Ita/79/2015 Of The Commissioner Of Income Tax v. M/S.assanar & Sons

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM TUESDAY, THE 28 DAY OF SEPTEMBER 2021 / 6TH ASWINA, 1943 ITA NO. 79 OF 2015 AGAINST THE ORDER IN ITA 191/2014 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX KOTTAYAM. BY ADV SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES); SRI NAVNEETH N NATH RESPONDENT/S: M/S.ASSANAR & SONSRUBBER DEALERS, KPV/542, KANJIRAPPALLY,KOTTAYAM 686 507. BY ADVS.SRI.K.V.SOHANSMT.SREEJA SOHAN.K. THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 28.09.2021, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No. 79 of 2015 2 J U D G M E N T S.V. Bhatti, J. Heard learned Senior Advocate Mr P K R Menon and learnedCounsel Mr K V Sohan for parties. 2. The Commissioner of Income Tax/Revenue is the appellant. M/s. Assanar & Sons/assessee is the respondent. TheRevenue, being aggrieved by the order of Income Tax AppellateTribunal (for short ‘the Tribunal'), Cochin Bench in ITANo.191/Coch/2014 dated 14.11.2014, is in appeal under Section 260Aof the Income Tax Act, 1961 (for short 'the Act') before this Court.The appeal deals with issues arising from the returns filed for theAssessment Year 2008-09. 3.The appeal is admitted on the following substantialquestions of law: “1) Whether, on the facts and in the circumstances of the caseand also in the light of the decision in 170 Taxman 9, theTribunal is right in interfering with the order of the Assessing ITA No. 79 of 2015 3 Officer? 2 (a) Whether the Tribunal is justified in holding that there wasno violation of Section 269T of the Act and that the 'bona fidebelief claimed by the assessee constitutes reasonable cause fordeleting the penalty under Section 273B of the Act and are notthe approach and finding of the Tribunal wrong and perverse?b) Did the assessee discharge the burden of proof? 3. Whether, in view of the decision of the Allahabad High Courtreported in [2008] 170 Taxmann 9, the Tribunal is right in holdingthat penalty provisions cannot be applied to the assessee's case asthere was no unaccounted money involved? 4.The issues relating to the levy of penalty under Section269T read with 271E arise for consideration. Read order dated28.09.2021 in I.A. No.2905/2017. This Court through the order in I.A.No.2905/2017 accepted the prayer of Revenue for bringing on recorda few documents which have bearing on the findings recorded by theTribunal on 'bona fide belief' available to an assessee under Section269T of the Act for exonerating from the pain of penalty. 5.The circumstances relevant for disposing of the appeal arebriefly stated thus. The assessee, a partnership firm, was engaged inthe business of trading in rubber sheet, rubber crepe, rubber scrap,latex etc. The assesse-firm received Rs.1,69,20,000/- during the ITA No. 79 of 2015 4 Financial Year 2007-08 from one K A Thomas. The said amount wasrepaid to K.A.Thomas on different dates with different amounts asset out in paragraph 7 of the order of the Commissioner of IncomeTax, Kottayam Range. 6.Through order dated 30.11.2011 (Annexure-A),Commissioner of Income Tax treated the receipt and subsequentrepayment of a sum of Rs.1,69,20,000/- to Mr K A Thomas,constituted a loan transaction and repayment has not been made inaccordance with the requirements of Section 269T of the Act. Hence,imposed a penalty of Rs.1,69,20,000/- under section 271E on the Act. Through order dated 30.11.2011 (Annexure-A), 7.The Commissioner of Income Tax (Appeals) confirmed theorder of penalty resulting in the assessee filing I.T.A. Nos.191-193/Coch/2014 before the Tribunal. The appeal in ITANo.191/Coch/2014 is with respect to the panalty imposed throughAnnexure-A order dated 30.11.2011. 8.Senior Advocate Mr P K R Menon argues that the findings 6.Through order dated 30.11.2011 (Annexure-A),Commissioner of Income Tax treated the receipt and subsequentrepayment of a sum of Rs.1,69,20,000/- to Mr K A Thomas,constituted a loan transaction and repayment has not been made inaccordance with the requirements of Section 269T of the Act. Hence,imposed a penalty of Rs.1,69,20,000/- under section 271E on the Act. Through order dated 30.11.2011 (Annexure-A), 7.The Commissioner of Income Tax (Appeals) confirmed theorder of penalty resulting in the assessee filing I.T.A. Nos.191-193/Coch/2014 before the Tribunal. The appeal in ITANo.191/Coch/2014 is with respect to the panalty imposed throughAnnexure-A order dated 30.11.2011. 8.Senior Advocate Mr P K R Menon argues that the findings ITA No. 79 of 2015 5 recorded by the Tribunal are very liberal and have changed themeaning of 'bona fide belief' leading to reasonable cause resulting inthe Commission of payment by bearer cheque which could be one ofthe grounds for relieving an assessee from the consequence ofpenalty for a few commissions or omissions under the Act. From thematerials before the Tribunal, the finding recorded in favour of theassessee is perverse and the approach of the Tribunal has literallydiluted the penalty proceedings initiated through order in Annexure-A. There is no justification in fact or material supporting the view ofthe Tribunal and the provision of law is wrongly applied to exercisethe appellate jurisdiction resulting in setting aside of penalty order.By referring to the documents now permitted on record, he argueswith great force that the Tribunal accepts more than what thedepositor (Thomas) declared to the Department. He argues thatthese documents, for reasons not discernable at this point of time,couldn't be brought to the notice of the Tribunal. He further ITA No. 79 of 2015 6 developed the argument that the documents since are on record, thefindings of the Tribunal on 'bona fide belief' or reasonable causeneeds to be disturbed and the substantial questions answered infavour of the Revenue and against the assessee.9.Advocate K V Sohan contends that the documents nowreferred to or relied on by the Revenue, were not put to his client atany time in the adjudication or penalty proceedings. Therefore, thisCourt, it is argued, might not receive documents and also examinethe applicability, relevancy etc on the explanation offered by theassessee and for the first time record findings in this behalf. As analternative plea, he submited that the ends of justice are met, ifopportunity is afforded to assessee to contest the documents nowrelied on by the Revenue. In other words, it is suggested that themain argument of the Revenue on merits ought not to be consideredby this Court, but relegate the parties to Tribunal for considerationand disposal afresh on the materials available in this behalf. ITA No. 79 of 2015 7 ITA No. 79 of 2015 7 10.We have perused the record and we take note of thecontentions advanced by the counsel appearing for the parties. Toappreciate the substantial questions of law formulated by theRevenue, we would have gone by the details set out in the order ofthe Tribunal. In the case on hand, the Joint Commissioner and theCommissioner of Income Tax (Appeals) have referred to a fewreasons as cogent reasons warranting levy of penalty on the assessee.The Tribunal, in our considered view, has recorded a finding infavour of the assessee which is not impugnable. In normal course,the findings recorded by the Tribunal would have been examined bythis Court to the extent permissible in law and answered thequestions. The additional documents now brought on record, it ispossible, may invite fresh examination of bona fide belief orreasonable cause relied on by the assessee. We refrain fromundertaking the responsibility of examining the case of assessee thatthe assessee had reasonable cause for not following the requirement ITA No. 79 of 2015 8 of law. But we are of the view that the matter, if remitted to the Tribunal, the parties would have reasonable opportunity andthereupon the claim/explanation of the assessee considered by theTribunal. 11. Substantial questions accordingly are answered in favour ofthe Revenue and against the assessee. The order of Tribunal is setaside. Matter remitted to the Tribunal for disposal in accordancewith law. The Tribunal affords opportunity to both the parties andwhether the assessee made out a ground for setting aside the penaltyor not is examined and decided afresh. The Tribunal disposes of theappeal upon remand as expeditiously as possible, preferably withinfour months from the date of receipt of a copy of this judgment. Sd/- S.V.BHATTI, Judge Sd/-VIJU ABRAHAM, Judge ITA No. 79 of 2015 9 APPENDIX OF ITA 79/2015 PETITIONER ANNEXURE ANNEXURE-APENALTY ORDER U/S 271E OF INCOME TAX ACT DT 30.11.2011ANNEXURE-BCIT (A)'S ORDER NO.ITA-37/KTM/CIT(A)-IV/2011-12 DT.07.03.2014ANNEXURE-BCIT (A)'S ORDER NO.ITA-37/KTM/CIT(A)-IV/2011-12 DT.07.03.2014 ANNEXURE-CITAT'S ORDER IN ITA NO.191/COCH/2014 DATED 14.11.2014 ANNEXURE-DTRUE COPY OF THE ASSESSMENT ORDER DATED 29.12.2010 FOR THE ASST.YEAR 2008-09FOR THE ASST.YEAR 2008-09 ANNEXURE-ETRUE COPY OF LETTER DATED 13.12.2010 SEND TO SRI.K.A.THOMAS, BY INCOME TAX OFFICER, WARD-1,KOTTAYAMSRI.K.A.THOMAS, BY INCOME TAX OFFICER, WARD-1,KOTTAYAM ANNEXURE-FTRUE COPY OF REPLY BY SRI. K.A.THOMAS DATED 22.12.2010 ALONG WITH THE BANK STATEMENTS OF SRI.K.A.THOMAS, HIS WIFE ALPHONSA THOMAS, AND HIS SON JUSTIN THOMASALONG WITH THE BANK STATEMENTS OF SRI.K.A.THOMAS, HIS WIFE ALPHONSA THOMAS, AND HIS SON JUSTIN THOMAS ANNEXURE-GTRUE COPY OF THE SUMMONS UNDER SEC.131 OF THE INCOME TAX ACT,1961 DATED 22.2.2010 ISSUED TO SRI.T.A.MOHAMMED FAISAL BY THE INCOME TAX OFFICER, WARD 1,KOTTAYAMINCOME TAX ACT,1961 DATED 22.2.2010 ISSUED TO SRI.T.A.MOHAMMED FAISAL BY THE INCOME TAX OFFICER, WARD 1,KOTTAYAM