The DCIT, Circle-4,, Baroda v. M/s. Metro Heritage Pvt.Ltd.,, Baroda

ITA 2560/AHD/2008 | 2005-2006
Pronouncement Date: 27-08-2010 | Result: Dismissed

Appeal Details

RSA Number 256020514 RSA 2008
Assessee PAN AAECM2161M
Bench Ahmedabad
Appeal Number ITA 2560/AHD/2008
Duration Of Justice 2 year(s) 1 month(s) 17 day(s)
Appellant The DCIT, Circle-4,, Baroda
Respondent M/s. Metro Heritage Pvt.Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 27-08-2010
Date Of Final Hearing 19-08-2010
Next Hearing Date 19-08-2010
Assessment Year 2005-2006
Appeal Filed On 10-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI MUKUL SHRAWAT JM & SHRI A N PAHUJA AM ITA NOS.2560 AND 2561/AHD/2008 (ASSESSMENT YEAR:-2005-06) DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-4 BARODA V/S M/S METRO HERITAGE PVT. LTD. ORIENTAL BUSINESS CENTRE OPP. SURAJPLAZA BUILDING SAYAJIGUNJ BARODA [PAN: AAECM 2161 M] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K M MAHESH SR. DR ASSESSEE BY:- SHRI MUKUND BAKSHI AR O R D E R A N PAHUJA: THESE TWO APPEALS FILED BY THE REVENUE ARE DIREC TED AGAINST TWO SEPARATE ORDERS DATED 21-4-2008 OF THE LD. CIT(APPEALS)-III BARODA CANCELLING A PENALTY OF R S.17 01 024/- LEVIED U/S 271D OF THE INCOME-TAX ACT 1961[HEREINAFTER REF ERRED TO AS THE ACT] & OF RS.4 64 379/- LEVIED U/S 271E OF THE A CT FOR THE ASSESSMENT YEAR 2005-06. 2 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSING OF FICER NOTICED ON PERUSAL OF A COPY OF LEDGER ACCOUNT OF FUTURE HOTEL S P. LTD. APPEARING IN THE BOOKS OF THE ASSESSEE COMPANY THAT LOANS/DEPOSITS AGGREGATING TO RS.17 01 024/- WERE ACCEPTED BY THE ASSESSEE AND AN AMOUNT OF RS. 4 64 379/- WAS REPAID OTHERWISE T HAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT IN VIOLATION O F PROVISIONS OF SECTION 269SS & 269T OF THE ACT RESPECTIVELY IN TH E PERIOD RELEVANT TO THE A.Y.2005-06. ACCORDINGLY THE ADDL. CIT I SSUED A SHOW CAUSE NOTICE U/S 274 R.W.S.271D & 271E OF THE ACT O N 16-11-2007 SEEKING EXPLANATION AS TO WHY PENALTY U/S 271D & 2 71E OF THE ACT SHOULD NOT BE LEVIED FOR ACCEPTANCE & REPAYMENT OF LOANS IN VIOLATION OF PROVISIONS OF SEC.269SS & 269T OF TH E ACT RESPECTIVELY. ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 2 IN RESPONSE TO ANOTHER NOTICE DATED 31-12-2007 THE ASSESSEE REPLIED ON 10-1-2008 THAT THE ASSESSEE COMPANY E NGAGED IN THE BUSINESS OF DEVELOPMENT OF GUEST HOUSE ACCOMMODATIO N AND HOSPITALITY BUSINESS WAS PROMOTED BY SHRI DARSHAN SHAH AND SMT . SHYMALI DARSHAN SHAH WHO ALSO OWN AND CONTROL THE OPERATIONS OF THE COMP ANY AS WELL AS ANOTHER GROUP COMPANY VIZ. FUTURE HOTELS PVT.LTD. ENGAGED IN SIMILAR BUSINESS AND ITS OPERATIONS WERE CARRIED OUT FROM ORIENTAL BUSINESS CENTRE OPP. SURAJ PLAZA BUILDING SAYAJIGUNJ BARODA. THE CORPORATE OFFICE OF THE ASSESSEE COMPANY WAS ALSO LOCATED AT THE SAME ADDRESS AND THAT THE MANAG EMENT OF BOTH THE COMPANIES WAS CARRIED OUT BY SHRI DARSHAN SHAH THE COMMON MANAGING DIRECTOR . THE COMPANY'S BANK ACCOUNT AS WELL AS TH AT OF GROUP CONCERN M/S FUTURE HOTELS PVT. LTD. WERE OPERATED WITH SOUTH IN DIAN BANK HAVING BRANCHES IN MUMBAI AND BARODA .SINCE THE ASSESSEE COMPANY WA S IN THE PROCESS OF CONSTRUCTION AND DEVELOPMENT OF ITS GUEST HOUSE PRE MISES AT MUMBAI THE ASSESSEE REQUIRED HUGE FUNDS WHICH WERE RAISED BY WAY OF EQUITY CAPITAL AND UNSECURED LOANS FROM THE DIRECTOR AND GROUP CONCERN S . SINCE THE ASSESSEE COMPANY WAS UNABLE TO OBTAIN FINANCIAL ASSISTANCE F ROM BANK OR ANY OTHER FINANCIAL INSTITUTION THE FINANCIAL REQUIREMENTS OF THE COMPANY WERE SUBSTANTIALLY MET BY RAISING FUNDS FROM THE SISTER CONCERNS OR PE RSONS OF THE GROUP IT WAS SUBMITTED. CONTINUING IT WAS POINTED OUT THAT DURI NG THE PERIOD UNDER CONSIDERATION THE COMPANY RAISED AN AMOUNT OF RS.2 08 28 093 FROM M/S FUTURE HOTELS PVT. LTD. OF WHICH PART OF THE AMOUNT WAS RE PAID DURING THE YEAR AND THE OUTSTANDING BALANCE DUE TO M/S FUTURE HOTELS PVT. L TD. AMOUNTED TO RS.1 86 47 718/-. THESE FUND REQUIREMENTS WERE NORM ALLY MET BY TRANSFER OF FUNDS THROUGH THE BANKING CHANNELS EXCEPT FOR AN AM OUNT OF RS.12 36 645/- (RS.17 01 204/- RS.4 64 379/-) RECEIVED IN CASH. T HE REQUIREMENT OF FUNDS IN CASH WAS NECESSITATED DUE TO CERTAIN URGENT PAYMENT S TO SMALL SERVICE PROVIDERS AND FOR PURCHASE OF ITEMS REQUIRED IN THE CONSTRUCT ION OF THE PROJECT. THIS NECESSITY OF TRANSFER OF FUNDS OUTSIDE BANKING CHAN NEL WAS IMPERATIVE ON ACCOUNT OF THE FACT THAT THE SOUTH INDIAN BANK DID NOT HAVE THE FACILITY OF MULTICITY BANKING AND TRANSFER OF FUNDS. WHILE ENCLOSING DETAILS OF U TILIZATION OF FUNDS THE ASSESSEE ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 3 PLEADED THAT A UNILATERAL ACT OF A PERSON WOULD NO T AMOUNT TO ENTERING INTO A TRANSACTION OF LOAN OR DEPOSIT. IT WAS SUBMITTED TH AT IN THE ASSESSEE'S CASE IT WAS SHRI DARSHAN SHAH WHO MANAGED THE ENTIRE BUSINESS OF THE ASSESSEE AND M/S FUTURE HOTELS PVT. LTD. AND THE UNILATERAL DECISION BY SHRI DARSHAN SHAH WOULD NOT MAKE THE ACCEPTANCE OF MONEY AS LOAN OR DEPOSI T. WHILE RELYING UPON DECISIONS IN THE CASE OF MM. GEORGE BANKERS 46 ITD 10(COCHIN) RAJENDRA TRADING CO. 48 ITD 210(CHANDIGARH) VIR SALES CORPO RATION 50 TTJ 130 (AHMEDABAD) GODHRA ELECTRICITY COMPANY-225 ITR 746 (SC) AND RAJABLAI NAZARLI & SONS - 163 ITR 7 (GUJ.) THE ASSESSEE ARG UED THAT MERELY CLASSIFICATION OF THESE ENTRIES AS LOAN BY THE ASSESSEE WOULD NOT IN ITSELF MEAN THAT THESE ARE LOANS OR DEPOSITS. SINCE THE TRANSACTIONS WERE NOT COVERED UNDER THE PROVISIONS OF SECTION 