ACIT.- Range-I, Gwalior v. M/s Cardinal Drugs Ltd., Bhind

ITA 701/AGR/2008 | 2004-2005
Pronouncement Date: 18-11-2011 | Result: Dismissed

Appeal Details

RSA Number 70120314 RSA 2008
Bench Agra
Appeal Number ITA 701/AGR/2008
Duration Of Justice 2 year(s) 11 month(s)
Appellant ACIT.- Range-I, Gwalior
Respondent M/s Cardinal Drugs Ltd., Bhind
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 18-11-2011
Date Of Final Hearing 16-11-2011
Next Hearing Date 16-11-2011
Assessment Year 2004-2005
Appeal Filed On 18-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI H.S. SIDHU JUDICIAL MEMBER AND SHRI B.P. JAIN ACCOUNTANT MEMBER ITA NO.701/AGR/2008 ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME TAX VS. M/S CARDINA L DRUGS LIMITED RANGE-1 GWALIOR. MALANPUR BHIND (M.P.) (PAN: NOT MENTIONED). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARMA JR. D.R. RESPONDENT BY : SHRI ARUN DAGA C.A. DATE OF HEARING : 16.11.2011 DATE OF PRONOUNCEMENT : 18.11.2011 ORDER PER BENCH : THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF LD. CIT(A) GWALIOR DATED 06.08.2008 FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS IN DELETING THE PENALTY U/S 271D AMOUNTING TO RS.11 62 850/- 3. THE BRIEF FACTS OF THE CASE AS PER PENALTY ORDER UNDER SECTION 271-D ARE AS UNDER :- ITA NO.701/AGR/2008 A.Y. 2004-05 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AS SESSMENT YEAR 2004-05 THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAD RECEIVED CERTAIN LOANS IN CASH DURING THE RELEVANT PERIOD FROM M/S MERCANTILE AGENCIES. THE DETAILS OF LOAN TAKEN IN CASH ARE AS UNDER :- S.NO. DATE AMOUNT OF CASH LOANS TAKEN 1. 2.12.2003 RS.1 00 000/- 2. 3.12.2003 RS.1 00 000/- 3. 9.12.2003 RS.2 00 000/- 4. 4.2.2004 RS.1 91 000/- 5. 6.2.2004 RS.1 50 000/- 6. 10.2.2004 RS.2 43 000/- 7. 14.2.2004 RS.1 78 850/- TOTAL RS.11 62 850/- SINCE THE ASSESSEE HAD TAKEN LOAN IN CASH IN VIOLAT ION OF THE PROVISIONS OF SECTION 269SS OF THE I.T. ACT THE CA SE WAS REFERRED TO THE UNDERSIGNED FOR IMPOSITION OF PENALTY U/S 271D OF THE I.T. ACT. SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO SHO W CAUSE WHY PENALTY U/S 271D BE NOT IMPOSED FOR ACCEPTING T HESE LOANS IN CASH. SHRI ARUN DAGA C.A. APPEARED ON BEHALF OF T HE ASSESSEE FURNISHED POWER OF ATTORNEY AND THREE REPLIES WERE SUBMITTED BY THE ASSESSEE. THE ASSESSEE CONTENDED THAT M/S MERCANTI LE AGENCIES WAS HAVING A CURRENT ACCOUNT WITH THE ASSESSEE COMPANY AND THEREFORE SECTION 269SS IS NOT APPLICABLE. IN SUPPORT THE AS SESSEE HAS CITED THE CASE LAW OF CIT VS. IDHAYAM PUBLICATIONS LTD. (2006 ) 285 ITR 221 (MAD.). IN THIS CASE THE HONBLE MADRAS HIGH COURT HAS HELD THAT THE TRANSACTION BETWEEN THE ASSESSEE AND DIRECTOR WAS N OT A LOAN OR DEPOSIT BUT WAS ONLY A CURRENT ACCOUNT AND NO INTER EST WAS BEING CHARGED AND THEREFORE THE TRIBUNAL WAS JUSTIFIED IN DELETING THE PENALTY U/S. 271D. THE ASSESSEE HAS SUBMITTED THE COPY OF THE LEDGER ACCOUNT OF M/S MERCANTILE AGENCIES IN THE BOOKS OF THE ASSESSEE. PERUSAL OF THIS LEDGER ACCOUNT REVEALS THAT IT IS N OT A CURRENT ACCOUNT BUT M/S MERCANTILE AGENCIES IS MAKING CERTAIN PAYME NTS ON BEHALF OF THE ASSESSEE AND SIMILARLY THE ASSESSEE COMPANY IS ALSO MAKING CERTAIN PAYMENTS ON BEHALF OF THE MERCANTILE AGENCI ES ON DIFFERENT DATES. THE FACTS OF THE INSTANT CASE ARE DIFFERENT FROM THE FACTS OF THE ITA NO.701/AGR/2008 A.Y. 2004-05 3 HONBLE MADRAS HIGH COURT CASE QUOTED BY THE ASSESS EE AND THAT DECISION IS THEREFORE NOT APPLICABLE TO THE FACTS O F THE INSTANT CASE. THE ASSESSEE HAS CLAIMED THAT M/S MERCANTILE AGENCY IS A SISTER CONCERN OF THE ASSESSEE BECAUSE PROPRIETOR OF THE F IRM IS THE DIRECTOR AND SUBSTANTIAL SHARE HOLDER OF THE ASSESSEE COMPAN Y AND THEREFORE THE PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE. THERE IS NO CLAUSE IN SECTION 269SS THAT THE PROVISIONS OF THIS SECTIO N SHALL NOT APPLY TO SISTER CONCERN OR TO TRANSACTIONS BETWEEN DIRECTOR AND THE COMPANY. THE COMPANY IS A SEPARATE LEGAL ENTITY AND THEREFOR E ANY TRANSACTION BETWEEN THE DIRECTOR AND THE COMPANY ATTRACTS THE P ROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT. THE ASSESSEE HAS FURTHER PLEADED THAT THE HONBLE S UPREME COURT IN THE CASE OF ADI VS. A.B. SHANTHI (2002) 25 5 ITR 256 (SC) HAS HELD THAT THE OBJECTS OF INTRODUCING SECTION 2 69SS IS TO ENSURE THAT A TAX PAYER IS NOT ALLOWED TO GIVE FALSE EXPLA NATION FOR HIS UNACCOUNTED MONEY HE SHALL NOT ESCAPE BY GIVING FA LSE EXPLANATION FOR THE SAME. DURING SEARCH & SEIZURES UNACCOUNTED MONEY IS UNEARTHED AND THE TAX PAYER WOULD USUALLY GIVE THE EXPLANATION THAT HE HAD BORROWED OR RECEIVED DEPOSITS FROM HIS RELAT IVES OR FRIENDS AND IT IS EASY FOR THE SO CALLED LENDER ALSO TO MAN IPULATE HIS RECORDS LATER TO SUIT THE PLEA OF THE TAX PAYER. THE MAIN OBJECT OF SECTION 269SS WAS TO CURB THIS MENACE. THE ASSESSEE HAS C LAIMED THAT NO SEARCH HAS TAKEN PLACE IN ITS CASE AND NO ADDITION IN ASSESSMENT ON THIS ACCOUNT HAS BEEN MADE. THE CONTENTION OF THE ASSESSEE IS NOT TENABLE. THE OBJECT ENUMERATED BY THE SUPREME COUR T IN THE ABOVE CASE LAW IS ONLY ONE OF THE OBJECTS FOR INTRODUCTIO N OF SECTION 269SS. IT HAS BEEN HELD BY VARIOUS COURTS INCLUDING THE HO NBLE SUPREME COURT THAT WHERE THERE IS A CLEAR SPECIFIC PROVISIO N IN HE ACT THEN THERE IS NO NEED TO INTERPRET THE PROVISIONS OF LAW BY COURTS IN SUCH A WAY THAT THE PROVISIONS ITSELF IS DEFEATED. IN VIE W OF THESE FACTS THE PLEA OF THE ASSESSEE IS NOT ACCEPTABLE ON THIS ACCO UNT. THE ASSESSEE HAS ALSO QUOTED CASE LAWS THAT THE LEV Y OF PENALTY IS NOT MANDATORY BUT DISCRETIONARY. HERE AGAIN WHE RE THERE ARE SPECIFIC PROVISION FOR LEVY OF PENALTY FOR CERTAIN VIOLATION THE PENALTY HAS TO BE IMPOSED UNLESS THERE IS SOME REASONABLE C AUSE FOR THE SAID VIOLATION. IN REPLY DATED 28/06/07 THE ASSESSEE HA S STATED THAT FROM 2/12/03 TO 10/12/03 AND FROM 4/02/04 TO 14/2/04 THE CASH IN HAND WAS ITA NO.701/AGR/2008 A.Y. 2004-05 4 TAKEN BY FACTORY MANAGER WHO TRAVELED TO DELHI FOR PURCHASE OF MACHINERY IN AUCTION SALE. NO CASH WAS AVAILABLE I N HIS PERIOD. SO CASH HAS BEEN DEPOSITED BY DIRECTOR HIMSELF FROM HI S PROPRIETOR SHIP CONCERN M/S MERCANTILE AGENCIES. THIS SUBMISSION OF THE ASSESSEE IS FACTUALLY INCORRECT. IF THERE WAS SHORTAGE OF CASH IN HAND THE CASH ITSELF WOULD HAVE BEEN GIVEN TO THE ASSESSEE AND WO ULD HAVE BEEN INTRODUCED IN THE CASH BOOK. ON THE CONTRARY THE A MOUNT HAS BEEN GIVEN IN CASH AND HAS BEEN DEPOSITED IN THE BANK WH ICH INDICATES THAT THERE WAS NO SHORTAGE OF CASH IN HAND. IN VIEW OF THESE FACTS THE ASSESSEE HAS FAILED TO ESTABLISH THE REASONABLE CAU SE FOR VIOLATION OF THE SPECIFIC PROVISIONS OF SECTION 269SS OF THE INC OME TAX ACT. IN VIEW OF THE ABOVE DISCUSSION I AM SATISFIED THAT THE ASSESSEE HAS ACCEPTED LOANS AGGREGATING RS.11 62 850/- AS ME NTIONED IN THE FIRST PARA IN CASH IN VIOLATION OF THE PROVISIONS O F SECTION 269SS OF THE INCOME TAX ACT WITHOUT REASONABLE CASE. I THEREFO RE IMPOSE A PENALTY OF RS.11 62 850/- BEING EQUAL TO THE AMOUNT OF LOAN TAKEN IN CASH BY THE ASSESSEE FROM MERCANTILE AGENCIES DURIN G THE RELEVANT YEAR ON DIFFERENT DATES IN VIOLATION OF SEC. 269SS OF INCOME TAX ACT 1961. 4. THE LD. CIT(A) IN VIEW OF THE CIRCULAR NO.387 DA TED 06.07.1984 AND THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF CIT VS. IDHAYAM PUBLICATIONS LIMITED REPORTED IN 285 ITR 221 (MAD) REVERSED THE ORDER OF THE A.O. BY OBSERVING THAT THE APPELLANT ACTED IN A BONAFIDE MANNER AND THERE WAS SUFFICIENT AND REASONABLE CAUSE FOR DEPOSITING CASH BY THE DIR ECTOR OF THE COMPANY. THEREFORE PENALTY PROCEEDINGS UNDER SECTION 271D O F THE ACT DID NOT ATTRACT IN THE CASE OF THE ASSESSEE AND THE PENALTY LEVIED BY J.C. I.T. WAS NOT JUSTIFIED AND ACCORDINGLY THE SAID PENALTY WAS DELETED BY THE LD. CIT(A). ITA NO.701/AGR/2008 A.Y. 2004-05 5 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE WITH THE FACT THAT THE DIRECTOR OF TH E COMPANY HAS DEPOSITED CASH DIRECTLY INTO THE BANK. WHETHER THERE WAS SUFFICIE NT AND REASONABLE CAUSE FOR DEPOSITING CASH INTO THE BANK OF THE ASSESSEE COMPA NY HAS TO BE PERUSED. THE EXPLANATION GIVEN BY THE ASSESSEE IS NOT FALSE AND THIS FACT HAS NOT BEEN BROUGHT ON RECORD BY THE A.O. THE URGENCY OF THE MATTER HAS B EEN PROVED BY THE ASSESSEE WHO ACTED IN A BONAFIDE MANNER AND THERE APPEARS TO BE SUFFICIENT AND REASONABLE CAUSE IN DEPOSITING THE CASH BY THE DIRECTOR IN THE BANK OF THE ASSESSEE COMPANY. THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY CANCELLED THE PENALTY LEVIED BY THE A.O. THUS THE GROUND OF THE REVENUE IS DISMISSED. 6. IN THE RESULT APPEAL OF THE REVENUE IN ITA NO.7 01/AGR/2008 IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2011). SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 18 TH NOVEMBER 2011 PBN/* COPY OF THE ORDER FORWARDED TO: APPELLANT/RESPONDENT/CIT CONCERNED/CIT(APPEALS) CO NCERNED/D.R. ITAT AGRA BENCH AGRA/GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY