Income Tax Appellate Tribunal - Chennai
Raajes Parekh, Chennai vs Acit, Non Corp Circle 10(1), Chennai on 27 September, 2024
आयकर अपील य अ धकरण, ''ए, यायपीठ,चे नई IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, CHENNAI माननीय ी मनु कुमार ग र, या यक सद य एवं माननीय ी एस.आर. रघुनाथा, लेखा सद य के सम BEFORE HON'BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON'BLE SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1401/CHNY/2024 िनधारण वष/Assessment Year: 2013-2014.
Raajes Parekh, The Assistant Commissioner of
No.28, New Avadi Road, Vs. Income Tax,
Kilpauk, Non Corporate Circle 10(1)
Chennai 600 010. Chennai.
PAN: AAPPR 9510F
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से/Appellant by : Shri S. Dwarakesh, FCA
यथ क ओर से/Respondent by : Dr. Samuel Pitta, IRS, JCIT.
सुनवाई क तारीख/Date of Hearing : 24.09.2024
घोषणा क तारीख/Date of Pronouncement : 27.09.2024 आदेश /O R D E R PER MANU KUMAR GIRI (Judicial Member) This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in order No.ITBA/NFAC/S/250/2023-
-2- ITA No.1401 /Chny/2024 24/1061736658 (1) dated 29.02.2024 for assessment year 2013- 2014.
2. The assessee has raised the following grounds of appeal:-
''1. The orders of the learned Additional Commissioner of Income Tax, Non Corporate Circle 10, Chennai ('Learned AO') and Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, New Delhi [CIT(A)'] are erroneous & bad in law and contrary to the provisions of the Income Tax Act, 1961 (the Act') to the extent it is prejudicial to the interest of the Appellant.
Ground 2 to 5 Levy of penalty under section 271E read with section 269T of the Act
2. That the CIT(A) and Learned AO have erred in holding the levy of penalty under section 271E read with 269T of the Act.
3. That the Learned CIT(A) and Learned AO ought to have appreciated that the provisions of section 271E read with section 269T cannot be applied in respect of transaction routed through banking channels. which otherwise gets reported.
4 That the Leaned CIT(A) and Learned AO have erred in holding that penalty under section 271E read with section 2691 of the Act is leviable without appreciating the fact that Non-Banking Financial Companies (NBFC) have to be treated at par with banking companies not leading to any unaccounted income.
5. That the Learned CIT(A) and Learned AO have erred in interpreting the penal provisions as defined in section 271E read with 269T of the Act in the manner which is not in line with the intent of the legislation''.
3. Brief facts of the case are that assessee is engaged in the business of Real Estate. For the subject assessment year, the Appellant filed his return of income under section 139(4) of the Income Tax Act, 1961 (in short "the Act'') on 30th March 2015. In the return of income, the Appellant declared a total income of Rs.41,98,650 and paid resultant tax liability of Rs.11,24,095/-. The Appellant has availed a vehicle loan from Mahindra and Mahindra Financial
-3- ITA No.1401 /Chny/2024 Services Ltd (Mahindra') which is a Non Banking Financial Company ('NBFC').
The Appellant has identified a buyer and directed the buyer to repay the loan before taking delivery of the vehicle. The buyer has subsequently repaid the loan by way of cash payment amounting to Rs.11,02,200/- for closing the loan.
The Learned Addl CIT has held that the Appellant has violated the provisions of section 269T of the Act by repaying loan by way of cash beyond the threshold of Rs.20,000. Relying on the order of the Addl CIT, the Learned AO issued a notice of demand under section 156 of the Act dated 18th February 2020 thereby levying a penalty of Rs. 11,02,000/-.
4. Aggrieved assessee preferred an appeal before the ld.CIT(A) who dismissed the appeal of the assesee and held as under:
''First being the intent of legislation where the appellant stated that the intention of the section does not apply as the loan was repaid in cash to the NBFC. In this regard, it is hereby stated that the language of the provisions of section 269T of the IT Act is very clear and there is no room for any ambiguity. The Hon'ble Supreme Court in the case of Sun Export Corporation Bombay vs. Collector of Customs (1997) 6 SCC 564 had held that if the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the legislature. Further, in the case of in Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act''.
Aggrieved assessee is in appeal before us.
5. Summary of the arguments of the ld.Counsel for the assessee:
-4- ITA No.1401 /Chny/2024 a. Intention of the Section 269T of the Act does not apply to banking companies;
b. Considering the intention of the legislation enacting the provisions of section 269SS and 269T by itself cannot be applied to the appellant's case on the ground that there was no intention to generate black money; c. The courts have been treating NBFCs at par with banking companies for income tax purposes [referred CIT V. KEC Holdings Ltd (IT Appeal No.221 of 2012 dated 11.06.2014; CIT Vs Mahila Seva Sahakari Bank Limited (Cooperative Bank) (2017) 395 ITR 324 (Gujrat High Court) and CIT Vs Vasisth Chai Vyapar Limited (NBFC) 410 ITR 244 SC] ; d. No penalty where cash has been deposited into bank though it has been normally received in excess of threshold limits. The Appellant further added that in the instant case, repayment has been made to the Mahindra loan account which has been duly reported by the NBFC recipient. The Court has appreciated the fact that though loan has been obtained by way of cash, since the amount has been subsequently deposited into bank account, such amount has to be regarded as routed through banking channels.
e. After referring the intent of the legislation for provisions of Section 269SS and 269T have been introduced in the year 1984, the ld.Counsel submitted that the intention of introducing this section is to curb availing cash loans which is utilized as an avenue to generate black money. In the instant fact pattern, the loan has actually been repaid to a NBFC which is subject to reporting guidelines. Therefore, considering the intent of the legislation, the provisions of section 269T itself cannot be applied to the Appellant's case on the ground that there was no intention to generate black money'.
f. The appellant submitted that NBFCs and financial institutions to be treated at par with banks. The Appellant further submitted that in the present case, the lender is Mahindra and Mahindra Financial Services
-5- ITA No.1401 /Chny/2024 Limited which is a NBFC, duly regulated and operated in accordance with the provisions of the Reserve Bank of India Act, 1945 ('RBI Act'). Time and again, the Courts have been treating NBFCs at par with banking companies for income tax purposes'.
g. The assessee has submitted paper book consisting of 166 pages which includes written submissions filed before the CIT (A), National Faceless Appeal Centre, Receipt issued by Mahindra and Mahindra Financial Services Ltd, judgments of Hon'ble Supreme Courts and various High Courts. The index of the same is reproduced hereunder for brevity.
Sl.No Particulars Page No.
From To
1 Written Submissions filed before the 1 10
Commissioner of Income Tax (Appeals),
National Faceless Appeal Centre ['CIT(A)] 2 Receipt issued by Mahindra & Mahindra 11 11 Financial Services Limited 3 Copy of income tax return (ITR') for AY 2012- 12 36 13 4 Copy of ITR for AY 2011-12 37 60 5 Extracts of Memorandum to Finance Act, 61 68 1984 6 Notification issued by the Reserve Bank of 69 69 India (RBI) dated 9th March 2017 [RBI/2016-
17/245 DNBR (PD),CC.No. 086/
03.10.001/2016-17]
Judicial precedents - Purposive interpretation to be adopted and where there is ambiguity in interpretation of law, the view in favour of the taxpayer needs to be considered 7 Decision of the Hon'ble Supreme Court in the case 70 73 of CIT vs Vegetable Products Ltd. [1973] 88 ITR 192 (SC)
