PRETTY JEWELLERY P. LTD, MUMBAI v. ACIT 5(2), MUMBAI

ITA 1064/MUM/2009 | 2005-2006
Pronouncement Date: 12-02-2010 | Result: Allowed

Appeal Details

RSA Number 106419914 RSA 2009
Assessee PAN AADCP0152G
Bench Mumbai
Appeal Number ITA 1064/MUM/2009
Duration Of Justice 11 month(s) 26 day(s)
Appellant PRETTY JEWELLERY P. LTD, MUMBAI
Respondent ACIT 5(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 12-02-2010
Date Of Final Hearing 21-12-2009
Next Hearing Date 21-12-2009
Assessment Year 2005-2006
Appeal Filed On 16-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI R V EASWAR SENIOR VICE PRESIDENT AND SHRI T R SOOD ACCOUNTANT MEMBER I T A NO: 1064/MUM/2009 (ASSESSMENT YEAR: 2005-06) PRETTY JEWELLERY P. LTD. MUMBAI APPELLANT (PAN: AADCP0152G) VS ASSISTANT COMMISSIONER OF INCOME TAX 5(2) MUMBAI RESPONDENT APPELLANT BY: SHRI RASHMIKANT KUNDALIA RESPONDENT BY: SHRI A R BAIWAR O R D E R R V EASWAR SENIOR VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE RELATES TO THE ASSESSM ENT YEAR 2005-06 AND IS DIRECTED AGAINST THE PENALTY OF RS.5 1 51 210/- IMPOSED ON THE ASSESSEE UNDER SECTION 271D OF THE INCOME TA X ACT 1961. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE JEWELLERY BUSINESS. IN THE COURSE OF ITS BUSINESS IT PURCHASES GOLD AND DIAMONDS FROM SUPPLIERS. DURING THE YEAR ENDED 31. 03.2005 THE ASSESSEE PURCHASED DIAMONDS FOR RS.51 51 210/- FROM M/S SUMAT ENTERPRISES 1104 PRASAD CHAMBERS OPERA HOUSE MUM BAI. THE DIAMONDS WERE NOT PAID FOR IMMEDIATELY ON PURCHASE AND THE PAYMENT REMAINED OUTSTANDING. ON 31.03.2005 THE ASSESSEE TRANSFERRED THE OUTSTANDING AMOUNT FROM THE PARTYS ACCOUNT TO ANOT HER ACCOUNT CALLED SUMAT ENTERPRISES LOAN A/C WITH THE NARRATION BEING DEFERRED CREDIT AMOUNT TRANSFERRED TO LOAN A/C. THE COPIES OF THE LEDGER ACCOUNT OF M/S SUMAT ENTERPRISES AND THE LOAN ACCOU NT OF THE SAID 2 PARTY ARE PLACED AT PAGES 8 TO 13 OF THE PAPER BOOK . THE LOAN ACCOUNT WAS CREDITED WITH THE CORRESPONDING AMOUNT OF RS.51 51 210/- ON 31.03.2005. ON THESE FACTS THE ASSESSING OFFICE R TOOK THE VIEW THAT THERE WAS A VIOLATION OF SECTION 269SS OF THE ACT WHICH PROHIBITED ANY PERSON FROM TAKING OR ACCEPTING ANY LOAN OR DEPOSIT FROM ANY OTHER PERSON OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF THE AMOUNT IS EXCEEDING RS.20 000/-. IN OTHER WORDS HE CONSIDERED THE ASSESSEE AS HAVING TAKEN A CASH LOAN FROM M/S SUMAT ENTERPRISES AND ACCORDINGLY INITIATED PENALTY PROCE EDINGS UNDER SECTION 271D. THE ASSESSEE EXPLAINED THAT THE AMOU NT WAS TRANSFERRED FROM THE PARTYS ACCOUNT TO THE LOAN AC COUNT SO AS TO SHOW A SOUND DEBT EQUITY RATIO WHICH WOULD ENABLE THE ASSESSEE TO BORROW FURTHER MONIES FROM THE BANK. IT WAS ALSO P OINTED OUT THAT THE MANUFACTURING UNIT WAS NEW REQUIRING LONG GESTATION PERIOD AND THEREFORE A REQUEST WAS MADE TO LARGE SUPPLIERS OF DIAMONDS TO CONVERT THEIR DUES INTO LONG TERM LOANS WHICH COUL D BE PAID IN FUTURE. IT WAS ALSO POINTED OUT THAT SINCE TRANSFER ENTRIES WERE MADE IN THE BOOKS OF ACCOUNTS AND SINCE THERE WAS NO ACTUAL REC EIPT OR PAYMENT OF MONEY FROM OR TO M/S SUMAT ENTERPRISES THERE WAS N O VIOLATION OF SECTION 269SS. THE EXPLANATION WAS HOWEVER NOT ACC EPTED BY THE ASSESSING OFFICER WHO TOOK THE VIEW THAT SINCE THE ASSESSEE HAS ACCEPTED A LOAN OTHERWISE THAN THROUGH AN ACCOUNT P AYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IT WAS LIABLE FOR PENALTY . ACCORDINGLY HE LEVIED THE IMPUGNED PENALTY BEING 100% OF THE AMOUN T OF THE ALLEGED LOAN. 3 3. THE ASSESSEE APPEALED TO THE CIT(A) AGAINST THE LEVY OF PENALTY AND HE HELD THAT SINCE THE LANGUAGE OF THE SECTION WAS UNAMBIGUOUS AND CLEAR THE ASSESSING OFFICER HAD RIGHTLY TAKEN THE VIEW THAT THE ASSESSEE WAS LIABLE FOR PENALTY. HE ALSO NOTED THA T THE ASSESSEE DID NOT ADDUCE ANY REASONABLE CAUSE FOR THE DEFAULT AND THE CLAIM THAT THE AMOUNT WAS CONVERTED INTO A LOAN TO IMPROVE THE DEB T EQUITY RATIO SO THAT THE ASSESSEE CAN GET BETTER FACILITIES FROM TH E BANK DID NOT AMOUNT TO REASONABLE CAUSE. HE THEREFORE CONFIRM ED THE PENALTY. 4. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. ON A CAREFUL CONSIDERATION OF THE FACTS AND THE RIVAL CO NTENTIONS WE ARE OF THE VIEW THAT THERE IS NO VIOLATION OF SECTION 269S S. UNDER THIS SECTION EVERY PERSON IS PROHIBITED FROM TAKING OR ACCEPTING ANY LOAN OR DEPOSIT FROM ANOTHER PERSON OTHERWISE THAN BY AN ACCOUNT PA YEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF THE AMOUNT OF THE LOAN TAKEN SINGLY OR ALONG WITH EARLIER LOANS TAKEN BY HIM AMOUNTS TO RS .20 000/- OR MORE. EXPLANATION (III) BELOW THE SECTION DEFINES LOAN O R DEPOSIT AS MEANING A LOAN OR DEPOSIT OF MONEY. THE PRIMARY QUESTION I N THE PRESENT CASE IS WHETHER THE ASSESSEE HAS TAKEN A LOAN OF MONEY. THIS QUESTION HAS TO BE ANSWERED IN THE NEGATIVE. THE ASSESSEE HAS P URCHASED DIAMONDS FROM M/S SUMAT ENTERPRISES ON CREDIT AND O N 31.03.2005 A SUM OF RS.51 51 210/- WAS TRANSFERRED BY BOOK ENTRY FROM THE ACCOUNT OF M/S SUMAT ENTERPRISES TO ANOTHER ACCOUNT STYLED SUMAT ENTERPRISES LOAN A/C. WHATEVER BE THE MOTIVE OF MAKING THE TRANSFER ENTRY THE FACT REMAINS THAT THE ASSESSEE DID NOT TAKE OR ACCEPT FROM M/S SUMAT ENTERPRISES ANY LOAN OR DEPOS IT IN MONEY. THE 4 AMOUNT DUE BY THE ASSESSEE TO M/S SUMAT ENTERPRISES AS PURCHASE PRICE OF DIAMONDS WHICH WAS OUTSTANDING WILL HAVE TO BE DISCHARGED BY THE ASSESSEE BY PAYING M/S SUMAT ENTERPRISES. I T IS DIFFICULT IN THESE CIRCUMSTANCES TO CONCEIVE OF A SITUATION WHER E THE ASSESSEE WOULD BE TAKING OR ACCEPTING ANY LOAN OR DEPOSIT IN CASH FROM M/S SUMAT ENTERPRISES SO THAT IT CAN BE SAID THAT THERE IS ANY VIOLATION OF SECTION 269SS. IN THE TRANSACTION WHICH HAS TAKEN PLACE IN THE PRESENT CASE NO MONEY HAS PASSED FROM M/S SUMAT ENTERPRISE S TO THE ASSESSEE. THEREFORE THE PROVISIONS OF SECTION 269 SS WERE WRONGLY INVOKED BY THE INCOME TAX AUTHORITIES. WHAT HAS AC TUALLY HAPPENED IS THAT A PART OF THE PURCHASE PRICE DUE BY THE ASSESS EE IN FAVOUR OF M/S SUMAT ENTERPRISES WAS CONVERTED INTO A LOAN ACCOUNT . WE DO NOT SEE HOW SECTION 269SS CAN APPLY TO SUCH A SITUATION. W E ACCORDINGLY FIND NO JUSTIFICATION FOR THE LEVY OF PENALTY WHICH IS HEREBY CANCELLED AND THE APPEAL OF THE ASSESSEE IS ALLOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON 12 TH FEBRUARY 2010. SD/- SD/- (T R SOOD) ( R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI DATED 12 TH FEBRUARY 2010 SALDANHA COPY TO: 1. PRETTY JEWELLERY P. LTD. UNIT 402 BLOCK 1 MIDC ANDHERI (EAST) MUMBAI 400 096 2. ACIT 5(2) 3.CIT-V 4.CIT(A)-V 5.DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI