Ita/149/2009 Of M/S. Pramati Educational v. The Addl Commissioner Of Income Tax

1 IN THR HIGH COURT OF KARNATAKA AT BANGALOREDATED THIS THE 28[‘T]DAY OF NOVEMBER 2014 PRESENT THR HON BLE MR. JUSTICE N. KUMAR. AND THR HON’BLE MR. JUSTICE B. MANOHAR|ITA NO.149 OF 2009 BETWEEN; M/s Pramati Educational &Cultural TrustCA Site No.2?Udayaravi RoadKuvempunagar, Mysore-23|Represented by its TreasurerSri.s.Paniraj, aged about 92 yearsson ot Sri.T.N.Subbarao APPBLLANT (By Sri.S.Parthasarathi, Advocate) AND: The Additional Commissioner otIncome tax, Range | Vidyaranya Complexsilpashree, Mysore — 570 008 _ RBSPONDENT (By Sri.K.V.Aravind, Advocate) -0-0-0-0-O0- This appeal is filed under Section 260-A of Income TaxAct 1961, arising out of order dated 01.12.2008 passed in| ITA No.316/BNG/2008, for the Assessment Year 2004-2005,praying that this court may be pleased to 1) formulate|the substantial questions of law stated therein and 1) allow|the appeal and set aside the order passed by the ITAT|Bangalore in ITA No.316/BNG/2008, dated 01.12.2008 in|the interest of justice. This appeal coming on _ tor Hearing this’ day,N.KUMAR, J.delivered the following:- JUDGMENT The assessee has preferred this appeal challenging theorder passed by the authorities below imposing a penalty|under Section 271D of the Income tax Act for raising cash|loans. D2 The assessee is an educational institution. Whileconcluding the assessment for the assessment year 2004-05|under Section 143(3) of the Income tax Act (for short herein|alter referred to as ‘Act), the assessing authority noticed|cash loans received by the assessee is more than)Rs.20,000/-. Therefore, they directed initiation of penal)proceedings under Section 271D of the Act in respect of cash|loans to the extent of 11,06,000/- in contravention of the)provisions of Section 269 SS of the Act. The assessee in)reply to the proposed action filed written submissions, | admitting the acceptance of the cash loans in cash as it had|a commitment to make the payment of cash within 72 hours.The assessing authority was not convinced with the|assessee’s explanation and accordingly, levied the penalty ofRs.11.06 Lakhs. Aggrieved by the said order, the assessee|has preferred an appeal to the Commissioner of Income Tax.(Appeals). 3.|The first appellate authority aiter considering thefacts of the case was of the specific view that the cash loan of.Rs.2.8 lakhs received from one Sri.B.H.Deshpande on.22.07.2003 is reasonably explained on account of urgency onthe ground that the assessee trust had entered into an|agreement with Babusar Narayan Trust on 21.07.2003 to|make a payment to KHB for revival of allotment of site and|such payment was made to KHB on 23.07.2003 on behalf ofBabusar Narayan Trust. He was of the opinion that the|amount to an extent of 2.08 Lakhs was reasonably explainedand cancelled the penalty to that extent. However, he|confirmed the penalty in respect of 8.08 lakshs. On the|eround that the assessee trust had ample time to raise| 4 money by way of cheques/DDs as it can be seen that the|sale deed was registered and registration charges were paid|only on 01.09.2003. Aggrieved by the said order the|assessee preferred an appeal to the Tribunal. The appeal|came to be dismissed by the tribunal sustaining the levy ofpenalty. 4The appeal was admitted on 19.11.2009 for|considering the following substantial questions of law:-_ UWhether the Tribunal was justified inupholding the levy ofpenalty under S.271 Dof|theActwhentheappellanthadreasonable cause in obtaining cash loans?u)Whether from the Seriatim of dates andevents furnished, can it be said that theappellant could have mobilized funds byaccount payee bank drafts/cheques?ult)Whether penalty under S.271 D of the Act is"excisable in the case of the appellant whenthe genuineness of transaction is_ notdisputedandexplanation1S not.controverted P” u) ult) 4The appeal was admitted on 19.11.2009 for|considering the following substantial questions of law:-_ UWhether the Tribunal was justified inupholding the levy ofpenalty under S.271 Dof|theActwhentheappellanthadreasonable cause in obtaining cash loans?u)Whether from the Seriatim of dates andevents furnished, can it be said that theappellant could have mobilized funds byaccount payee bank drafts/cheques?ult)Whether penalty under S.271 D of the Act is"excisable in the case of the appellant whenthe genuineness of transaction is_ notdisputedandexplanation1S not.controverted P” u) ult) 5 |The tribunal was of the view that the assessee|trust had in fact, sufficient time i1.e., 40 days to mobilize therequired funds by way of demand drafts/cheques , instead ofresorting to receive the huge loans in cash by contravening|the provisions of section 269 SS of the Act. Therefore, this|appeal is filed assailing the said finding. 6.|The appellate commissioner at Para NO.2 of his|order has given the chart of funds relating to purchase of theCA site. The facts stated therein are not in dispute. A.perusal of the said chart shows that the payment of the|amount due to the KHB by the assessee, the allotment whichhadbeencancelledWaS revivedOT]14.08.2003.Subsequently on the next day, the assessee was requested topay the amount needed for meeting the cost of registration|and stamp duty urgently. 160[&<]was Saturday and 17[&<]WaSsunday. On 18[&<]the assessee borrowed money in cash anddeposited the money in the bank account as is clear from the pass book entry. After depositing the amount he has taken|the DDs and given to the KHB. It is to be remembered when|a statutory authority is executing a sale deed the purchaser| 6 has to pay or deposit the stamp duty to the authority.Thereafter they prepare a drait sale deed. It has to be|approved by the concerned authorities. It is only on|execution of the sale deed the same is handed over to thepurchaser to get it registered by paying the registration fee.From the chart, it is clear. Though the stamp duty was|supplied on 18.08.2003, copy of registered sale deed was|ready on 28.08.2003. On 30.08.2003, the KHB executed thesale deed. 31["&]was the Sunday. On 01.09.2003, the samewas presented and got registered. The registration fees were|paid and therefore the sale deed came to be executed. _ [|Therefore,the|atoresaideventsclearlydemonstrates the asssessee having paid entire sale|consideration and got allotment revived. They wanted to see|that the sale deed is executed immediately and therefore, thesaturday and Sunday intervened and by Monday, they|deposited entire amount. The sale deed on record clearly|demonstrates a payment of Rs.6,56,510/- towards stamp|duty and a demand draft was taken and given to the KHB.They also paid a sum of Rs.77,150/- registration charges on| T 01.09.2003. Subsequently the assessee has obtained the|registered sale deed from Babusar Narayan Trust. The|original allottee under ae registered sale deed dated24.09.2004. In fact, these facts are not in dispute. The|assessee iS an educational institution. They had paid the|entire amount to KHB to revive the cancelled allotment and|they were in tremendous pressure to pay stamp duty and_registration charges and in those circumstances they have|raised cash loan, deposited the amount in the bank,|obtained the demand draft and handed over the same to)KHBimmediatelyandtheyhavealsoarranged{Orregistration of sale deed in the name of the allottee. 3.|In the circumstances, we are satisfied even the|amount of Rs.8.08. lakhs raised by the asessee is for the|purpose of stamp duty and registration and as there was|urgency, they could not have obtained said amount by way ofcheque or demand drait or as otherwise the investment they|have made in getting lapsed allotment revived would have|been in jeopardize. The authorities were not justified in|ignoring these admitted facts on record and merely because| 3.|In the circumstances, we are satisfied even the|amount of Rs.8.08. lakhs raised by the asessee is for the|purpose of stamp duty and registration and as there was|urgency, they could not have obtained said amount by way ofcheque or demand drait or as otherwise the investment they|have made in getting lapsed allotment revived would have|been in jeopardize. The authorities were not justified in|ignoring these admitted facts on record and merely because| there is a gap of more than 1o days between the date of|revival and date of registration, their understanding that|the assessee would have arranged funds by way of Cheques/demand drafts is unacceptable. As on 14[&<]allotment wasrevived, 15[&<]they were informed, 16[&<]was a Saturday, 17[&<]was a Sunday and 18[&<]they had to make the payment, theyhave made the payment. Therefore the substantial questions|oft law are answered in favour of the assessee and against therevenue. Hence, we pass the following order:- The appeal is allowed. The impugned order passed by the authorities levying.the revival of penalty is set aside. Ordered accordingly. Sd/-. JUDGE. Sd/-.JUDGE. BSV