-6- ITA No.1401 /Chny/2024 8 Decision of the Hon'ble Supreme Court in the case 74 80 of CIT vs Gold Coin Health Food (P) Ltd. (304 ITR 308] (SC) 9 Decision of the Hon'ble Supreme Court in the case 81 88 of Pradip J Mehta vs CIT [300 ITR 231] (SC) Judicial precedents - Provisions of the Reserve Bank of India Act, 1934 to be considered incase of Non-Banking Financial Companies ('NBFC') even for the purposes of the Income Tax Act, 1961 10 Decision of the Hon'ble Supreme Court in the 89 90 case of CIT vs Vasisth Chay Vyapar Ltd. [253 Taxman 401] 11 Decision of the Hon'ble Supreme Court in the 91 98 case of CIT vs Vasisth Chay Vyapar Ltd. [330 ITR440] 12 Decision of the Gujarat High Court in the case 99 122 of Principal Commissioner of Income-tax vs Shri Mahila Sewa Sahakari Bank Ltd. [395 ITR 324] No penalty is leviable even in a case where the loan received in cash is ultimately deposited into bank account (in the context of section 271D) 13 Decision of the Allahabad High Court in the 123 128 case of Commissioner of Income-tax vs Smt. Dimpal Yadav [379 ITR 177] 14 Decision of the Agra ITAT in the case of DCIT 129 139 vs Akhilesh Kumar Yadav [26 taxmann.com 264] 129
-7- ITA No.1401 /Chny/2024 Penalty cannot be imposed as a mandatory levy in a mechanical or automatic manner 15 Decision of the Supreme Court in the case of 140 163 Union of India vs Rajasthan Spinning & Weaving Mills [Civil Appeal No. 3527 of 2009] 140 16 Decision of the Punjab & Haryana High Court 164 166 in the case of CIT vs Sidhartha Enterprises [322 ITR 80] 164 The ld.Counsel for the assessee also submitted letter of the Reserve Bank of India (Pg 69 of P.B. Index supra) which reads as under:-
भारतीय रजव बक RESERVE BANK OF INDIA
-------------------------------------------------------------------------------------------- RBI/2016-17/245 DNBR (PD) CC.No.086/03.10.001/2016-17 March 09, 2017 All NBFCs Madam/ Sir, Disbursal of loan amount in cash Reference is invited to instructions contained in para 37(iii)(b) of Non- Banking Financial Company Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 and Non-Banking Financial Company Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 which states that high value loans against gold of 1 lakh and above must only be disbursed by cheque.
2. On review, and in line with the rules issued under Section 269SS and 269T of the Income Tax Act, 1961, the requirements under the Income Tax Act, 1961, as amended from time to time, would be applicable to all NBFCs with immediate effect. Currently, the relevant threshold under the Income Tax Act, 1961 is Rupees Twenty thousand.
-8- ITA No.1401 /Chny/2024
3. Accordingly, para 37(iii) (b) of the above Master Directions stands deleted and the above provision stands incorporated at para 104 and 117, respectively, in the Master Directions referred above.
4. Updated Non-Banking Financial Company Systemically Important Non-
Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 are enclosed.
Yours faithfully (C.D. Srinivasan) Chief General Manager
6. Per contra ld. DR Dr.Samuel Pitta, JCIT submitted that as per Income Tax Act, 1961 NBFC cannot become banking company by RBI regulation. The ld.DR pleaded for the strict interpretation of the provisions of section 269T of the Act.
7. We have heard the rival submissions, perused the record, gone through the relevant provisions of the Act, paper book and case laws cited at bar.
Seeing the entire conspectus of matter, we are of the considered view that issue of repayment of loan in cash to NBFC is not free from doubt specially in the light of Notification issued by the Reserve Bank of India (RBI) dated 9th March 2017 [RBI/2016-17/245 DNBR (PD),CC.No. 086/ 03.10.001/2016-17] and citations referred. In fact, Notification issued by the Reserve Bank of India (RBI) dated 9th March 2017 gives another plausible view hence, we find reasonable cause u/s 273B of the Act in peculiar facts of the case. We also find that
-9- ITA No.1401 /Chny/2024 transaction in question is genuine. Therefore, we delete the levy of penalty u/s 271E of the Act.
8. In result, appeal of the assessee is allowed.
Order pronounced in the open court on 27th day of September, 2024 at Chennai.
Sd/- Sd/-
एस.आर. रघन
ु ाथा (मनु कुमार ग र)
(S.R. RAGHUNATHA) (MANU KUMAR GIRI)
लेखा सद य/ ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER
चे ई/Chennai,
दनांक/Dated, the 27th September, 2024
KV
आदेश क ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant
2. यथ /Respondent
3. आयकर आयु /CIT, Chennai/Coimbatore/Madurai/Salem.
4. िवभागीय ितिनिध/DR
5. गाड फाईल/GF.