Income Tax Appellate Tribunal - Pune
Sanjay Ramchandra Phand, Ahmednagar vs Assessee on 26 December, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 2237/PN/2012
(Asstt.Year : 2006-07)
Sanjay Ramchandra Phand,
C/o. Hotel Radhika
Opp. ST Stand, Shrirampur,
Dist : Ahmednagar. .. Appellant
PAN No.AAZPP7219F
Vs.
Addl.CIT, Range-9, Ahmednagar .. Respondent
Assessee by : Shri Malpani
Revenue by : Smt. Garima Chouhary
Date of Hearing : 26-12-2013
Date of Pronouncement : 31-12-2013
ORDER
Per R.K. Panda, AM :
This appeal filed by the assessee is directed against the order dated 29-06-2012 of the CIT(A)-I, Pune relating to Assessment Year 2006-07. Levy of penalty of Rs. 2 lakhs u/s.271D by the Addl.CIT, Ahmednagar and upheld by the CIT(A) is the only issue in this appeal.
2. Facts of the case, in brief, are that the assessee is owner of building comprising of Hotel and Dining hall. Assessment in this case was completed u/s.143(3) on a total income of Rs.5,93,720/-. During the course of assessment proceedings the Assessing Officer noticed from the balance sheet that it has shown advance for Hotel Radhika amounting to Rs.2 lakhs. From the details furnished by the assessee, he noted that Shri Jayram Gopal Shetti and Shri Sudhakar L. Kottiyan had taken on rent the Restaurant part and Dining hall part of Hotel Radhika 2 respectively by paying Rs. 1 lakh each in cash as deposit. During the assessment proceedings on being questioned by the Assessing Officer, it was clarified that above amounts were taken as advance and not as a loan or deposit. It was explained that the same has been accepted as security against any damage happening to the furniture, decoration, kitchen sets etc. and these advances will be returned to them when they will stop to run on rental basis. Since the assessee has accepted the deposit of Rs.2 lakhs in cash the Assessing Officer was of the opinion that provisions of section 269SS were attracted. He, therefore, referred the matter to the Addl.CIT for initiating penalty u/s.271D of the I.T. Act. On being questioned by the ADdl.CIT, the assessee reiterated the same submissions as made before the Assessing Officer. It was submitted that the provisions of section 269SS are not applicable to the facts of the present case. The decision of Hyderabad Bench of the Tribunal in the case of Dillu Cine Enterprises Pvt. Ltd. Vs. Addl.CIT reported in 80 ITD 484 was relied upon.
2.1 It was further submitted that the amount accepted by the assessee is security deposit against future contingencies. It was brought to the notice of the Addl.CIT that an amount of Rs.5,200/- had been debited to such account due to some breakage of glass. It was further argued that the very basis of bringing the provision in the Act was to avoid tax evasion by bringing cash in the books under the grab of loan or deposit. In the instant case, the security deposit is accepted as genuine and genuine transactions are outside the net of provisions of section 269SS. It was finally argued that the default, if any can be said to be technical in nature and therefore, proceedings may be dropped. 3 2.2 However, the Addl.CIT was not convinced with the explanation given by the assessee. He noted that there is no reasonable cause on the part of the assessee in not accepting such deposit in account payee cheques or bank drafts. He also rejected the alternate contention of the assessee that the depositors have no bank account in Shrirampur on the ground that those persons should have given out station cheques as there was no emergency in making the payments or they could have telegraphic transfer of the amounts. Referring to various decisions the Addl.CIT levied penalty of Rs.2 lakhs for violation of provisions of section 269SS.
3. In appeal the Ld.CIT(A) upheld the penalty so levied by the Addl.CIT. While doing so, he rejected the contention of the assessee that the money was received as security deposit for the safety of any damage to the physical property or financial damage to omission or commission of the tenants and, therefore, is not of the nature of deposit or loan covered u/s.269SS. He also rejected the argument of bonafide belief.
