Ita/121/2014 Of Parayil Balan Nair v. The Commissioner Of Of Income Tax, Kannur

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE SHAJI P.CHALY WEDNESDAY, THE 12TH DAY OF AUGUST 2015/21ST SRAVANA, 1937 ITA.No. 121 of 2014 () ----------------------- AGAINST THE ORDER IN ITA 460/2013 of INCOME TAX APPELLATETRIBUNAL,COCHIN BENCH, COCHIN DATED 22-11-2013 APPELLANT/RESPONDENT/ASSESSEE: -------------------------------------------------------- PARAYIL BALAN NAIR XI/291, RAMKRIPA, P.O.ALAVIL KANNUR-670002 REPRESENTED BY ITS POWER OF ATTORNEY HOLDER SHRI. SUBASH RAJANI BALAN. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SRI.M.B.PRAJITH SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN RESPONDENT/APPELLANT/REVENUE: ------------------------------------------------------ THE COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, KANNOTHUMCHAL, CHOVVA KANNUR-670006. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON12.08.2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA.No. 121 of 2014 APPENDIX APPELLANT'S ANNEXURES: ANNEXURE-A: TRUE COPY OF ASSESSMENT ORDER DATED 31.12.2010PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE– 2, CALICUT. ANNEXURE -B: TRUE COPY OF THE SHOW CAUSE NOTICE U/S 271DDATED 24.2.2011 ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX,CENTRAL RANGE, ERNAKULAM. ANNEXURE -C: TRUE COPY OF ORDER IMPOSING PENALTY U/S.271DDATED 29.6.2011 PASSED BY THE JOINT COMMISSIONER OF INCOME TAX,CENTRAL RANGE, ERNAKULAM. ANNEXURE – D: TRUE COPY OF THE ORDER DATED 17.1.2013 IN ITA NO.E-29/ABIPN 8694-G/11-12 PASSED BY THE COMMISSIONER OF INCOME TAX(APPEALS) – 1, KOCHI. ANNEXURE – E: TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNALIN ITA NO.460/COCH/2013 DATED 22.11.2013. ANNEXURE – F: TRUE COPY OF THE LETTER DATED 4.3.2011 SUBMITTEDBY THE APPELLANT BEFORE THE ADDITIONAL COMMISSIONER OF INCOME TAX,ERNAKULAM. ANNEXURE – G: TRUE COPY OF THE LETTER DATED 4.3.2011 OFSRI.K.C.BASHEER SUBMITTED BY THE APPELLANT BEFORE THE ADDITIONALCOMMISSIONER OF INCOME TAX. ANNEXURE – H: TRUE COPY OF THE NOTICE NO.JCIT-CR-EKM/PENALTY/11-12 DATED 3.06.2011 ISSUED BY THE JOINT COMMISSIONER OF INCOME TAX,ERNAKULAM. ANNEXURE – I: TRUE COPY OF THE LETTER DATED 8.6.2011 SUBMITTEDBY THE CHARTERED ACCOUNTANT TO THE JOINT COMMISSIONER OF INCOMETAX. RESPONDENT'S ANNEXURES: NIL //TRUE COPY// smv P.A. TO JUDGE ANTONY DOMINIC & SHAJI P. CHALY, JJ. ----------------------------------------------- I.T.A. No.121 of 2014 ----------------------------------------------- Dated this the 12[th] day of August, 2015 JUDGMENT Antony Dominic,J. This appeal is filed by the assessee under Section 260A ofthe Income Tax Act, challenging the order passed by the IncomeTax Appellate Tribunal, Cochin Bench in ITA No.460/2013pertaining to the assessment year 2008-2009. In the appeal filedby the Revenue, Tribunal set aside the order passed by theCommissioner of Income Tax (Appeals), by which the orderpassed by the Joint Commissioner of Income Tax levying penaltyon the assessee under Section 271D of the Income Tax Act wasset aside and the penalty levied was restored. 2. We heard the learned Senior Counsel for the appellantand the learned Senior Standing Counsel for the Revenue. 3. Brief facts of the case are that the assessee is a non-resident Indian. Based on letter dated 13.12.2010 from oneK.C.Basheer to the Assistant Commissioner of Income Tax,Calicut where Sri.Basheer confirmed that he had paid a sum of Rs.15,00,000/- to the assessee on behalf of his brotherSri. K.C. Usman, a non-resident Indian doing business in Dubai.He also confirmed that the amount was paid in cash on21.01.2008 after withdrawing the same from his Savings BankAccount maintained at the Indian Overseas Bank, Kadirur. Theletter with the subject; “confirmation of loan to Mr.Balan Nair 2. We heard the learned Senior Counsel for the appellantand the learned Senior Standing Counsel for the Revenue. 3. Brief facts of the case are that the assessee is a non-resident Indian. Based on letter dated 13.12.2010 from oneK.C.Basheer to the Assistant Commissioner of Income Tax,Calicut where Sri.Basheer confirmed that he had paid a sum of Rs.15,00,000/- to the assessee on behalf of his brotherSri. K.C. Usman, a non-resident Indian doing business in Dubai.He also confirmed that the amount was paid in cash on21.01.2008 after withdrawing the same from his Savings BankAccount maintained at the Indian Overseas Bank, Kadirur. Theletter with the subject; “confirmation of loan to Mr.Balan Nair (K.V.R. Tower), Kannur”, reads thus: “This is to confirm that I have given a sum ofRs.15,00,000/- (Rupees Fifteen Lakhs only) toMr.Balan Nair (K.V.R. Group), Kannur on behalf of mybrother Mr.K.C.Usman who is an Non Resident Indiandoing business at Dubai. The said sum of Rs.15 lacswas given in cash on 21-01-08 after withdrawing frommy Savings Bank A/c No.6414 maintained with IndianOverseas Bank, Kadirur. A copy of my bankstatement for the relevant period is enclosed. Theamounts to my account was transferred from bybrother's NRE A/c also maintained at IOB, Kadirur. Iam assessed to Income Tax at Ward 2, Kannur and myPN is AMXPB4206E.” 4. Based on this letter of Sri.K.C. Basheer, notice dated 24.02.2011 was issued by the Additional Commissioner ofIncome Tax, Ernakulam under Section 274 read with Section271D of the Income Tax Act, informing the assessee that it hasbeen brought to his notice that the assessee had acceptedloans/deposits amounting to Rs.15,00,000/- in contravention of the provisions of Section 269SS of the Act for the assessmentyear 2008-2009. He was called upon to appear and explain as towhy penalty under Section 271D shall not be levied. 5. On receipt of this notice, the assessee submitted hisreply dated 04.03.2011. In this letter, he denied of having takenor accepted any loan or deposit from any person relating toassessment year 2008-2009 and according to him, Rs.15,00,000/-received from Sri.K.C. Basheer was only an advance received inconnection with the sale of a property. He also stated that he isnot denying that one Mr.Sreedharan Nair had receivedRs.15,00,000/- for and on his behalf. According to him, he hadintention to sell a part of the land near K.V.R. Tower in Kannurand that his friend K.C.Usman was interested in purchasing theproperty and as such made the advance of Rs.15,00,000/-through his brother K.C. Basheer from Tellicherry. He alsoenclosed letter dated 4.3.2011 from Sri.K.C.Bahseer, clarifyinghis letter dated 13.02.2010 to the effect that it was not actually aloan but was only a property advance given to Sreedharan Nairand that the advance was given in accordance with the directionof his brother K.C.Usman. 6. On the basis of the above, Annexure-C order dated 29.06.2011 was passed by the Joint Commissioner of Income Taxin which it was found that the assessee had contravened theprovisions of Section 269SS and on that basis penalty was leviedunder Section 271D. The assessee challenged this order beforethe Commissioner of Income Tax (Appeals) who set aside theorder and allowed the appeal by Annexure-D order on theground that the transaction in question is not a loan or depositand that therefore Section 269SS is not attracted. It was thisorder which was challenged by the Revenue before the Tribunal.By the impugned order, the Tribunal set aside the order of theAppellate Commissioner and restored the penalty order. 6. On the basis of the above, Annexure-C order dated 29.06.2011 was passed by the Joint Commissioner of Income Taxin which it was found that the assessee had contravened theprovisions of Section 269SS and on that basis penalty was leviedunder Section 271D. The assessee challenged this order beforethe Commissioner of Income Tax (Appeals) who set aside theorder and allowed the appeal by Annexure-D order on theground that the transaction in question is not a loan or depositand that therefore Section 269SS is not attracted. It was thisorder which was challenged by the Revenue before the Tribunal.By the impugned order, the Tribunal set aside the order of theAppellate Commissioner and restored the penalty order. 7. Before us, referring to the above documents and also theprovisions of Section 269SS and 271D of the Income Tax Act,learned Senior Counsel for the appellant contended that theassessee did not accept any loan or deposit in order to attractthe penal provisions of Section 271D. According to the counsel,even the vague statement that it was a loan contained in theletter dated 13.12.2010 given by Sri.K.C. Basheer was clarifiedby him in his letter dated 04.03.2011 submitted by the assesseealong with his reply to the notice dated 24.02.2011. Counselclarified that this was an advance paid to the assessee by Sri.K.C.Basheer on behalf of his brother Usman pursuant to anagreement for sale entered into between the parties for the saleof a plot of land owned by the children of the assessee.Therefore, according to the learned counsel, the Commissionerof Income Tax (Appeals) rightly set aside the order of penaltyand the Tribunal without any valid reasons interfered with thesaid order. 8. However, these contentions were contradicted by thelearned Senior Standing Counsel for the Revenue and accordingto him, originally it was conceded that this was a loan and laterthat was sought to be modified as a case of payment of advancefor sale of the property. It was pointed out that the facts of thecase show that the theory of payment of advance was notsubstantiated in any manner and that therefore, the originalversion that it was a loan stood established. In such a case,counsel contended, Section 269SS and Section 271D areattracted. 9. We have considered the submissions made. The fact thatRs.15,00,000/- was received from Sri.K.C.Basheer on behalf ofthe assessee is undisputed, although the receipt of the amount orits utilisation are not reflected in the books of accounts of the assessee. Initially in his letter dated 13.12.2010, Sri.K.C.Basheerhimself had confirmed that the payment was by way of a loan. Itwas on that basis the assessee was issued notice dated24.02.2011. In his reply to the said notice the assessee hadstated that he had not accepted any loan or deposit fromanybody and that Rs.15,00,000/- received on his behalf wastowards advance for the property that was intended to be sold.It was along with that reply that he enclosed a clarification fromSri.K.C. Basheer to the effect that the amount paid was towardsadvance as contended by the assessee. The story that paymentmade was towards the advance was disbelieved by the Tribunaland the reasons thereof have been given by the Tribunal inparagraph 8 of its order which reads thus: “8. We have heard the rival contentions andcarefully perused the record. In the first place, wenotice that the theory of receipt of Rs.15.00 lakhsas property advance does not find to be aconvincing one to us for the following reasons.(a) The property was said to belong to the fourchildren of the assessee. From the recitals made inthe agreement, it is seen that two persons areresiding in India and other two persons are doingbusiness abroad. However, the said agreement wassigned by one Shri. V.V.Sreedharan, on behalf ofthe four children of the assessee. It is not explainedas to how a third person could enter into such an “8. We have heard the rival contentions andcarefully perused the record. In the first place, wenotice that the theory of receipt of Rs.15.00 lakhsas property advance does not find to be aconvincing one to us for the following reasons.(a) The property was said to belong to the fourchildren of the assessee. From the recitals made inthe agreement, it is seen that two persons areresiding in India and other two persons are doingbusiness abroad. However, the said agreement wassigned by one Shri. V.V.Sreedharan, on behalf ofthe four children of the assessee. It is not explainedas to how a third person could enter into such an agreement, that too for sale of a property. Thereason why the four children or at least the twopersons who are residing in Kathirur Village,Tellicherry Taluk, did not sign the said agreement isalso not explained. (b) The property, that was proposed to be sold isdescribed as under in the agreement:- “0.20 cents of land with old building No.IV/308and well in Old survey 4/3 and resurvey577W1b11 Korambath South Amsam Parambawith usufructs.” It is seen that the description of the property isincomplete, i.e., the usual practice of describing thesurrounding properties on the four sides of theimpugned property is absent here. Further thearea of the property was mentioned as 0.20 cents,which converts into just about 86 Sq.Ft. The salevalue of Rs.50.00 lakhs mentioned in the agreementfor such a small property is highly disproportionate.(c) The reason for not executing the sale deedwithin the period of six months from the date of theagreement, viz, 21.1.2008 was not given. (d) No further materials in the form of confirmationletters from the buyer or the children of theassessee were furnished to substantiate theexplanations. (e) The reason for the delay of about two years inreturning the advance amount of Rs.15.00 lakhswas not explained. (f) The agent of the buyer Shri.K.C.Basheer gave aletter dt.13.12.2010 before the AO, wherein thetransaction was mentioned as Loan transaction.However, before the JCIT the said person has changed his stand and has stated the same asProperty advance in his letter dated 04.03.2011filed with JCIT. It is to be noted here that theassessee herein has started repaying the amountfrom 20.10.2010 onwards, i.e., during the course ofassessment proceedings. However, the lettersfurnished by Shri.K.C.Basheer did not mentionabout the repayments nor did it state about thereasons for cancellation of the sale agreement. Thenames of children of the assessee or the details ofproperty also do not find place in the said letters.(g) If the amount of Rs.15.00 lakhs was received asadvance for sale of property belonging to fourchildren of the assessee, then the said amountbelong to them only and the assessee shall bedeemed to have received the amount from hischildren only. However, the letters written byShri.K.C.Basheer do not mention about the childrenof the assessee. The assessee has also failed tofurnish any confirmation letters from his children. Further the Ld Counsel for the assessee hadadmitted before JCIT that the assessee did notmaintain any accounts for land transactions and hecould not furnish the details of utilisation ofRs.15.00 lakhs. Hence, we are of the view that theclaim of the assessee that it represents the advancereceived for sale of property belonging to his fourchildren does not stand substantiated and hencethe said explanation is liable to be rejected. Hence,in our view, the AO was justified in rejecting thisclaim and accordingly, in our view, the Ld(CIT(A))was not justified in accepting the contentions of theassessee without conducting further enquiries to ascertain about the veracity of the said claim.” 10. These facts found by the Tribunal are absolutely Further the Ld Counsel for the assessee hadadmitted before JCIT that the assessee did notmaintain any accounts for land transactions and hecould not furnish the details of utilisation ofRs.15.00 lakhs. Hence, we are of the view that theclaim of the assessee that it represents the advancereceived for sale of property belonging to his fourchildren does not stand substantiated and hencethe said explanation is liable to be rejected. Hence,in our view, the AO was justified in rejecting thisclaim and accordingly, in our view, the Ld(CIT(A))was not justified in accepting the contentions of theassessee without conducting further enquiries to ascertain about the veracity of the said claim.” 10. These facts found by the Tribunal are absolutely unassailable. Such being the case, we are clearly of the view thatthe transaction was correctly taken as a loan and if so theprovisions of Section 269SS and Section 271D are attracted tothe case. 11. We, therefore, do not find any illegality in the viewtaken by the Tribunal. Appeal fails and it is accordingly dismissed. Sd/-ANTONY DOMINIC JUDGE smv Sd/-JUDGE SHAJI P. CHALY