Income Tax Appellate Tribunal - Mumbai
K.K. Enterprises, Mumbai vs Assessee
आयकर अपील य अ धकरण "ए" यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI ी संजय अरोड़ा, लेखा सद य एवं ी संजय गग, या यक सद य के सम ।
BEFORE SHRI SANJAY ARORA, A.M. AND SHRI SANJAY GARG, J.M. आयकर अपील सं./I.T.A. Nos. 4699 & 4700/Mum/2012 ( नधारण वष / Assessment Year: 2001-02) K. K. Enterprises Jt. CIT, Range-25(2), 5, Sai Sadan, Roshan Nagar, Pratyakshar Bhavan, C-11, Chandavarkar Lane, Borivali (East), बनाम/ Bandra Kurla Complex, Bandra (E), Mumbai-400 067 Vs. Mumbai-400 051 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAAFK 1872 A (अपीलाथ /Appellant) : ( यथ / Respondent) अपीलाथ ओर से / Appellant by : Shri Jitendra Shah यथ क ओर से/Respondent by : Shri S. K. Madhuk सनु वाई क तार ख / : 21.08.2013 Date of Hearing घोषणा क तार ख / : 18.10.2013 Date of Pronouncement आदे श / O R D E R Per Sanjay Arora, A. M.:
This is a set of two Appeals by the Assessee agitating the separate Orders by the Commissioner of Income Tax (Appeals)-35, Mumbai ('CIT(A)' for short) of even date, i.e., 28.05.2012, dismissing the assessee's appeal contesting the levy of penalty u/ss. 271D and 271E of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2001-02.2
ITA Nos. 4699 & 4700/Mum/2012 (A.Y. 2001-02) K. K. Enterprises vs. Jt. CIT
2. The appeals raising common issues, were posted for hearing and, accordingly, heard together, and are being decided by a common, consolidated order. The brief facts of the case are that the assessee, a partnership firm, being a builder and developer, was found during the course of the assessment proceedings by the Assessing Officer (A.O.) to have received a sum of Rs.4.35 lacs from one, M/s. Sahakar Developers, in cash during the relevant year, so that there had been a clear violation of section 269SS of the Act. The assessee was, accordingly, show caused in the matter, whereat it was explained that the sum received was in fact not a 'loan or deposit', but amounts received toward a land deal, the payer-firm, which is only a group concern, being also in the same line of business. However, as no details in respect of the said deal nor evidence/s to substantiate the said claim, stood furnished, the same was found not acceptable. No other explanation having been furnished, so that the assessee was clearly unable to show any reasonable cause for to the impugned default, penalty u/s.271D was levied, and also confirmed by the first appellate authority for the same reason. The assessee had similarly also paid Rs.1 lac in cash to the said payer, i.e., M/s. Sahakar Developers, so that there was also a contravention of section 269T of the Act. Penalty u/s.271E, i.e., toward the default of the said provision, stood attracted, and was accordingly levied, and confirmed for the same reason; both the penalties being in terms of the relevant sections, i.e., the amounts having been received and repaid in cash, i.e., other than by way of account-payee cheque or account-payee bank draft, the prescribed modes, and thus in default of the provisions.
3. We have heard the parties, and perused the material on record. 3.1 The default of the relevant sections, being ss. 269SS and 269T of the Act, is apparent. The question before us, however, is the maintainability in law of the corresponding penalty u/ss.271D and 271E of the Act respectively under the facts and circumstances of the case. The assessee's case before us as well as before the authorities below was in terms of the sums having been received from a sister concern, having a common partner in Shri Kamlesh Gangar, with both the concerns having in fact offices at the same place at Borivali, Mumbai and, two, of having acted bona fide, with no ulterior 3 ITA Nos. 4699 & 4700/Mum/2012 (A.Y. 2001-02) K. K. Enterprises vs. Jt. CIT motive, with the transactions being recorded in the regular books of accounts of both the parties, and which would, therefore, constitute a reasonable cause u/s.273B of the Act, saving penalty. With reference to the decision by the apex court in the case of Hindustan Steel Ltd. vs. State of Orissa [1972] 83 ITR 26 (SC), it is claimed that there was no deliberate defiance of law or guilt of conduct contumacious or conscious disregard of its obligation, so as to attract the levy of penalty. Further, qua the repayment of loan or deposit, the extended definition of the loan or deposit u/s.269T is only by Finance Act, 2003 w.r.e.f 01.06.2002, so that the same would not apply for the current year; the impugned repayment of Rs.1 lac having been made on 14.07.2000 (PB pg.14) and, thus, outside the ambit of the extended definition as provided and applicable from 01.06.2002. The Revenue's case, on the other hand, is that none of the foregoing contentions constitute a reasonable cause in terms of section 273B of the Act, and which in any case has to be proved as a fact by the asseesse.
3.2 The provision of sections 269SS and 269T, as well as sections 271D and 271E, prescribing penalty respectively for default of the former sections, have been held as constitutionally valid by the apex court in the case of Assistant Director of Inspection vs. Kum. A.B. Shanthi [2002] 255 ITR 258 (SC). To say, therefore, that the breach of the said provisions is a mere technical or venial breach, so that no penalty on that account would be exigible, as explained by the apex court in Hindustan Steel Ltd. vs. State of Orissa (supra), would not obtain. The said decision, no doubt forming part of the jurisprudence on penal provisions, particularly in the context of fiscal legislation, we may clarify, could only be applied with reference to the factual circumstances and the conduct of the assesse, and not merely with reference to a prescription of law. As explained in Kum. A.B. Shanthi (supra), where there was a genuine and bona fide transaction and the tax payer could not get a loan or deposit by account-payee cheque or account-payee demand draft for some reason, the authority vested with the power to impose the penalty has the discretionary power not to levy the penalty. This would then sum up or define the parameters under which the applicability or otherwise of the decision in the case of 4 ITA Nos. 4699 & 4700/Mum/2012 (A.Y. 2001-02) K. K. Enterprises vs. Jt. CIT Hindustan Steel Ltd. (supra) would need to be considered qua the penalties under reference. In other words, the transaction being genuine or bona fide, though representing an essential condition for saving penalty would itself not be sufficient. Rather, non- genuine transaction was held as outside the scope of the penal provisions inasmuch as the same is liable to be considered as the income of the assessee u/s. 68 of the Act; the two provisions operating in different fields. Reference in this regard may be made to the decision in the case of CIT v. Standard Brands Ltd. [2006] 285 ITR 295 (Del), besides several by the tribunal.
Continuing further, true, the provisions of ss. 269SS and 269T were enacted by the Legislature toward providing a check on the tax payers giving false explanation for their unaccounted money, or making false entries in accounts, explaining the cash found during searches, etc. with reference thereto, as noted by the apex court in Kum. A. B. Shanthi (supra). However, that would not, even as explained by the apex court therein, constrict the scope of the provisions, cast in clear and unambiguous language, to such cases of search, etc. only. As such, where a person is found to have acted in violation, he is bound to show reasonable cause, failing which the penalty is imposable. A reasonable cause is always a matter of fact. In the several cases cited by the assessee, penalty has been deleted on the basis of finding/s of a reasonable cause with the assessee-appellant toward the impugned transaction.
3.3 We next examine the facts and circumstances of the case. To begin with, however, we may clarify that while a loan or deposit stands defined to mean 'loan or deposit of money' in section 269SS, i.e., providing for a conditionality on its acceptance, and from its very inception (i.e., 11.07.1981), the said words were defined in sec. 269T to mean any loan or deposit of money which is repayable after a notice or repayable after a period. The enhancement in the scope of s. 269T, so as to include loan or deposit of any nature, i.e., in case of a person other than a company, is only by Finance Act, 2003 w.e.f. 01.06.2002. Clearly, the cash received by the assessee from its sister concern cannot be said to be repayable after a notice or after a period, i.e., in terms of the definition 5 ITA Nos. 4699 & 4700/Mum/2012 (A.Y. 2001-02) K. K. Enterprises vs. Jt. CIT obtaining at the time of its acceptance (16.06.2000) or repayment (14.07.2000). Its repayment would, thus, stand to be ousted and, thus, not hit by section 269T. No penalty u/s.271E of the Act, on an ostensible default thereof, would, thus, hold.
3.4 As regards the sum of Rs.4.35 lacs received by the assessee in cash on different dates during the relevant year, the same would definitely qualify as a loan or deposit within the meaning of the term u/s.269SS of the Act inasmuch as the same stands widely defined as loan or deposit of money. The sum received by the assessee is admittedly payable to the payer, as reflected per the accounts of both the parties (PB pgs.4, 14) and, as such, is only a loan or deposit of money falling within the purview of section 269SS. The assessee has clearly been unable to substantiate its claim of the said sum as having been received in relation to a transaction/s in land or having its genesis in business transaction/s with the said party. In fact, Rs.1 lac out of the sum received stands repaid in cash and, again, without reference to, or any underlying business transaction being otherwise exhibited. In fact, the assessee itself states of the account with the said party to be in the nature of a current account, contradicting its said explanation.
So however, in our view, the assessee is entitled to relief u/s.273B. Both the concerns are sister concerns, in the same business; rather, having their office located in the same premises, with a common partner. A firm under normal circumstances only acts through the agency of its partners, who may bank for the cash required in one firm on that available with another. We may though clarify that we, in saying so, do not in any manner suggest that where cash entries are duly recorded in the books of accounts of both the recipient and the payer, i.e., represent genuine transactions of cash paid and received, the same would by itself constitute a reasonable cause, excluding penalty u/s.271D / 271E of the Act. This is as this is precisely what stands barred by sections 269SS and 269T, which, therefore, are to be regarded as substantive provisions, proscribing acceptance and repayment of loan or deposit of money otherwise than by account-payee cheque or account-payee bank draft where the threshold limit is exceeded, as in the instant case. But only that in the given circumstances of this case, where cash has been 6 ITA Nos. 4699 & 4700/Mum/2012 (A.Y. 2001-02) K. K. Enterprises vs. Jt. CIT accepted by the assessee-firm from another constituted by the family members, being in fact run through the agency of, among others, a common partner, the transfer of cash by one from to another would operate as a reasonable cause, saving penalty. True, the assessee has not been able to show of being prevented by any reasonable reason in not accepting the same through account-payee cheque or bank draft; rather, there has been no contention to that effect. Equally, the constitution of the payer concern, which is only another person under the Act, would not be of much import. However, it is the totality of the circumstances that have to be taken into account. The transactions between firms are, in fact, only done between individuals. In the perception of the partner, inasmuch as the things are to be viewed from the stand-point of the businessman, he may only be transferring the money from one pocket to another. In so deciding, we have been guided by the decisions by the hon'ble courts, where the term 'reasonable cause' has been explained as liable to be liberally construed where the bona fides are not in doubt, and indeed penalty held as not exigible under similar circumstances, as in CIT vs. Natvarlal Purshottamdas Parekh [2008] 303 ITR 5 (Guj)). As explained in CIT v. Sunil Kumar Goel [2009] 315 ITR 163 (P&H), where the transactions are between two sister concerns, both within the family, and the fund transfers were for the purposes of business, with the transactions accounted for in the books, the requirement of reasonable cause is to be considered as satisfied in such circumstances. On the same footing is the decision in the case of CIT v. Maheswari Nirman Udyog [2008] 302 ITR 201 (Raj) and CIT v. Lakshmi Trust Co. [2008] 303 ITR 99 (Mad).
4. In view of the foregoing, considering the totality of the facts and circumstances of the case, including the number and volume of transactions, in our view the assessee has been able to exclude its case on the ground of reasonable cause, so that the penalty in the instant case is saved by section 273B of the Act, as well as on the ground of applicability of the un-amended provision of s. 269T of the Act. We decide accordingly.
7ITA Nos. 4699 & 4700/Mum/2012 (A.Y. 2001-02) K. K. Enterprises vs. Jt. CIT
5. In the result, both the appeals by the assessee are allowed.
प रणामतः नधा रती क अपील वीकृत क जाती है ।
Order pronounced in the open court on October 18th, 2013
Sd/- Sd/-
(SANJAY GARG) (SANJAY ARORA)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांकDated : 18.10.2013
व. न.स./Roshani, Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु त(अपील) / The CIT(A)
4. आयकर आयु त / CIT - concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई /
DR, ITAT, Mumbai
6. गाड फाईल / Guard File
आदे शानस
ु ार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai