Ita/237/2010 Of Commissioner Of Income Tax, Kottayam v. Shri.p.k.shamsuddin

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY FRIDAY, THE 4TH FEBRUARY 2011 / 15TH MAGHA 1932 ITA.No. 237 of 2010() --------------------- AGAINST THE ORDER IN ITA.509/COCH/2009 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ SHRI.P.K.SHAMSUDDIN, PACKWELL, ROOM NO.16, MUNICIPAL SHOPPING ARCADE, CHANGANACHERRY, KOTTAYAM DIST. ADV. SRI.ANIL D. NAIR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04/02/2011 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. .................................................................... ITA No.237 of 2010 .................................................................... Dated this the 4[th] day of February, 2011. J U D G M E N T Ramachandran Nair, J. This appeal is filed by the Revenue challenging the order ofthe Tribunal cancelling penalty levied on the respondent assesseeunder Section 271D for violation of Section 269SS of the Income TaxAct (hereinafter referred to as the Act for short). 2.We have heard Shri.P.K.R.Menon, learned Senior counselappearing for the Revenue, and Shri.Anil D.Nair, learned counselappearing for the respondent assessee. We have heard Shri.P.K.R.Menon, learned Senior counsel 3. The assessee was employed in a circus company for 25 years, and thereafter he started an industry making packing cases.In the second year of business, the assessee borrowed substantialamounts from various persons in cash, which is in violation ofSection 269SS of the Act. The Assessing Officer after collectingparticulars of cash loans taken from these persons levied penaltyunder Section 271D, which is an amount equal to the loan amount. ITA No.237/2010 Even though first appeal was unsuccessful, the Tribunal acceptedthe explanation offered by the assessee under Section 273B andcancelled the penalty, against which this appeal is filed. 4.Before us, learned Senior counsel for the Revenuecontended that the explanation of the assessee, which was acceptedby the Tribunal, that it is on account of ignorance of law that heborrowed money from individuals, is not tenable. Learned counselappearing for the assessee, on the other hand, referred to thefindings of the Assessing Officer in the penalty order itself, whereinthe source of lenders as borrowings from Banks is accepted by theOfficer. After hearing both sides and after going through the facts on record, we notice that the assessee used several persons, probablyclose relatives and friends, to take loan from Banks for his businesspurposes. Borrowers from Bank cannot issue cheques to anotherperson, which will only prove that borrowed funds are again lend toother persons. So much so, after availing loans these creditorswithdrew all the money in cash from the Bank accounts and gave itto the respondent assessee. When factual position of source of ITA No.237/2010 fund is accepted by the Department, necessarily, the conclusion ofthe Tribunal has to be upheld because there is no tax evasioninvolved or black money introduced in business in cash. We feel,furnishing of source of lenders accepted by the Department itself isreasonable cause against levy of penalty because when source isprovided violation becomes technical. It is also found by theTribunal that the assessee was in the second year of business andon noticing his mistake he discontinued the practice. Consideringthe above, we are of the view that the explanation accepted by theTribunal under Section 273B based on facts, on which there is nocontroversy, does not give rise to any substantial question of lawwarranting interference by this Court. Therefore, this Income Tax Appeal is dismissed. (C.N.RAMACHANDRAN NAIR, JUDGE)