE DECISIONS IN CIT VS.- R.M. CHIDAMBARAM PILLAI (SUPRA) : ASSTT. DIRECTOR OF INS PECTION (INVESTIGATION) VS. KUM. A.B. SHANTHI (2002) 174 CT R (SC) 513 : (2002) 255 ITR 258 (SC) : CIT VS.- LOKHPAT F ILM EXCHANGE (CINEMA) (SUPRA), TRIBUNAL CONFIRMED THE F INDING OF CIT(A) THAT PARTNERSHIP FIRM IS NOT A JURISTIC P ERSON AND THERE IS NO SEPARATE IDENTITY FOR THE FIRM AND PART NERS AND THAT THE TRANSACTIONS BETWEEN THE FIRM AND THE PART NER CANNOT BE BROUGHT WITHIN THE MEANING OF S. 269SS OF THE ACT. 8................................. 9. IN CIT VS.- DECCAN DESIGNS (INDIA) (P) LTD. (20 12) 347 ITR 580 (MAD.) LOANS WERE TAKEN FROM SISTER CONCERN UNDER CONDITION BUSINESS EXIGENCY. REFERRING TO CIT VS.- KUNDRATHUR FINANCE & CHIT CO. (SUPRA): CIT VS.- BA LAJI TRADERS (2008) 303 ITR 312 (MAD.) AND CIT VS.- RAT NA AGENCIES (2006) 284 ITR 609 (MAD.), THE DIVISION BE NCH OF THIS COURT DISMISSED THE APPEAL HOLDING THAT THERE WERE ENOUGH REASONS OFFERED BY THE ASSESSEE TO JUSTIFY T HE CASH TRANSACTIONS WHICH IT MAY WITH ITS SISTER CONCERN AND THAT CONSEQUENCES OF VIOLATION OF S. 269SS IS NOT ATTRAC TED. 10.................................... 11. REFERRING TO CIT VS.- R.M. CHIDAMBARAM PILLAI (SUPRA) : ASSTT. DIRECTOR OF INSPECTION (INVESTIGATION) VS .- KUM. A.B. SHANTHI (SUPRA) : CIT VS.- LOKHPAT FILM EXCHANGE ( CINEMA) (SUPRA), TRIBUNAL HELD THAT THERE IS NO SEPARATE ID ENTITY FOR THE PARTNERSHIP FIRM AND THAT THE PARTNER IS ENTITL ED TO USE THE FUNDS OF THE FIRM AND THAT THE ASSESSEE ACTED B ONA FIDE AND THAT THERE WAS A REASONABLE CAUSE WITHIN THE ME ANING OF S. 273B OF THE ACT. WE DO NOT FIND ANY ERROR OR LEG AL INFIRMITY IN THE ORDER OF THE TRIBUNAL WARRANTING INTERFERENC E. THE SUBSTANTIAL QUESTION OF LAW RAISED IN THIS APPEAL I S ANSWERED IN FAVOUR OF THE ASSESSEE AND THE TAX CASE (APPEAL) STANDS DISMISSED. NO COSTS. I.T.A. NO.: 897/ KOL. / 2013 ASSESSMENT YEAR : 2006-07 PAGE 5 OF 5 6. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE WHEREIN THE PARTNER HAS GIVEN LOAN AND FIRM HAS REPAID, THE RE IS NO VIOLATION OF THE PROVISIONS OF SECTION 269SS AND 269T OF THE ACT AS MANDATED BY THE HONBLE SUPREME COURT IN THE CASE OF R.M. CHIDAMBAR AM PILLAI (SUPRA) AND ALSO BY THE HONBLE MADRAS HIGH COURT IN THE CA SE OF V. SIVAKUMAR (SUPRA), I DELETE THE PENALTY AND REVERSE THE ORDER OF THE LOWER AUTHORITIES. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DAY OF SEPTEMBER, 2014. SD/- MAHAVIR SINGH (JUDICIAL MEMBER) KOLKATA, THE 2 ND DAY OF SEPTEMBER, 2014 COPIES TO : (1) AGARWAL KEJRIWAL & CO., CHARTERED ACCOUNTANTS, 1, GANESH CHANDRA AVENUE, 4 TH FLOOR, KOLKATA-700 013 (2) ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-54, KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.