D.b. Income Tax Appeal v. Ashok Kumar Agarwal

D.B. Income Tax Appeal No. 42 / 2012 Commissioner of Income Tax-I, Aaykar Bhawan, Paota C Road, Jodhpur. Versus Ashok Kumar Agarwal Proprietor, M/s. Gulabchand Anantram Agency, Nagar Palika Road, Sumerpur. d'* ,., .L.' 2, '"% ', For Appellant(s) : Mr. K.K. Bissa C ,*. For Respondent(s) : Mr. Anil Bhansali with Mr. Bhagirath Patel HON'BLE DR. LJ:U.STIGE ;PLJ-SH.PEUD;RA SINGH BHATI . $&&$ 9 *st 82F~2:, ....?8$.tI. $&$@$$$$&@~$#~y~r&~@ .r -3;u-d" *a **.41'= , . ,a 9 ?,me j.? %_c&i% fit?: ..6 %$$- ,-w " f%&&<? >\'" & ;? v* i.3 .*-, m w. .<," -3 A. I,, . . ;e>\5c&%; , +d Q <*->a 9- 2 " $;*;2,wj 5. ** d* 23/Q1/2018 ,> - ! 2. 4, 1 By way of this ap,pe*i$,, jfh-ae,;a~peIIant has assailed the judgment and order of &he tribunal .whereby the tribunal has ..$# $* dismissed the appeal preferred by the department. 7 * 7 2. This court while::adini$t-ing the"appea1 on 23.2.2017 framed following substantial que * W~ I .:I &.A *s y'- I "Whether the' ITAT has erred in law and on the facts in holding that even if there is violation of Section 269SS of the ~ct; no penalty can be levied u/s 271D, when g,enuineness of the transactions is not doubted?" 3. Counsel for the appellant has taken us to the provis'ions of Section 269 SS and 273B of the Income Tax Act which reads as '269SS. Mode of taking or accepting certain loans, deposits and speciJied sum.-No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,- the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or on the date of taking or accepting such loan or deposit or specified sum: any loan or deposit or specified sum taken or accepted earlier by such person fiom the depositor is remaining unpaid (whether repayment h~ fallen due or not), the amount or the aggregate amount remaining unpaid; or % % (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), (a) lthe Govetnment; I (b) any banking company, post office savings bank or co-operative bank; (c) any corporation established by a Central, State or Provincial Act; (d) any Government company as defined in clause (45)of section 2 of the Companies Act, 201 3 (1 8 of 20 13); (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: 273B.Penalty not to be imposed in certain cases Notwithstanding anything contained in the provisions of 2 clause (b) of sub- section (I) ofl section 271, section 271.A, section 271B 4 section 271BB,] section 271C, section 27iD, section qiE, clause (c) or clause (d) of sub- section (1) or sub- section (2) of section 2724 sub- section (I) of section 272AA.l or 5 sub- section (I) of section 272BB or] clause (b) of subsection (1) or clause (b) or clause (c) of sub- section (2) of section 273y no penalty shall be imposable on the pet- son 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.] 4. However, counsel for the respondent has relied on the provisions of Section 271 D which reads as under:- 271D. Penalty for failure to comply with the provisions of section 269SS.- (1) If a person takes or accepts any loan or E:$~.X- deposit in contravegtio%p, Hg-Llb~ of ; ;e prows ~nsf 08 section 269SSy he ~~-4k~t shall be lia~l&$o\~ay, by way of penaltyj#&yqual to the CTW 4. -4. fl amount of tbloan or deposit so taken or acceptetl. Pv (2) hy $penalty imposable under e$ by the Joint Commissioner. 4.1 He also relied upon th section 273y no penalty shall be imposable on the pet- son 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.] 4. However, counsel for the respondent has relied on the provisions of Section 271 D which reads as under:- 271D. Penalty for failure to comply with the provisions of section 269SS.- (1) If a person takes or accepts any loan or E:$~.X- deposit in contravegtio%p, Hg-Llb~ of ; ;e prows ~nsf 08 section 269SSy he ~~-4k~t shall be lia~l&$o\~ay, by way of penaltyj#&yqual to the CTW 4. -4. fl amount of tbloan or deposit so taken or acceptetl. Pv (2) hy $penalty imposable under e$ by the Joint Commissioner. 4.1 He also relied upon th observations made by the merit in such mentioned in the borate submissions ese facts have not been controve written submis transactions see was held to and 269T were not contended establishes that the assessee did not entertain any grievance in this regard. It is obvious that any such grievance if it hinders the assessee from making effective representation in his defence is required to be raised before the Assessing Officer who aicne could meet the requirements of the assessee. Failure to do so clearly indicates that the assessee was not prohibited from making effective representation in his defence which alone is a requirement of the principal of natural justice. Under these circumstances, not finding merit in the appellant's contention that the impugned order was devoid of principle of natural justice as the same was passed without providing reasonable opportunity, the appeal in this regard is not allowed. tribunal:- As regards the contention that no penalty was imposable u/s 271D/271E