The Commissioner of Income Tax Kottayam V. Assanar & Sons Rubber Dealers

ITA/79/2015

AI Insights

The case involves an appeal by the Commissioner of Income Tax, Kottayam against M/s. Assanar & Sons Rubber Dealers concerning a penalty imposed under Section 271E of the Income Tax Act, 1961 for non-compliance with Section 269T during a loan transaction. The Tribunal had previously set aside the penalty, leading to the Revenue's appeal. The High Court found that the Tribunal's decision might have been influenced by documents not initially considered, which were later allowed on record. Consequently, the Court remitted the case back to the Tribunal for a comprehensive re-evaluation of the facts and legal provisions.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 818853 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 28-09-2021
• Assessment Year: misc
• Other Referred Cases: [2008] 170 Taxmann 9
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K V SOHAN; SREEJA SOHAN K
• Assessee Lawyers: P K R M MENON; NAVNEETH NATH
• Keywords: Bona Fide Belief; Income Tax; Loan transaction; Penalty; Reasonable cause; Repayment
• Section: 273B; 271E; 260A; 269T

Judgement Text

"ITA No. 79 of 2015 1 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM TUESDAY, THE 28TH DAY OF SEPTEMBER 2021 / 6TH ASWINA, 1943 ITA NO. 79 OF 2015 AGAINST THE ORDER IN ITA 191/2014 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX KOTTAYAM. BY ADV SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES); SRI NAVNEETH N NATH RESPONDENT/S: M/S.ASSANAR & SONS RUBBER DEALERS, KPV/542, KANJIRAPPALLY,KOTTAYAM 686 507. BY ADVS. SRI.K.V.SOHAN SMT.SREEJA SOHAN.K. THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 28.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No. 79 of 2015 2 J U D G M E N T S.V. Bhatti, J. Heard learned Senior Advocate Mr P K R Menon and learned Counsel Mr K V Sohan for parties. 2. The Commissioner of Income Tax/Revenue is the appellant. M/s. Assanar & Sons/assessee is the respondent. The Revenue, being aggrieved by the order of Income Tax Appellate Tribunal (for short ‘the Tribunal'), Cochin Bench in ITA No.191/Coch/2014 dated 14.11.2014, is in appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act') before this Court. The appeal deals with issues arising from the returns filed for the Assessment Year 2008-09. 3. The appeal is admitted on the following substantial questions of law: “1) Whether, on the facts and in the circumstances of the case and also in the light of the decision in 170 Taxman 9, the Tribunal is right in interfering with the order of the Assessing ITA No. 79 of 2015 3 Officer? 2 (a) Whether the Tribunal is justified in holding that there was no violation of Section 269T of the Act and that the 'bona fide belief claimed by the assessee constitutes reasonable cause for deleting the penalty under Section 273B of the Act and are not the approach and finding of the Tribunal wrong and perverse? b) Did the assessee discharge the burden of proof? 3. Whether, in view of the decision of the Allahabad High Court reported in [2008] 170 Taxmann 9, the Tribunal is right in holding that penalty provisions cannot be applied to the assessee's case as there was no unaccounted money involved? 4. The issues relating to the levy of penalty under Section 269T read with 271E arise for consideration. Read order dated 28.09.2021 in I.A. No.2905/2017. This Court through the order in I.A. No.2905/2017 accepted the prayer of Revenue for bringing on record a few documents which have bearing on the findings recorded by the Tribunal on 'bona fide belief' available to an assessee under Section 269T of the Act for exonerating from the pain of penalty. 5. The circumstances relevant for disposing of the appeal are briefly stated thus. The assessee, a partnership firm, was engaged in the business of trading in rubber sheet, rubber crepe, rubber scrap, latex etc. The assesse-firm received Rs.1,69,20,000/- during the ITA No. 79 of 2015 4 Financial Year 2007-08 from one K A Thomas. The said amount was repaid to K.A.Thomas on different dates with different amounts as set out in paragraph 7 of the order of the Commissioner of Income Tax, Kottayam Range. 6. Through order dated 30.11.2011 (Annexure-A), Commissioner of Income Tax treated the receipt and subsequent repayment of a sum of Rs.1,69,20,000/- to Mr K A Thomas, constituted a loan transaction and repayment has not been made in accordance with the requirements of Section 269T of the Act. Hence, imposed a penalty of Rs.1,69,20,000/- under section 271E on the Act. 7. The Commissioner of Income Tax (Appeals) confirmed the order of penalty resulting in the assessee filing I.T.A. Nos.191- 193/Coch/2014 before the Tribunal. The appeal in ITA No.191/Coch/2014 is with respect to the panalty imposed through Annexure-A order dated 30.11.2011. 8. Senior Advocate Mr P K R Menon argues that the findings ITA No. 79 of 2015 5 recorded by the Tribunal are very liberal and have changed the meaning of 'bona fide belief' leading to reasonable cause resulting in the Commission of payment by bearer cheque which could be one of the grounds for relieving an assessee from the consequence of penalty for a few commissions or omissions under the Act. From the materials before the Tribunal, the finding recorded in favour of the assessee is perverse and the approach of the Tribunal has literally diluted the penalty proceedings initiated through order in Annexure- A. There is no justification in fact or material supporting the view of the Tribunal and the provision of law is wrongly applied to exercise the appellate jurisdiction resulting in setting aside of penalty order. By referring to the documents now permitted on record, he argues with great force that the Tribunal accepts more than what the depositor (Thomas) declared to the Department. He argues that these documents, for reasons not discernable at this point of time, couldn't be brought to the notice of the Tribunal. He further ITA No. 79 of 2015 6 developed the argument that the documents since are on record, the findings of the Tribunal on 'bona fide belief' or reasonable cause needs to be disturbed and the substantial questions answered in favour of the Revenue and against the assessee. 9. Advocate K V Sohan contends that the documents now referred to or relied on by the Revenue, were not put to his client at any time in the adjudication or penalty proceedings. Therefore, this Court, it is argued, might not receive documents and also examine the applicability, relevancy etc on the explanation offered by the assessee and for the first time record findings in this behalf. As an alternative plea, he submited that the ends of justice are met, if opportunity is afforded to assessee to contest the documents now relied on by the Revenue. In other words, it is suggested that the main argument of the Revenue on merits ought not to be considered by this Court, but relegate the parties to Tribunal for consideration and disposal afresh on the materials available in this behalf. ITA No. 79 of 2015 7 10. We have perused the record and we take note of the contentions advanced by the counsel appearing for the parties. To appreciate the substantial questions of law formulated by the Revenue, we would have gone by the details set out in the order of the Tribunal. In the case on hand, the Joint Commissioner and the Commissioner of Income Tax (Appeals) have referred to a few reasons as cogent reasons warranting levy of penalty on the assessee. The Tribunal, in our considered view, has recorded a finding in favour of the assessee which is not impugnable. In normal course, the findings recorded by the Tribunal would have been examined by this Court to the extent permissible in law and answered the questions. The additional documents now brought on record, it is possible, may invite fresh examination of bona fide belief or reasonable cause relied on by the assessee. We refrain from undertaking the responsibility of examining the case of assessee that the assessee had reasonable cause for not following the requirement ITA No. 79 of 2015 8 of law. But we are of the view that the matter, if remitted to the Tribunal, the parties would have reasonable opportunity and thereupon the claim/explanation of the assessee considered by the Tribunal. 11. Substantial questions accordingly are answered in favour of the Revenue and against the assessee. The order of Tribunal is set aside. Matter remitted to the Tribunal for disposal in accordance with law. The Tribunal affords opportunity to both the parties and whether the assessee made out a ground for setting aside the penalty or not is examined and decided afresh. The Tribunal disposes of the appeal upon remand as expeditiously as possible, preferably within four months from the date of receipt of a copy of this judgment. Sd/- S.V.BHATTI, Judge Sd/- VIJU ABRAHAM, Judge jjj/ ITA No. 79 of 2015 9 APPENDIX OF ITA 79/2015 PETITIONER ANNEXURE ANNEXURE-A PENALTY ORDER U/S 271E OF INCOME TAX ACT DT 30.11.2011 ANNEXURE-B CIT (A)'S ORDER NO.ITA-37/KTM/CIT(A)-IV/2011-12 DT.07.03.2014 ANNEXURE-C ITAT'S ORDER IN ITA NO.191/COCH/2014 DATED 14.11.2014 ANNEXURE-D TRUE COPY OF THE ASSESSMENT ORDER DATED 29.12.2010 FOR THE ASST.YEAR 2008-09 ANNEXURE-E TRUE COPY OF LETTER DATED 13.12.2010 SEND TO SRI.K.A.THOMAS, BY INCOME TAX OFFICER, WARD- 1,KOTTAYAM ANNEXURE-F TRUE COPY OF REPLY BY SRI. K.A.THOMAS DATED 22.12.2010 ALONG WITH THE BANK STATEMENTS OF SRI.K.A.THOMAS, HIS WIFE ALPHONSA THOMAS, AND HIS SON JUSTIN THOMAS ANNEXURE-G TRUE COPY OF THE SUMMONS UNDER SEC.131 OF THE INCOME TAX ACT,1961 DATED 22.2.2010 ISSUED TO SRI.T.A.MOHAMMED FAISAL BY THE INCOME TAX OFFICER, WARD 1,KOTTAYAM "