Income Tax Appellate Tribunal - Hyderabad
Social Action For Rural Education, ... vs Department Of Income Tax on 21 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA.No.147/Hyd/2014
Assessment Year 2008-09
Social Action for Rural
The DIT(Exemptions)-1, vs. Education, Heath & Loving
Hyderabad - 500 004. Life of Abundance Society,
Hyderabad - 500 029.
PAN AADTS1409C
(Appellant) (Respondent)
For Revenue : Mr. Rajat Mitra
For Assessee Mr. K.C. Devdas
Date of Hearing : 14.01.2015
Date of Pronouncement : 21.01.2015
ORDER
PER SAKTIJIT DEY, J.M.
This appeal by the department is against the order dated 29.11.2013 passed by the Ld. CIT(A)-IV, Hyderabad for the A.Y. 2008-2009.
2. The department is aggrieved with the decision of the Ld. CIT(A) in deleting the penalty imposed under section 271(E) of the Act. The effective ground raised by the department are as under :
1. "On the facts and in the circumstances of the case, the Ld. CIT(Appeals) is not justified in deleting the penalty of Rs.21,18,920/- levied by the Addl. Director of Income Tax (Exemptions), Hyderabad under section 271E of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case and when the assessee has not produced any new cash 2 ITA.No.147/Hyd/2014 Social action for Rural Education, Health & Loving Life of Abundance Society, Hyderabad.
book during the course of penalty proceedings, the Ld. CIT(Appeals) erred in directing the assessee to produce both set of books of accounts, thereby entertaining the additional evidence, without giving opportunity to the Assessing Authority.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have confirmed the penalty of Rs.21,18,920 levied by the Addl. Director of Income Tax (Exemptions), Hyderabad under section 271E of the Income Tax Act, 1961.
3. Briefly the facts are assessee, a society is registered under section 12AA of the Act. For the year under consideration, assessee filed its return of income declaring income at NIL after claiming exemption under section 10(23) (iiiad) of the Act. The assessee society runs two nursing schools viz., M/s. Supriya School of Nursing at Kakinada and M/s. St. Mary's College of Nursing at Visakhapatnam. During the course of assessment proceedings, for the impugned assessment year it was noticed by the A.O. that the assessee had purchased land admeasuring ac.12.36 gts., at Maddur (v), Shabad (M), Ranga Reddy District from Mr. Narasimha Reddy and three others for a sum of Rs.21,18,920 including registration and other costs. It was noticed by the A.O., the purchase consideration of the land was paid by Mr. S.S. Prasad and Smt. S. Vidyakumari from their individual accounts on behalf of the society as the society did not have sufficient funds. He further noticed, assessee-society repaid the loan to the concerned persons in cash instead of account payee cheque/draft in violation of the provisions of section 269T of the Act thereby, attracting the penalty provisions of section 271E of the Act. As the Addl. DIT(E), Hyderabad was having jurisdiction to impose penalty under section 271E, the A.O. referred the matter to the authority having jurisdiction for 3 ITA.No.147/Hyd/2014 Social action for Rural Education, Health & Loving Life of Abundance Society, Hyderabad.
imposing penalty. The Addl. DIT(E) accordingly, issued notice directing the assessee to show cause as to why penalty shall not be imposed for violation of the provisions of section 269T of the Act. In response to the show cause notice issued by the Officer concerned, it was submitted by the assessee that it has not taken any loan or deposit from the concerned persons. Hence, the repayment of any loan or deposit does not arise. Therefore, the provision of section 269T of the Act are not applicable. Alternatively, it was submitted by the assessee that even assuming the amount advanced by the concerned persons are loans, repayment of the amount by the assessee to these persons were not in cash, as alleged by the A.O., but through account payee cheques. It was submitted by the assessee that because of some clerical mistake the payments were wrongly shown as 'made in cash' in the books of accounts. In support of such contention, assessee furnished ledger account copies along with bank statement of M/s. Supriya School of Nursing, Kakinada bearing S.B.A/c. No.11117303661. Assessee also submitted confirmation letters from the recipients to establish its claim. The Addl. DIT(E), however, was not satisfied with the explanation of the assessee. He observed that the repayment of loan claimed to have been made in cash is different from the repayment of loans mentioned in the ledger accounts submitted during the course of assessment proceedings. He observed that the assessee has not submitted any reconciliation explanation in respect of loan repayment of Rs.21,18,920. He also was not convinced with assessee's explanation that payments made in cheque were wrongly shown as cash payments in the books of accounts due to clerical mistake, since the books of accounts of the assessee were audited by a Chartered Accountant. He 4 ITA.No.147/Hyd/2014 Social action for Rural Education, Health & Loving Life of Abundance Society, Hyderabad.
further, observed that the copies of the ledger accounts of the individuals showing cheque payment of Rs.8,75,000 on 22.01.2008 and Rs.9,22,108 and Rs.5,27,308 totalling to Rs.22,75,000 furnished by the assessee during the penalty proceedings are not supported by the audited books of accounts. He therefore, disbelieved assessee's claim that the repayment was made through account payee cheque. Accordingly, Addl. DIT(E) having held that the assessee has violated the provisions of section 269T of the Act proceeded to pass an order imposing penalty of Rs.21,18,920 under section 271E of the Act. Being aggrieved of the penalty order, assessee preferred appeal before the Ld. CIT(A).
4. Before the First Appellate Authority, the assessee producing the audited books of accounts as well as the corrected books of accounts reconciled the mistake in the audited books of accounts. Assessee also produced statement of accounts of the State Bank of India, Kakinada Branch in the name of M/s. Supriya School of Nursing as well as the confirmations obtained from Axis Bank, Himayatnagar Branch, certifying that cheques issued by the assessee amounting to Rs.8,75,000, Rs.9,00,000 and Rs.5,00,000 were credited to the bank account of Smt. Vijay Kumari and Mr. S.S. Prasad 22.01.2008 and 27.03.2008 respectively. The Ld. CIT(A) on considering the submissions of the assessee and going through the evidences produced by the assessee, found that the bank statement of State Bank of India relating to the account of M/s. Supriya Nursing Home as well as certificate issued by Axis Bank, Himayatnagar Branch clearly establish that the repayment of loan to the concerned persons were through cheque. She, therefore, was of the view, as the bank 5 ITA.No.147/Hyd/2014 Social action for Rural Education, Health & Loving Life of Abundance Society, Hyderabad.
statements are primary documents which form the basis of the entries in the books of accounts, if there is a conflict between the entries in the primary documents and those of the books of accounts, credence must be given to the primary documents. Ld. CIT(A) also disapproved the observations of the Addl. CIT that repayments made through cheques relate to a separate loan and not the loan which is subject matter of penalty proceeding. Accordingly, Ld. CIT(A) deleted the penalty imposed by the Assessing Officer.
5. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. On consideration of facts and materials placed on record, we do not find any dispute to the fact that the amount utilized for purchase of the concerned land were received from two individuals i.e., Mr. S.S. Prasad and Smt. S. Vijay Kumari. It is also not disputed that the assessee has repaid the amount in question to the concerned persons. The only dispute is with regard to mode of repayment. The Addl. CIT relying upon the entries made in the audited books of accounts has proceeded to impose penalty under section 271(E) whereas, it is the contention of the assessee that the loan was actually repaid through account payee cheques but due to a clerical mistake it was wrongly shown as cash payments in the audited books of accounts. Though, before the Addl. CIT assessee has submitted the bank statements and revised ledger account copy to establish the fact that the repayment to the concerned persons were through account payee cheques but the Addl. CIT has rejected the contention of the assessee on the ground that assessee has taken two separate loans and repayment through cheques 6 ITA.No.147/Hyd/2014 Social action for Rural Education, Health & Loving Life of Abundance Society, Hyderabad.
relate to a different loan than what has been shown in the audited books of accounts. However, as can be seen from the evidence on record as well as discussions made by the first appellate authority, assessee has taken loan of Rs.8,75,000 from Mr. S.S. Prasad and Rs.14,00,000 from Smt. S. Vijay Kumari which were repaid through account payee cheques issued from the bank account of M/s. Supriya School of Nursing of State Bank of India through three account payee cheques numbered as 154071, 154072 and 154073. The aforesaid fact is clearly established from the bank statement of State Bank of India as well as the confirmation issued by Axis Bank, Himayathnagar Branch, certifying that the said cheques amounting in total to Rs.22,75,000 was credited to the respective bank accounts of Mr. S.S. Prasad and Smt. S. Vijay Kumari. Therefore, when there is no evidence before the A.O. that the assessee has availed two separate loans from these persons, on mere presumption and surmises, he cannot reject the explanation of the assessee which were supported by cogent evidence. Further, assessee's contention that repayments through cheques were wrongly mentioned as cash payments as a result of clerical mistake is believable because, as found by the Ld. CIT(A), withdrawals made from State Bank of India account of M/s. Supriya School of Nursing through cheques were wrongly mentioned in the books of accounts as cash withdrawals. Therefore, on overall examination of facts and materials on record, it is very much evident that the repayment of loan by the assessee to Mr. S.S. Prasad and Smt. S. Vijay Kumari were through account payee cheques. Hence, there is no violation of provisions contained under section 269T of the Act thereby, attracting the penal provision of section 271(E). In the aforesaid facts and circumstances, we do 7 ITA.No.147/Hyd/2014 Social action for Rural Education, Health & Loving Life of Abundance Society, Hyderabad.
not find any infirmity in the order of the Ld. CIT(A) in deleting the penalty imposed under section 271(E). We, therefore, uphold the order of the Ld. CIT(A).
6. Though, the department has also raised the issue of Ld. CIT(A) entertaining additional evidence without giving opportunity to the assessing authority, but, at the time of hearing neither the learned D.R. could point-out what are those evidences entertained by the Ld. CIT(A) which can be considered to be in the nature of additional evidence nor on examination of the facts and materials on record, we could find anything to prove the allegation of the department to be correct. Hence, the ground raised does not merit consideration. The ground raised is therefore dismissed.
7. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 21.01.2015 Sd/- Sd/-
(B.RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 21st January, 2015 VBP/- Copy to
1. Dy. Director of Income Tax (Exemptions)-I, 3rd Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.
2. Social action for Rural Education, Health & Loving Life of Abundance Society, Flat No.401, Balaji Enclave, Backside of Gandhi Bhavan, Nampally, Hyderabad.
3. Commissioner of Income Tax-IV, Hyderabad.
4. Director of Income Tax (Exemptions), Hyderabad
5. D.R. ITAT "B" Bench, Hyderabad.