Income Tax Appellate Tribunal - Delhi
Dcit, Meerut vs M/S Paswara Papers Ltd.,, Meerut on 28 February, 2018
In the Income-Tax Appellate Tribunal,
Delhi Bench 'F', New Delhi
Before : Shri Bhavnesh Saini, Judicial Member And
Shri L.P. Sahu, Accountant Member
ITA Nos. 4046 & 4047/Del./2016
Assessment Year: 2012-13
D.C.I.T., Circle - 2, vs. M/s. Paswara Chemicals Ltd., Paswara
Meerut. House, Baghpat Road, Meerut.
PAN-AADCP 0846P
(Appellant) (Respondent)
ITA Nos. 4048 & 4049/Del./2016
Assessment Year: 2012-13
D.C.I.T., Circle - 2, vs. M/s. Paswara Papers Ltd., Paswara
Meerut. House, Baghpat Road, Meerut.
PAN-AADCP 9539Q
(Appellant) (Respondent)
Appellant by Sh. Atice Ahmad, Sr. DR
Respondents by S/Sh. Raj Kumar Gupta & Sumit
Goel, CAs
Date of Hearing 01.02.2018
Date of Pronouncement 28.02.2018
ORDER
Per L.P. Sahu, A.M.:
All these four appeals filed by the Revenue in the cases of two assessees are directed against the separate orders of the ld. CIT(A), Meerut dated 29.04.2016 for the assessment year 2012-13, challenging the deletion of penalties imposed against both the assessees u/s. 271D and 271E of the IT Act ITA Nos. 4046 to 4049/Del./2016 2 in violation of section 269SS and 269T of the IT Act, 1961. Both the assessees have raised common grounds in these appeals.
2. Since common issues are involved in all these appeals, the same were heard together and are being disposed of by this consolidated order. For the sake of convenience, we first take up the appeals of the Revenue in the case of M/s. Paswara Chemicals Ltd., bearing No. 4046 & 4047/Del./2016, the decision on which shall equally apply to other two appeals of Revenue in the case of Paswara Papers Ltd.
3. The brief facts of the case are that during the assessment proceedings u/s. 143(3) of the Act, it was noticed by the Assessing Officer that the assessee had claimed to have accepted loan of Rs.52,00,000/- from some parties and paid back the loans of Rs.2,76,00,000/- to some parties. However, the same was not actually received from and paid back to the claimed parties, but it was received from and paid back to other group concern on behalf of the loan providers. The details of amounts received and repaid by way of cheques are as under :
The details regarding Receipt of loans ITA Nos. 4046 to 4049/Del./2016 3 S. Name of Cheque Date Amount From where amt.
No. depositor No. withdrawn for deposit
through a/c payee
cheque
1 Kavita Singhal 070688 10.02.2012 15,00,000 From Paswara Impex Ltd.
through journal entry
2 Nishit Singhal 070687 10.02.2012 37,00,000 From Paswara Impex Ltd.
through journal entry
TOTAL 52,00,000
The details regarding repayment of loans
S.No. Name of Cheque No. Date Amount Amount repaid
depositor other than a/c
payee cheque or
draft (violation of
section 269T)
1 Arvind Kumar 115261 9.2.2012 30,00,000 To Paswara Papers
Ltd. through journal
entry
2 Vinod Kumar 115262 9.2.2012 58,00,000 To Paswara papers
Ltd. through journal
entry
3 Kapil Kumar 115263 9.2.2012 40,00,000 To Paswara Papers
Ltd. through journal
entry
4 Ranji Agarwal 115265 9.2.2012 20,00,000 From Paswara
Papers Ltd. through
journal entry
5 Kavita Singhal 058723 31.5.2011 2,00,000 To Saving a/c with
UBI in the name of
Kavita Singhal
5 Kavita Singhal 115266 9.2.2012 15,00,000 To Paswara Papers
Ltd. through journal
entry
6 Nitasha Singhal 115267 9.2.2012 15,00,000 To Paswara Papers
Ltd. through journal
entry
7 Maganwati 115264 9.2.2012 25,00,000 To Paswara Papers
Ltd. through journal
entry
ITA Nos. 4046 to 4049/Del./2016 4
8 Arvind Kumar 115258 9.2.2012 15,00,000 To Paswara Papers
HUF Ltd. through journal
entry
9 Vinod Kumar 115259 9.2.2012 29,00,000 To Paswara Papers
HUF Ltd. through journal
entry
10 Kapil Kumar HUF 115260 9.2.2012 27,00,000 To Paswara Papers
Ltd. through journal
entry
TOTAL 2,76,00,000
4. The Assessing Officer observed that the amounts of advances received and cheque numbers do not appear in the bank statements of the loan providers since the cheques were issued by some other parties on behalf of the loan providers, which was in violation of section 269SS of the Act.
Similarly, it was also observed that the amounts of repayments were not found in the given bank statements of loan providers, but were paid back to Paswara Papers Ltd. in violation of section 269T of the Act. The Assessing Officer further observed that the assessee failed to assign any explanation as to why the amount of loan was received by cheques from the person other than loan providers and why the amount of loans were repaid to the persons other than claimants. He accordingly, imposed penalty of Rs.52,00,000/- u/s. 271D in violation of section 269SS and penalty of Rs.2,76,00,000/- u/s. 271E in violation of section 269T of the Act against the assessee. The assessee challenged the penalty orders before the ld. CIT(A) in appeals, where the first ITA Nos. 4046 to 4049/Del./2016 5 appellate authority deleted the penalties vide impugned orders. Being aggrieved, the Revenue is in appeals before the Tribunal.
5. The ld. DR relying on the penalty orders, submitted that the ld. CIT(A) was not justified in deleting the penalties ignoring the fact that the assessee has acted in contravention of section 269SS and 269T of the IT Act. It was submitted that the cheques received of loan were not reflected in the bank account of the loan providers and similarly, the amounts repaid were not reflecting in the bank statements of the persons from whom the loans were shown to have been received by the assessee. The assessee did not offer any plausible explanation to receive the payments by way of cheques from the persons other than loan providers and to make the repayments to the persons other than the loan providers. The ld. CIT(A) has not considered the facts of the case in right perspective and therefore, the impugned orders deserve to be set aside.
6. On the other hand, the ld. AR of the assessee, relying on the orders of the ld. CIT(A) submitted that the assessee had received loans of Rs.52,00,000/- through account payee cheques in the account of two parties namely Kavita Singhal amounting to Rs.15,00,000/- and Nishit Singhal Rs.37,00,000/- during ITA Nos. 4046 to 4049/Del./2016 6 the year under consideration. No violation of section 269SS and 269T of the Act can be assumed, as no transactions were made otherwise by way of account payee cheques. No payment was made in cash either by assessee or on its behalf nor any loan was accepted by assessee otherwise by way of cheques. Both the account payee cheques were reeived from M/s. Paswara Impex Ltd. where loan creditors were having their loan account. M/s. Paswara Impex Ltd. debited loan creditors' account and assessee credited the account of loan creditors. The amounts accepted and repaid by cheques stood evident from the bank certificate issued by assessee's bank, bank statement of assessee, ledger account of loan creditor, Kavita Singhal and Nishit Singhal in the books of assessee, bank statement of Paswara Impex Ltd. and ledger account of loan creditor Kavita Singhal and Nishit Singhal in the books of Paswara Impex Ltd. He, therefore, contended that any payment accepted or repayment made pursuant to current account maintained between the parties cannot be considered as violation of section 269SS and 269T of the Act and as such, the penalties imposed u/s. 271D and 271E for alleged violation of sections 269SS & 269T of the Act have rightly been deleted by the ld. CIT(A). The reliance is placed, inter alia, on the following decisions :
(i). CIT vs. Noida Toll Bridge Co. Lt., 262 ITR 260(Del)
(ii). CIT vs. Worldwide Township Projects Ltd., 367 ITR 433 (Del)
(iii). Natco Mahashakti Mining (P) Ltd., 66 DTR(Del)(Trib) 401
(iv). CIT vs. Natvarlal Purshottam Parekh 303 ITR 5 (Guj) ITA Nos. 4046 to 4049/Del./2016 7
(v). ADI(Inv) vs. Kumari A.B. Shanthi 255 ITR 258 (SC)
(vi). Saini Medical Store, 277 ITR 420 (P&H)
(vii). Omec Engineers vs. CIT,217 CTR 144(Jharkhand)
(viii). ACIT vs. Bhagwati Prasad Bajoria, 137 Taxman 75(Gau)(Mag)
(ix). Shiv Nandan Kaushik vs. DCIT, 74 TTJ (Chd) 761
7. We have considered the rival submissions of both the parties and have gone through the entire material available on record and we find no infirmity in the impugned orders passed by the ld. CIT(A). The findings reached by the ld. CIT(A) read as under :
"It has been admitted by the AO also that these payments are not by cash but he has drawn adverse inference since the entries do not touch the relevant bank account of the depositors and these entries have been routed through accounts of some other persons and loans have been shown to have been taken by other persons.
From the perusal of the facts of the case following conclusions can be drawn:
(i) All depositors about whom adverse inference has been drawn by the AO. These do not fall in the category loans and deposits as per the companies Act.
(ii) All the entries on which adverse view was taken by the Addl. CIT are journal entries which have gone to other account.
(iii) All entries which have been held by the AO as contravening the provisions of section 269SS are either through account payee cheque or journal entries.
During appeal the AR has brought on record several rulings and citation defining the scope of section 269SS and the incidence of corresponding penalty u/s 271D of the IT Act. The sum and substance of these judgments go back to the insertion of the said provisions into the Income Tax Act, wherein it was clarified that these provisions have been brought in specifically to curb transactions and deposit by cash. The judgment of Noida Toll Bridge Co. Ltd. on 28 January, 2003, 184 CTR Del 266, 2003 262 ITR 260 Delhi is relevant wherein the Hon'ble Court observed as under:
"....Aggrieved, the assessed preferred appeal to the Commissioner of Income-tax (Appeals) but without any success. The assessed carried the matter in further appeal to the Tribunal. By the impugned order, the Tribunal had deleted the said penalty. While holding that the provisions of section 269SS of the Act were not attracted, the Tribunal has noticed that: (i) in the instant case, the transaction was by an account payee cheque, (ii) no payment on account was ITA Nos. 4046 to 4049/Del./2016 8 made in cash, either by the assessed or on its behalf, (Hi) no loan was accepted by the assessed in cash, and (iv) the payment of Rs. 4.85 crores made by the assessed through IL & FS, which holds more than 30 per cent, of the paid-up capital of the assessed, by journal entry in the books of account of the assessed by crediting the account ofIL & FS... ".
Further, in the case of Idhayam Publications Limited on 23 January, 2006 (285 ITR 221 (Madras) is relevant wherein the Hon'ble Court observed as under:
" ....We heard the arguments of the learned counsel for the Revenue. We have perused the materials available in record. Admittedly Mr. S.V. S. Manian was one of the Directors. Therefore the order of the lower authority clearly shows that there was a running current account in the books of account of the assessee in the name of Mr. S. V.S. Manian used to pay the money in the current account and used to withdraw the money also from the current account. The Revenue should establish that what was received by the assessee is a loan or deposit within the meaning of section 269SS. The deposit and the withdrawal of the money from the current account could not be considered as a loan or advance. Further it was also found that the assessee filed a letter dated 29.09.97 and in that letter he explained that the amount received from Mr. S.V.S. Manian had been show as "unsecured loan from directors'' in the Balance Sheet. As per the Companies Act, under Companies (Acceptance of Deposit) Rules 1975, under Rule 2(b)(ix), deposit does not include any amount received from a Director or a share holder of a Private Limited Company. Therefore the transaction between the appellant and the Director cum Share holder is not loan or deposit and it is only current account in nature and no interest being charged for the above transaction....". ..-.. . - ......
The object of introducing Section 269SS of the Act was to ensure that a tax payer was not allowed to give false explanation for his unaccounted money or if the tax payer made some false entries, he would not escape by giving false explanation for the same. It was found that during the search and seizure, unaccounted money was found and the tax payer usually gave an explanation that he had borrowed or received deposits from his relatives or friends and, consequently, it became easy for the so called lender to manipulate his record to suit the plea of the tax payer. In order to curb this menace, Section 269SS of the Act was introduced to do away with the menace of making false entries in the account books and later give an explanation for the same. Section 269SS of the Act consequently, required that no person shall take or accept any loan or deposit, if it exceeds more than Rs. 20,000/- in cash.
Section 27 ID of the Act caused undue hardship to the tax payers where they took a loan or deposit in cash exceeding Rs. 20,000/- even where there was a genuine or bona fide transaction. The legislature accordingly, introduced Section 273B of the Act, which provided that if there was a genuine and bona fide transaction and the tax payer could not get a loan or deposit by an account payee cheque or demand ITA Nos. 4046 to 4049/Del./2016 9 transaction for some bona fide reason, the authority vested with the power to impose penalty had a discretion not to levy the penalty.
13. In Chamundi Granites (P.) Ltd. [2002] 255 ITR 2587122 Taxman 574 (SC) the Supreme Court considered the provision of Section 271D and 273B of the Act and held:--
"It is important to note that another provision, namely section 273B was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision is Fie proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or account-payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account-payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power."
The Gauhati High Court in CIT v. Bhagwati Prasad Bajoria (HUF)[2QQ3] 263 ITR 487/133 Taxman 426 held:
".,... The transaction of loan has found place in the books of account of the assessee as well as the lender of the loan. None of the authorities have reached the conclusion that the transaction of the loan was not genuine and it was a sham transaction to cover up the unaccounted money. It appears to us that the assessee felt need of money and thus he approached the money-lender for advancement of the money, the transaction is reflected in the promissory notes executed by the assessee in favour of the lender. When there is an immediate need of money the person cannot get such money from the nationalised bank to satisfy the immediate requirement. ....."
The Ld. ITAT [ 2015 ] 60 taxmann.com 407 (Delhi - Trib.)Assistant Commissioner of Income-tax vs Vardaan Fashion has held as under :
I. Section 269SS, read with section 271D, of the Income-tax Act, 1961 - Deposits
- Mode of taking/accepting (Book entry) - Assessment year 2008-09 - Assessing Officer noticed that assessee had accepted loan or deposit otherwise than by account payee cheque or account payee draft and accordingly, levied penalty under section 271D - It was observed that there was no monetary transaction between assessee and creditors -transaction had taken place between creditors and some third party which entry by debiting account of some other party and crediting to account of creditor -Whether since there was no monetary transaction between assessee and creditor, it could not be said that assessee accepted loan or deposit from creditor in violation of section 269SS; hence ITA Nos. 4046 to 4049/Del./2016 10 penalty levied under, section 271D was to be cancelled - Held, yes [Para 15] [In favour of assessee] Thus, considering the ratio of various judgment cited and discussed above and taking into consideration of the findings of Ld. Jurisdictional Tribunal in the case of Assistant Commissioner of Income-tax vs Vardaan Fashion (Supra) alongwith the fact that all the transaction involved are either through account payee cheques or journal entries and considering that as per the companies Act none of the entities involved come within the definition of loans and depositors in terms of companies Act. In view of the forgoing discussion penalty imposed u/s 27ID of the Income Tax Act is uncalled for and not sustainable in law or on facts and is therefore hereby deleted."
8. Similar findings have been given by the ld. CIT(A) while deleting the penalty u/s. 271E of the Act. We find that the ld. CIT(A) has reached its decision after relying on various decisions as noted above and the attending facts of the cases in right perspective. It is also notable that in the instant case it is admittedly proved that no transaction either of receipt or repayment was made in cash. The bank statements and ledger accounts of the loan creditors etc. in the books of assessee unequivocally prove that the transactions were made by way of cheques and respective journal entries were passed in respective books of account of the parties. Therefore, in view of the decisions relied by the ld. CIT(A) and also relied by the assessee before us, we do not find any infirmity in the orders of the ld. CIT(A) while deleting the impugned penalties u/s. 271D and 271E of the IT Act. The ld. CIT(A) has passed good reasoned orders which need not to be interfered with. No material is placed on record on behalf of the Revenue to discard the findings of the first ITA Nos. 4046 to 4049/Del./2016 11 appellate authority. Accordingly, both the appeals of the Revenue in the case of assessee M/s. Paswara Chemicals Ltd. deserve to be dismissed.
9. Adverting to remaining two appeals of the Revenue, as already noted, the facts, circumstances, attending to other two appeals of Revenue in the case of Paswara Papers Ltd., arguments of the parties and findings of the ld.
Authorities below are similar, therefore, our decision reached in appeals of Revenue in case of Paswara Chemicals Ltd. shall equally apply to remaining two appeals of Revenue in the case of Paswara Papers Ltd. Accordingly, these appeals of the Revenue also deserve to fail.
10. In the result, all the four appeals are dismissed.
Order pronounced in the open court on 28th February, 2018.
Sd/- Sd/-
(Bhavnesh Saini) (L.P. Sahu)
Judicial member Accountant Member
Dated: 28th February,2018
*aks*
Copy of order forwarded to:
(1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Delhi Benches, New Delhi