269SS OF THE ACT THE ASSESSEE ARGUED T HAT NO PENALTY IS LEVIABLE. AS REGARDS REPAYMENT OF LOAN IN CASH THE ASSESSEE SU BMITTED THAT THESE WERE REPAID IN CASH BY PHYSICAL TRANSFER BEING CARRIED O UT BY THE MANAGING DIRECTOR HIMSELF ON HIS VARIOUS PERSONAL VISITS. THE MANAGIN G DIRECTOR OF THE COMPANY WAS UNDER GENUINE AND BONAFIDE BELIEF THAT HE BEING THE OWNER OF BOTH THE COMPANIES SUCH TRANSFER BY HIM IN CASH WOULD NOT A TTRACT THE PROVISIONS OF SECTION 269T OF THE ACT AND THEREFORE HIS UNILAT ERAL ACTION WOULD NOT ATTRACT THE PROVISIONS OF SECTION 271E IT WAS SUBMITTED. HOWE VER THE ADDL. CIT DID NOT ACCEPT THESE SUBMISSIONS ON THE GROUND THAT THE ASSESSEE COULD HAVE MADE ARRANGEMENTS TO ENSURE THAT SUCH CASH TRANSACTIONS OF HUGE AMOUNT WERE AVOIDED AND THE ASSESSEE'S PLEA THAT THE TRANSACTIO NS WERE EITHER MADE CONSIDERING THE BUSINESS URGENCIES OR UNDER BONAFID E BELIEF CONSTITUTING A REASONABLE CAUSE DO NOT HOLD ANY STRENGTH. ACCORDI NGLY PENALTY AMOUNTING TO RS.17 01 024/- WAS LEVIED U/S 271D OF THE ACT ON ACCOUNT OF DEPOSIT/LOAN RECEIVED BY THE ASSESSEE FROM FUTURE HOTEL PVT. LTD . IN VIOLATION OF SECTION 269SS OF THE ACT BESIDES PENALTY OF RS.4 64 379/- U/S 27 1E OF THE ACT FOR REPAYMENT OF LOANS IN VIOLATION OF PROVISIONS OF SEC. 269T OF TH E ACT. 3. ON APPEAL THE LD. CIT(A) CANCELLED THE AFORES AID PENALTY LEVIED U/S 271D OF THE ACT IN THE FOLLOWING TERMS: ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 4 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. A .R AND THE FACTS OF THE CASE. * SECTION 271D PRESCRIBES PENALTY FOR CO NTRAVENTION OF PROVISIONS OF SECTION 269SS. HOWEVER PENALTY CAN B E SPARED U/S 273B IF THE ASSESSEE CAN DEMONSTRATE REASONABLE CAUSE FOR S UCH CONTRAVENTION. WHAT CONSTITUTES 'REASONABLE CAUSE' HAS BEEN CONSID ERED BY THE COURTS IN SEVERAL CASES. THE CONSENSUS OF OPINION HAS VEERED TO THE POSITION THAT ALTHOUGH THE EXPRESSION 'REASONABLE' IS NOT CAPABLE OF CLEAR AND PRECISE DEFINITION PRIMA FACIE IT WOULD DEPEND ON THE FACT S OF THE CASE. HOWEVER REASONABLE CAUSE HAS BEEN HELD TO BE 'THAT WHICH WO ULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENC E.' FURTHER REASONABLE CAUSE CAN BE REASONABLY SAID TO BE A CAU SE WHICH PREVENTS A MAN OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE ACTING UNDER NORMAL CIRCUMSTANCES WITHOUT NEGLIGENCE OR INACTION OR WA NT OF BONA FIDES. IN THE INSTANT CASE THE ASSESSEE'S EXPLANATION IS THAT TH E TRANSFER OF FUNDS WAS NECESSITATED BY EXIGENCY OF REQUIREMENTS. IT IS SEE N THAT TOTAL SUM OF TRANSACTIONS BETWEEN THE TWO COMPANIES DURING THE Y EAR AMOUNTED TO MORE THAN RS.2.08 CRORES. OF THIS ONLY ABOUT RS.17. 