Income Tax Appellate Tribunal - Hyderabad
Sattar Sons Packaging Private Limited , ... vs Addl. Commissioner Of Income Tax, ... on 27 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
I.T.A. No. 2077/HYD/2018
Assessment Year: 2012-13
M/s. Sattar Sons Packaging Additional Commissioner of
Private Limited, Vs Income Tax,
HYDERABAD Range-3,
[PAN: AAFCS4535G] HYDERABAD
(Appellant) (Respondent)
For Assessee : Shri Syed Jameeluddin, AR
For Revenue : Shri Nilanjan Dey, DR
Date of Hearing : 19-02-2019
Date of Pronouncement : 27-02-2019
ORDER
PER Smt. P. MADHAVI DEVI, J.M. :
This is assessee's appeal for the AY. 2012-13, against the order of the Commissioner of Income Tax (Appeals)-3, Hyderabad, dated 23-11-2017.
2. Brief facts of the case are that, the assessee-company, engaged in the business of manufacture of Corrugated Boxes, e-filed its return of income for the AY. 2012-13 on 30-09-2012, admitting total income of Rs. 'NIL'. The assessment was completed u/s. 143(3) of the Income Tax Act [Act], accepting the assessee's returned income. Thereafter, the Assessing :- 2 -:
ITA. No. 2077/Hyd/2018Officer issued a show cause notice for levy of penalty u/s. 271E of the Act for violating the provisions of Section 269T of the Act.
2.1. In response to the show cause notice, the assessee filed its reply dt. 03-12-2015 stating that the assessee has made the re-payment of loan in cash under the bonafide belief that repayment can be made in cash to the Directors of the company and also to reputed companies. It was submitted that it was not aimed at avoiding any tax liability and the genuineness of transaction was not doubted by the Assessing Officer. The assessee relied upon the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Muthoot Financers [371 ITR 408] (Delhi) and also the decision of the Hon'ble High Court of Rajasthan in the case of CIT Vs. Lokpat Film Exchange (Cinema) [212 CTR 371] (Raj.) in support of above contentions. The Assessing Officer, however, was not convinced with the submissions of assessee. He observed that the decisions of the Hon'ble High Courts of Delhi and Rajasthan were rendered in the context of transactions between a firm and its partners, whereas in the present case of assessee, the transactions are between company, its directors and others and therefore the said decisions are not applicable to the case on hand. He also observed that assessee has not established the reasonable cause for violation of the provisions of Section 269T of the Act. He relied upon various other decisions to hold that the penalty u/s. 271E of the Act is leviable, where the assessee has not given any reasons for not :- 3 -:ITA. No. 2077/Hyd/2018
complying with the provisions of Section 269T of the Act. Thus, he levied penalty of Rs. 12,18,059/- u/s. 271E of the Act by raising the following grounds of appeal:
"1. Having regard to the facts and circumstances of the case, the Commissioner of Income-tax (Appeals)-3, Hyderabad, is wrong in confirming the penalty order u/s. 271E of the I.T. Act, 1961, dt. 27-
05-2016, passed by the Additional Commissioner of Income-tax, Range-3, Hyderabad.
2. The C.I.T. (Appeals) is not justified in not considering the submission made by the assessee that bona fide belief coupled with the genuineness of the transactions would constitute reasonable cause under Section 273B for not invoking the provisions of Section 271E of the I.T. Act, 1961, as held by the Hon'ble High Court of Delhi in the case of C.LT. Vs. Muthoot Financiers, reported in (2015) 371 ITR 408 (Delhi).
3. The C.I.T.(Appeals) is not justified in not considering the submission that the alleged contravention of Section 269T did not result in any unaccounted transaction and the said transactions were made under bona fide belief and were not made with a view to avoid or evade tax. In this regard, the assessee relies on the decision of the Hon'ble High Court of Madras in the case of C.I.T. Vs. Ratna Agencies, reported in (2006) 284 ITR 609 (Mad).
4. The C.I.T. (Appeals) is not justified in not considering the fact that the assessee Company was running in losses right from the assessment year 2006-07 and the explanation of the assessee that the repayment of loans was made in cash under the bona fide belief that payment can be made in cash to the Directors of the Company and also to reputed Companies and the genuineness of the said transactions was not at all in doubt.
5. Any other ground or grounds that may be urged at or before the time of hearing".
2.2. Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the order of the Assessing Officer and the assessee is in second appeal before us.
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ITA. No. 2077/Hyd/20183. Ld. Counsel for the assessee while reiterating the submissions made before the authorities below, submitted that the assessee's return of income was accepted by the Assessing Officer, after scrutiny u/s. 143(3) of the Act and none of the payments were found to be not genuine and no disallowance of any expenditure or repayment of loan was made by the Assessing Officer. He submitted that assessee was under a bonafide belief that the loans taken from the directors and other reputed companies can be repaid in cash as was submitted before the Assessing Officer and CIT(A) in response to the notice u/s. 271E of the Act. In reply to the Assessing Officer's finding that the decision of the Hon'ble High Court of Delhi was in the case of transactions between assessee-firm and its partners and therefore is not applicable to the case on hand, the Ld. Counsel for the assessee submitted that the ratio laid down therein is applicable to the facts of the case before us also. He submitted that in the said case, the ratio laid down was that the creditworthiness of the partners and the genuineness of the transactions coupled with relationship with two persons and two different legal interpretations put forward, could constitute a reasonable cause for not invoking the provisions of Section 271D and 271E of the Act and that Section 273B would come to the aid and help of assessee. Hon'ble High Court further held that "money was brought by partners of assessee-firms and source of money had also not been doubted by Revenue - Transaction made by assessee was bonafide and not aimed to avoid any tax liability". The Ld. Counsel has stated that in the case :- 5 -:
ITA. No. 2077/Hyd/2018before us also, the genuineness of the repayment made in cash are not doubted and the assessee had submitted the said explanation in response to the show cause notice u/s. 271E of the Act.
4. Ld.DR, on the other hand, had argued that the assessee had clearly violated the provisions of Section 269T and has failed to give satisfactory explanation as to why the provisions of Section 269T were not followed and therefore the penalty order is to be sustained.
5. Having regard to the rival contentions and material on record, we find that the assessment was completed u/s. 143(3) of the Act and no disallowance what-so-ever was made by the Assessing Officer. Thus, it is to be presumed that the genuineness of the payments is not doubted by the Assessing Officer. The penalty u/s. 271E of the Act is sought to be levied for making the repayment of loans in cash. Assessee had pleaded 'bonafide belief' as a reason for not confirming with the said provision, while the Assessing Officer has held that the assessee's books of account are audited and the assessee was assisted by a tax consultant and therefore, the 'bonafide belief' is not believable. Let us therefore examine the facts of the case and the reasonableness of assessee's explanation. The details of the loans repaid in cash are as under:
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S.No. Name Amount (Rs)
1 Sri Mohd. Imran Baig, 5,00,000
PAN: ADDPM 3170 H
2 Sri Mohd. Irfan Baig, 5,00,000
PAN: ABZPM 3780 B
3 Mahindra and Mahindra 1,03,700
Financial Services (P) Ltd.,
4 Tata Motors Finance Ltd., 1,14,359
5.1. From these details, we find that the first two persons are the Directors of the company and their identity is proved and the genuineness of the said payment is also not doubted by the Assessing Officer. As regards the other two parties, we find that assessee had taken vehicle loans and the repayment was made in cash and therefore, the genuineness of these transactions also could not be doubted. The Co-ordinate Bench of the Tribunal in the case of Dillu Cine Enterprises (P) Ltd., Vs. Addl. CIT in ITA No. 184/Hyd/1999 dt. 27th Sept.
2001 has considered the issue of penalty leviable for technical breach of provisions where the transactions are genuine, and has held that "when the transactions are not for evasion of tax/concealment of income and bonafide belief of the assessee was that it could have made the payment in cash, penalty is not automatic and the penalty levied there under u/s. 271D of the Act is not valid". For the sake of clarity, and ready reference, the relevant portion of the said Tribunal's order is reproduced hereunder:
"This Bench of the Tribunal in Industrial Enterprises vs. Dy.CIT (2008) 68 TTJ (Hyd) 373 : (2000) 73 ITD 252 (Hyd), held in Para 17 of its order, as follows:
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"Provisions of s. 269SS were brought in the statute book to counter the evasion of tax in certain cases, as clearly stated in the heading of Chapter XX-B of the IT Act, 1961 which reads 'requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax.' Legislative intention in bringing s. 269SS in the IT Act was to avoid certain circumstances of tax evasion, whereby huge transactions are made outside the books of account by way of cash. As far as the case on hand before us is concerned, there is no case against the assessee-firm that these transactions had anything to do with evasion of tax or concealment of income. As rightly pointed by the CIT(A) himself, it may be a case of negligence. But a negligent person does not have any intention or means rea to purposely violate any provision of law so as to be visited with stringent punishment of heavy penalty."
We find force in the argument of the Learned Counsel for the assessee that the object of the provisions being unearthing of unaccounted money, is not applicable to any transaction which is done in an open manner, which is genuine and in which no unaccounted money, is involved. Mere technical breach of the provisions, while the transactions are held to be genuine, do not attract the provisions of s. 269SS. It is not the case of the Revenue that the amount involved were unaccounted transactions. It is an undisputed fact that the transactions are genuine. Both the assessee and the director were on the records of the IT Department and both declared these transactions to the Department. The Chapter XX-B and s. 269SS begins with the heading - Requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax. The term "certain' used therein, when read along with the legislative intent of curbing tax evasion, clearly means that all loans are not attracted. This section attracts only "certain" loans that are brought in by the taxpayer to explain away his unexplained cash or unaccounted deposit. This section is definitely not intended to penalise genuine transactions, where no tax evasion is involved. It is well settled that the headings prefixed to sections or set of sections in some modern statutes are regarded as "preambles" to those sections. This view was approved by Farewell L.J. in Fletcher vs. Birkenhead Corporation (1907) 1 K.B. 205. Thus, respectfully following the judgment of this Tribunal in Industrial Enterprises' case (supra), we hold that the transactions between the assessee and Mr. P.K. Swamy do not fall within the mischief sought to be remedied by the section as there is no case against the assessee that these transactions had anything to do with evasion of tax or concealment of income".
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ITA. No. 2077/Hyd/20185.2. We find that similar view was also expressed by the Hon'ble High Court of Delhi in the case of CIT Vs. Muthoot Financers (supra). Therefore, we are inclined to accept the contentions of assessee of 'bonafide belief' for repayment of loans in cash and the penalty u/s. 271E of the Act is deleted.
Grounds raised by assessee are allowed.
6. In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 27 th February, 2019 Sd/- Sd/-
(S. RIFAUR RAHMAN) (P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated 27th February, 2019
TNMM
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ITA. No. 2077/Hyd/2018
Copy to :
1. M/s. Sattar Sons Packaging Private Limited, C/o. Syed Jameeluddin, Income-tax Consultant, 16-7-302, 'Erram Cottage', Azampura, Chaderghat, Hyderabad.
2. Additional Commissioner of Income Tax, Range-3, Hyderabad.
3. CIT(Appeals)-3, Hyderabad.
4. Pr.CIT-3, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.