Income Tax Appellate Tribunal - Pune
Kotibhaskar Builders,, Sangli vs Department Of Income Tax on 8 April, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND
SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.1506/PN/2011
Assessment Year : 2007-08
Income-tax Officer, Ward- M/s. Kotibhaskar Builders,
1(2), Aayakar Bhavan, Opp. Ram Mandir Corner, Shivaji
Birnale College, South Vs. Nagar, Sangli
Shivajinagar, Sangli
(Appellant) (Respondent)
PAN No.AAAFK9962H
Appellant By: Ms. Ann Kapthuama
Respondent By: Shri C.H. Nanivadekar
Date of hearing : 08-04-2013
Date of pronouncement : 29-04-2013
ORDER
PER R.S. PADVEKAR, JM:-
In this appeal, the revenue has challenged the impugned order of the Ld.CIT(A). The revenue has taken the following effective ground:
"On the facts circumstances of the case and in Law, the learned CIT(Appeal), Kolhapur erred in not appreciating the that amount of Rs.20,00,000/- received by the assessee firm in cash is nothing but deposit which was accepted in contravention of provision of section 269 SS of the IT Act, 1961."
2. The facts which are revealed from the record as under. During the course of the assessment proceedings of the assessee, it was noticed by the Assessing Officer that the assessee has accepted Rs.20,00,000/- in cash from one M/s. Sai Trading Company. The said amount was returned by the assessee on 20-01-2007 itself vide cheque of Rs. 10,00,000/- and two cheques of Rs.5,00,000/- each. The Joint Commissioner of Income Tax, Range-1 (JCIT, R-1), Sangli, levied a penalty of Rs.20,00,000/- u/s. 271D by holding that the amount of Rs.20,00,000/- was accepted by the assessee as deposit from M/s. Sai Trading Company in violation of provisions of section 269SS of the Income-tax Act. It appears that the M/s. Sai Trading Company filed the 2 ITA No.1506/PN/2011, Kotibhaskar Builders, Sangli explanation why the amount was kept with the assessee. The explanation of the M/s. Sai Trading Company is reproduced in the order of Ld.CIT(A), which is as under:
"A) Activity: The firm was incorporated with the object of collection of octroi in the Jurisdiction of Sangli Miraj and Kupwad City Municipal Corporation. The firm has been awarded contract for collection of octroi by the Sangli Miraj and Kupwad City Municipal Corporation for the year 2006-07. The firm was dissolved on completion of the contract.
B) Extract of Cash Book for the period ended 10-1/2--7 to 15.01.2007 is enclosed as asked for.
C) The firm has suffered losses due to short collection of octroi than the amount projected by us. As per terms of contract we have provided Bank Guarantee of Rs 625 lakhs issued by the Shetkari Sahakari Bank Ltd. (Rs 425 lakhs) and Central Bank of India Sangli Branch (Rs 200 lakhs). We were to make weekly payment @ 2% of the amount bid per week. For this purpose we were to deposit daily collection in the bank account and settle the payment on every Monday. The Bank Guarantees were invoked by the Sangli Miraj and Kupwad City Municipal Corporation due to failure on our part to make payment of octroi amount as stipulated in the agreement.
Therefore Bank had made payment by debiting to forced loan account. Therefore Bank Accounts were not operative during that period due to forced loans. As the SMKC has invoked the guarantees, there arose dispute between us and SMKC, we stopped depositing daily collection in the SMKC amount as required by us and deposited small amounts with SMKC.
As we started depositing small amounts out of daily collection we were having substantial cash balances out of daily collections. In order to safeguard the cash in hand we have kept the amounts with others alongwith Kotibhaskar Builders. The amounts were kept for safe custody that too in cash as Bank accounts were inoperative. The fact can be verified from the cash book extract enclosed. Out of these amounts we have taken back the amounts to deposit in Forced loan account on 15/01/2007 with Shetkari Sahakari Bank Ltd on resolution of issues with Banks.
We have utilized amount kept with Kotibhaskar Builders to repay the temporary loans taken by us. The cheques were issued directly in the names of third parties as per our directions by Kotibhaskar Builders.
D) The amount is given by us on our own for our convenience for safe custody to Kotibhaskar Builders alongwith others. The firm, Kotibhaskar Builders, has not demanded any amount form us to meet their needs. The same can be verified from the fact that we taken back the amount within 6 days from the date of keeping in safe custody. It is also evident from the fact that the firm Kotibhaskar Builders has not paid any Interest to us as the amount was kept with them for our convenience.
3ITA No.1506/PN/2011, Kotibhaskar Builders, Sangli
E) Bank Account: As stated above the firm Kotibhaskar Builders has made direct payment to third parties as per our instructions. These entries do not appear in our Bank Statement. Therefore Bank Account is not enclosed."
3. This explanation was not accepted by the JCIT, Range-1, Sangli, on the reason that said firm could have kept the money in the Bank in safe custody by opening a bank account then, there was no necessity of keeping the same for safe custody with the assessee especially when it has deprived of any benefit of earning interest by keeping the amount with the assessee. The Assessing Officer has observed that the amounts were repaid to M/s. Sai Trading Company but were repaid by cheque to third parties at the instance of the said company. The Assessing Officer also has observed if at all the said amount was 'anamat' kept with the assessee then there was no need to record the said amount in the books of account as the said amount has no nexus with the assessee's business.
4. Moreover, the Assessing Officer also interpreted the expression 'anamat' as acceptance of deposits in cash. The Assessing Officer also referred to Law Lexicon, re-print edition 2002 to explain the meaning of the term 'deposit' before Ld. CIT(A). The assessee explained the situation in which said amount of Rs.20,00,000/- has come. The assessee took the constant stand that it was just a 'anamat' not a 'deposit' and there was no violation of section 269SS. As explained by the assessee that M/s. Sai Trading Company which was a firm has bided for collection of octroi on behalf of Sangli-Miraj-Kupwad Corporation for an amount of Rs.43.07 crores. The said amount was payable in fifty weeks and hence, the assessee was supposed to deposit installment of Rs.86.13 crores every week. The daily collection was required to be kept by M/s. Sai Trading Company in its account with the Corporation Bank or with Shetkari Sahakari Bank Ltd. If the daily collection was insufficient to meet the amount of agreed installment then, the deficit was required to 4 ITA No.1506/PN/2011, Kotibhaskar Builders, Sangli be deposited in either of those banks on the Monday next following the week which had ended on Saturday. During the period in which M/s. Sai Trading Company has bided for collection of contract, it sustained the loss due to the general strike between some period which lead to deficit in collection of Rs.65,06,585/- and there were flood situation and during the period of flood situation there was further deficit in collection of octroi to the extent of Rs.71,40,097/-.
5. Moreover, there was another strike by the traders against the levy of octroi between 01-12-2006 and 09-12-2006 and M/s. Sai Trading Company suffered loss in collection to the extent of Rs. 53,29,383/-. Some other instances were also led to a shortfall in collection of octroi. M/s. Sai Trading Company claimed that they have suffer a loss of more than 4 crores and requested the Corporation to verify the terms of contract and allow them to make the payment of shortfall or deficit within 30 days instead of one day. It appears that the M/s. Sai Trading Company unable to honour the payment schedule and the Corporation invoked the bank guarantee issued by Central Bank of India as well as Shetkari Sahakari Bank Ltd. The Corporation also asked for fresh bank guarantees. Due to the above situation, operation of bank accounts of M/s. Sai Trading Company came to stand still and also M/s. Sai Trading Company stopped depositing the octroi collection with the bank. There was a collection with M/s. Sai Trading Company and surplus amount was covered and hence, M/s. Sai Trading Company kept the said amount with the assessee for short period till the dispute with the bank was temporarily resolved. The contention of the assessee is that it was not a deposit but the money kept in trust as "anamat" and hence, the provisions of section 269SS are not applicable. The Ld.CIT(A) accepted the contention of the assessee that no penalty is leviable and deleted the penalty by giving the following reasons:
"I have gone through the facts and circumstances in which the appellant accepted cash o f ? 20 lakhs from M/s Sai 5 ITA No.1506/PN/2011, Kotibhaskar Builders, Sangli Trading Company. It is a fact that M/s Sai Trading Company had been facing difficulty in octroi collection which was running into a deficit and it was being forced to make good the deficit by making payments of Sangli Miraj Kupwad Corporation. It is a fact that the relationship between M/s Sai Trading Company had soured to the extent the extent that the Corporation had invoked the bank guarantees to make good the deficit in payments. On the contrary, it was the claim of M/s Sai Trading Company that the shortfall in collection was a result of certain manmade and natural calamities and it was also a direct result of certain decisions taken by the Sangli Miraj Kupwad Corporation which had a direct negative impact in the quantum of octroi collection. Once the bank guarantees are invoked, any money which was deposited would have gone in to refurbish the forced loan account and not towards payment to the Corporation. Under these circumstances, if the monies were deposited into the bank accounts, the problem of increasing deficits in payments to the Corporation would persist and, therefore, would not be resolved. Hence, it was not prudent on the part of M/s Sai Trading Company to deposit the octroi collection with the bank. The money collected by M/s Sai Trading Company could be kept with itself or it could be kept anywhere. There is nothing on record to negate that the appellant required the money for utilization in its own business. The appellant is not in the business of acceptance of deposits from public. There is nothing which indicates that the appellant had indulged in any tax planning or tax evasion. This transaction has found place in the books of account of the appellant as well as in the account of M/s Sai Trading Company. There is nothing to show that it was not a genuine transaction to cover up any unaccounted money. Even if we consider for a moment that the appellant was in requirement of some immediate money then it is normal course to approach a moneylender or a cash rich person who would lend money to satisfy the immediate requirement because the banks and financial institutions take a long time in clearing the financial requirements. Since the transactions have not been shown to be malafide or aimed at disclosing concealed money, I am of the view that penalty under section 27 ID cannot be imposed for venial or technical mistakes.
10. It is held in the case of Director of Inspection (Investigation) V/s Kumari A B Shanthi [2002] 255 ITR 258 (SC) that the object of introducing section 269SS is to ensure that the tax payer is not allowed to give false explanation for his unaccounted money or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. Further, the principles enunciated in (i) CIT vs. Bhagwati Prasad Baoria (HUF) [2003] 183 CTR (Gau) 484 (ii) CIT vs. Bombay Conductors & Electricals Ltd. [2003] 3 DTR (Guj) 200 & (iii) OMEC Engineers vs. CIT [2008] 271 CTR (Jharkhand) 144 that section 271 D cannot be imposed for technical breach is squarely applicable in the instant case as well. In view of the above discussions the penalty levied under section 271 D is deleted."
6. Now the revenue is in appeal before us. We have heard the rival submissions of the parties and perused the record. We have also 6 ITA No.1506/PN/2011, Kotibhaskar Builders, Sangli anxiously considered the background facts to examine whether section 269SS is applicable to the assessee. It is seen that from very beginning, the assessee has taken stand that due to the genuine problem, M/s. Sai Trading Company kept an amount of Rs.20,00,000/- as an 'anamat' with the assessee on 15-01-2007 for safe custody and the same amount was returned by cheque to the M/s. Sai Trading Company on 20-01-2007. We further find that the Assessing Officer has interpreted the said amount as an 'anamat' only but gave the meaning to it as a 'deposit' covered with the meaning of section 269SS. In our opinion, the Assessing Officer has to make out a clear case by bringing some materials on record as a genuineness of the transaction is nowhere in dispute. Section 269SS is brought on statute to check the loop hole to check circulation of the unaccounted money showing it as a deposit or loan. One aspect of section 271D cannot be discarded that the Assessing Officer has to first establish in clear terms, being Quasi Criminal proceedings, that in fact, the amount received by the assessee was in the nature of deposit within the meaning of section 269SS. It is true that the term deposit is very much wide enough even to cover a short tenure deposit. It is also not necessary that each and every deposit should attract the interest but there is a difference between the deposit which is contemplated in section 269SS and amount kept in entrust with someone. We further find that Ld.CIT(A) has given a categorical finding that amount was returned by the assessee through bank cheque within 5 to 6 days as per the books of account of the assessee. The said amount was not at all utilized for any purpose by the assessee as the assessee has sufficient cash balance during said period. Under this situation, in our opinion, section 269SS is not applicable to the transaction of Rs.20,00,000/- and hence, levy of penalty under section 271D was not justified at all. In our opinion Ld.CIT(A) has rightly deleted the penalty levied by the Assessing Officer and we do not find 7 ITA No.1506/PN/2011, Kotibhaskar Builders, Sangli any reason to interfere with the order of the CIT(A) and the same is confirmed.
7. In the result, the revenue's appeal is dismissed.
Pronounced in the open Court on 29-04-2013
Sd/- Sd/-
(G.S. PANNU) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
RK/PS
Pune, Dated: 29th April, 2013
Copy to
1 Department
2 Assessee
3 The CIT (A), Kolhapur
4 The CIT(C), Pune
5 The DR, ITAT, "A" Bench, Pune.
6 Guard file.
//True Copy//
By Order
Private Secretary
Income Tax Appellate Tribunal
Pune