01 LACS HAS BEEN COLLECTED IN CASH. THERE ARE NUMEROUS TRANSACTIONS INVOLVED AND FROM THE COPY OF THE LEDGER ACCOUNT IT APPEARS THAT THERE WE RE APPROXIMATELY 100 TRANSACTIONS BETWEEN THE TWO COMPANIES. THE TRANSFE R OF FUNDS VIRTUALLY AMOUNTED TO CURRENT ACCOUNT TRANSACTIONS RATHER THA N ACCEPTANCE OF LOANS/DEPOSITS. MOREOVER SECTION 27ID MUST BE APPL IED HAVING DUE REGARD TO THE OBJECTS BEHIND THE LEGISLATION. SECTION 269S S WAS INTRODUCED IN THE ACT VIDE FINANCE ACT 1984 W.E.F 1-7-1984. EXPLAINI NG THE SCOPE AND EFFECT OF THE SECTION AND THE NECESSITY FOR BRINGING THE L EGISLATION THE BOARD ISSUED CIRCULAR NO. 387 DATED 6-7-1984. THE OPERATI VE PORTION OF THE CIRCULAR IS REPRODUCED BELOW: '(XXIV) PROHIBITION AGAINST TAKING OR ACCEPTING CER TAIN LOANS AND DEPOSITS IN CASH. 32.1 UNACCOUNTED CASH FOUND IN THE COURSE OF SEARC HES CARRIED OUT BY THE INCOME-TAX DEPARTMENT IS OFTEN EXPLAINED BY TAXPAYE RS AS REPRESENTING LOANS TAKEN FROM OR DEPOSITS MADE BY VARIOUS PERSON S. UNACCOUNTED INCOME IS ALSO BROUGHT INTO THE BOOKS OF ACCOUNT IN THE FORM OF SUCH LOANS AND DEPOSITS AND TAXPAYERS ARE ALSO ABLE TO GET CO NFIRMATORY LETTERS FROM SUCH PERSONS IN SUPPORT OF THEIR EXPLANATION. 32.2 WITH A VIEW TO COUNTERING THIS DEVICE WHICH E NABLES TAXPAYERS TO EXPLAIN AWAY UNACCOUNTED CASH OR UNACCOUNTED DEPOSI TS THE FINANCE ACT 1984 HAS INSERTED A NEW SECTION 269SS IN THE INCOM E-TAX ACT DEBARRING PERSONS FROM TAKING OR ACCEPTING AFTER 30' JUNE 19 84 FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACC OUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMOUNT OF SUCH LOAN AND DEPOSIT OF RS.10 000/-MORE.' ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 5 3.3 ON THE ABOVE IT IS SEEN THAT THE MISCHIEF SOUG HT TO BE PREVENTED BY INTRODUCTION OF SECTION 269SS WAS THE PRACTICE OF T HE ASSESSEE TO EXPLAIN AWAY THE UNACCOUNTED MONEY FOUND DURING THE COURSE OF SEARCH AS LOANS. HOWEVER NO SUCH ACTION U/S 132 HAS BEEN TAKEN AGAIN ST THE ASSESSEE. MOREOVER THE FUNDS HAVE BEEN TRANSFERRED BY WITHDR AWAL FROM THE BANK ACCOUNT OF M/S FHPL AT BARODA. THERE IS A CLEAR COR RELATION BETWEEN WITHDRAWAL FROM BANK AND TRANSFER TO MUMBAI IN CASH . LOOKING AT THE OVERALL SITUATION I AM OF THE OPINION THAT THE ASS ESSEE WAS NOT UNJUSTIFIED IN RESORTING TO TRANSFER OF FUNDS FROM ONE GROUP CO MPANY TO ANOTHER COMPANY FOR URGENT FINANCE REQUIREMENTS. IT IS HELD THAT THE ASSESSEE HAD REASONABLE CAUSE FOR CONTRAVENTION OF PROVISIONS OF SECTION 269SS. ACCORDINGLY THE PENALTY IS CANCELLED. 3.1 FOR ALMOST SIMILAR REASONS PENALTY LEVI ED U/S 271E WAS CANCELLED BY THE LD. CIT(A). 4. THE REVENUE IS NOW IN APPEAL BEFORE US A GAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED THE ORDERS OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A) IN THE LIGHT OF DECISION DATED 11-09-2009 T HE ITAT AHMEDABAD BENCH-D IN THE CASE OF ITO VS. SMT. BHANU BEN R SHAH IN ITA NO.1801/AHD/2009.INTERALIA THE LD. AR RELIE D UPON DECISIONS IN A.D.I. V/S KUMARI A.B. SHANTHI 255 ITR 258 (SC) DIR ECTOR OF INCOME TAX (INV.) V. ALL INDIA DEAF AND DUMB SOCIETY 283 I TR 113 (DELHI) CIT V MANOJ LALWANI 260 ITR 590 (RAJ.) CIT V. BHAGWATI PRASAD BAJORIA HUF 263 ITR 487 (GAU) CIT V. PARMA NAND 180 CTR 489 (DELHI) CIT V. EETACHI AGENCIES 248 ITR 52 5 (BOM.) VIR SALES CORPORATION 50TTJ 130(AHD) RAJENDRA TRADING C O. 48 ITD 210 (CHD) CHANDRA CEMENT LTD. 68 TTJ 35 (JAIPUR) M.M.GE ORGE BANKERS 46 ITD 10 (COCH) AND CIT V IDHAYAM PUB LICATIONS LIMITED 285 ITR 221 ( MAD ). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON . BEFORE PROCEEDING FURTHER WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF SEC. 2 69SS OF THE ACT WHICH READ AS UNDER: ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 6 ' NO PERSON SHALL AFTER THE 30TH DAY OF JUNE 1984 TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SECTION REFERRE D TO AS THE DEPOSITOR) ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PA YEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF - (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGRE GATE AMOUNT OF SUCH LOAN AND DEPOSIT; OR (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEPOSIT ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH PERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HA S FALLEN DUE OR NOT) THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID; OR (C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT RE FERRED TO IN CLAUSE (B) IS TWENTY THOUSAND RUPEES OR MORE: .. EXPLANATION: FOR THE PURPOSE OF THIS SECTION (III) 'LOAN OR DEPOSIT' MEANS LOAN OR DEPOSIT OF MO NEY.' 5.1 THE PROVISIONS OF SECTION 269T OF THE ACT RE AD AS UNDER: 269T. MODE OF REPAYMENT OF CERTAIN DEPOSITS. NO BRANCH OF A BANKING COMPANY OR A CO-OPERATIVE BA NK AND NO OTHER COMPANY OR CO-OPERATIVE SOCIETY AND NO FIRM OR OTHE R PERSON SHALL REPAY ANY LOAN OR DEPOSIT MADE WITH IT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT DRAWN IN THE NAM E OF THE PERSON WHO HAS MADE THE LOAN OR DEPOSIT IF- (A) THE AMOUNT OF THE LOAN OR DEPOSIT TOGETHER WITH THE INTEREST IF ANY PAYABLE THEREON OR (B) THE AGGREGATE AMOUNT OF THE LOANS OR DEPOSITS H ELD BY SUCH PERSON WITH THE BRANCH OF THE BANKING COMPANY OR CO -OPERATIVE BANK OR AS THE CASE MAY BE THE OTHER COMPANY OR C O-OPERATIVE SOCIETY OR THE FIRM OR OTHER PERSON EITHER IN HIS OWN NAME OR JOINTLY WITH ANY OTHER PERSON ON THE DATE OF SUCH REPAYMENT TOGETHER WITH THE INTEREST IF ANY PAYABLE ON SUCH LOANS OR DEPO SITS IS TWENTY THOUSAND RUPEES OR MORE: ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 7 EXPLANATION.