3.1. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
4. The Ld. Counsel for the assessee reiterated the same arguments as made before the Assessing Officer and the CIT(A). It was submitted that the advance received against future contingencies cannot be termed as loan or deposit. He submitted that the contingency was proved by filing extract of tenant where an amount of Rs.5,200/- was debited due to breakage of one glass. There is one more debit to the said account in 4 the last accounting year towards payment of VAT by the assessee because the tenant has gone to his native place. These instances, according to the Ld. Counsel for the assessee, prove that the said amount is contingency advance and cannot be termed as a loan or deposit. He further submitted that both the tenants were not having bank account at Shrirampur. Referring to the affidavit of both the persons he submitted that these affidavits were produced before the Addl.CIT.
4.1 Referring to the decision of the Mumbai Bench of the Tribunal in the case of Dr. Deepak Muchala Vs. ITO reported in 58 TTJ (Bom) 524 he submitted that the Tribunal in the said decision has held that in case of genuine transaction even if there was infraction of law resulting from ignorance of law, which did not prejudice the interest of the revenue, the default was only technical or venial infraction of law and could be excused in view of the decision of the Hon'ble Supreme Court in the case of Hindustan Steel Vs. State of Orissa reported in 83 ITR 126. Referring to the decision of Pune Bench of the Tribunal in the case of Bharadiya Trading Co. he submitted that the Tribunal in the said decision has deleted the penalty levied u/s.271D and 271E on the ground of reasonable cause. He submitted that there was a reasonable cause on the part of the assessee for accepting such deposit in cash since the rent of the property was on a daily basis, and therefore in view of the provisions of section 273B the penalty levied by the Addl.CIT and upheld by the CIT(A) should be cancelled.
5
5. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
6. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee in the instant case has received security deposit of Rs.1 lakh each from 2 tenants namely Shri Jayram Gopal Shetti and Shri Sudhakar L. Kottiyan towards rent of restaurant part and dining hall part of Hotel Radhika. According to the Addl.CIT, by accepting such security deposit in cash the assessee has violated the provisions of section 269SS. Therefore, she levied penalty u/s.271D of the I.T. Act of the equivalent amount which has been upheld by the CIT(A). 6.1 It is the case of the Ld. Counsel for the assessee that the amount of Rs.1 lakh each has been taken as security deposit to meet the future contingency such as loan to assessee due to breakings, fire or mishandling etc. According to him, it is a common experience that these tenants suddenly break the contract to go to their native place without intimating to the landlord and in such situation the tenant even do not pay the outstanding bills towards Electricity, VAT, Telephone bill or Salary etc. It is also the case of the Ld. Counsel for the assessee that the 2 tenants did not have bank accounts at Shrirampur. It is also the case of the Ld. Counsel for the assessee that the Hotel has been let out on a daily rent basis and instances have occurred when amounts 6 have been recovered from the said security deposit towards breakage of glass and payment of VAT.
6.2 As per the provisions of section 273B penalty u/s.271D shall not be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was a reasonable cause for the said failure. Considering the totality of the facts of the case in the instant case, we are of the opinion that when the assessee has let out the hotel building on a daily basis, when the tenants had no bank account at Shrirampur and the genuineness of the transaction has not been doubted, a fact not controverted by the Revenue, therefore, there was a reasonable cause on the part of the assessee for accepting such security deposit in cash. Under these circumstances, we are of the considered opinion that it is not a fit case for levy of penalty u/s.271D of the I.T. Act. We accordingly set-aside the order of the CIT(A) on this issue and the penalty is directed to be deleted.
7. In the result, the appeal filed by the assessee is allowed.
Pronounced in the Open court on 31-12-2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated : 31st December, 2013
Satish
Copy of the order is forwarded to :
1. The Assessee 2. The Department
3. The CIT(A)-I, Pune 4. The CIT-I, Pune
5. D.R. "A" Bench, Pune 6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune