ITO, Madurai v. T.Visalakshi, Madurai

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NOS. 1172 & 2024/MDS 2010 ASSESSMENT YEAR : 2004-05 THE INCOME-TAX OFFICER WARD-II(4) MADURAI. V. SMT. T. VISALAKSHI P/O VISALAM TRADERS 3 WEST AVANIMOOLA STREET MADURAI-1. (PAN : ABTPV6695E) (APPELLANT) (RESPONDENT) A N D C.O. NO. 84/MDAS/2010 (IN ITA NO. 1172/MDS/2010) ASSESSMENT YEAR : 2004-05 SMT. T. VIASALAKSHI V. THE INCOME-TAX OFFICER P/O VISALAM TRADERS WARD-II(4) 3 WEST AVANIMOOLA STREET MADURAI. MADURAI-1. (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI P.B. SEKARAN ASSESSEE BY : SHRI T. VASUDEVAN O R D E R PER GEORGE MATHAN JUDICIAL MEMBER : ITA 1172/MDS/2010 IS AN APPEAL FILED BY THE REVENU E AGAINST THE ORDER OF THE LEARNED CIT(APPEALS0-I MADURAI CANCELLING THE PENALTY LEVIED U/S 271D OF I.T.A. NOS. 1172 & 2024/MDS/2010 & CO 84/MDS/2010 2 THE INCOME TAX ACT 1961 IN APPEAL NO. 43/08-09 DAT ED 26-4-2010 FOR THE ASSESSMENT YEAR 2004-05. C.O. NO. 84/MDS/2010 IS A CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE REVENUES APPEAL IN ITA NO . 1172/MDS/2010. ITA NO. 2024/MDS/2010 IS AN APPEAL FILED BY THE REVENUE AGA INST THE ORDER OF THE LEARNED CIT(APPEALS)-I MADURAI CANCELLING THE PENA LTY LEVIED U/S. 271E OF THE INCOME TAX ACT 1961 IN ITA NO. 43A/08-09 DATED 26- 04-2010 FOR THE ASSESSMENT YEAR 2004-05. 2. SHRI P.B. SEKARAN LEARNED CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI T. VASUDEVAN ADVOCATE REPRESENTED ON BEHA LF OF THE ASSESSEE. 3. ITA 1172/MDS/2010: IT WAS SUBMITTED BY THE LEARNED DR THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE WHO WAS AN INDIVIDUAL IT WAS NOTICED THAT THE ASSESSEE HAD BOR ROWED CASH LOANS EXCEEDING THE LIMITS PRESCRIBED IN SEC. 269SS FROM VARIOUS PA RTIES. IT WAS THE SUBMISSION THAT ON BEING QUESTIONED BY THE ASSESSING OFFICER T HE ASSESSEE HAD SUBMITTED THAT THE LOANS HAD BEEN TAKEN BY WAY OF CASH DUE TO BUSINESS EXIGENCY AND IT HAD BEEN TAKEN AND REPAID AFTER BANKING HOURS. IT WAS THE FURTHER SUBMISSION THAT THE ASSESSEE HAD ALSO CLAIMED INNOCENCE IN REG ARD TO THE VIOLATION AS ALSO BEING UNAWARE OF THE LEGAL CONSEQUENCES. IT WAS TH E SUBMISSION THAT AFTER VERIFYING THE ACCOUNTS OF THE ASSESSEE THE ASSESSIN G OFFICER HAD HELD THAT THE ASSESSEE COULD NOT PROVE THE BUSINESS EXIGENCY. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) ON THE GROUND THAT SOME OF THE CREDI TORS DID NOT HAVE BANK I.T.A. NOS. 1172 & 2024/MDS/2010 & CO 84/MDS/2010 3 ACCOUNTS HAD DELETED THE PENALTY. IT WAS THE FURTH ER SUBMISSION THAT THE LEARNED CIT(A) HAD ALSO ACCEPTED THE CLAIM OF THE ASSESSEE IN REGARD TO THE BUSINESS EXIGENCY. IT WAS THE SUBMISSION THAT THE LEARNED C IT(A) HAD NOT PASSED A SPEAKING ORDER. IT WAS THE SUBMISSION THAT THE OR DER OF THE LEARNED CIT(A) IS LIABLE TO BE REVERSED. 4. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT OUT OF THE 7 PERSONS FROM WHOM THE ASSESSEE HAD RECEIVED THE LOA NS 3 OF THEM BEING MR. JEYARAJ MR. MOHAN AND MRS. AR SEETHALAKSHMI DID NO T HAVE BANK ACCOUNTS. IT WAS THE SUBMISSION THAT XEROX COPIES OF THE AFFIDAV IT HAD ALSO BEEN FILED AND THESE AFFIDAVITS HAD NOT BEEN DISPUTED. IT WAS THE FURTHER SUBMISSION THAT THE ASSESSEE HAD AN OVERDRAFT FACILITY WITH THE ICICI B ANK FOR ` 8 LAKHS. THE OVERDRAFT FACILITY WAS RUNNING AT ITS MAXIMUM. THE BANK WAS ALSO DEMANDING THAT THE ASSESSEE REDUCE THE OVERDRAFT AMOUNTS. CO NSEQUENTLY THE ASSESSEE WAS COMPELLED TO TAKE CASH AND DEPOSIT INTO THE BAN K ACCOUNT. IT WAS THE SUBMISSION THAT IN SOME CASES WHERE THE MONIES HAD BEEN TAKEN IN CASH THE SAME WERE ALSO USED FOR SETTLING THE ACCOUNT OF ONE OF THE TRADE CREDITORS BEING M/S. RASI SALES CORPORATION AS THEY WERE DEMANDING IMMEDIATE PAYMENT AND THE ASSESSEES OVERDRAFT FACILITY WAS ALSO RUNNING AT ITS MAXIMUM. IT WAS THE FURTHER SUBMISSION THAT ON ACCOUNT OF THIS FINANCIA L ADJUSTMENT THAT HAD TO BE DONE I.E. FOR KEEPING THE OVERDRAFT FACILITY IN CO NTROLLABLE LEVEL AS ALSO FOR PAYING OFF THE TRADE CREDITOR M/S.RASI SALES CORPORATION THE ASSESSEE HAD BORROWED I.T.A. NOS. 1172 & 2024/MDS/2010 & CO 84/MDS/2010 4 THE MONIES FROM SHRI JAYARAJ B. MALA AND B. NARAYA NA KUMARI. IT WAS THE SUBMISSION THAT AS THE ASSESSEE HAD TO REPAY THE LO AN TO B. MALA THE ASSESSEE HAD TAKEN CASH LOAN FROM ONE KANNATHAL. IT WAS THE FURTHER SUBMISSION THAT THE LOAN TAKEN FROM MR. MOHAN WAS ALSO FOR SETTLING THE TRADE CREDITOR RASI SALES CORPORATION AND MOHAN DID NOT HAVE ANY BANK ACCOUNT . IT WAS THE SUBMISSION THAT THE LOAN FROM MR. NAGAPPAN WAS MOSTLY DEBIT BA LANCE AND IN MOST OF THE CASES THE LOANS WERE BELOW ` 20 000 AND THESE AMOUNTS WERE ALSO TAKEN ONLY TO TIDE OVER THE FINANCIAL DIFFICULTY CAUSED ON ACCOUN T OF THE BANK OF THE ASSESSEE DEMANDING REDUCTION OF THE OVERDRAFT FACILITY. IT WAS THE SUBMISSION THAT WHEN THE BANK COULD PRESSURE ON THE ASSESSEE IN ORDER TO MAINTAIN THE STABILITY OF THE BUSINESS THE ASSESSEE HAD BORROWED THESE AMOUNTS AND THAT WAS WHY IT WAS SAID THAT THERE WAS BUSINESS EXIGENCY. THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO VARIOUS ACCOUNT COPIES WHICH WERE PRODUCED BEFORE THE LOWER AUTHORITIES AS ALSO THE REPLY GIVEN BY THE AS SESSEE BEFORE THE ASSESSING OFFICER AND THE LEARNED CIT(A). IT IS SPECIFICALLY NOTED HERE THAT IN THE DETAILS OF THE ACCOUNT COPIES GIVEN BEFORE THE ASSESSING OFFIC ER THE REASON FOR TAKING OF THE CASH AND FOR WHAT PURPOSE THE CASH HAS BEEN USE D ARE SPECIFICALLY FOUND TO BE NOTED. IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) MAY BE UPHELD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ACCOUNT COPIES WHICH WERE AVAILABLE BEFORE THE LOWER AUTHOR ITIES CLEARLY SHOWS THAT THE I.T.A. NOS. 1172 & 2024/MDS/2010 & CO 84/MDS/2010 5 ASSESSEE HAD TAKEN THE LOANS FOR THE PURPOSE OF SET TLING THE BANK OVERDRAFTS OR THE TRADE CREDITOR M/S. RASI SALES CORPORATION AS ALSO FOR SETTLING THE EARLIER CASH LOANS TAKEN. THESE EXPLANATIONS WHICH HAVE BEEN GI VEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER. HOW THESE BUSINESS EXIGENCIES AS STATED BY THE ASSESSEE DO NOT CONSTITUTE BUSINESS EXIGENCIES HAVE NOT BEEN SHOWN BY THE ASSESSING OFF ICER. THE DIFFICULTIES OF A BUSINESSMAN ARE KNOWN TO THE BUSINESSMAN ONLY. THE FACT THAT THE PROVISIONS OF SECTION 269SS AND 269T HAVE BEEN BROUGHT INTO THE S TATUTE FOR THE PURPOSE OF CONTROLLING THE INFLOW AND OUTFLOW OF BLACK MONEY H AS TO BE KEPT IN MIND. THIS IS NOT A CASE WHERE THERE IS ANY ALLEGATION ON THE PAR T OF THE REVENUE THAT BLACK MONEY OR UNACCOUNTED FUNDS ARE INVOLVED IN THE TRAN SACTIONS. IF SUCH WAS THE CASE OBVIOUSLY THE PROVISIONS OF SECTIONS 269A 2 69B 269C 269D ETC. WOULD COME INTO PLAY. EVEN THOUGH WE ARE LIVE TO THE ISSU E THAT THERE IS NO CONNECTION BETWEEN THE GENUINENESS OF THE TRANSACTION AS AGAIN ST THE VIOLATION OF THE PROVISIONS OF SECTION 269SS AND 269T STILL THE REA SONABLE CAUSE OF THE BUSINESS EXIGENCY AS SHOWN BY THE ASSESSEE REMAINS PROVED AN D THE ASSESSEE CAN ONLY PUT FORTH A CLAIM OF REASONABLE CAUSE. THAT IS WHA T IS EXPECTED OF HER AS PER THE PROVISIONS OF SECTION 273B. ONCE AN EXPLANATION IS GIVEN BY THE ASSESSEE THEN IT IS OPEN TO THE REVENUE TO SHOW THAT THE REASONAB LE CAUSE AS EXPLAINED BY THE ASSESSEE DOES NOT CONSTITUTE REASONABLE CAUSE. ONE SHOULD KEEP IN MIND THAT IN SEC. 271(1)(C) IN THE EXPLANATION 1(B) THE WORDINGS ARE WHICH HE IS NOT ABLE TO I.T.A. NOS. 1172 & 2024/MDS/2010 & CO 84/MDS/2010 6 SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE . SUCH WORDINGS ARE MISSING IN THE PROVISIONS OF SECTION 2 73B. AS PER SECTION 273B ALL THAT IS REQUIRED IS THAT THE ASSESSEE PROVES THAT T HERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. THE ACCOUNT STATEMENT AS PRODUCE D BY THE ASSESSEE CLEARLY SHOWS THE BUSINESS EXIGENCY WHICH SHE HAS PROVED WI TH THE ACCOUNT STATEMENTS. THIS PROOF HAS NOT BEEN DISLODGED. IN THE CIRCUMST ANCES WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) IN CANCELLING THE PENALTY IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. IN THE CIR CUMSTANCES THE APPEAL OF THE REVENUE IN ITA NO. 1172/MDS/2010 STANDS DISMISSED. 6. C.O. NO. 84/MDS/2010: THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A) AND AS WE HAVE ALREADY UPHELD THE ORDER OF THE LEARNED CIT(A) THE CROSS O BJECTION FILED BY THE ASSESSEE STANDS DISMISSED. 7. ITA NO. 2024/MDS/2010: IN THIS APPEAL THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN CANC ELLING THE PENALTY LEVIED UNDER SECTION 271E OF THE INCOME TAX ACT 1961 ON ACCOUNT OF THE REPAYMENT OF THE LOANS IN CASH TAKEN BY THE ASSESSEE IN CASH. THE L EARNED DR AND THE LEARNED AUTHORISED REPRESENTATIVE RE-ITERATED THEIR SUBMISS IONS AS MADE IN REGARD TO ITA NO. 1172/MDS/2010 SUPRA. I.T.A. NOS. 1172 & 2024/MDS/2010 & CO 84/MDS/2010 7 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE PENALTY ORDER CLEARLY SHOWS THAT THE PENALTY HAS BEEN LEVIED ON A CCOUNT OF THE REPAYMENT OF THE LOANS IN CASH TO 13 PERSONS. A PERUSAL OF THE ORDERS OF THE LEARNED CIT(A) AND THE ASSESSING OFFICER CLEARLY SHOWS THAT THE AS SESSEE HAS PRODUCED THE ACCOUNT COPIES OF THE LOAN CREDITORS TO WHOM THE PA YMENTS HAVE BEEN MADE IN CASH. AS WE HAVE HELD EARLIER IN REGARD TO THE PEN ALTY LEVIED U/S 271D THAT THE REASONS GIVEN BY THE ASSESSEE ARE SUPPORTED BY THE ACCOUNT COPIES WHEREIN SHE BROUGHT OUT THE REASONS WHY THE LOANS HAVE BEEN TAK EN AND REPAID. OBVIOUSLY WHEN THE OVERDRAFT FACILITY OF THE ASSESSEE IS RUNN ING AT THE MAXIMUM AND THE BANK HAS ALSO DIRECTED FOR REDUCTION OF THE SAME AN Y DEPOSIT INTO THE BANK ACCOUNT WOULD DIRECTLY GET ADJUSTED AGAINST THE BAN K OVERDRAFT AND IT WOULD AFFECT THE ASSESSEES BUSINESS INSOFAR AS THOSE WHO WERE WILLING TO HELP THE ASSESSEE WOULD STOP HELPING THE ASSESSEE IF THE ASS ESSEE IS UNABLE TO REPAY THE LOANS IN TIME OR MEET THE FINANCIAL COMMITMENTS. I N THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT (A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. TH IS VIEW OF OURS GETS SUPPORT FROM THE DECISION OF THE HON'BLE JURISDICTIONAL HIG H COURT IN THE CASE OF KUNDRATHUR FINANCE AND CHIT CO. REPORTED IN 283 ITR 329. IN THE CIRCUMSTANCES THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STA NDS CONFIRMED AND THE APPEAL AS FILED BY THE REVENUE STANDS DISMISSED. I.T.A. NOS. 1172 & 2024/MDS/2010 & CO 84/MDS/2010 8 9. IN THE RESULT THE APPEALS FILED BY THE REVENUE IN ITA NO. 1172/MDS/2010 AND IN ITA NO. 2024/MDS/2010 AS ALSO THE CROSS OBJE CTION NO. 84/MDS./2010 FILED BY THE ASSESSEE STAND DISMISSED. 10. THE ORDER WAS PRONOUNCED IN THE COURT ON 04/02/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 04 TH FEBRUARY 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE