Income Tax Appellate Tribunal - Jaipur
Paras Buildhome P Ltd, Jaipur vs Acit, Jaipur on 25 July, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES (SMC), JAIPUR
Jh Hkkxpan] ys[kk lnL;] ds le{k
BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER
vk;dj vihy la-@ITA No. 803/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2010-11
M/s Paras Buildhome P. Ltd., cuke Addl. Commissioner of
E 52A, Lal Bahadur Nagar, JLN Vs. Income Tax,
Marg, Jaipur-302017. Range-6, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAECP 1391 C
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Suresh Chand Khincha (CA)
jktLo dh vksj ls@ Revenue by : Smt. Poonam Rai, (DCIT).
lquokbZ dh rkjh[k@ Date of Hearing : 13/06/2017
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 25/07/2017
vkns'k@ ORDER
PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-II, Jaipur dated 21/06/2016 for the A.Y. 2013-14, wherein the assessee has raised following grounds of appeal:
"1. That the Authorities below were not justified /have erred in law and facts in imposing / Confirming the Penalty for under section 271D of Income tax Act 1961 for Rs 576000.00.
2. That the Authorities below were not justified /have erred in law and facts in imposing / Confirming the Penalty for under section 271D of Income tax Act 1961 for Rs 576000.00 without considering
2 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT the contention of the assessee that the loans were received from directors and their close relatives in cash in urgent and extreme situation and without proving mens rea which is essential in all case where the penalty is imposable.
3. That the authorities below have erred in confirming the penalty under section 271D of I T Act 1961 by not considering the settled legal pronouncement which was before them even without discussing the same in her order that how the facts of the case is different from the fact of the case of the assessee.
2. In this appeal, the only issue involved is against sustaining the penalty levied U/s 271D of the Income Tax Act, 1961 (in short the Act) of Rs. 5,76,000/-. The Addl. CIT, Range-6, Jaipur had levied the penalty of Rs. 5,76,000/- lacs by violating the provisions of Section 269SS of the Act.
3. In first appeal, the ld. CIT(A) confirmed the penalty of Rs.
5,76,000/- by holding as under:-
"2.3 I have perused the facts of the case, the penalty order and the submissions of the appellant. The first submission made by the Authorized Representative on the issue is that the loans were taken in cash in extreme and urgent situation. It was sated that the accounts were used to fund shortage of part payment to honour the cheques issued to Rajasthan Financial Corporation installments so that financial offences against the company may not be lodged by them. However, as discussed in pages 2 & 3 of the penalty order of the Addl. CIT, Range-6, Jaipur, the facts are otherwise. Party wise details have been reproduced to show that loans taken were not utilized only for the purpose of making payments to financial institution except on one occasion when a part payment of Rs.70,000/- taken from Shri Amit Goyal 3 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT is used for issue of cheque to RFC, the others are used for issuing cheques to individuals and are regular business transactions. Therefore, this submission of the AR is not borne out by facts.
The next submission made is that persons from whom loans were accepted were either directors of the company or close relatives and filing their returns regularly. Further, TDS was also deducted on interest paid and so no malafide intention to violate the income tax provisions was there and hence, penalty is not imposable. It has been held in the case of CIT vs. Samora Hotels Pvt. Ltd. 19 Taxman.com 285, Delhi (HC) it has been held that the expression 'any other person' in section 269SS does not exclude directors or members of company which has received or accepted loans.
Section 271D in the statute is for a specific purpose and obligates certain specific modes in which loans can be taken when exceeding a certain amount. The assessee as per records, is seen indulging in violation of provisions in the case of 5 persons and on different occasion. It has been held that in 27 Taxmann.com 307 (Hyd.).
"Rigour of penalty exonerated -- Existence of reasonable cause The assessee may be exonerated from the rigour of penalty under the provision of section 27 ID provided it is established that there existed a reasonable cause for not complying with the prescription of section 269SS. It is clearly laid down in section 271D that no person shall after 30-06- 1984 taken or accept from any other person any loan or deposit otherwise that by account payee cheques or account payee DD, if the amount or loan or deposit or the aggregate amount of such loan or deposit is Rs. 20,000 or more. This provisions of the Act was brought on the statute book to counter tax evasion. Therefore, it is not sufficient to say that simply the transaction was genuine, so provisions of section 269SS of the Act, are not applicable. Once cannot accept such proposition of law. Therefore, subject to the existence of mitigating circumstances penalty cannot be deleted. The assessee must prove beyond the shadow of the doubt that there existed a reasonable cause for not complying with the conditions contained in section 269SS. Circumstances under which cash was accepted must be explained.
Conclusion 4 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT The majesty of law is to be maintained. The commissioner (Appeals) is not justified in accepting the oral explanation offered by the assessee without any cogent material brought on record to delete the penalty."
In the present case, the assessee could not prove that a reasonable cause existed for the above violation. Payments of installments of the financial institution was in the knowledge of the assessee, well in time and it was not a liability which suddenly cropped out. Further, the reasonableness can be accepted for one occasion but the assessee has taken cash loans in different months violating the provisions of the section. As already discussed above, it is not that every loan has been taken for the liability of the financial institution, as discussed largely the cash loans have been taken from routine payments.
As already quoted above, it has been consistently held that it is not sufficient to say that the transaction was genuine and hence the provisions of section 269SS of the I.T. Act, 1961 are not applicable. Further, reliance is placed on the case of Charan Dass Ashok Kumar 52 Taxman.com 424 (Punjab & Haryana). In view of the discussion as above and the case laws relied on the penalty levied under section 271D, is confirmed. Ground of appeal is dismissed."
4. Now the assessee is in appeal before me. While pleading on behalf of the assessee, the ld AR has submitted as under:-
1. The assessee M/s Paras Buildhome Pvt. Ltd. has taken Loans in cash from the under mentioned person in extreme and urgent situation which was genuine for a business entity in that circumstances.
Our request for non imposition of penalty for violation of section 269SS of Income tax Act 1961 was that it was not intentional but was essential for the existence of the entity. We have given sequentially all the cash taken by different persons in such extremely essential situation that for the sake of saving goodwill of the company and honouring of cheques 5 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT presented by the persons to whom the cheques issued by the company for the satisfaction of dues . Most of the amount was accepted by the company to fund the shortage of part amount which could not arranged to honour the cheques issued to Rajasthan Financial corporation installments of secured loans taken by the company. On perusal of all instance and the cheques issued thereon to financial institution which on non issue of cheque may lodged any financial offence against the company. Further all the money received was duly deposited in bank account.
We are giving hereby all the events of cash deposit and against them the cheque honoured in chronological manner.
1. Sh. Amit Goval (SON OF DIRECRTOR SMT REKHA GOYAL) a. 28/7/2009 Cash deposited Rs. 40000/- Rajasthan Bank Cheque of Rs. 50000/- issued to Archana and balance in bank on 28/7/2009 was Rs. 10731/- hence to fulfil the shortage of fund to honour cheques. b. 4/3/2010 Cash deposited 70000/- Amount deposited in HDFC Bank Cheque issued to Rajasthan Financial Corporation of Rs. 2202000/- and balance in bank was only RS.2137644/-( Shortage of Rs. 64356.00).
2. Smt. Gunja Agarwal (WIFE OF DIRECRTOR RAHUL GOYAL)
a) 3/9/2009 85000/- cash deposited in HDFC Bank 15000/- cash deposited in HDFC Bank Payment to RFC 2202000/- and balance in bank was Rs.2121242=00
3. Rekha Goyal (DIRECTOR)
a) 22/6/2009 100000/- cash deposited in HDFC Bank i. Balance was short in bank. Cheque of RS. 400000/- issued to Disha Construction Co., cheque was already once returned and was re 6 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT lodged hence it was necessary to deposit the cash to get the cheque honour otherwise serious legal consequences may happen against the company.
ii. 200000/- cash deposited on 1/7/2009 in BOR Cheque issued to Mrs. Ragini of Rs.200000/- and the balance in bank was Rs.1007/- as on 30/6/2009
4. Shobhit Goyal (COUSIN OF DIRECTOR RAHUL GOYAL
(a) 33500/- cash deposited on 10/8/2009 in The Bank of Rajasthan Ltd. company has to issue cheques of interest to the persons from whom loan were taken by the company These parties are:-
Premchandkeshwani Rs. 6600/-
Arti Keshwani Rs. 8800/-
Godawani Devi Rs. 8800/-
Kantesh Kumar Keshwani Rs. 8800/-
Rs. 33000/-
5. SHRI ANIL KUAMR GOYAL (A.K.GOYAL) (HUSBAND OF DIRECRTOR SMT REKHA GOYAL)
(a) Rs. 8000/- cash deposited on 24/6/2009 on that balance as per bank account was Rs. 393143/- and cheque issued to party was of Rs. 400000/- for honouring of that cheque the company has taken cash from A.K Goyal in urgency.Shri A.K.Goyal is the husband of the director Smt. Rekha Goyal.
(b) Rs. 25000/- cash deposited on 26/2/2010 in this quarter cheque of Rs.2202000/- was issued to RFC and due to short balance in bank, cash deposited in that date.
Thus on working at all the transaction it has been seen that cash are deposited only due to honouring of cheques of financial institution of Rs 7 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT 2202000/- in every quarter which was essential for the assessee otherwise they would have been declared as defaulters and penal interest could be imposed .Further the persons from whom the loans were accepted are Income Tax assessee's and was either the directors of the company or closed relatives of the directors of the company and filing their returns regularly. Copies of the returns filed was submitted by the assessee during the course of assessment proceedings u/s 143(3) of income tax Act 1961.Futher the TDS was also deducted on the amount paid as interest.
Thus there was no malafide intention to violate the income tax provisions but it was happened due to financial crisis management of the company hence the no penalty is imposable.
Hence the assessee has reasonable cause for accepting the loans in cash u/s 273B of Income tax Act 1961.
Section 273B. Notwithstanding anything contained in the provisions of clause (b) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C,section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FAB, section 271FB, section 271G, section 271GA, section 271H, section 271-1, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA, or section 272B or sub- section (1) or subsection (1A) of section 272BB or clause (b) of subsection (1) of section or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall 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 reasonable cause for the said failure."
8 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT 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 : 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 271D of the Act provided that a person who takes or accepts any loan or deposit in contravention of the provision of Section 269SS of the Act, he would be liable to pay by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted. Section 271D 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 bonafide transaction. The legislature accordingly, introduced Section 273B of the Act, which provided that if there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by an account payee cheque or demand transaction for some bonafide reason, the authority vested with the power to impose penalty had a discretion not to levy the penalty.
As per following case laws no penalty u/s 271D is imposable when the assessee has reasonable cause and transactions were done to meet 9 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT exigencies of the business .it can be said ot have constituted "reasonable cause and no penalty is leviable under section 271D of Income Tax Act.
In Chamundi Granites (supra) the Supreme Court considered the provision of Section 271D and 273B of the Act and held:-
"
lt 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 he 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 213B 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 bonafide reasons, the authority vested with the power to impose penalty has got discretionary power."
In Bhagzvati Prasad Bajoria's (supra) the Gauhati High Court 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....."
In the instant case, we find that the Tribunal has given a categorical finding that the assessee had established a reasonable cause for failure to comply with the provision of Section 269SS of the Act. The Tribunal further found that the loan given by the Samajwadi Party was a genuine loan, which was reflected in the books of accounts on account of the 10 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT Samajwadi Party as well as in the books of account of the assessee and that the cash given by the party was deposited in the bank of the assessee and, thereafter, used for the purpose of converting the nazul land into free hold.
The Tribunal found that the genuineness of the transaction was also not disputed by the Assessing Officer.
In the light of the aforesaid, we find that even though the assessee had taken a loan in cash, nonetheless, the loan transaction was a genuine transaction and was routed through the bank account of the assessee which clearly shows the bonafides of the assessee. The cash given by the lender was not unaccounted money but was duly reflected in their books of account. The Assessing Officer also accepted the explanation and found the transaction to be genuine.
The contention of the learned counsel for the appellant that since there was no urgency, the assessee could have taken the loan through cheque and should have processed the matter through regular banking channels is immaterial, inasmuch as the genuineness of the transaction has not been disputed by the Ass essing Officer. Further, we find that the cash was deposited in the bank account of the assessee and the money was thereafter, routed through the banking channel for payment to the Government for converting the land into free hold property.
In the light of the aforesaid, we are of the view that reasonable cause had been shown by the assessee and the provisions of Section 273B of the Act was applicable.
The appellate authorities were justified in holding that no penalty could be imposed since a reasonable cause was shown by the assessee In view 11 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT of the aforesaid, we are of the opinion that no substantial question of law arises for consideration.
" dillu cine Enterprises(P) Ltd v CIT (2002180ITD 484 (HYD) No penalty is could be levied where the inter se transactions between the assessee and its partners even if there is violation of section 269SS and 269TT CIT V/S MANOT LALWANI ( 20031 130 CTR 2 ( 2003) 260 ITR 590 RAT HIGH COURT In the present case the tribunal found that the assessee is an exporter and was in the urgent need of the money for complying with the time bound supplies and therefore took a loan of Rs 250000.00 from his brother in law. The tribunal was justified in arriving at a conclusion that the cash loan was taken under the exceptional circumstances and that there was a reasonable cause in terms of section 273B and the penalty imposed U/s 271D was rightly set aside.
In the recent decision of Allahabad High Court in case of Smt. Dimale Yadav and Shri Akhilesh Kumar Yadav dated 21.08.2015 it was held that if the transaction is genuine then no penalty is leviable.
In case of RIDHI SIDHI INFRAPROTECTS P LTD ITAT JODHPUR BENCH A also held that if the transactions are between the sister concern no penalty u/s 271D is leviable.
Looking to the judicial pronouncements mentioned above and extreme and urgent circumstances mentioned above under which the company was forced to accepted the loans in cash and transactions with director or their relatives which are assessed to tax.
12 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT Further the amount was taken during the year through cheques and 0 Cash both in case if exigency. Loans were held to be genuine by the assessing officer in the assessment proceedings. Assess has reasonable cause u/s 273B .Hence no penalty is leviable u/s 271D."
The ld AR also relied on the following decisions of the Hon'ble ITAT Jaipur Benches, Jaipur.
(i) ITA No. 847/JP/2011 order dated 13/06/2014.
(ii) ITA No. 41/JP/2016 order dated 01/11/2016.
(iii) ITA No. 36/JP/2013 order dated 31/01/2017.
5. On the contrary, the ld DR has vehemently supported the orders of the authorities below.
6. I have heard the rival contentions of both the parties and perused the material available on the record. From perusal of the record, it transpires that the assessee is a private limited company engaged in the business of builders. It is not in dispute that during the year under consideration, the assessee had taken loan of Rs. 5,76,000/- from five persons. All these persons are either director of the company or close relatives of the director of the company. They are filing their income tax return regularly and assessed to tax. It is very pertinent to note that the Assessing Officer has invoked the provisions of Section 269SS of the Act treating the amount as cash loans received from many persons. The AR 13 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT has submitted that the loans were taken in cash in extreme and urgent situation. It was due to accounts were used to fund shortage of part payment to honour the cheques issued to Rajasthan Financial Corporation's installments. Therefore, considering the various case laws on this issue, no penalty should be imposed on the assessee for contravention of Section 271D of the Act. In the similar case, this Bench of the ITAT in the case of Vijesh Devi Vs Addl.CIT has granted relief to the assessee by holding as under:-
"9. I have heard the rival contentions of both the parties and perused the material available on the record. It is very pertinent to note that in the assessment order, the Assessing Officer has taken two views regarding these amounts. He has made addition by invoking the provisions of Section 68 of the Act treating the amount as bogus cash credits and holding the amount as assessee's own. On the other hand, the Assessing Officer has also invoked the provisions of Section 269SS of the Act treating the amount as cash loans received. The relevant para in respect of Shri Ramniwas Chopra is as under:-
"Further, assessee has taken loan of Rs. 2,50,000/- in cash, hence violated the norms as per Section 269SS of I.T. Act, 1961. Further, as clear from statement of Sh. Ram Niwas Chopra that loan was also returned back in cash, hence assessee has violated provisions of Section 269T I.T. Act, 1961. Therefore, matter is being referred to Additional Commissioner of Income Tax, Range-2, for initiation of penalty proceedings U/s 271D and 271E of the IT Act, 1961.
Similar findings have been also recorded in the case of Shr. Bheru Ram Choudhary and Shri Rajveer Singh. Thus, the Assessing Officer himself was not in belief whether the amount was a bogus
14 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT cash credit or it was a loan received in cash in violation of Section 269SS of the Act. The ld AR of the assessee in his written submissions has stated that assessee's husband was an Army Officer, who was declared martyr during the Kargil war and the Government of India awarded him "Gallantry Award"
posthumously and allotted a petrol pump for her livelihood and her children in the year 2001. But she faced lots of problems in running of petrol pump due to paucity of funds. Therefore, her relatives helped her. In Section 269SS of the Act, it is held that no person shall take or accept from any other person any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearings system through a bank account, but in the present case, the persons, who helped her, are her relatives or neighbours, who were also agriculturists having no bank accounts at the time of funds given. The assessee has filed an affidavit by stating that she has received the amounts as gifts and advances. The assessee is a widow of an Army Officer and she was not educated. The allotment of the petrol pump was given by the Government of India but she was not perfect in conducting the business due to illiteracy. All these facts make a reasonable cause where the assessee should not be visited by the penalty U/s 271D of the Act towards the loans and deposits accepted from the known persons and close relatives in the hours of distress. Further it is also clear from the dwell stand taken by the Assessing Officer and further relief granted in the quantum appeal by the higher authorities that the assessee has not adopted this procedure to avoid or evade the tax. Therefore, considering the various case laws on this issue, no penalty should be imposed on the assessee for contravention of
15 ITA 803/JP/2016_ M/s Paras Buildhome P Ltd. Vs. Addl.CIT Section 271D of the Act. The above view also get supports from the various case laws relied by the ld AR of the assessee including decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Raj Kumar Sharma (2007) 294 ITR 131 (Raj) and decision of ITAT, Jaipur Bench in the case of Smt. Kusum Dhamani Vs ADDl.CIT in ITA No. 847/JP/2011. Therefore, by considering the totality of facts and circumstances of the case, I delete the penalty sustained by the ld. CIT(A)."
Therefore, by considering the totality of facts and circumstances of the case, I delete the penalty sustained by the ld. CIT(A).
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 25/07/2017.
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1. vihykFkhZ@The Appellant- M/s Paras Buildhome P. Ltd., Jaipur
2. izR;FkhZ@ The Respondent- Addl. CIT, Range-6, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 803/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar