M/s. Suresh & Co.,, Bharuch v. The Income tax Officer,Ward-1,, Bharuch

ITA 4011/AHD/2008 | 2004-2005
Pronouncement Date: 10-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 401120514 RSA 2008
Assessee PAN AAKFS6628Q
Bench Ahmedabad
Appeal Number ITA 4011/AHD/2008
Duration Of Justice 3 year(s) 1 month(s) 30 day(s)
Appellant M/s. Suresh & Co.,, Bharuch
Respondent The Income tax Officer,Ward-1,, Bharuch
Appeal Type Income Tax Appeal
Pronouncement Date 10-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 10-02-2012
Date Of Final Hearing 12-01-2012
Next Hearing Date 12-01-2012
Assessment Year 2004-2005
Appeal Filed On 11-12-2008
Judgment Text
ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH A HMEDABAD (BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI A. L. GEHLOT AM) I.T.A. NO. 4 011/AHD/2008 (ASSESSMENT YEAR: 2004-05 ) M/S. SURESH & CO. A/2 YOGESHWAR COMPLEX BHARUCH. (APPELLANT) VS. INCOME TAX OFFICER WARD-1 BHARUCH. (RESPONDENT) PAN: AAKFS 6628Q ON BEHALF OF THE ASSESSEE : MR. M. K. PATEL ON BEHALF OF THE REVENUE : MR.G.S. SOURYAWANSHI SR. DR ( )/ ORDER DATE OF HEARING : 12-1-2012 DATE OF PRONOUNCEMENT : 10-2-2012 PER: SHRI A.L. GEHLOT ACCOUNTANT MEMBER. THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. CIT (A)-VI BARODA DATED 14-10-2008 FOR THE ASSESSMENT YEAR 200 4-05. 2. THE EFFECTIVE GROUND RAISED IN ASSESSEES APPEAL PERTAINS TO LEVY OF PENALTY OF RS.60 86 700/- UNDER SECTION 271D OF THE ACT. 3. THE BRIEF FACTS OF THE CASE THAT THE AO AFTER E XAMINING DETAILS LEVIED PENALTY OF RS.60 86 700/- U/S. 271D OF THE ACT AS A SSESSEE ACCEPTED CERTAIN AMOUNTS OF LOANS/DEPOSITS IN CONTRAVENTION OF PROVI SIONS OF SECTION 269SS OF THE ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 2 ACT. THE DETAILS OF SUCH LOAN/DEPOSITS GIVEN BY THE AO IN PENALTY ORDER ARE AT PAGES 2 TO 6. 4. THE CIT (A) DECIDED THE MATTER AFTER CONSIDERING ASSESSEES SUBMISSIONS AND REMAND REPORT OF THE AO WHERE IN THE AO HIMSELF ACC EPTED ASSESSEES EXPLANATION FOR RS 37 72 700/- AND FOR BALANCE AMOUNT THE AO SU BMITTED THAT BALANCE AMOUNT RS23 14 000/-WAS PARTLY USED FOR THE PURPOSE OF BUS INESS. FINALLY THE CIT (A) DECIDED MATTER AS UNDER:- CONSIDERING THE FACTS AND CIRCUMSTANCES AND ALSO THE FACT THAT THE ASSESSEES ARGUMENTS RELATING TO REASONABLE CAUSE OF BUSINESS EXPEDIENCY ARE ONLY PARTLY ACCEPTABLE I AM INCLINED TO AGREE WITH THE ALTERNA TIVE CONTENTION OF THE ASSESSEE THAT THE PENALTY BE LEVIED ONLY IN RESPECT OF THE P EACK CREDIT OF LOANS RAISED FROM THE 3 SHROFFS WHICH AMOUNTS TO RS.16 98 415/-. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND PERUSED RECORDS. LET US SEE THE RELEVANT STATUTORY STATUS OF PROVISI ONS AND THE SCHEME OF THE ACT. CHAPTER XX-B PROVIDES REQUIREMENTS TO MODE OF ACCEP TANCE PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX. SECTION 269SS PROVIDES THAT NO PERSON SHALL AFTER THE 30TH DAY OF JUNE 1 984 TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN AC COUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGR EGATE AMOUNT OF SUCH LOAN AND DEPOSIT ; OR (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN O R DEPOSIT ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH PERSON FR OM THE DEPOSITOR IS REMAINING ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 3 UNPAID (WHETHER REPAYMENT HAS FALLEN DUE OR NOT) T HE 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 REFERRED TO IN CLAUSE (B) IS [TWENTY] THOUSAND RUPEES OR MORE : PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED FROM OR ANY LOAN OR DEPOSIT TAKE N OR ACCEPTED BY (A)GOVERNMENT ; (B) ANY BANKING COMPANY POST OFFIC E SAVINGS BANK OR CO- OPERATIVE BANK ; (C) ANY CORPORATION ESTABLISHED BY A CENTRAL STATE OR PROVINCIAL ACT ; (D) ANY GOVERNMENT COMPANY38 AS DE FINED IN SECTION 617 OF THE COMPANIES ACT 1956 (1 OF 1956) ;(E) SUCH OTHER INSTITUTION ASSOCIATION OR BODY OR CLASS OF INSTITUTIONS ASSOCIATIONS OR BODI ES WHICH THE CENTRAL GOVERNMENT MAY FOR REASONS TO BE RECORDED IN WRITING NOTIFY3 9 IN THIS BEHALF IN THE OFFICIAL GAZETTE [PROVIDED FURTHER THAT THE PROVISIONS OF TH IS SECTION SHALL NOT APPLY TO ANY LOAN OR DEPOSIT WHERE THE PERSON FROM WHOM THE LOAN OR DEPOSIT IS TAKEN OR ACCEPTED AND THE PERSON BY WHOM THE LOAN OR DEPOSIT IS TAKEN OR ACCEPTED ARE BOTH HAVING AGRICULTURAL INCOME AND NEITHER OF THEM HAS ANY INCOME CHARGEABLE TO TAX UNDER THIS ACT. THE MEANING OF LOAN AND DEPOSIT HAS BEEN IN EXPLAINED IN IN THE EXPLANATION IN THE EXPLANATION LOAN OR DEPOSIT MEAN S LOAN OR DEPOSIT OF MONEY. 5.1 SIMILARLY IN SECTION 269T PROVIDES THAT NO BRANCH OF A BANKING COMPANY OR A CO-OPERATIVE BANK AND NO OTHER COMPANY OR CO-OPER ATIVE SOCIETY AND NO FIRM OR OTHER PERSON SHALL REPAY ANY LOAN OR DEPOSIT MADE W ITH IT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT DR AWN IN THE NAME OF THE PERSON WHO HAS MADE THE LOAN OR DEPOSIT IF ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 4 (A) THE AMOUNT OF THE LOAN OR DEPOSIT TOGETHER WI TH THE INTEREST IF ANY PAYABLE THEREON OR (B) THE AGGREGATE AMOUNT OF THE LOANS OR DEPOSITS HELD BY SUCH PERSON WITH THE BRANCH OF THE BANKING COMPANY OR CO-OPERATIVE BANK OR AS THE CASE MAY BE THE OTHER COMPANY OR CO-OPERATIVE SOCIETY OR TH E FIRM OR OTHER PERSON EITHER IN HIS OWN NAME OR JOINTLY WITH ANY OTHER PE RSON ON THE DATE OF SUCH REPAYMENT TOGETHER WITH THE INTEREST IF ANY PAYAB LE ON SUCH LOANS OR DEPOSITS IS TWENTY THOUSAND RUPEES OR MORE. THE SECTION SHALL NOT APPLY TO REPAYMENT OF ANY LO AN OR DEPOSIT TAKEN OR ACCEPTED FROM (I) GOVERNMENT;(II) ANY BANKING COMPANY POST OFFIC E SAVINGS BANK OR CO- OPERATIVE BANK;(III) ANY CORPORATION ESTABLISHED BY A CENTRAL STATE OR PROVINCIAL ACT; (IV) ANY GOVERNMENT COMPANY45 AS DEFINED IN SE CTION 617 OF THE COMPANIES ACT 1956 (1 OF 1956); (V) SUCH OTHER INS TITUTION ASSOCIATION OR BODY OR CLASS OF INSTITUTIONS ASSOCIATIONS OR BODI ES WHICH THE CENTRAL GOVERNMENT MAY FOR REASONS TO BE RECORDED IN WRITING NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE. FOR THE PURPOSES OF THIS SECTION 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 FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269TPENALTY IS PROVIDED IN SECTION 271E. IF A PERSON REPAYS ANY [LOAN OR] DEPO SIT REFERRED TO IN SECTION 269T OTHERWISE THAN IN ACCORDANCE WITH THE PROVISIONS OF THAT SECTION HE SHALL BE LIABLE TO PAY BY WAY OF PENALTY A SUM EQUAL TO THE AMOUN T OF THE [LOAN OR] DEPOSIT SO REPAID.]. SIMILARLY PENALTY FOR FAILURE TO COMPLY W ITH THE PROVISIONS OF SECTION 269SS PROVIDED IN SECTION271D. [(1)] IF A PERSON TA KES OR ACCEPTS ANY LOAN OR DEPOSIT IN CONTRAVENTION OF THE PROVISIONS OF SECTI ON 269SS HE SHALL BE LIABLE TO ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 5 PAY BY WAY OF PENALTY A SUM EQUAL TO THE AMOUNT O F THE LOAN OR DEPOSIT SO TAKEN OR ACCEPT-TED. 5.3 IN THE CASE UNDER CONSIDERATION WE NOTICE D THAT A DETAILS OF SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF PROCEEDINGS WHERE IN IT WERE STATED THAT THE ASSESSEE ARE DOING CONST RUCTION AND ROAD CONSTRUCTION WORK OF CORPORATE BODIES AND GOVERNMENT; SEMI GOVER NMENT ORGANIZATION. ASSESSEES CUSTOMERS OFFER WORK BY TENDER OR QUOTAT ION AND THE WORK IS ASSIGNED TO LOWEST BIDDER. THE ASSESSEE HAS TO COMPLETE THE WOR K IN SCHEDULE TIME. HENCE THE ASSESSEE REQUIRED SOURCE OF FINANCE. BUT ASSESSEES CUSTOMERS ARE MAKING PAYMENT LATE DUE TO THEIR OWN FORMALITIES. MOREOVER HIS CLI ENTS ARE DEDUCTING RETENTION MONEY MARGIN MONEY ETC. FROM HIS RUNNING BILL PAYM ENT. HENCE THE ASSESSEE IS IN TIGHT FINANCIAL POSITION. SO HE HAS TO RUN HIS BUSI NESS HE HAS TO DISCOUNT OUR CHEQUE WITH SHROFF AND ARRANGE THEIR BUSINESS. IN THE TRAN SACTIONS THE ASSESSEE HAS GIVEN THE CHEQUE TO THE SHROFF INCONSIDERATION OF CASH. T HE TRANSACTION IS THAT OF PURCHASE OF CHEQUE. ( A NEGOTIABLE INSTRUMENT AS ACTIONABL E CLAIM AN ASSETS) BY SHROFF IN CONSIDERATION OF CASH . THE TRANSACTION IS NOT A TR ANSACTION OF ACCEPTING OR PAYMENT OF LOAN. IT IS A TRANSACTION OF PURCHASE AND SALE. ISSUANCE OF CHEQUES BY THE ASSESSEE IS EVIDENCE FROM THE BANK STATEMENT WHICH CLEARLY SHOWS THE ENTRIES FOR THE CHEQUES ISSUED TO THE SHROFF. THE AO HAS NOT CO NSIDERED SOME VITAL ASPECTS OF THE TRANSACTION TO BE TERMED AS LOAN. IF ANY AMOUNT MUST BE CONSIDERED AS A LOAN THERE HAS TO BE SOME DEBT. ALSO MERELY INDEBTEDNESS CLOSE NOT IMPLIED LOAN BUT TO CONSIDER ANY AMOUNT AS LOAN THE AMOUNT MUST BE IN DEBITED TO THE OTHER PARTY. THE APPELLANT HAS EXCHANGED CHEQUE WITH THE SHROFF IN L IEU OF CASH. ON THE DAY OF TRANSACTION BOTH THE PARTIES PERFORM THERE PART OF CONSIDERATION I.E. THE ASSESSEE GIVES CHEQUE TO THE SHROFF AND THE SHROFF GIVES MON EY TO THE APPELLANT. HENCE THERE IS NO LIABILITY OF ANY OF THE PARTY SINCE THE EXCHANGE COMPLETE. THE CHEQUE IS ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 6 AN EXCHANGEABLE CLAIM I.E. ASSETS. WHEN TWO ASSETS HAVE BEEN EXCHANGED IN CONSIDERATION OF EACH OTHER THE TRANSACTION IS COM PLETE ON THAT MOMENT ONLY. WHERE AS IN TRANSACTION OF LOAN THE LENDER PERFOR MS ITS PART ON THE FIRST DAY GIVING MONEY TO THE BORROWER WHEREAS THE BORROWER PERFORM S HIS PART ON A LATER DATE BY REPAYING THE SAID AMOUNTS. IN THE INSTANT CASE BOT H THE PARTIES HAVE PERFORMED THEIR PART OF CONSIDERATION ON THE SAME DAY. HENCE NO LIABILITY IS INCURRED BY ANY OF THE PARTY. ON THE DAY OF EXCHANGE THERE EXISTS NO L IABILITY (LOAN) FROM EITHER PARTY TO THE OTHER. THE LIABILITY IF ANY EXIST ON THE DA Y OF TRANSACTION IS THE LIABILITY OF ASSESSEE TOWARDS THE BANKER TO KEEP SUFFICIENT BALA NCE WITH HIM SO AS TO ENABLE HIM TO HONOR THE CHEQUE THAT HE HAS ISSUED. THERE I S NO LIABILITY OF THE ASSESSEE TOWARDS THE SHROFF AS HE HAS PERFORMED HIS PART OF CONSIDERATION. IN ABSENCE OF ANY LIABILITY THE QUESTION OF LOAN DOES NOT ARISE AT A LL. IT MAY BE NOTED THAT THE AO HAS FAILED TO DISTINGUISH BETWEEN CHEQUES GIVEN AS SECU RITY AND CHEQUES GIVEN AS CONSIDERATION OF TRANSACTION. THE AMOUNT RECEIVED H AVE BEEN TREATED AS LOAN BY YOUR OFFICE PRESUMING THAT THE CHEQUES ARE ONLY SEC URITY OF THE AMOUNTS PAID BY THE SHROFF TO THE APPELLANT AND CONSIDERATION IS YET TO BE PAID BY THE ASSESSEE. THE AO HAS OBSERVED THE ABOVE ON THE BASIS OF CHEQUE DISCO UNT PAID BY THE ASSESSEE TO THE SHROFF. HOWEVER AS CONSIDERATION OF THE MONEY RECE IVED. THUS THE AMOUNT WAS CONSIDERATION BY AO AS LOAN BECAUSE OF INCORRECT UN DERSTANDING OF THE FACTUAL POSITION. 5.4 AFTER CONSIDERING NATURE OF TRANSACTIONS WE AGREE WITH VIEW OF THE AO THAT NATURE OF TRANSITIONS ARE LOANS AND DEPOSITS IN IN THE LIGHT OF SECTION 269SS OF THE ACT. HOWEVER IN PRINCIPLE WE DO NOT AGREE WITH CIT (A) ALSO THAT PENALTY UNDER SECTION CAN BE LEVIED ON PEAK AMOUNT OF THE CASH DE POSIT. THEREFORE THE ISSUE TO BE EXAMINED IN THE CASE UNDER CONSIDERATION WHETHER PE NALTY UNDER SECTION 271 D IS LEVIABLE WHEN ASSESSEE WAS HAVING REASONABLE CAUSE. WE NOTICED THAT WHILE ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 7 INTRODUCING SECTION 269SS SECTION 273B WAS ALSO IN CORPORATED IN THE STATUTE WHICH PROVIDES THAT NO PENALTY SHALL BE IMPOSABLE ON A PE RSON OR AN ASSESSEE AS THE CASE MAY BE FOR ANY FAILURE REFERRED TO IN THE SAID PRO VISION IF THE ASSESSEE PROVES THAT THERE WAS A REASONABLE CAUSE FOR SUCH FAILURE. IN O THER WORDS PENALTY IS NOT AUTOMATIC UNDER SECTION 271D ON MERE VIOLATIONS OF PROVISIONS OF SECTION 269SS/269T. THE WORDS REASONABLE CAUSE HAVE NOT B EEN DEFINED UNDER THE ACT BUT THEY COULD RECEIVE THE SAME INTERPRETATION WHIC H IS GIVEN TO THE EXPRESSION SUFFICIENT CAUSE. THEREFORE IN THE CONTEXT OF TH E PENALTY PROVISIONS THE WORDS REASONABLE CAUSE WOULD MEAN A CAUSE WHICH IS BEYO ND THE CONTROL OF THE ASSESSEE. REASONABLE CAUSE OBVIOUSLY MEANS A CAUS E WHICH PREVENTS A REASONABLE MAN OF ORDINARY PRUDENCE ACTING UNDER NORMAL CIRCUM STANCES WITHOUT NEGLIGENCE OR INACTION OR WANT OF BONA FIDES. BEFORE IMPOSITIO N OF PENALTY UNDER THESE SECTIONS THE ASSESSING OFFICER MUST BE SATISFIED NOT ARBITRARILY BUT JUDICIOUSLY THAT THE ASSESSEE HAS WITHOUT REASONABLE CAUSE FAIL ED TO COMPLY WITH THE PROVISIONS. WHILE CONSIDERING REASONABLE ONE SHOULD KEEP IN MIN D COMMERCIAL EXPEDIENCY AND OBJECT OF THE SECTION FOR WHICH IT WAS INSERTED . IT IS TO SEE WHETHER THE TRANSACTION IS IN ACCORDANCE WITH COMMERCIAL EXPEDI ENCY. THUS SUCH CASES ARE REQUIRED TO DECIDE CONSIDERING FACTS OF THE RELEVAN T CASE. THEREFORE THE CASES ON WHICH RELIED UPON THE PARTIES DO NOT HELP THEM. IF WE SEE THE FACTS OF THE CASE UNDER CONSIDERATION IN CONSOLIDATED WAY WE NOTICED THAT T HE ASSESSEE HAS DEMONSTRATED THE FUNDS WERE ARRANGED IN CASH ON URGENT REQUIREME NT OF THE BUSINESS WHICH IS IN ACCORDANCE WITH COMMERCIAL EXPEDIENCY OF ASSESSEES BUSINESS. THE ASSESSEE FILED DETAILS OF TRANSACTIONS OF WHICH COPIES HAVE BEEN P LACED AT PAGE NO22 TO 30 OF THE PAPER BOOK. IT HAS BEEN NOTICED FROM THE SAID DETAI LS THAT THE FUNDS WERE UTILIZED IMITATIVELY FOR THE PURPOSE OF BUSINESS WITHIN REAS ONABLE PERIOD. BUT WE NOTICED THAT ONE OF THE TRANSACTION DATED 25.11.2003 IS FOR 114 DAYS AND ASSESSEE HAS FILED EXPLAIN THAT THE SAID CASH TRANSACTION WAS IN ACCO RDANCE WITH COMMERCIAL ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 8 EXPEDIENCY TO HOLD THAT THERE WAS REASONABLE CAUSE WE THEREFORE PENALTY ON THIS TRANSACTION OF RS 355000/- IS CONFIRMED AND FOR BAL ANCE AMOUNT ON WHICH THE AO LEVIED PENALTY IS CANCELLED. THE AO IS DIRECTED ACC ORDINGLY. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 10 - 2 - 2012. SD/- SD/- (G. C. GUPTA) (A.L. GEHLOT) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-VI BARODA. 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD. ITA NO.4011/AHD/2008 ASSESSMENT YEAR 2004-05 9 1.DATE OF DICTATION 6 - 2 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 8 / 2 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 8 - 2 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 10 - 2 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 10 - 2 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..