Income Tax Appellate Tribunal - Kolkata
Nasir Ahmed Khan, Kolkata vs Department Of Income Tax on 22 June, 2012
आयकर अपीलीय अधीकरण, Ûयायपीठ - " C" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
(सम¢)Before ौी महावीर िसंह, Ûयायीक सदःय एवं/and ौी, सी.डȣ.राव लेखा सदःय)
[Before Shri Mahavir Singh, JM & Shri C. D. Rao, AM]
आयकर अपील संÉया / I.T.A No. 1510/Kol/2010
िनधॉरण वषॅ/Assessment Year: 2004-05
Income-tax Officer, Wd-40(2), Kolkata Vs. Nasir Ahmed Khan
(PAN: AFVPK1083P)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
Date of hearing: 22.06.2012
Date of pronouncement: 22.06.2012
For the Appellant: Shri Manish Tiwari
For the Respondent: Shri A. K. Pramanick
आदे श/ORDER
Immediately upon conclusion of hearing of this appeal on 22nd June,
2012, the bench passed the following order:
"22nd June, 2012
Revenue's appeal is partly allowed. Order pronounced in open court.
Detailed order will follow.
In accordance with the above, the reasoned order is now set out as follows:
Per Mahavir Singh, JM ( महावीर िसंह, Ûयायीक सदःय)
सदःय This appeal by revenue is arising out of order of CIT(A)-XII, Kolkata in Appeal No. 243/XII/Addl.CIT,R-10/07-08 dated 20.04.2010. Assessment was framed by DCIT, Circle-40, Kolkata, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") for AY 2004-05 vide his order dated 27.12.2006. Penalty in dispute was levied by Addl. CIT, Range- 40, Kolkata u/s. 271D of the Act vide his order dated 25.06.2007.
2. The only issue in this appeal of revenue is against the order of CIT(A) deleting the penalty levied by AO u/s. 271D of the Act. For this, revenue has raised following ground no.1:
"1. The Ld. CIT(A) had erred both in fact and law by holding that the penalty u/s. 271D of the I. T. Act, 1961 amounting to Rs.16,40,000/- is not leviable since transactions were in the nature of 'trade advances' although the same were received in cash from the so- =called suppliers in contravention of the normal trade practices."
3. Brief facts leading to the above issue are that the assessee filed his return of income on 01.11.2004 and assessment was completed u/s. 143(3) of the Act on 27.12.2006. During the 2 ITA 1510/K/2010 Nasir Ahmed Khan A.Y. 2004-05 course of assessment proceedings, AO found that assessee took cash loan of Rs.15 lacs from Liberal Spinners Ltd. and Rs.1,40,000/- from Mr. Anish Ahmed Khan. As the loan was taken in cash of both the above amounts, the AO during the course of assessment proceedings initiated penalty proceedings u/s. 271D of the Act for violation of provisions of section 269SS of the Act. During the course of penalty proceedings u/s. 271D of the Act before addl. CIT, Range-40, Kolkata, the assessee stated that he accepted cash advance of Rs.15 lacs from Liberal Spinners Ltd. for supply of shrimps and also accepted cash advance of Rs.1,40,000/- from Mr. Anish Ahmed Khan for supply of shrimps. According to assessee, the advance was against supply of raw material and hence, provisions of section 269SS of the Act were not applicable. The AO on investigation of facts found and noted that the amounts received from Liberal Spinners Ltd. and Mr. Anish Ahmed Khan were in the nature of loan and, therefore, Addl. CIT levied penalty u/s. 271D of the Act on 25.06.2007 for violation of provisions of section 269SS of the Act in accepting the cash loan. Aggrieved, assessee preferred appeal before CIT(A), who deleted the penalty by observing as under:
"l have carefully considered the submissions and judicial decisions quoted by the appetlant with reference to the facts of the case and observations made by the A.O in the penalty order. The basic question that has to be decided whether the sums receìved by the appellant from M/s. Liberal Spinners Ltd and Mr. Anish Ahmed Khon are in the nature of 'Loan' or ' trade advance'. The A.O is of the view that the sums received in cash are in the nature of loans and hence violated the provisions of section 269SS and thus liable tor penalty under section 271 D of the I. T. Act. On the other hand, the appellant contended that these sums are nothing but the trade advances received during the course of business and hence no violation of section 269SS and hence not liable to penatty u/s. 271D. The appeltant also retied on case laws in support of his contentions.
From the facts and material brought on record, l find that the appellant furnished confirmations from both the parties who have advanced the amounts. M/s. Liberal Spinners Ltd. has confirmed that the sums were advanced against future supply of goods. lt also furnished a certified copy reflecting sundry debtors list as on 31.3.2004 where in the appellant is shown as a debtor. The A.O missed out this fact. As regards Mr. Anish Ahmed Khan, the appellant in his books has shown these sums under one account only and no interest provided on such sums. Based on the 'confirmation account', the A.O, however, concluded that since it was one account, the 'sums' shown under this account along with other loans have to be treated as 'loans' and not as 'trade advances'. On the other hand, the appellant submitted that the A.O erred in concluding that the sums are in the nature of loan as Mr. Anish Ahmed Khan maintained a common account both for loan and non-loan amounts. Further the appellant clarìfied that atthough Mr. Anish Ahmed Khan incorporated the said amount in one account the appellant on the other hand, maintained two separate accounts, one for trade advance and another for loan account. Thus the intention of the appellant was only to show the amount as trade advance and not a loan amount. Quoting Apex Court decisions in Kedarnath Jute Mfg. Co. Ltd and Sutlez Cotton Mills Cp. Ltd (supra), the appellant further contended that entry in the account books ìs neither determinative nor conclusive and authorìtìes should see the facts relevant for the transactions and decide the issue. The appellant further stated that he had trade transactions with Mr. Anish Ahmed Khan in the next year. The appellant also relied on Hyderabad Tribunai decision in the case of Dillucine Enterprise P. Ltd, where in Hon'ble Tribunal held that the main purpose for introduction of section 269SS is to check inflow
3 ITA 1510/K/2010 Nasir Ahmed Khan A.Y. 2004-05 of black money and bonafide transactions between closely related persons are not hit by section 269SS. Applying the same ratio of the Tribunal, the appellant contended saying that even such amount of advance is treated in the nature of loan since the transaction effected between the appellant and Mr. Anish Ahmed Khan who happen to be his son, the same can not be treated as violation of the provisions of section 269SS in view of the Tribunals decision. Quoting the High Court decisions in the case of Kharaiti Lal & Co (supra) and Kailash Chandra Deepak Kumar [2009, 317 ITR 351 (Ahm)] the appellant submitted that since the sums being trade advances for future supply of goods, provisions of section 269SS are not applicable.
On due consideration of the facts, submissions and case laws relied on by the appellant, I am in agreement wifh the subrnissions of the appellant. Considering fhe totality of facts and circumstances of the case, I am of the opinion that the sums advanced are in the nature of 'trade advances' and hence provisions of section 269S5 are not applicable. As such the levy of penalty u/s. 271D is not justifiable. The appellant's ground is allowed."
Aggrieved, revenue came in appeal before us.
4. We have heard rival submissions and gone through facts and circumstances of the case. We find that there are two aspects to this appeal. The first aspect is regarding levy of penalty on loan from Anish Ahmed Khan of Rs.1,40,000/-. At the outset, the Ld. counsel for the assessee stated before us that Anish Ahmed Khan is the son of the assessee and this fact is very much narrated in the penalty order at page 3 by the AO as under:
"Hence, I am not inclined to accept the contention of the assessee. No business transaction was reflected with the son of the assessee in the AY 2005-06. From the confirmation of account filed it is clear that Rs.1,40,000/- received in aggregate by cash by the assessee is continuation of loan and it clearly violates provision of section 269SS of the I. T. Act."
Further, this fact is also noted by the AO in Assessment Order by way of reproduction of assessee's submissions as under:
"I have received loan from my son Anish Ahmed Khan (PAN:AFAPK1049O) in earlier year in account payee cheque, opening balance as on 01.04.03 is Rs.9,32,200/- and I have repaid Rs.10,000/- on 25.07.2003 by account payee cheque."
It means that Anish Ahmed Khan is son of the assessee and once the transaction is between father and son, no penalty can be levied because it is between relatives and between relatives there cannot be the transaction of loan or deposit, which violates the provisions of section 269SS of the Act. For this, he relied on the decisions of Hon'ble Madras High Court in the case of CIT Vs. Idhayam Publications Ltd. (2006) 285 ITR 221 (Mad.), Hon'ble Gujarat High Court in the case of CIT Vs. Natvarlal Purshottamdas Parekh (2008) 303 ITR 5 (Guj.) and ITAT, Kolkata Bench's decision in the case of Shri Madhu Ghosh Vs. JCIT, ITA No.271/K/2009, AY 2003-04 dated 28.10.2011. We find that Hon'ble Madras High Court in the case of Idhayam Publications Ltd. (supra) and ITAT Kolkata Benches is taking consistent view that where the transactions between the relatives whether loan or deposit that will not 4 ITA 1510/K/2010 Nasir Ahmed Khan A.Y. 2004-05 come within the mischief of section 269SS of the Act and once there is no violation of provisions of section 269SS of the Act, no penalty u/s. 271D of the Act can be levied. Hence, in respect to levy of penalty on the amount of loan given by Anish Ahmed Khan to his father, the assessee herein, has rightly been deleted by CIT(A) and we confirm the same.
5. Another issue in this appeal of assessee is regarding levy of penalty on a cash loan of Rs.15 lacs from Liberal Spinners Ltd. Assessee's basic contention was whether the amount received by assessee from Liberal Spinners Ltd. is in the nature of 'loans' or 'trade advance'. For this, we have to see the documents and other evidence filed before us. First of all, the assessee's counsel relied on the details of sundry debtors of Liberal Spinners Ltd. as on 31st Marh, 2004 and the details reads as under:
"DETAILS OF SUNDRY DEBTORS AS ON 31ST MARCH 2004 Name Amount EASTERN SYNTHETICS PVT. LTD. Rs. 975,000.00 OVEN COMMERCIALS PVT. LTD. Rs. 450,000.00 NASIR AHMED KHAN Rs.1,500,000.00 Rs.2,925,000.00"
The Ld. counsel for the assessee stated that Nasir Ahmed Khan is a sundry debtor in the books of Liberal Spinners Ltd. He also referred to the cash received on various dates and confirmation of account for the year ended 31st March, 2004 relevant to AY 2004-05 of Liberal Spinners Ltd. The relevant account is as under:
DEBIT CREDIT
Date Particulars Amount Date Particulars Amount
01.04.2003 To Cash 5,00,000.00 31.03.2003 By Balance C/f 15,00,000
03.04.2003 To Cash 2,00,000.00
16.04.2003 To Cash 1,50,000.00
03.09.2003 To Cash 75,000.00
17.10.2003 To Cash 1,15,000.00
10.12.2003 To Cash 60,000.00
05.01.2004 To Cash 2,45,000.00
06.02.2004 To Cash 1,55,000.00 -----------------
15,00,000.00 15,00,000
First of all, we have to consider the arguments of assessee that this is advance for shrimps and not loan. Is it really so? We have gone through the assessment order of the assessee, wherein the fact noted is that the amount received from Liberal Spinners Ltd. for supply of shrimps to the assessee are that most of the directors are from Rajasthan and vegetarian and they are not doing any shrimps business. We have seen the copy of account of Liberal Spinners Ltd. and observed that the amount of Rs. 5 lacs at the first instance was received on 01.04.2003 in cash and second amount of Rs.2 lacs was received on 03.04.2003 in cash. Thereafter, the third 5 ITA 1510/K/2010 Nasir Ahmed Khan A.Y. 2004-05 amount of Rs.1.5 lacs was received on 16.04.2003 in cash. Further, fourth amount of Rs.75,000/- was received on 03.09.2003 in cash. Similarly, the fifth amount of Rs.1,15,000/- was received on 17.10.2003 in cash. Likewise, 7th, 8th and 9th amount of Rs.60,000/-, 2,45,000/- and Rs.1,55,000/- were received in cash on 10.12.2003, 05.01.2004 and 06.02.2004 respectively. The AO noted the fact in his penalty order as well as assessment order that Liberal Spinners Ltd. was never in the business of supply of shrimps and he has proved this factual position that this money was required by the assessee on account of purchase of shop for running of business. This fact is narrated in the assessment order at page 2 para 3 line 8, which is as under:
".... The facts are that the assessee has started a new proprietorship concern under the name & style M/s. Footprints for which he has to incur huge expenses on acocunt of purchase of shop and running of the business. The assessee required money and he has taken cash loan of Rs.15,00,000/- and Rs.1,40,000/- from M/s. Liberal Spinners Ltd. and Mr. Anish Ahmed Khan respectively in disguise of advance. Therefore, the assessee violated the provisions of section 269SS and accordingly penalty proceedings u/s. 271D is initiated separately."
Even the assessee is carrying on wholesale business of cloth. This amount of Rs. 15 lacs remained unadjusted till the close of FY as on 31.03.2004. From the above facts and circumstances, we are of the view that the amount or the transaction involved is in the nature of loans or deposit and it is never 'trade advance' because the assessee never entered into any transaction of supply of shrimps in earlier years or in the future years as confessed by the assessee's counsel before us. This being solitary cash loans in the solitary year and particularly when the assessee required the funds for purchase of shop and actually he invested this amount in purchase of shop, the amount cannot be called as advance for supply of shrimps.
In view of above, we are of the view that the taxability or otherwise of an amount or transaction would depend on the nature and character of the receipt at the initial stage. In this regard, it is pertinent to note that the proposition that an amount which is not initially received as a trading receipt, cannot become a trading receipt by influx of time and has to be read in the context of the facts of the case. If a receipt is a trading receipt or otherwise, the fact it is not so shown in the account books of an assessee does not prevent the assessing authority from treating the correct nature of the receipt. The entries in the account books cannot alter or affect the nature, the quality and character of the transaction. Its true nature and quality of the receipt and not the head under which it is entered in the account books which would prove decisive and if receipt is a loan or deposit the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority for treating the same as loan or deposit. In the case before us also the creditor who has advanced this loan to assessee was never in the 6 ITA 1510/K/2010 Nasir Ahmed Khan A.Y. 2004-05 business of shrimps. Hence, this cannot be treated as advance on account of supply of shrimps to assessee. Even the ultimate user of the money i.e. this loan so utilised by the assessee for purchase of shop and running of business of assessee as noted by AO in Assessment Order and penalty order. In entirety, we have no hesitation in confirming the penalty levied by AO and we rever the order of CIT(A) on this issue. Appeal of revenue is partly allowed.
6. In the result, appeal of revenue is partly allowed.
7. Order pronounced in the open court.
Sd/- Sd/-
सी.डȣ
सी डȣ.राव
डȣ राव लेखा सदःय महावीर िसंह, Ûयायीक सदःय
(C. D. Rao) (Mahavir Singh)
Accountant Member Judicial Member
तारȣख)
तारȣख) Dated : 22nd June, 2012
(तारȣख
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - ITO, Ward-40(2), Kolkata. .
2 ू×यथȸ/ Respondent - Sh. Nasir Ahmed Khan, 4/1, J. K. Ghosh Road,
Kolkata-700 037. .
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/ CIT Kolkata
5. ǒवभािगय ूितनीधी / DR, Kolkata Benches, Kolkata
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
सहायक पंजीकार/Asstt. Registrar.