Shri Khemabhai R.Prajapati, Sabarkantha v. The Addl.CIT.,S.K.Range,, Himatnagar

ITA 3429/AHD/2010 | 2005-2006
Pronouncement Date: 11-03-2011 | Result: Allowed

Appeal Details

RSA Number 342920514 RSA 2010
Assessee PAN ACYPP9743P
Bench Ahmedabad
Appeal Number ITA 3429/AHD/2010
Duration Of Justice 2 month(s) 15 day(s)
Appellant Shri Khemabhai R.Prajapati, Sabarkantha
Respondent The Addl.CIT.,S.K.Range,, Himatnagar
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 11-03-2011
Date Of Final Hearing 10-03-2011
Next Hearing Date 10-03-2011
Assessment Year 2005-2006
Appeal Filed On 27-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHR I T.K. SHARMA J.M .) I.T.A. NO. 3429/AHD./2010 ASSESSMENT YEAR : 2005-2006 KHEMABHAI R. PRAJAPATI SABARKANTHA -VS- THE ADDL. CIT SK RANGE HIMATNAGAR (PAN : ACYPP 9743P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N.DIVATIA A.R . RESPONDENT BY : SHRI VIMALENDU VERMA D .R. O R D E R THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 08.10.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VIII AHMEDABAD CONFIRMING THE PENALTY OF RS.1 30 000/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271D OF THE I.T. ACT 1961 FOR THE ASSESSMENT YEAR 2005-2006. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A RETIRED SCHOOL TEACHER. HE WAS WORKING AS A CLERK IN A HIGH SCHOOL AT VILLAGE RANASAN FOR ABO UT 37 YEARS. FOR THE ASSESSMENT YEAR UNDER APPEAL HE FILED THE RETURN OF INCOME DECLARING TOT AL INCOME OF RS.78 995/- ON 30.10.2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HAS ACCEPTED CASH OF RS.1 30 000/- FROM SHRI SUBHASH PA TEL ON 02.11.2004. THIS CASH DEPOSIT ACCORDING TO ASSESSING OFFICER WAS IN VIOLATION OF SECTION 269SS. THE ASSESSING OFFICER MADE A REFERENCE TO ADDITIONAL COMMISSIONER OF INCOME-TAX FOR INITIATION OF PENALTY UNDER SECTION 271D OF THE I.T. ACT 1961. IN REPLY TO SHOW-CAUSE NOTICE ISSUED BEFORE LEVYING PENALTY UNDER SECTION 271D BEFORE THE ASSESSING OFFICER WRITTEN SUBMISSIONS WERE FILED VIDE LETTER DATED 10.12.2009 WHICH READS AS UNDER: AT THE OUTSET I WOULD LIKE TO POINT OUT THAT I A M A RETIRED SCHOOL TEACHER. I WAS WORKING AS A CLERK IN THE HIGH SCHOOL AT VILL. RANSAN. I H AVE STUDIED UPTO SSC. I WORKED FOR ABOUT 37 YEARS. I HAVE VERY LIMITED MEANS OF INCOME LIKE INCOME FROM THE POST RETIREMENT FUNDS RECEIVED BY ME. SINCE I WANTED TO HAVE SOME INCOME EARNING ACTIVITIES AFTER RETIREMENT 2 ITA NO. 3429-AHD-2010 MY FRIENDS LIKE JETHABHAI PATEL AND OTHERS AGREED THAT A PETROL PUMP SHOULD BE STARTED WHEREIN I WILL BE LOOKING AFTER THE DAY TO DAY OPE RATIONS WHERE AS THE OTHERS \WOULD CONTRIBUTE NECESSARY CAPITAL BECAUSE IT IS REQUIRE D IN THIS LINT OF BUSINESS IN VIEW OF THE PRE-DEPOSIT HAS TO BE MADE BEFORE THE PETROLEUM TA NKER IS DELIVERED BY IOC. HOWEVER THE PARTNERSHIP WOULD NOT BE MADE DUE TO LEGAL AND TECHNICAL DIFFICULTIES AND ULTIMATELY THE LICENSE WAS ISSUED IN MY NAME AND THE SAID BUS INESS COMMENCED BY ME OF COURSE WITH THE FINANCIAL SUPPORT FROM FRIENDS AND RELATI VES. I FILED MY RETURN OF INCOME FOR A. Y. 2005-06 ON 30-10-2005 DECLARING TOTAL INCOME AT RS .78 995/- AND THE REGULAR ASSESSMENT U/S 143(3) WAS COMPLETED ON 22-10-2007. 2. AS REGARDS THE MERITS OF THE CASE I HAVE LO SUBMIT REPLY AS UNDER:- (A) I HAD ACCEPTED LOAN OF RS. 23 000/- FROM RAMES HBHAI A PATEL M CASH ON 1-1-2005 BECAUSE I HAD ISSUED CHEQUE NO. 5645769 IN FAVOUR OF IOC FOR PURCHASE OF PETROLEUM WAS TO BE HONOURED BUT THERE WAS NO SUFFICIENT BAL ANCE IN THE BANK ACCOUNT WITH DENA BANK. YOU WILL APPRECIATE THAT AFTER CLEARANCE OF THIS CHEQUE THE BALANCE HAS REDUCED SO RS.1 153/- AND THEREFORE HAD THERE BEEN NO CASH DE POSITS MADE IN THE BANK ACCOUNT THE CHEQUE WOULD HOVE BEEN RETURNED AND INVITED THE PR OSECUTION UNDER SECTION 138 OF NEGOTIABLE INSTRUMENT ACT. THUS THERE WAS A COMME RCIAL NECESSITY AND BUSINESS PRUDENCE TO ACCEPT THE LOAN IN CASH (REFER TO MARU TI NANDAN FIANCE CORP. P. LTD. 114 ITJ 147) AHD. (B) 1 HAD ACCEPTED CASH OF RS.1 30 000/- FROM SHRI SUBASH PATEL ON 2-11-2004 WHICH WAS MEANT AS CAPITAL CONTRIBUTION FROM THIS PARTY. YOU WILL APPRECIATE THAT AS POINTED OUT HEREIN SHRI SUBASHBHAI PATEL OR HIS NOMINEE WAS T O JOIN AS PARTNER BUT THE SAME CANNOT FRUCTIFY DUE TO LEGAL AND TECHNICAL PROBLEMS. IT I S THEREFORE SUBMITTED THAT THE AFORESAID AMOUNT RECEIVED FROM SHRI SUBASH PATEL WAS NOT LOA N OR DEPOSIT. EVEN I HAVE NOT PAID INTEREST THEREON. LATER ON THE AFORESAID AMOUNT H AS BEEN TRANSFERRED TO MY CAPITAL ACCOUNT. UNDER THY CIRCUMSTANCES THERE IS BREACH OF SECTION OF 269SS. C) AS REGARDS RAMANHHAI K PATEL YON HAVE CONSID ERED RS.27 890 AS RECEIVED ON 4-1- 2005 BY \WAY OF LOAN BUT NO SUCH CASH HAS BEEN RE CEIVED AND IT IS A JOURNAL ENTRY PASSED. THE COPY OF HIS LEDGER A/C. IS ENCLOSED HEREWITH. YOU WILL APPRECIATE THAT WHEN THE TRANSACTIONS HAS NOT TAKEN PLACE M CASH BUT BY JO URNAL ENTRY THE PROVISIONS OF SECTION 269SS ARE NOT ATTRACTED. RELIANCE IS PLACED ON THE DECISION OF THE CASE OF CI VS. NATWARLAL PURSHOTAMDAS PAREKH (303 ITR 5)(GUJ) BOM BAY CONDUCTORS & ELECTRICALS LTD. (301 ITR 328) (GUJ) AS REGARDS SHRI ISHWARBHAI PATEL THE AMOUNT OF R S.10 000/- EACH CREDITED UN 20- 12-2004 AND 8-1-2005 ARE NOT IN CASH BUT BY JOURNA L ENTRY AS IT WOULD BE NOTICED FROM THE LEDGER A/C ENCLOSED. THEREFORE AS STATED IN PARA (C) ABOVE THERE IS NO VIOLATION OF SECTION 269SS QUA THE AFORESAID TWO AMOUNTS. IN SO FAR AS THE AMOUNT OF RS. 20 000/- ON 24-1-2005 IS CONCERNED IT IS RECEIVED BY CHEQUE F ROM HDFC CURR. A/C. NO.405256000017 3 ITA NO. 3429-AHD-2010 IN VIEW OF THE ABOVE I SUBMIT THAT THERE IS NO D EFAULT U/S 269SS IS CONCERNED WITH REGARD TO THE TRANSACTIONS STATED IN YOUR ABOVE NO TICE DATED 1-12-2009. 3. WITH OUT PREJUDICE TO THE ABOVE I HAVE TO SUB MIT THAT THE TRANSACTION WITH THE AFORESAID PARTIES HAVE BEEN FOUND TO BE GENUINE BY ASSESSING OFFICER IN THE COURSE OF ASSTT. PROCEEDINGS. IT IS NOW A WELL-SETTLED POSI TION IN LAW IN VIEW OF DECISION IN THE CASE OF A B SHANTI (255 ITR 258) (SC) THAT THE PROVISIO NS OF SECTION 269SS ARE NOT INTENDED TO APPLY TO THE BONAFIDE TRANSACTIONS FOLLOWING CBDT CIRCULAR EXPLAINING THE INTENTION BEHIND THE ENACTMENT OF THIS PROVISION. 4. IN ANY VIEW OF THE MATTER I HAVE TO SUBMIT THAT THERE WAS A REASONABLE CAUSE FOR ACCEPTING THE AMOUNTS IN QUESTION IN CASH BECAUSE I BONAFIDE BELIEF THAT THE AMOUNTS COULD BE ACCEPTED IN CASH FOR THE PURPOSE OF CARRY ING ON BUSINESS AND IN CASE OF BUSINESS NECESSITY. I BELIEVED THAT THE LAW CANNOT STIFLE T HE BONAFIDE BUSINESS TRANSACTIONS WHICH HAVE TO BE CARRIED OUT IN A BUSINESS LIKE MANNER. 3.1 THE ADDITIONAL COMMISSIONER OF INCOME-TAX REJEC TED THE AFORESAID EXPLANATION ON THE GROUND THAT NO SUPPORTING DOCUMENT/EVIDENCES EVIDEN CING THE REASONABLE CAUSE FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269SS HAVE BE EN MADE. HE ACCORDINGLY LEVIED THE PENALTY OF RS.1 30 000/- UNDER SECTION 271D OF THE I.T. ACT 1961. 4. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) CONFIRMED THE PENALTY OF RS.1 30 000/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 269SS OF THE I.T. ACT OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED COGENT EVIDENCES IN SUPPORT OF THE CLAIM THAT DEPOSIT WAS MEANT FOR CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRM. 5. AGGRIEVED WITH THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING S.N.DIVATIA A.R. APPEAR ED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE WAS HAVING LIMIT SOURCE OF INCOME LIKE INCOME FROM INVESTMENT OUT OF POST RETIREMENT FUNDS. IN ORDER TO AUGMENT HIS I NCOME HIS FRIEND NAMELY SHRI JETHABHAI PATEL AGREED THAT A PETROL PUMP SHOULD BE STARTED WHEREIN THE ASSESSEE WOULD BE LOOKING AFTER THE DAY TO DAY OPERATIONS AND HIS FRIEND WILL CONTRIBUTE NE CESSARY CAPITAL REQUIREMENT. IN THIS LINE OF BUSINESS LIKE PRE-DEPOSIT BE MADE BEFORE THE PETRO LEUM TANKER IS DELIVERED BY IOC. HOWEVER THE PARTNERSHIP COULD NOT BE FORMED DUE TO THE LEGA L AND TECHNICAL DIFFICULTIES AND ULTIMATELY THE LICENSE WAS ISSUED IN THE NAME OF THE ASSESSEE ONLY AND HE STARTED THE BUSINESS WITH THE FINANCIAL SUPPORT FROM THE FRIENDS AND RELATIVES. THE COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT SINCE LICENSE WAS ISSUED IN THE NAME OF THE INDIVIDUAL P ARTNERSHIP WAS NOT FORMED. THE COUNSEL OF THE 4 ITA NO. 3429-AHD-2010 ASSESSEE SUBMITTED THAT BOTH THE DEPARTMENTAL AUTHO RITIES BELOW REJECTED THE PLEA OF THE ASSESSEE FOR REASONABLE CAUSE ON DOUBTS AND SUSPICION. THE C OUNSEL OF THE ASSESSEE FURTHER POINTED OUT THAT THE ASSESSEE WAS OF THE BONA FIDE BELIEF THAT FOR ACCEPTING THE CAPITAL CONTRIBUTION IN CASH THERE IS NO VIOLATION OF PROVISIONS CONTAINED IN SE CTION 269SS. HE SUBMITTED THAT THIS REASONABLE BELIEF OF THE ASSESSEE CONSTITUTED REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B. THEREFORE PENALTY OF RS.1 30 000/- LEVIED BY THE A SSESSING OFFICER UNDER SECTION 271D BE CANCELLED. 7. ON THE OTHER HAND SHRI VIMALENDU VERMA D.R. A PPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED BOTH THE VIEWS TAKEN BY BOTH T HE DEPARTMENTAL AUTHORITIES BELOW. THE LD. D.R. POINTED OUT THAT BEFORE FORMING THE PARTNERSHI P THE ASSESSEE ADMITTED THAT LOAN/DEPOSIT WAS RECEIVED IN CASH. THEREFORE THERE IS A VIOLATION O F PROVISIONS CONTAINED IN SECTION 269SS AND PENALTY UNDER SECTION 271D WAS RIGHTLY LEVIED AND C ONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 8. HAVING HEARD BOTH THE SIDES I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE WA S WORKING AS A CLERK IN A HIGH SCHOOL FOR 37 YEARS. AFTER RETIREMENT HE WANTED TO START BUSINES S OF PETROL PUMP IN PARTNERSHIP WITH HIS FRIEND. HOWEVER THE LICENCE WAS ISSUED IN HIS INDIVIDUAL N AME. IN THESE CIRCUMSTANCES PARTNERSHIP WAS NOT FORMED. BE THAT IT MAY BE PRIMA FACIE IT APPEARS THAT THE ASSESSEE WAS OF THE BONA FIDE BELIEF THAT THERE IS NO VIOLATION OF PROVISIONS CONTAINED IN SECTION 269SS IN CASE OF CAPITAL CONTRIBUTION IN CASH BY PARTNER. IN MY VIEW THIS BONA FIDE BELIEF CONSTITUTED REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE I.T. ACT 1961. BOTH THE DEPARTMENTAL AUTHORITIES BELOW REJECTED THIS EXPLANATION OF THE ASSESSEE ON DOUBTS AND SUSP ICION. I AM THEREFORE OF THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 27 1D. THEREFORE THE PENALTY OF RS.1 30 000/- LEVIED BY THE ASSESSING OFFICER AND CONFIRMED BY TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS HEREBY CANCELLED. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11.03.20 11. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED :11/03/2011 5 ITA NO. 3429-AHD-2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED 4) CIT CONCERNED 5) D.R. ITAT AHMEDABAD. TRUE COPY` BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD TALUKDAR/SR.P.S.