The Addl.CIT.,B.K.Range,, Palanpur v. M/s. Jain Trading Co.,, Deesa

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH JM AND D.C.AGRAWAL AM ADDL. CIT B.K. RANGE PALANPUR. VS. M/S JAIN TRADING CO. TIRUPATI COMPLEX. OPP. NYAYMANDIR DEESA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K. MADHUSUDAN SR.DR RESPONDENT BY:- SHRI N. C. AMIN AR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THE REVENUE HAS RAISED FOLLOWING GROUND IN ITS APP EAL :- (1) THE LD. CIT(A)-XV AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DIRECTING TO DELETE PENALTY OF RS.39 23 000/- LE VIED U/S 271D OF THE I.T. ACT. WHEREAS ASSESSEE HAS FILED THE CROSS OBJECTION IN S UPPORT OF THE ORDER OF LD. CIT(A). 2. THE FACTS OF THE CASE ARE THAT ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. DURING THE YEAR UND ER CONSIDERATION ASSESSEE BUILT SHOPPING CENTRE FOR SALE OF SHOPS. D URING THE COURSE OF BUSINESS ASSESSEE RECEIVED A SUM OF 39 23 000/- FRO M VARIOUS PERSONS FOR PURCHASE OF SHOPS. ALL THESE AMOUNTS WERE RECEIVED IN CASH AND EACH AMOUNT TAKEN FROM THEM EXCEEDED RS.20 000/-. THE AO ACCORDINGLY ITA NO.637/AHD/2009 ALONG WITH CO NO.55/AHD/2009 ASST. YEAR 2005-06 ITA NO.637/AHD/2009 ALONG WITH CO NO.55/AHD/2009 ASST. YEAR 2005-06 2 THOUGHT THAT IT IS A VIOLATION OF SECTION 269SS AND THEREFORE HE INITIATED PENALTY PROCEEDINGS UNDER SECTION 271D. IN RESPONSE TO SHOW CAUSE NOTICE DATED 28.12.2007 ASSESSEE FILED A REPLY DATE D 24.3.2008 AS UNDER :- WE ARE DOING OUR BUSINESS AT BECHARAJI. ALSO WE AC CEPT ADVANCE PAYMENT OF SHROFF FROM AGRICULTURISTS WHO HAD NO AN Y BANK ACCOUNT IN BECHARAJI. ALSO ALL AGRICULTURISTS LIVE IN A SMALL VILLAGE NEAR ABOUT BECHARAJI. IN THE SMALL VILLAGE NO ANY BANK FACILIT IES IN THEIR RESIDENT PLACES. ALSO THEY ARE DOING AGRICULTURAL WORK A CO PY OF 7/12 ATTACHED HEREWITH. THEY ALSO NOT EDUCATED PERSONS SO DO NOT MAINTAIN THEIR BANK ACCOUNT IN VILLAGE OF BECHARAJI AND THEREFORE NOT O PEN THEIR BANK ACCOUNT. AS PER ABOVE CIRCUMSTANCES WE ACCEPT ADVANCE PAYMEN T OF SHOP IN CASH FORM AGRICULTURIST WHO HAD NO ANY BANK ACCOUNT WAS REASONABLE CAUSE TO ACCEPT AMOUNT IN CASH AND NOT BECAME A BREACH OF SE CTION 269SS. AT THE TIME OF OUR ASSESSMENT PROCEEDINGS U/S 143(3) OF TH E INCOME-TAX ACT 1961 I HAVE PRODUCED THEIR REPLY OF ACCEPT THE ADVA NCE PAYMENTS. ALSO WE HAVE NOT GIVEN ANY INTEREST ON THAT AMOUNT OF AD VANCE PAYMENT RECEIVED FROM AGRICULTURIST. AS PER ABOVE MY CONTENTION I RELY UPON THE FOLLOWIN G JUDGMENTS AS PER MENTIONED UNDER :- CIT VS. KUNDRATHUR FINANCE AND CHIT CO.(2006) 283 I TR 329 (MAD) CIT VS. KASI CREDIT CORPORATION AND ANOTHER (2006) 280 ITR 129 (MAD) CIT VS. SAINI MEDICAL STORES (2005) 277 ITR 420 (P& H) CIT VS. SAINI MEDICAL STORES (2005) 276 ITR 79 (P & H) THE AO WAS NOT SATISFIED. HE LEVIED THE PENALTY ON THE GROUND THAT ALTHOUGH ALL THESE PERSONS HAD DEPOSITED THE SUM IN CASH BUT THEY HAD COME TO TAKE THE SHOPS AT BECHARAJI WHERE BANKING F ACILITIES ARE AVAILABLE. THUS THERE WAS NO PROBLEM FOR THESE PERSONS TO OPEN BANK ACCOUNT AND DO THE TRANSACTIONS THROUGH BANKING CHANNELS AND FURTH ER ASSESSEE COULD HAVE ALSO INSISTED THAT HE WILL NOT ACCEPT THE DEPO SITS WITHOUT ACCOUNT PAYEE CHEQUES. ACCORDINGLY THE AO LEVIED THE PENAL TY UNDER SEC.271D. ITA NO.637/AHD/2009 ALONG WITH CO NO.55/AHD/2009 ASST. YEAR 2005-06 3 3. THE LD. CIT(A) CANCELLED THE PENALTY HOLDING THA T CASE OF THE ASSESSEE IS DIRECTLY COVERED BY THE DECISION OF HON . JHARKHAND HIGH COURT IN OMEC ENGINEERS VS. CIT (2008) 217 CTR (JHA RKHAND) 144 AND THAT OF HON. MADRAS HIGH COURT IN THE CASE OF CIT V S. JAYASAKTHI BENEFIT FUND LTD. 303 ITR 29 (MAD). SHE CANCELLED THE PENAL TY BY HOLDING AS UNDER :- 4 AFTER GOING THROUGH RIVAL SUBMISSIONS FOLLOWIN G POINTS EMERGE : (A) THE 91 DEPOSITORS WHO ARE FARMERS ARE LOCATED IN VA RIOUS VILLAGES OF DIFFERENT TALUKAS LIKE BECHRAJI MEHSAN A CHANASMA MANDAL. NONE OF THE VILLAGES CHADASNA DELOLI UDH ROJ MARTOLI DETHALI DHANPURA MITHI DHARIYAL MANIYAR I MAGUNA RANASNA ETC. HAVE ANY BANKING FACILITIES IS NOT DISPUTED BY THE AO. THOUGH THERE ARE BANKING FACILI TIES AT BECHRAJI BUT CERTAINLY NONE AT THE VILLAGES WHERE T HE 91 FARMERS ARE BASED. (B) THE GENUINENESS OF 91 DEPOSITORS THEY BEING AGRICULTURISTS/FARMERS LOCATED IN VILLAGES IS NOT D OUBTED BY THE AO SEVERAL OF WHOM APPEARED BEFORE THE AO AND CONFI RMED THIS. JHARKHAND HIGH COURT DECISION -217 CTR 144 CITED BY THE APPELLANT SUPPORTS THE CASE OF THE APPELLANT WHERE IT WAS HELD THAT PENALTY U/S 271D WAS NOT JUSTIFIED BECAUSE THE ASSESSEES RETURN WAS ACCEPTED U/S 143(3) AFTER SCRUTINY THER E WAS ALSO NO FINDING THAT TRANSACTIONS WERE MALAFIDE AIMED AT DI SCLOSING CONCEALED MONEY AND HIGH COURT FOUND TECHNICAL LAPS E OF ACCEPTING CASH DEPOSITS NOT GROUND ENOUGH FOR PENAL TY. (C) THE CASE OF THE APPELLANT IS ALS O DIRECTLY COVERED BY MADRAS HIGH COURT DECISION IN THE CASE OF CIT VS. JAYASAKT HI BENEFIT FUND LTD. (MADRAS) 303 ITR 29 WHERE THE ASSESSEE RA N A BENEFIT FUND AND DID FINANCE BUSINESS. THE AO INITIATED PEN ALTY PROCEEDINGS U/S 271-D ON THE PREMISE THAT THE ASSES SEE HAD VIOLATED THE PROVISIONS OF SECTION 269SS WHILE TAK ING OR ACCEPTING LOANS OR DEPOSITS EXCEEDING RS.20 000/- F ROM VARIOUS PERSONS OTHERWISE THAN BY ACCOUNT PAYEE CHEQUES OF ACCOUNT PAYEE DRAFTS. THE ASSESSEE SUBMITTED DETAILS TO WHO THAT THE DEPOSITORS WERE AGRICULTURISTS AND HAD MADE THE DEP OSITS FROM ITA NO.637/AHD/2009 ALONG WITH CO NO.55/AHD/2009 ASST. YEAR 2005-06 4 OUT OF THEIR SAVINGS FROM AGRICULTURAL INCOME AND F URTHER STATED THAT NONE OF THE PERSONS FROM WHOM THE DEPOSITS WER E RECEIVED IN CASH HAD BANK ACCOUNTS. THAT WAS CONFIRMED BY THE D EPOSITORS CONSIDERED. THE AO IMPOSED PENALTY BUT THE CIT(A) CANCELLED THE PENALTY AND THIS WAS UPHELD BY THE TRIBUNAL MAD RAS HIGH COURT FOUND THE CANCELLATION OF PENALTY JUSTIFIED. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THERE IS NO CASE FOR INTERFERENCE IN THE OR DER OF LD. CIT(A). THE REASONS ARE THAT UNDISPUTED FACTS ARE THAT ASSESSEE HAS NOT ACCEPTED THE DEPOSITS FOR THE PURPOSE OF EARNING INTEREST BUT FO R THE PURPOSE OF SELLING SHOPS AND ULTIMATELY SHOPS HAVE BEEN SOLD TO ALL TH OSE PERSONS FROM WHOM MONEY WAS RECEIVED. ONCE IT IS A BUSINESS TRAN SACTION THEN THE PAYMENT OF CASH TO THE ASSESSEE CANNOT BE COVERED W ITHIN THE DEFINITION OF DEPOSITS AS MENTIONED IN SECTION 269SS. HON. ALLAHA BAD HIGH COURT IN CIT & ANR. VS. KAILASH CHANDRA DEEPAK KUMAR (2009) 317 ITR 351 (ALL) HELD THAT WHERE AMOUNTS ARE RECEIVED TOWARDS FUTURE SUPPLY OF GOODS THEN PROVISIONS OF SECTION 269SS ARE NOT APPL ICABLE. THE SHOPS ARE STOCK IN TRADE OF THE ASSESSEE WHICH WERE SOLD TO T HOSE DEPOSITORS WHICH FACT IS NOT DISPUTED BY THE AO ONCE DEPOSITS ARE AD JUSTED AGAINST SALE OF SHOPS THEN CLEARLY PROVISIONS OF SECTION 269SS WOUL D NOT BE APPLICABLE. HON. MADRAS HIGH COURT IN CIT VS. BALAJI TRADERS (2 008) 303 ITR 312 (MAD) HELD THAT WHERE MONEY WAS RECEIVED FOR COMMER CIAL EXPEDIENCY AND NECESSITATED BY THE BUSINESS AND THERE WAS NO R EVENUE LOSS PENALTY UNDER SECTION 271D WOULD NOT BE JUSTIFIED. ONCE THE RE ARE BUSINESS EXPEDIENCY AND DEPOSITORS ARE GENUINE PERSONS AND T RANSACTIONS ARE NOT DOUBTED BY THE AUTHORITIES THERE WAS NO REVENUE LO SS ALL THE TRANSACTIONS ARE BROUGHT INTO ACCOUNT OF THE ASSESSEE AND RESPEC TIVE PARTIES HAVE ACCEPTED THAT THEY HAD PAID THE MONEY FOR PURCHASE OF SHOPS THEN QUESTION OF LEVY OF PENALTY WOULD NOT ARISE. FURTHE R LEVY OF PENALTY MUST BE SEEN WITHIN THE PARA-METER OF SECTION 273B. IF T HERE ARE ADEQUATE ITA NO.637/AHD/2009 ALONG WITH CO NO.55/AHD/2009 ASST. YEAR 2005-06 5 REASONS FOR MAKING SUCH DEPOSITS THEN NO PENALTY UN DER SECTION 271D SHOULD BE LEVIED. IT IS SO HELD BY HON. RAJASTHAN H IGH COURT IN THE CASE OF CIT VS. MAHESHWARI NIRMAN UDYOG (2008) 302 ITR 2 01 (RAJ). ITAT CHANDIGARH BENCH IN DCIT VS. FLAT HOUSING PROMOTOER S (2008) 303 ITR (AT) 453 (CHANDIGARH) HAS HELD THAT WHERE CREDITORS WERE AGRICULTURISTS IN REMOTE VILLAGES AND THEY DID NOT HAVE ANY BANK A CCOUNT BEFORE MAKING DEPOSITS WITH THE ASSESSEE THEN IT SHOULD BE ACCEPT ED AS REASONABLE EXPLANATION AND PENALTY SHOULD NOT BE LEVIED. AS A RESULT WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 5. THE LD. AR WITHDREW THE C.O. THEREFORE IT IS TR EATED AS REJECTED. 6. IN THE RESULT BOTH THE APPEAL FILED BY THE REVE NUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 4/2/11. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 4.2.11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ITA NO.637/AHD/2009 ALONG WITH CO NO.55/AHD/2009 ASST. YEAR 2005-06 6 1.DATE OF DICTATION 31/1/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 1/2/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 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..