M/S. TANU HEALTH CARE LTD, MUMBAI v. THE ADDL CIT RG. 4(3), MUMBAI

ITA 6129/MUM/2007 | 2001-2002
Pronouncement Date: 19-01-2010 | Result: Allowed

Appeal Details

RSA Number 612919914 RSA 2007
Assessee PAN AANCS1383A
Bench Mumbai
Appeal Number ITA 6129/MUM/2007
Duration Of Justice 2 year(s) 3 month(s) 16 day(s)
Appellant M/S. TANU HEALTH CARE LTD, MUMBAI
Respondent THE ADDL CIT RG. 4(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 19-01-2010
Date Of Final Hearing 30-12-2009
Next Hearing Date 30-12-2009
Assessment Year 2001-2002
Appeal Filed On 03-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI. BEFORE SHRI SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMB ER AND SHRI V.D. RAO JUDICIAL MEMBER. I.T.A. NO. 61 29 & 6130/MUM/2007 ASSESSMENT YEAR : 2001-02 M/S TANU HEALTH CARE LTD. ADD L. COMMISSIONER OF 305. KRISHNA-A VISHAL NAGAR VS. INCOME TAX RANGE-4(3) MARVE ROAD MALAD (W) MUM BAI. MUMBAI 400 064. PAN : AANCS 1383A APPELLANT RESPONDENT APPELLANT B Y : SHRI PRADIP KEDIA RESPONDENT BY : SHRI L.K. AGARWAL. O R D E R PER J. SUDHAKAR REDDY A.M. BOTH THESE APPEALS ARE FILED BY THE ASSESSEE DIRE CTED AGAINST THE COMMON ORDER OF THE CIT(APPEALS)-XIV MUMBAI D ATED 24 TH AUGUST 2007 WHEREIN HE CONFIRMED THE LEVY OF PENALTY U/S 271D AS WELL AS U/S 271E OF THE ACT FOR VIOLATIONS OF SECTION 269SS AN D SECTION 269T OF THE INCOME TAX ACT 1961 RESPECTIVELY. 2. FACTS IN BRIEF. THE ASSESSEE IS ENGAGED IN THE MANUFACTURING AND MARKETING OF AYURVEDIC & ALLOPATHIC MEDICINES CHEMICAL RAW MATERIALS SHARES AS WELL AS INTO THE BUSINESS OF FINANCING INVESTMENT AND CONSULTANCY SERVICES. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE AO RECORDED THAT ON GOING THROUGH THE CASH BOOK AND LEDGER OF T HE ASSESSEE IT IS SEEN THAT ON A NUMBER OF OCCASIONS THE ASSESSEE HAS SHO WN RECEIPTS AND 2 REPAYMENTS IN CASH FROM 4 PERSONS INCLUDING A COMP ANY. SHOW CAUSE NOTICE WAS ISSUED AS TO WHY PENALTY U/S 271D AND PE NALTY U/S 271E OF THE ACT SHOULD NOT BE LEVIED AS LOANS WERE ACCEPTED AND ALSO REPAID IN AMOUNTS EXCEEDING RS.20 000/- IN AGGREGATE IN CASH. THE ASSESSEE REPLIED THAT CASH WAS RECEIVED FROM VARIOUS PARTIES AS ADVA NCE ON ACCOUNT OF PURCHASE OF SHARES OF VARIOUS COMPANIES FOR THEM B UT DUE TO PRICE DISAGREEMENT THE SHARES COULD NOT BE BROUGHT FOR T HEM AND HENCE THE MONEY RECEIVED FROM THEM WAS RETURNED TO THEM. THE ASSESSEE CONTENDED THAT THE MONEY RECEIVED WAS NOT IN THE NATURE OF LO AN AND HENCE QUESTION OF APPLICABILITY OF SECTION 269SS OR SECTION 269T D OES NOT ARISE AND THEREFORE THE PENALTY U/S 27D AND 271E CANNOT BE L EVIED. THE AO REJECTED THESE CONTENTIONS AND LEVIED THE PENALTY. THE REASONS RECORDED BY THE AO ARE AS FOLLOWS : I. IN ALL THE FOUR CASES THERE IS NEITHER OPENING BAL ANCE NOR CLOSING BALANCE; II. IN ALL THE FOUR CASES THE ASSESSEE HAS ACCEPTED AM OUNTS IN CASH RANGING UPTO RS.19 500 ON VARIOUS DATES IN APRIL TO JULY 2000. THE FREQUENCY OF RECEIPTS ALSO SUGGEST THAT THEY CA NNOT BE ADVANCES BUT CAN ONLY BE LOANS INTRODUCED BY THE AS SESSEE IN ITS BOOKS OF ACCOUNTS. III. IN ALL THE FOUR CASES THE ASSESSEE HAS REPAID THE AMOUNTS IN CASH RANGING UPTO RS.19 500 ON VARIOUS DATES BUT ONLY I N JANUARY FEBRUARY AND MARCH 2001. THE FREQUENCY OF PAYMENTS SUGGEST THAT THE ASSESSEE IS TRYING TO MEET THE COMMITMENT OF REPAYMENT IN THE YEAR UNDER CONSIDERATION ITSELF; IV. IN THE INTERMITTENT PERIOD (IN AUGUST NOVEMBER DE CEMBER 2000) THE BANK WHICH OBVIOUSLY INCLUDED THE AMOUN TS BORROWED FROM AMIT SINGHAL SHALINI AGARWAL BANKEYAL AGRAWA L AND NEEV FINANCE PVT LTD.. THE DEPOSITS CLEARLY SUGGEST THAT THE ASSESSEE NEEDED THE AMOUNTS TO MEET ITS CERTAIN OTH ER OBLIGATION REQUIRING PAYMENT BY CHEQUE. 3 2.1 THEREAFTER THE AO FURTHER HELD THAT THE ASSES SEE IS NEITHER A BROKER NOR THE SUB-BROKER IN SHARE TRADING BUSINESS AND HENCE COULD NOT ACT ON BEHALF OF THE FOUR PARTIES TO PURCHASE SHARE S. HE HELD THAT IT IS MANDATORY TO BE REGISTERED WITH SEBI AS A BROKER OR SUB BROKER FOR PURCHASE AND SALE OF SHARES ON BEHALF OF ANY CLIENT . HE FURTHER NOTED THAT THE ASSESSEE ACCEPTED CASH IN MARCH APRIL MAY AND JUNE 2000 AND REPAYMENTS WERE MADE FROM JANUARY TO MARCH 2001. 2.2 AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY OBSERVED THAT THE ASSESSE E HAD TAKEN CASH AND DEPOSITED THE SAME WITH THE BANK ACCOUNT WITH HDFC AND LATER THESE AMOUNTS WERE PAID BACK AND ACCOUNTS SQUARED UP. HE REFERRED TO THE STATEMENT OF MR. GIRRAJ AGRAWAL DIRECTOR OF THE CO MPANY THAT THE AMOUNT WAS RECEIVED IN CASH AND DEPOSITED IN THE BA NK ACCOUNT. HE ALLEGED THAT THE ASSESSEE HAD TWISTED ITS STAND BEF ORE THE CIT(APPEALS). HE AGREED WITH THE REASONS GIVEN BY THE AO AND CONF IRMED THE PENALTIES. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE MR. PRADIP KEDIA SUBMITTED THAT THE AO IN THE SHOW CAUSE NOTICE DATE D 30-3-2004 AT PARA 2 STATED THAT CERTAIN INSTANCES HAVE BEEN BROUGHT OUT WHERE THE ASSESSEE HAS ACCEPTED LOANS/ADVANCES. HE CONTENDED THAT THE LOAN S ARE DIFFERENT FROM ADVANCES AND THE AO HIMSELF IS NOT CLEAR AS TO WHET HER IT IS A LOAN OR ADVANCE. AS PER MR. KEDIA THE AO WAS CLEAR THAT WH AT WAS RECEIVED IN CASH BY THE ASSESSEE WAS ONLY AN ADVANCE AND HENCE THERE IS NO VIOLATION OF EITHER THE PROVISIONS OF SECTION 269SS OR THE PR OVISIONS OF SECTION 269T FOR THE PROPOSITION THAT A LOAN OR A DEPOSIT I S DIFFERENT FROM AN ADVANCE RECEIVED. THE LEARNED COUNSEL RELIED ON THE FOLLOWING CASE LAWS : 4 CIT VS. KARAITILAL & OTHERS 270 ITR 445 (P&H). CIT VS. K. SRINIVASAN & OTHERS 50 ITR 788 (MAD.) 3.1 HE FURTHER RELIED ON THE DECISION OF BAIDYANAT H PLASTIC INDUSTRIES (P) LTD. REPORTED IN 230 ITR 522 (DEL.) FOR THE PROPOSITION THAT LOANS ARE DIFFERENT FROM DEPOSITS. HE FURTHER SUBMI TTED THAT IN THE CASE OF CIT VS. RUGMINI RAM RAGHAV SPINNING PVT. LTD. 304 I TR 417 (MAD.) THE HONBLE MADRAS HIGH COURT HELD THAT IF THE INTENTIO N IS TO RECEIVE THE MONEY AS LOAN OR DEPOSIT INTEREST WOULD BE ORDINAR ILY CHARGED. 3.2 MR. PRADIP KEDIA FURTHER SUBMITTED THAT THE MO NEY RECEIVED WAS ADVANCES GIVEN TO THE ASSESSEE FOR PURCHASE OF SHARES HELD BY IT. HE POINTED OUT THAT THE AMOUNT WAS DECLARED AS ADVANCE AGAINST SHARES IN THE BOOKS OF ACCOUNT AND NO INTEREST IS PAYABLE. HE POI NTED OUT THAT THE CBDT IN ITS CIRCULAR NO. 387 DATED 6-7-1984 HELD T HAT PURCHASE/SALE OF SHARES IS NOT COVERED BY LOANS/DEPOSIT U/S 269SS. H E CONTENDED THAT THE STAND OF THE ASSESSEE THAT IT HAD RECEIVED CERTAIN ADVANCES FOR PURCHASE OF SHARES HAS NOT BEEN DISPUTED BY THE AO AND EVEN IN STATEMENT RECORDED U/S 131 FROM SHRI GIRRAJ AGRAWAL NO QUESTION WAS A SKED TO CONTRADICT THIS CLAIM OF THE ASSESSEE. ON THE CONTRARY IN THE SHOW CAUSE NOTICE THE AO AGREED THAT THIS AMOUNT IS AN ADVANCE. ALTERNATI VELY MR. KEDIA SUBMITTED THAT THE ASSESSEE HAD A BONAFIDE BELIEF THAT THIS IS AN ADVANCE RECEIVED AND REPAID AND HENCE THE SAME CAN BE TRANS ACTED IN CASH. HE FURTHER SUBMITTED THAT MERE TECHNICAL BREACH WILL N OT ATTRACT PENALTY IF THE TRANSACTIONS ARE GENUINE AND FOR THIS PROPOSITION H E RELIED ON THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF D ILLY CINE ENTERPRISES (P) LTD. 80 ITD 484 (HYD.). HE FURTHER SUBMITTED TH AT MERE SUSPICION WITHOUT ANY EVIDENCE TO THE CONTRARY ON THE CLAIM OF THE ASSESSEE WITHOUT MAKING ANY ENQUIRIES WITH THE LENDERS DOES NOT AUTHORISE THE AO TO LEVY PENALTY. FOR THE PROPOSITION THAT SUSPICION DOES NOT TAKE THE PLACE 5 OF PROOF HE RELIED ON THE DECISION OF THE DELHI BE NCH OF THE TRIBUNAL IN THE CASE OF U.P. CERAMICS & POTTERIES LTD. VS. DCIT REPORTED IN 52 ITD 334 (DEL.). HE SUBMITTED THAT SECTION 269D CANNOT A PPLY FOR REPAYMENT OF LOANS PRIOR TO 1-6-2002 AND THAT IT DOES NOT APPLY FOR THE ASSESSMENT YEAR 2001-02. HE RELIED ON THE CASE LAW IN MOTILAL SUBO DHKUMAR (2005) 277 ITR 524 (MP) FOR THE PROPOSITION THAT ADVANCE FOR A SHARE TRANSACTION IS NOT A LOAN OR A DEPOSIT. HE RELIED ON THE JUDGEMENT IN THE CASE OF CIT VS. KHARAITILAL & CO. 270 ITR 445 (P&H). 4. THE LEARNED DR. MR. L.K. AGARWAL ON THE OTHER HAND SUBMITTED THAT THE UNDISPUTED FACT IS THAT THE ASSE SSEE HAD RECEIVED THE AMOUNTS IN CASH AND HAS ALSO REPAID THE AMOUNTS IN CASH. HE SUBMITTED THAT THE FREQUENCY OF THE RECEIPTS OF MONEY IN CASH FROM THE FOUR PARTIES SUGGEST THAT THEY CANNOT BE ADVANCED BUT CAN ONLY B E LOANS INTRODUCED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. HE POINTED OU T THAT THE CASH AMOUNT RECEIVED WAS IMMEDIATELY DEPOSITED IN THE BANK ACCO UNT WHICH SUGGEST THAT THE ASSESSEE REQUIRED THE SAME FOR MEETING CER TAIN IMMEDIATE OBLIGATIONS. HE FURTHER SUBMITS THAT THE ASSESSEE I S NEITHER A BROKER NOR A SUB BROKER IN SHARE TRADING BUSINESS AND HENCE THE ASSESSEE IS NOT AUTHORISED TO SELL SHARES. HE SUBMITTED THAT THE AS SESSEE HAS NOT SOLD ANY SHARES NOR HE AUTHORISED TO SELL ANY SHARE. HE SUBM ITTED THAT THE THEORY FLOUTED BY THE ASSESSEE THAT IT HAD RECEIVED ADVAN CES FOR THE PURCHASE IS ONLY AN AFTER THOUGHT. HE POINTED OUT THAT THERE WA S A MARK DEVIATION IN THE ASSESSEES STAND AS POINTED OUT BY THE CIT(APPE ALS). ON THE ISSUE OF SHOW CAUSE NOTICE HE SUBMITTED THAT JUST BECAUSE T HE AO ALTERNATIVELY USED THE TERM LOAN OR ADVANCE IT DOES NOT MAKE T HE NOTICE INVALID. FOR THE SAME HE RELIED ON SECTION 292B. HE SUBMITTED T HAT THE INTENT AND DECISION OF THE AO WAS THAT THIS WAS A LOAN AND AS THE ASSESSEE HAS NOT SHOWN ANY REASONABLE CAUSE PENALTY IN QUESTION WAS RIGHTLY LEVIED AND 6 CONFIRMED. HE FURTHER POINTED OUT THAT THE ASSESSEE HAD NO REASON TO RETURN THE AMOUNTS IN CASH. THUS HE ARGUED THAT THE ORDER OF THE AO AS CONFIRMED BY THE CIT(APPEALS) LEVYING PENALTIES U/ S 271D AND 271E BE CONFIRMED. 5. JOINING THE ISSUE MR. PRADIP KEDIA DREW THE A TTENTION OF THE BENCH TO ANNEXURE A OF THE ASSESSMENT ORDER AND POI NTED OUT THAT THE ASSESSEE DURING THE YEAR HAS ADMITTEDLY DONE A NUMB ER OF TRANSACTIONS OF SALE AND PURCHASE OF SHARES. HE POINTED OUT THAT TH IS PROVES THAT THE ASSESSEE NEED NOT BE REGISTERED AS A BROKER OR A SU B BROKER. HE SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAD STATED WRONG FACTS AND CAME TO A WRONG CONCLUSION THAT THE ASSESSEE HAD TWISTED THE FACTS BEFORE HIM. HE SUBMITTED THAT NO DIFFERENT STANDS WERE TAKEN AND I N FACT THE FACTUAL STATEMENT OF THE ASSESSEE THAT IT HAD RECEIVED CERT AIN ADVANCES FOR THE SALE OF SHARES WAS NOT CONTRADICTED WITH THE EVIDENCE A ND WAS ALSO NOT ENQUIRED INTO BY THE AO. 6. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL O F THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED WE HOLD AS FOLLOWS. 7. THE ASSESSEE HAS BEEN PURCHASING AND SELLING SH ARES IN HUGE QUANTITIES. THIS IS CLEAR FROM ANNEXURE A TO THE ASSESSMENT ORDER. IN FACT THE AO RELIED ON THIS PURCHASE AND SALE OF SHA RES FOR COMING TO A CONCLUSION THAT THE ASSESSEE HAD FAILED TO ESTABLIS H ITS CLAIM OF INVESTMENT IN THE SHARES AND ALSO THAT THE PROVISIONS OF SECTI ON 43(5) WILL APPLY AND THE LOSS CLAIMED BY THE ASSESSEE IS NOTHING BUT A S PECULATION LOSS. ON THE FACE OF THESE FINDINGS THE AO AS WELL AS THE CIT(A PPEALS) IN OUR HUMBLE OPINION HAVE WRONGLY CONCLUDED THAT THE ASSESSEE C OULD NOT PURCHASE OR 7 SELL SHARES UNLESS IT IS REGISTERED AS A SHARE BRO KER OR SUB BROKER. NO REGISTRATION IS REQUIRED TO SELL ONES OWN SHARE. 8. BE IT AS MAY THE ASSESSEE HAS STATED BEFORE TH E AO BOTH DURING THE ASSESSMENT PROCEEDINGS AS WELL AS IN THE PENALTY PROCEEDINGS THAT THE AMOUNTS IN QUESTION WERE RECEIVED FROM FOU R PARTIES AS ADVANCES FOR THE PURCHASE OF SHARES OF VARIOUS COMPANIES. NE ITHER THE AO NOR THE ADDL. COMMISSIONER OF INCOME TAX WHO LEVIED THE PE NALTY U/S 271D CHOSE TO CONDUCT ANY INVESTIGATION WHATSOEVER TO P ROVE THAT THIS CLAIM OF THE ASSESSEE IS FALSE. THE DIRECTOR OF THE ASSESSEE COMPANY MR. GIRRAJ KISHORE AGRAWAL WAS EXAMINED U/S 131 OF THE I.T. AC T ON 23-3-2004 AND THE NUMBER OF QUESTIONS WERE ASKED ON THE DETAILS O F SHARES ACQUIRED AND SOLD. IT IS SURPRISING THAT NO QUESTION WAS ASKED R EGARDING THE TRANSACTIONS FROM THE FOUR PARTIES. IN CASE THE REVENUE WANTED T O DISPUTE THE FACTUAL POSITION AS STATED BY THE ASSESSEE THE MINIMUM REQ UIREMENT WAS TO PUT THE ISSUE TO THE ASSESSEE. THIS HAS NOT BEEN DONE. THE FOUR PARTIES HAVE NOT BEEN EXAMINED. ON THE OTHER HAND THE ASSESSEE FILED CONFIRMATION LETTERS FROM ALL THE FOUR PARTIES. THESE PARTIES FR OM WHOM THE ASSESSEE HAD RECEIVED CERTAIN ADVANCES CONFIRMED TO THE AO THAT THEY HAVE GIVEN THIS MONEY AS ADVANCE FOR THE PURCHASE OF SHARES. I F THESE CONFIRMATIONS HAVE TO BE REJECTED THE REVENUE SHOULD HAVE COLLEC TED EVIDENCES OR AT LEAST INVESTIGATED THE MATTER. NO SUCH EXERCISE HAS BEEN DONE. IN THE SHOW CAUSE NOTICE THE ADDL. COMMISSIONER OF INCOME TAX I S NOT CLEAR WHETHER THE ASSESSEE HAS ACCEPTED THE LOAN OR AN ADVANCE. T HE TWO TERMS LOAN AND ADVANCE ARE NOT THE SAME AND CONNOTE DIFFERENT NAT URE OF TRANSACTIONS. THE AMOUNT RECEIVED AS AN ADVANCE FOR THE PURCHASE OF SHARES AND DECLARED AS SUCH IN THE BOOKS OF ACCOUNT IS DIFFERE NT FROM A LOAN TRANSACTION. THIRD PARTY EVIDENCES CANNOT BE REJECT ED WITHOUT VERIFICATION OR FURTHER ENQUIRY. MERE REJECTION OF SUBMISSIONS M ADE BY THE ASSESSEE 8 AND THIRD PARTY EVIDENCES PRODUCED BY HIM DOES NOT AUTHORISE EITHER THE AO OR THE ADDL. COMMISSIONER OF INCOME TO COME TO A CONCLUSION THAT THE EXPLANATION IS NOT GENUINE OR FACTUALLY INCORRE CT. ON THESE FACTS WE ARE OF THE OPINION THAT THE CONCLUSION DRAWN BOTH B Y THE AO AS WELL AS BY THE CIT(APPEALS) IS BASED ON SURMISES AND CONJECTUR ES. THUS WE SET ASIDE THEIR ORDERS. THE EXPLANATION GIVEN BY THE ASSESSEE THAT THESE AMOUNTS WERE RECEIVED AS ADVANCE FOR PURCHASE OF SHARES IS NOT TO BE REJECTED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. AS ADVANCES ARE DIFFERENT FROM LOANS OR DEPOSITS IN OUR HUMBLE OPINION THE PENALTIES IN QUESTION CANNOT BE LEVIED AND HENCE HAVE TO BE CANCELLED. 9. WE ALSO FIND THAT THE SHOW CAUSE NOTICE ISSUED BY THE ADDL. COMMISSIONER OF INCOME TAX IS DATED 30-3-2004 AND T HE PENALTY WAS LEVIED ON 16-10-2006. AS PER SECTION 275(1)(C) ORD ER IMPOSING PENALTY SHALL HAVE TO BE PASSED IN THE FINANCIAL YEAR IN WH ICH THE PROCEEDINGS IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALT Y HAS BEEN INITIATED ARE COMPLETED OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ACTION FOR IMPOSITION OF PENALTY IS INITIATED WHICHEVER P ERIOD EXPIRES LATER. AS THE PENALTY HAS BEEN INITIATED ON 30 TH MARCH 2005 AND WHEREAS THE PENALTIES HAVE BEEN LEVIED ON 16-10-2006 IN OUR HU MBLE OPINION THE PENALTIES ARE BARRED BY LIMITATION. EVEN OTHERWISE AS ALREADY STATED AS THE AMOUNT WAS RECEIVED AS AN ADVANCE FOR THE PURCHASE OF SHARES IT IS NEITHER LOAN NOR A DEPOSIT WHICH ATTRACTS THE PROVI SIONS OF SECTION 269SS OR SECTION 269T OF THE ACT AND NO PENALTY CAN BE L EVIED. 9 10. IN THE RESULT BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED AND THE PENALTIES LEVIED U/S 271D AND 271E ARE HEREBY Q UASHED. ORDER PRONOUNCED ON THIS 19 TH DAY OF JANUARY 2010. SD/- SD/- (V.D. RAO) (J. SUDHAKARY REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI DATED : 19 TH JANUARY 2010. WAKODE COPY FORWARDED TO : 1. APPLICANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR J-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES