Ita/83/2014 Of Grihalakshmi Vision v. The Additional Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY FRIDAY, THE 7TH DAY OF AUGUST 2015/16TH SRAVANA, 1937 ITA.No. 83 of 2014 ------------------------ AGAINST THE ORDER IN ITA 103/2011 of I.T.A.TRIBUNAL, COCHIN BENCH, DATED 10-01-2014 APPELLANT/APPELLANT: ---------------------------------- GRIHALAKSHMI VISION KTC BUILDING, YMCA ROAD, KOZHIKODE-673 001. BY ADVS.SRI.P.BALAKRISHNAN (E) SRI.MOHAN PULIKKAL SRI.P.P.NARAYANAN SRI.R.ANAS MUHAMMED SHAMNAD RESPONDENT/RESPONDENT:--------------------------------------- THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE I, KOZHIKODE-673 001. R. BY SR. ADV. SRI.PKR MENON, SC, FOR INCOME TAX R BY SRI.B.RAMACHANDRAN, ADDL.CGSC THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07-08-2015,ALONG WITH ITA. 86/2014, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: I.T.A.No. 83 of 2014 APPENDIX PETITIONER'S ANNEXURES: ANNEUXRE A: TRUE COPY OF THE ASSESSMENT ORDER DATED6.11.2007 PASSED BY THE ASSISTANT COMMISSIONER OF INCOMETAX, CIRCLE (1), KOZHIKODE. ANNEXURE B: TRUE COPY OF THE SHOW CAUSE NOTICE DATED28.3.2008 ISSUED BY THE RESPONDENT. ANNEXURE C: TRUE COPY OF THE REPLY DATED 15.4.2008SUBMITTED BY THE APPELLANT TO THE RESPONDENT. ANNEXURE D: TRUE COPY OF THE ORDER DATED 29.7.2008 ISSUEDBY THE RESPONDENT. ANNEXURE E: TRUE COPY OF THE ORDER DATED 22.11.2010 PASSEDBY THE COMMISSIONER OF INCOME TAX (APPEALS), KOZHIKODE. ANNEXURE F: TRUE COPY OF THE ORDER DATED 20.9.2013 INM.A.NOS.89 & 90/COCH/2013 OF THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH. ANNEXURE G: TRUE COPY OF THE ORDER DATED 10.1.2014 PASSEDBY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. // TRUE COPY // P.A. TO JUDGE ANTONY DOMINIC & SHAJI P. CHALY, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ITA No.83 & 86 of 2014 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 7[th] day of August, 2015 Antony Dominic, J. JUDGMENT These appeals are filed by the assessee impugning the orders passedby the Tribunal in ITA Nos.103/11 and 104/11 whereby the orders passedunder Sections 271D and 271E of the Income Tax Act (hereinafter referredto as 'Act') confirmed by the Commissioner of Income Tax (Appeals) wereupheld. 2. We heard the counsel for the appellant and the Standing Counselfor the Revenue. 3. Briefly stated, the facts of the case are that for the assessment year2005-2006, the assessee had filed returns declaring loss. The returns wereaccepted and finally, on 6.11.2007, assessment order was passed. In theassessment order, it was found that by accepting deposits and makingrepayments in violation of the provisions contained in Section 269SS and269T of the Income Tax Act, penalty provisions of Section 271D and 271Eare initiated. Accordingly, the matter was referred to the Joint ITA No.83 & 86 of 2014 Commissioner of Income Tax and who issued notice dated 28.3.2008.To the notice, replies were given and finally order under Section 271Dand 271E were passed on 29.7.2008. In the order passed under Section271D, penalty of Rs.10,83,000/- which is equal to the cash loans takenby the assessee in contravention of 261SS of the Income Tax Act waslevied. Similarly, in the order passed under Section 271E, penalty ofRs.2,97,000/- which is equal to the amount of cash loans repaid by theassessee in contravention of 269T of the Act was levied. These orderswere confirmed by the Commissioner of Income Tax (Appeals). Furtherappeals filed before the Tribunal as ITA Nos.103 and 104 of 2011 werealso dismissed by the common order. It is in this background, theseappeals are filed by the assessee. ITA No.83 & 86 of 2014 Commissioner of Income Tax and who issued notice dated 28.3.2008.To the notice, replies were given and finally order under Section 271Dand 271E were passed on 29.7.2008. In the order passed under Section271D, penalty of Rs.10,83,000/- which is equal to the cash loans takenby the assessee in contravention of 261SS of the Income Tax Act waslevied. Similarly, in the order passed under Section 271E, penalty ofRs.2,97,000/- which is equal to the amount of cash loans repaid by theassessee in contravention of 269T of the Act was levied. These orderswere confirmed by the Commissioner of Income Tax (Appeals). Furtherappeals filed before the Tribunal as ITA Nos.103 and 104 of 2011 werealso dismissed by the common order. It is in this background, theseappeals are filed by the assessee. 4. The questions of law framed are mainly whether the Tribunalwas correct in holding that the orders imposing penalty under Section271D and E were passed within the period of limitation prescribedunder Section 275(1)(c) and whether the Tribunal was correct inconfirming the findings without examining the circumstances providingreasonable cause as contemplated under Section 273B of the Act. ITA No.83 & 86 of 2014 Another question of law which is framed is whether the authoritiesbelow erred in not considering the issue whether the cash receipts,being bonafide transactions between the assessee and its sisterconcerns/partners, can be considered as loans or deposits attracting theprovisions of Sections 269SS and 269T of the Act. 5. These contentions were reiterated before us by the learnedcounsel for the assessee and were contradicted by the learned SeniorCounsel appearing for the Revenue. 6. Section 269SS of the Act, occurring in Chapter XXB, provide for mode of taking or accepting certain loans and deposits. Insofar as it isrelevant, the Section provides that no person shall, after 30[th] day of June1984, take or accept from any other person any loan or depositotherwise than by an account payee cheque or account payee bank draftif the aggregate amount of such loan or deposit is Rs.20,000/- or more.Section 269T of the Act, also occurring in Chapter XXB of the Act,provides for the mode of repayment of certain loans or deposits. As perthis provision, no firm or other person shall repay any loan or depositmade with it otherwise than by an account payee cheque or account ITA No.83 & 86 of 2014 payee bank draft drawn in the name of the person who has made thedeposit if the amount of loan or deposit together with the interest, ifany, payable thereon is Rs.20,000/- or more. 7. Section 271D and 271E of the Act provides for penalty forfailure to comply with the provisions of Section 269SS and 269T. As perthese provisions, contravention of provisions of Section 269SS and 269Trenders the person concerned liable to pay, by way of penalty, a sumequal to the amount of the loan or deposit so taken or accepted and asum equal to the amount of the loan or deposit so repaid. Sub section(2) of both these provisions provide that any penalty imposable undersub section (1) shall be imposed by the Joint Commissioner. By virtue ofthese provisions, though contravention of Section 269SS and Tautomatically invites penalty under Section 271D and E, Section 273Bprovides that notwithstanding anything contained in the aboveprovisions, no penalty shall be imposable on the person or the assesseeas the case may be, for any failure referred to in the said provisions if heproves that there was reasonable cause for the said failure. This Sectionalso provides that no penalty shall be levied under Section 271D or ITA No.83 & 86 of 2014 : 5 : 271E after the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated,are completed, or six months from the end of the month in which actionfor imposition of penalty is initiated, whichever period expires later.(vide Section 275(1)(c) of the Act). ITA No.83 & 86 of 2014 : 5 : 271E after the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated,are completed, or six months from the end of the month in which actionfor imposition of penalty is initiated, whichever period expires later.(vide Section 275(1)(c) of the Act). 8. Insofar as these cases are concerned, the assessment order was passed on 6.11.2007 and the assessment order concluded by statingthus: “Since the assessee has violated the provisions of section269SS and 269T of the IT Act by accepting and repayingloans exceeding Rs.20,000/- aggregating and otherwiseat any point of time, as given above, penalty provisions ofSection 271D and 271E of the IT Act are attracted.Accordingly initiated penalty proceedings under Section271D and 271E.” It was relying on the last sentence in the assessment order that “Accordingly initiated penalty proceedings under Section 271D and271E”, the counsel for the assessee is contending that the AssessingOfficer having initiated the proceedings vide his order dated 6.4.2007, the order passed by the Joint Commissioner on 29.7.2008 levyingpenalty is beyond the time permitted in Section 275(1)(c). It was to ITA No.83 & 86 of 2014 substantiate this contention that the learned counsel placed reliance ofthe Supreme Court judgment in D.M.Manasvi v. Commissioner of IncomeTax, Gujarat II [1972] 86 ITR 557 and Commissioner of Income Tax v..Jitendra Singh Rathore [2013] 352 ITR 327 (Raj) 9. As we have already seen, although Section 271D and E of the Income Tax Act provides for levy of penalty for contravention ofSections 269SS and 269T. As per sub section (2) to both these sectionsany penalty imposable under sub section (1) of these provisions shall beimposed by the Joint Commissioner. It was, therefore, that the matterwas referred to the Joint Commissioner who passed orders on29.7.2008 levying penalty. 10. Question to be considered is whether proceedings for levy ofpenalty, are initiated with the passing of the order of assessment by theAssessing Officer or whether such proceedings have commenced withthe issuance of the notice issued by the Joint Commissioner. Fromstatutory provision, it is clear that the competent authority to levypenalty being the Joint Commissioner. Therefore, only the JointCommissioner can initiate proceedings for levy of penalty. Such ITA No.83 & 86 of 2014 initiation of proceedings could not have been done by the AssessingOfficer. The statement in the assessment order that the proceedingsunder Section 271D and E are initiated is inconsequential. On the otherhand, if the assessment order is taken as the initiation of penaltyproceedings, such initiation is by an authority who is incompetent andthe proceedings thereafter would be proceedings without jurisdiction.If that be so, the initiation of the penalty proceedings is only with theissuance of the notice issued by the Joint Commissioner to the assesseeto which he has filed his reply. 11. The only case of the assessee is that if the period of limitationprescribed in Section 271(1)(c) is reckoned from the date of theassessment order dated 6.11.2007, the penalty order passed by theJoint Commissioner on 29.7.2008 is beyond the time permitted in theabove section. As we have already held, the initiation of the penaltyproceedings is not by the Assessing Officer but by the JointCommissioner and if that be so, the order levying penalty passed by theJoint Commissioner is within the time prescribed in Section 275(1)(c). ITA No.83 & 86 of 2014 11. The only case of the assessee is that if the period of limitationprescribed in Section 271(1)(c) is reckoned from the date of theassessment order dated 6.11.2007, the penalty order passed by theJoint Commissioner on 29.7.2008 is beyond the time permitted in theabove section. As we have already held, the initiation of the penaltyproceedings is not by the Assessing Officer but by the JointCommissioner and if that be so, the order levying penalty passed by theJoint Commissioner is within the time prescribed in Section 275(1)(c). ITA No.83 & 86 of 2014 12. Insofar as the judgment of the Apex Court in D.M.Manasvi v.Commissioner of Income Tax, Gujarat II [1972] 86 ITR 557 is concerned,that was a case where penalty was levied under Section 271(1)(c) andas is evident from the provision itself, the proceedings under thatSection are to be initiated on the basis of the satisfaction of the officersmentioned therein including the Assessing Officer. Unlike theprovisions of Section 271(1)(c), under the provisions of Section 271Dand E, the exclusive authority is conferred on the Joint Commissioner.Therefore, the principles laid down in the judgment of the Apex Courtcannot be called in aid to impugn the concurrent findings of the lowerauthorities. Therefore, the first contention raised by the learnedcounsel for the assessee deserves to be rejected and we do so. 13. The second contention raised by the assessee is regarding theexistence of reasonable cause. As we have already stated, Section 273Bprovides that notwithstanding anything contained in the provisions ofSection 271D and E, no penalty shall be imposable on the person or theassessee, as the case may be, for any failure referred in the provisions, ifhe proves that there was reasonable cause for the failure. Insofar as ITA No.83 & 86 of 2014 : 9 : this case is concerned, reading of the reply given by the assessee showsthat the amount in cash was taken from the partners of the firm to meetcertain urgent business expenditure. It is also stated that the amount incash was taken from M/S Grihalakshmi Music and M/S Kerala TransportCompany for meeting various business expenditure at the locationwhere serial was being shot. The explanation offered was considered bythe Assessing Officer and he examined the question whether this was areasonable cause as provided under Section 273B. Answering thisquestion, the Assessing Officer has stated thus: “The said replies do not give 'reasonable cause' offailure to repay 'otherwise' than by the account payeecheque or, account payee bank draft. The assessee doesnot state any 'objective satisfaction' regarding cashrepayment of Rs.2,97,000/-. The assessee also does notsay anything about availability of banking facility andmaintenance of bank accounts by both parties (theperson who has paid loan/deposit and the person whohas received such loan/deposit) or, Nothing has beenstated about banking transaction facilities/knowledge ofboth the assessee firm and its partners/sister concerns.But why the partners/sister concerns of the firm werepaid cash loans whereas banking facilities are availablefor both the firm and the partners/sister concerns. Ifound no reasonable circumstances compelling theassessee firm to repay cash loans to its partners/sisterconcerns without proving the receipts and payments both were made beyond normal banking hours or beyond theavailability of banking facilities. The said provision ofsection 269T is procedural regarding why the assesseemust not repay any loan exceeding Rs.20,000/-(aggregate) 'otherwise' than by an account payee chequeor an account payee bank draft. It not only prohibitscash loan repayment but also prohibits any amountreceived 'otherwise' than by account payee cheque or anaccount payee bank draft. The assessee must prove totake the benefit of section 273B why the cash loan or'otherwise' has been repaid and whether there has beenany 'reasonable cause' for the said failure. The saidsection 269T does not say anything about how the loan ordeposit amount is being utilized, or sourced or by whompaid or received or flexibility of cash/'otherwise'loan/deposit (other than account payee cheque oraccount payee bank draft). It is only referring why thecash loan or 'otherwise' must not be repaid other than byan account payee cheque or account payee bank draft.So, I am not inclined to give the benefit of provision ofSection 273B of the Income Tax Act, 1961, since theassessee firm has not proved any 'reasonable cause' forthe said failure. ” 14. It is this finding which has been confirmed by theCommissioner of Income Tax (Appeals) and by the Tribunal, havingappreciated the reasoning of the lower authorities we do not find anyperversity in the findings. Apart from that, this concurrent findings ofthe lower authorities are finding of facts which does not give rise to any ITA No.83 & 86 of 2014 question of law to be considered by this Court in an appeal underSection 260A of the Act. 15. The third contention that was raised by the assessee was thatif money is taken from partners or sister concerns, it could not betreated as loans or deposits. In support of this contention, counsel forthe assessee relied on judgments in Commissioner of Income Tax v.T.Perumal (Indul.) [2015] 370 ITR 313 (Mad) and Commissioner ofIncome Tax v. Muthoot Financiers and another [2015] 371 ITR 408(Delhi). Reading of these judgments show that these cases were decidedon the basis of the documents that were available before the Court. Onthe other hand, insofar as these cases are concerned, though it is theadmitted case that amounts were received from partners and othersister concerns of the assessee and were repaid, there is no materialwhatsoever to infer that these receipts were anything other than loansor deposits. There is no law that every receipt from a partner or a sisterconcern cannot, in all circumstances, be treated as a loan or deposit. Onthe other hand, the nature of the receipt would depend upon theagreement between the parties and the evidence that is produced. As ITA No.83 & 86 of 2014 : 12 : we have already stated, there is no material whatsoever to accept thecase of the assessee that these are loan or deposit. In suchcircumstances, the findings of the Assessing Officer confirmed by theAppellate Commissioner and the Tribunal that it was a loan or depositthat was received by the assessee also has to be upheld and we do so. In the result, the questions of law framed by the assessee areanswered against it and in favour of the Revenue. Appeals areaccordingly rejected. ANTONY DOMINIC JUDGE jes SHAJI P. CHALY JUDGE