as assessee did not make any contravention to the provisions of sec. 269SS and 269T and further that the transactions were undertaken under bonafide belief that there was no contravention as transactions were made through account payee cheque or draft and no cash transaction was involved which indicates that reasonable cause existed, I have considered the relevant facts, the reasons advanced by the JCIT for levy of penalty and the submission of the appellant. I find that the most questions for determination are whether the assessee had committed any default of the was not provisions of sec. 269SS. The the transactions as appearing from the impugned order assessee, it was 69SS were not case, relevant to case of Noida Toll of the judgement I Bridge Co. Ltd. is reason, it has of the provisions case of Noida instant case to be held tha of sec. 269SS or that of 269T. As regards the issue whether the penalty u/s 271D/271E is justified in the facts and circumstances of the case, it is settled position that even if there is contravention of provisions of sec. 269SS/269TI levy of penalty u/s 271D/271E is not justifiable if there is reasonable cause for undertaking such transaction. Levy of penalty u/s 271D was held not justified where accounts of the sister concern were credited by the assessee by general entries on account of payment made by the sister concern on behalf of the assessee for the reason that there was no violation of sec. 269SS attrecting penalty u/s 271D (ACIT v/s Gujarat Ambuja Proteins Ltd. 3 SOT 811 Ahm.) Similarly, in the case of Income Tax Officer v/s Amarnath Shivraj HUF (1 SOT 246 Agr.) it was held that penalty u/s 271D was not attracted where debt is acknowledged by passing entry in the books of accounts for the reason that there was no violatio of sec. 269SS where credit balance in the books of one was transferred to the accounts of others through journal entry. Proteins Ltd. 3 SOT 811 Ahm.) Similarly, in the case of Income Tax Officer v/s Amarnath Shivraj HUF (1 SOT 246 Agr.) it was held that penalty u/s 271D was not attracted where debt is acknowledged by passing entry in the books of accounts for the reason that there was no violatio of sec. 269SS where credit balance in the books of one was transferred to the accounts of others through journal entry. Thus, from the various judicial decision discussed above, the principle that emerges is that payment made by others on behalf of the assessee which is subsequently reflected in the books of accounts of the assessee by passing relevant entries does not attract the provisions of sec. 269SS or 269T. For this reason, it has w..s to be held thq ivkt5qstant $a e- that facts do not Ci$+jqls~ons of- ~sdc@~~S and 269T. penalty u/s 271D and Y2.qlE levied. also settled law - %f~ cannot be imposed even if there is e%;ovisions of sec. 26955 and 269T if Tthat the transactions through sec. 269SS and 269T are genuine (Omac Engineers v/s even if it is sec. 269SS and It has been e circumstances, hat transactions a finding that the hold that the sec. 271D a by the JCIT am being the subj$~\~rna~tP 06 th,ez$$?e$l no 84/2009-10 and Rs. 15,29,%~~5@~~~$~(1~&~1ln~~t~e subject matter of the appeal N; 85/2009-10 is canbelied." We have heard both the parties. The Hon'ble apex Court in the case of Asstt. Direct~r of Inspection (Investigation) vs kum. A.B. shanthi 255 ITR 258 has held that the authority vested with the power to impose penalty u/s 271D has got discretionary power. If there is a genuine and bona fide transaction and if for any reason the tax payer could not get a loan or deposit by account payee cheque or demand draft then for the same bonafide reasons penalty should not be imposed. The ITAT Jodhpur bench in the case of Choudhary Co. Bhujiawala vs ITO, 89 TTJ 357 held that in case the default for not accepting the amount by cheque is on account of bonafide belief and the transaction is genuine then penalty u/s 271D cannot be imposed. Inc the" instant case the Id.CIT (A) has referred to tKe*decision OF jurisdictional High Court in the case "~~=*CIT vs Govind Kumar, 253 ITR 102 in which it has been held that ther:,et, is not contravention of provisions of section 269T where' the book entries were made by the respondent with reference to the payment made on its behalf by other party. Moreover, section 269SS refers that a person shall not accept loan or deposit otherwise than by an kcount payee cheque from any other person. On identical facts. Hon'ble Delhi High Court in the case of CIT 'vs Noida Toll Bridge co. , 262 ITR 260 upheld the findings of the' Tribunal that provisions of section 269SS was not attracted as the payment in question was made on assessee's behalf ve heard counsel for the parties. 5.1 We are of the considered o~inion that the entries which are #s &{q taken are from th 'F*gl;& view of the observations of the% id is just and proper. 6. In that view of the -*y ha68 a F be ?T+ is answered in favour of the assess and ag