Ita/694/2009 Of The Commissioner Of Income Tax,Trichur v. M/S.polsons Distillery,Chalakkudy

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 6TH JANUARY 2010 / 16TH POUSHA 1931 ITA.No. 694 of 2009() --------------------- ITA.431/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT --------------------------------------- THE COMMISSIONEROF INCOME TAX, TRICHUR. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ M/S.POLSONS DISTILLERY,MURINGOOR, CHALAKUDY. ADV. SRI.T.M.SREEDHARAN FOR R1 SMT.C.K.SHERIN FOR R1 SRI.V.P.NARAYANAN FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06/01/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -------------------------------------------- -------------------------------------------- Dated this the 6th day of January, 2010 JUDGMENT Ramachandran Nair, J. Heard senior standing counsel appearing for the appellant andSri. T.M. Sreedharan, counsel appearing for the respondent-assessee.The challenge is against the order of the Tribunal confirming the orderof the C.I.T. (Appeals), cancelling penalty levied on the respondent-assessee under Section 271 D of the IT Act. The allegation based onwhich penalty was levied is receipt of loan in excess of Rs. 20,000/-from several persons in cash, the total of which is Rs. 5,51,850/-.Penalty levied is equal to the amount of cash loans received in excessof Rs. 20,000/-. The contention of the revenue is that assessee has notestablished circumstances beyond it's control justifying cashborrowings to avoid penalty by virtue of exemption contained inSection 273 B of the Act. Counsel appearing for the respondent-assessee referred to the finding in the CIT (Appeals)'s order and that ofthe Tribunal wherein they have consistently held that assessee was steadily in cash shortage and it exceeded OD limits with banksjustifying frequent cash borrowings. However, after going through theorders of the first appellate authority and the Tribunal we notice thatthere has been shift in the stand taken by the assessee at different times.Before the assessing officer, the assessee contended that assessee hadin fact debited various amounts totalling around to Rs. 31.97 lakhstowards commission, sales promotion, incentives, etc. in the names ofvarious employees and credited the same in their personal accounts.However, the assessee later filed a revised return offering the entireamount for tax. The contention of the assessee that the very sameamounts shown as credit in the name of the employees are treated asloan by the assessing officer for the purpose of levy of penalty. Wenotice that none of the authorities has gone into the details of the claimsof the assessee even though Tribunal briefly states this also. If this isthe true fact, then we see no reason why the assessee did not make anelaborate attempt by producing cash flow statement, bank accounts,etc., before the CIT (Appeals) to establish that there was steadyshortage of cash justifying borrowings in cash from employees.Therefore there is inconsistent stand adopted by the assessee before different authorities. If the amount in fact represents the expenditureoriginally claimed by the assessee and later withdrawn as commissionand incentives paid to employees, then the credit shown in the name ofthe employees are not the actual borrowings but it is assessee's ownmoney. In view of the subsequent case put forward by the assesseewhich is not consistent with the case put forward before the assessingofficer, we allow the appeal by setting aside the order of the tribunaland that of the first appellate authority and remand the matter to theassessing officer for reconsideration after verifying the true facts withreference to books of accounts and if necessary after collectinginformation from employees. Assessee should be given an opportunityto produce records and accounts and other evidence in support of theircontentions and for completing the assessment afresh. (C.N.RAMACHANDRAN NAIR)Judge.Judge. (V.K. MOHANAN) Judge. kk