- FOR THE PURPOSES OF THIS SECTION - (III) 'LOAN OR DEPOSIT' MEANS ANY LOAN OR DEPOSIT OF MONEY WHICH IS REPAYABLE AFTER NOTICE OR REPAYABLE AFTER A PERIOD AND IN THE CASE OF A PERSON OTHER THAN A COMPANY INCLUDES LOAN OR DEPOSIT OF ANY NATURE. 5.2. THE AFORESAID PROVISIONS OF S. 269SS & 2 69 T SAY THAT IF THE STIPULATED AMOUNT OF LOAN OR DEPOSIT IS ACCEPTED OR REPAID OTH ERWISE THAN BY CROSSED CHEQUE OR ACCOUNT PAYEE BANK DRAFT THERE IS A VIOL ATION OF THE SAID PROVISIONS. THE PROVISIONS OF SECTION 269SS WERE BROUGHT IN THE STATUTE BOOK TO COUNTER THE EVASION OF TAX IN CERTAIN CASES AS CLEARLY STATED IN THE HEADING OF CHAPTER XXB OF THE ACTWHICH READS 'REQUIREMENT AS TO MODE OF ACCEP TANCE PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX'. LEGISLATIVE INTENTION IN BRINGING SECTION 269SS IN THE ACT WAS TO AVOID CERTAIN CIRCUMSTANCES OF TAX EVASION WHEREBY HUGE TRANSACTIONS ARE MADE OUTSIDE THE BOOKS OF ACCOUNT BY WAY OF CAS H. AS FAR AS THE APPEALS BEFORE US ARE CONCERNED THERE IS NO CASE AGAINST T HE ASSESSEE THAT THESE TRANSACTIONS HAD ANYTHING TO DO WITH EVASION OF TAX OR CONCEALMENT OF INCOME. IN THE INSTANT CASE THE LD. CIT(A) FOUND THAT THERE WERE APPROXIMATELY 100 TRANSACTIONS BETWEEN THE TWO COMPANIES AND THE TRAN SFER OF FUNDS VIRTUALLY AMOUNTED TO CURRENT ACCOUNT TRANSACTIONS RATHER THA N ACCEPTANCE OF LOANS/DEPOSITS. SINCE THE FUNDS WERE TRANSFERRED BY WITHDRAWAL FROM THE BANK ACCOUNT OF M/S FHPL AT BARODA THE LD. CIT(A) OBSER VED THAT THERE WAS A CLEAR CORRELATION BETWEEN WITHDRAWAL FROM BANK AT BARODA AND TRANSFER TO MUMBAI IN CASH. CONSIDERING THE NATURE OF TRANSACTIONS THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE WAS NOT UNJUSTIFIED IN RESORTING TO TRANSF ER OF FUNDS FROM ONE GROUP COMPANY TO ANOTHER COMPANY FOR URGENT FINANCE REQUI REMENTS AND THAT BEING A REASONABLE CAUSE PENALTY U/S 271D WAS CANCELLED. LIKEWISE PENALTY U/S 271E WAS CANCELLED SINCE ON COMPARISON OF THE BANK STATE MENTS THE LD. CIT(A) FOUND THAT THE MOVEMENT OF THE FUNDS COULD BE CORRELATED TO WITHDRAWALS FROM BANK. IN THESE CIRCUMSTANCES ESPECIALLY WHEN FUNDS HAVE BE EN WITHDRAWN FROM BANK ACCOUNT OF ONE COMPANY AT ONE PLACE AND TRANSFERRED TO ANOTHER GROUP COMPANY ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 8 AT OTHER PLACE AND AS POINTED OUT BY THE LD. CIT(A) THAT THE MOVEMENT OF THE FUNDS COULD BE CORRELATED TO WITHDRAWALS FROM BANK WE ARE OF THE OPINION THE COMPELLING CIRCUMSTANCES IN WHICH THE ASSESSEE WAS CONSTRAINED TO VIOLATE THE PROVISIONS OF SECTION 269SS OR 269T OF THE ACT WHI CH HAVE NOT BEEN FOUND TO BE INTENTIONAL HAVE NOT IN ANYWAY DEFEATED OR TENDED TO DEFEAT THE OBJECTIVES OF INCORPORATION OF SECTION 269SS & 269T IN THE STATU TE FOR PREVENTION OF TAX EVASION AS THERE IS NO ELEMENT OF TAX EVASION IN TH E INSTANT CASE. THUS IN THIS CASE IT IS ONLY A TECHNICAL VIOLATION OF THE PROVI SIONS OF SECTION 269SS & 269 T OF THE ACT. THE ASSESSEE HAS SUFFICIENTLY EXPLAINED BE FORE THE LD. CIT(A) THE CIRCUMSTANCES UNDER WHICH THEY WERE CONSTRAINED TO GO IN FOR CASH LOANS OR THEIR REPAYMENT. THESE EXPLANATIONS IN OUR OPINION CONSTI TUTED REASONABLE CAUSE AS STIPULATED IN SECTION 273B OF THE ACT. 5.3 THERE IS ANOTHER ASPECT OF THE MATTER. IN THE CASE OF BOMBAY CONDUCTORS & ELECTRICALS LTD. VS. DCIT 56 TTJ 580(AHD.) THE T RIBUNAL FOUND THAT THERE WAS NO EVIDENCE ON RECORD TO SHOW THAT INFRACTION OF TH E PROVISIONS WAS WITH THE KNOWLEDGE OR IN DEFIANCE OF THE PROVISIONS. IT HAS FURTHER BEEN HELD THAT THERE IS NOTHING ON RECORD TO INDICATE THAT THE ASSESSEE HAD INDULGED IN ANY TAX PLANNING OR TAX EVASION AND THAT THERE WAS REASONABLE CAUSE RATHER IF IT IS A VIOLATION IT IS MERE VENIAL OR TECHNICAL. THIS DECISION OF THE ITAT HAS BEEN UPHELD BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. B OMBAY CONDUCTORS & ELECTRICALS LTD 301 ITR 328(GUJ). IN THE CASE UNDER CONSIDERAT ION ALSO THERE IS NOTHING ON RECORD SUGGESTING ANY TAX PLANNING OR INFRACTION OF RELEVANT PROVISIONS WITH MALAFIDE INTENTION.THE HONBLE APEX COURT INTERPRE TING THE POWERS CONFERRED ON THE REVENUE UNDER SECTION 273B OF THE ACT IN ASST. DIRECTOR OF INSPECTION (INVESTIGATION) V. KUM. A.B. SHANTHI [2002] 255 ITR 258 HELD THAT IF THERE WAS A GENUINE AND BONA FIDE TRANSACTION AND THE ASSESSEE COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONA FIDE REASON THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENALTY H AS A DISCRETION NOT TO LEVY PENALTY . ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 9 5.4 WE FIND THAT THE ITAT COCHIN BENCH IN THEIR D ECISION IN THE CASE OF MUTHOOT M GEORGE BANKERS(SUPRA) HELD THAT THE TRANSACTIONS INTER SE BETWEEN THE SISTER CONCERNS CANNOT PARTAKE OF THE NATURE OF EITHER DEPOSIT ' OR ' LOAN ' THOUGH INTEREST MIGHT HAVE BEEN PAID ON THE SAME. FURTHER THE TRANSACTIONS HAVE NOT BEEN IMPEACHED AS NON-GENUINE OR BOGUS. HENCE THE P ROVISIONS OF SECTIONS 269SS AND 269T ARE NOT ATTRACTED TO THE FACTS OF TH E CASE. IT WAS FURTHER HELD THAT BONA FIDE BELIEF COUPLED WITH THE GENUINENESS OF TH E TRANSACTIONS WILL CONSTITUTE REASONABLE CAUSE FOR NOT INVOKING THE PROVISIONS OF SECTION 271D OF THE ACT. IN THE CASE UNDER CONSIDERATION ALSO FUNDS HAVE BEE N TRANSFERRED AFTER WITHDRAWAL FROM A BANK AT ONE PLACE TO ANOTHER SISTER CONCERN THROUGH A COMMON MD AND THE GENUINENESS OF TRANSACTIONS HAS NOT BEEN DOUBTE D. THE LD. CIT(A) FOUND THAT MOVEMENT OF THE FUNDS COULD BE CORRELATED TO WITHDR AWALS FROM BANK . IN THESE CIRCUMSTANCES THERE IS NO CASE FOR LEVY OF PENALTY U/S 271D OR 271E OF THE ACT. 5.5 HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT V BHAGWATI PRASAD BAJORIA (HUF) 263 ITR 487 (GAUHATI) HELD THAT WHEN THERE IS AN IMMEDIATE NEED OF MONEY AND TO SATISFY THE IMMEDIATE REQUIREMENTS THE PERSON APPROACHES THE MONEY-LENDER OR HIS FRIEND OR RELATIVE WHO COULD L END MONEY TO HIM TO SATISFY HIS IMMEDIATE REQUIREMENT IN THOSE CIRCUMSTANCES IT CA NNOT BE SAID THAT THE TAXPAYER HAS ENTERED INTO A TRANSACTION TO AVOID TH E PAYMENT OF TAX OR TO DEFRAUD THE REVENUE. IT WAS FURTHER HELD THAT THE ELEMENT O F MENS REA BEING NOT BORNE OUT FROM THE NATURE AND THE MANNER IN WHICH THE TRANSAC TION WAS CARRIED OUT THERE WAS NO JUSTIFICATION IN IMPOSING THE PENALTY U/S 2 71D OF THE ACT 5.6 MOREOVER THE ITAT AHMEDABAD BENCH 'C' IN THE CASE OF VIR SALES CORPORATION V. ACIT (1994) 50 TTJ 130(AHD) HAVE HE LD THAT IN RESPECT OF TRANSACTIONS INTER SE BETWEEN THE SISTER CONCERNS M ADE WITH A VIEW TO MEET THE BUSINESS NEEDS UNDER THE BONA FIDE BELIEF AND WITH REASONABLE CAUSE NO PENALTY IS IMPOSABLE UNDER SUCH CIRCUMSTANCES. IN T HE CASE UNDER CONSIDERATION ADMITTEDLY TRANSACTIONS ARE BETWEEN SISTER CONCERNS . APPARENTLY RATIO OF THE SAID DECISION IS APPLICABLE TO THE FACTS OF THE CASE. ITA NOS.2560 AND 2561/AHD/2008 FOR AY 2005-06 M/S METRO HERITAGE PVT. LTD. BARODA 10 6. IN VIEW OF THE FOREGOING WHEN THERE WAS REASONABLE CAUSE FOR NOT ACCEPTING OR REPAYING LOANS OTHERWISE THAN BY CROSSED CHEQUE OR ACCOUNT PAYEE BANK DRAFT AND IN THE LIGHT OF AFORESAID DECISION OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF BOMBAY CONDUCTORS & ELECTRICALS LTD.(SUPRA ) WE HAVE NO ALTERNATIVE BUT TO CONCLUDE THAT IT IS NOT A FIT CASE FOR IMPOS ITION OF PENALTY UNDER SECTION 271D & 271E FOR VIOLATION OF PROVISIONS OF SECTION 269SS & 269T OF THE ACT RESPECTIVELY. THEREFORE BOTH IN LAW AS WELL AS O N FACTS WE FIND THAT IMPOSITION OF PENALTY UNDER SECTION 271 D & 271E OF THE ACT WAS NOT IN ORDER AND THE LD. CIT(A) WAS RIGHT IN CANCELING THESE PENALTIES. THE REFORE GROUND NO.1 IN THESE TWO APPEALS IS DISMISSED. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED IN T ERMS OF RESIDUARY GROUND NO. 2 IN THESE APPEALS WHILE GROUND NO. 3 BEING MERE P RAYER BOTH THESE GROUNDS ARE DISMISSED 8. IN THE RESULT BOTH THE APPEALS BY THE REVENUE ARE DISMISSED ORDER PRONOUNCED IN THE COURT TODAY ON 27-08-2010 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 27-08-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S METRO HERITAGE PVT. LTD. ORIENTAL BUSINESS CENTRE OPP. SURAJPLAZA BUILDING SAYAJIGUNJ BARODA 2. THE DCIT CIRCLE-4 BARODA 3. CIT CONCERNED 4. CIT(A)-III BARODA 5. DR BENCH-C ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR/ASSISTANT REGISTRAR ITAT AHMEDABAD