Our Consideration Are v. I.t. Appeal

Kss IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE TUESDAY, THE 25TH DAY OF FEBRUARY 2014/6TH PHALGUNA, 1935 ITA.No. 19 of 2014 ---------------------- ITA NO. 118/COCH/2009 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH DATED 31/07/2013 ... APPELLANT(S)/APPELLANT/ASSESSEE:-: ------------------------------------------------------------------ N.S.S.KARAYOGAM, P.B.NO.1365, NEERKUNNAM, ALAPPUZHA - 688 005. BY SRI.T.M.SREEDHARAN,SENIOR ADVOCATE ADVS. SRI.V.P.NARAYANAN SMT.BOBY M.SEKHAR SMT.DIVYA RAVINDRAN RESPONDENT/RESPONDENT/REVENUE:-: -------------------------------------------------------------- THE COMMISSIONER OF INCOME TAX, PUBLIC LIBRARY BUILDING, SHASTRI ROAD, KOTTAYAM - 686 001. BY ADV. SRI.JOSE JOSEPH, SC, INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 25-02-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ON 25-02-2014, THE COURT ON THE SAME DAY DELIVERED THE ITA.NO.19/2014 APPENDIX APPELLANT'S ANNEXURES: ANNEX.A:COPY OF ASSESSMENT ORDER DTD. 24/12/2007 ISSUED BY THEDY.COMMISSIONER OF INCOME TAX, CIRCLE I, ALAPPUZHA. ANNEX.B:COPY OF THE ORDER DTD. 30/10/2008 IN ITA NO.19/ALPA/CIT(A)/IV/07-08 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOCHI. ANNEX.C:COPY OF THE ORDER DTD. 21/10/2011 IN ITA NO.14/COCH/2009 OFTHE ITAT, COCHIN BENCH. ANNEX.D:COPYOFTHEORDERDTD.26/06/2008VIDEC.R.NO.39/ADDL.CIT/ALP/2008-09 ISSUED BY THE ADDL.COMMISSIONER OFINCOME TAX, ALAPPUZHA. ANNEX.E:COPY OF THE ORDER DTD. 17/11/2008 IN ITA NO.8/ALPA/CIST(A)/IV/08-09 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEX.F:COPY OF THE ORDER DTD. 31/07/2013 IN ITA NO.118/C/2009 OFTHE ITAT, COCHIN BENCH. RESPONDENT'S ANNEXURES: N I L /TRUE COPY/ P.S.TO JUDGE Manjula Chellur, C.J. & A.M. Shaffique, J.=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= I.T. Appeal No. 19 of 2014 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=Dated this, the 25[th]day of February, 2014. J U D G M E N T Manjula Chellur, C. J. Heard learned counsel for appellant as well asstanding counsel for Revenue. 2.The matter is disposed of on merits. 3.The substantial questions of law which arise for our consideration are: “(i) Whether, on the facts and in the circumstances ofthe case and having regard to the principle of lawlaid down by this Hon'ble Court, in the case of CITVs. P.K. Shamsuedheen in I.T.A. No. 239 of 2011, isthe Appellate Tribunal justified in law and facts inconfirming the order of the Commissioner ofIncome Tax (Appeals), Cochin, in I.T.A. No.4/Alp/CIT(A)-IV/2010-11 and confirming the levy ofpenalty u/s 271D?the case and having regard to the principle of lawlaid down by this Hon'ble Court, in the case of CITVs. P.K. Shamsuedheen in I.T.A. No. 239 of 2011, isthe Appellate Tribunal justified in law and facts inconfirming the order of the Commissioner ofIncome Tax (Appeals), Cochin, in I.T.A. No.4/Alp/CIT(A)-IV/2010-11 and confirming the levy ofpenalty u/s 271D? (i)Did not the Appellate Tribunal err in not followingthe binding precedence in the decision in Shri P.K.Shamsudheen's case as well as the decisions ofother Hon'ble High Courts of Punjab and Haryana,Rajasthan and Madras, reported in 276 ITR 79 (P &H) (CIT vs. Saini Medical Stores), 260 ITR 590(Raj.) & 303 ITR 99 (Mad.) (CIT vs. Lakshmi TrustCo) and 283 ITR 329 (Mad.) (CIT Vs. KundrathurFinance & Chit Co.) respectively and dismissing theappeal?the binding precedence in the decision in Shri P.K.Shamsudheen's case as well as the decisions ofother Hon'ble High Courts of Punjab and Haryana,Rajasthan and Madras, reported in 276 ITR 79 (P &H) (CIT vs. Saini Medical Stores), 260 ITR 590(Raj.) & 303 ITR 99 (Mad.) (CIT vs. Lakshmi TrustCo) and 283 ITR 329 (Mad.) (CIT Vs. KundrathurFinance & Chit Co.) respectively and dismissing theappeal? (iii) In the facts and circumstances of the case, andhaving regard to the fact that no part of thedeposits were found to be not genuine and wereaccepted in the assessment, did not the AppellateTribunal err in law in sustaining the order imposinghaving regard to the fact that no part of thedeposits were found to be not genuine and wereaccepted in the assessment, did not the AppellateTribunal err in law in sustaining the order imposing I.T. Appeal No. 19 of 2014 -: 2 :- penalty u/s 271D? (iv) Is not the order of th Appellate TribunalAnnexure-F arbitrary and illegal and liable tobe set aside?”Annexure-F arbitrary and illegal and liable tobe set aside?” 4.The undisputed facts that lead to filing of thepresent appeal are as under: The appellant-assessee is having several branches of Karayogam. The branch in question is N.S.S.Karayogam No. 1365, said to have been established forthe overall welfare of its members ofKakazham/Neerkunnam area. Apparently, it indulgesin financial business independently. The appellantassessee was accepting deposits from and financingloans to both members and non-members. Severalissues came up for consideration for the aboveassessment year. But, we are concerned only with onecontroversy, whether assessee has explained withsufficient reason for receiving cash deposit exceedingRs. 20,000/- in violation of provisions of Section 269SSof the Income Tax Act. The Assessing Officer, afterseeking explanation from the assessee, proceeded withthe assessment and imposed penalty. This came to bechallenged before the First Appellate Authority and theappeal came to be partly allowed remanding back thematter to the Assessing Officer with specific directionnot to consider receipts which were below Rs. 20,000/-. I.T. Appeal No. 19 of 2014 5. Aggrieved by the same, the appellant-assesseeapproached the Appellate Tribunal. The AppellateTribunal, after referring to its earlier order pertainingto K.V. George's case, ITA No. 22/2012 dated 27.7.2013,proceeded to opine that appellant never raised acontention that there is no banking facility in thelocality and further, most of the depositors beingpensioners, who were receiving pension throughbanking channel therefore, such defence wasuntenable. Confirming the decision of the C.I.T(Appeal), the appeal came to be dismissed. Aggrievedby the same, the assessee is before us contending thatAppellate Tribunal did not consider principles of lawlaid down by various High Courts supportingcontentionsof the assessee before the Appellate Tribunal. 5.Learned counsel for appellant contends before usthat there could be more than one reason why receipt ofmoney was in cash. It could be ignorance, could be non-availability of banking facility in the locality etc. It is not asituation where the assessee never had an opportunity toexplain. It is not ignorance of the customers, but it is theignorance of the assessee who received the money in cash.As pointed out by the First Appellate Authority, there wasdifference of one crore forty lakhs ie. variance betweenthe balance sheet and account book produced. This gaverise to a survey by the Department. However, with other I.T. Appeal No. 19 of 2014 -: 4 :- issues, we are not concerned. 5.Learned counsel for appellant contends before usthat there could be more than one reason why receipt ofmoney was in cash. It could be ignorance, could be non-availability of banking facility in the locality etc. It is not asituation where the assessee never had an opportunity toexplain. It is not ignorance of the customers, but it is theignorance of the assessee who received the money in cash.As pointed out by the First Appellate Authority, there wasdifference of one crore forty lakhs ie. variance betweenthe balance sheet and account book produced. This gaverise to a survey by the Department. However, with other I.T. Appeal No. 19 of 2014 -: 4 :- issues, we are not concerned. 6.Learned standing counsel arguing for Revenuesubmits, the only defence raised by assessee at the earliestpoint of time was ignorance and further contends thatignorance of law cannot be an excuse. So far as the FirstAppellate Authority for verification of factual situationwhether entire cash receipts, which was subject matter ofpenalty were Rs.20,000/- and above or below Rs.20,000/-,remanded back the matter to the Assessing Officer to verifyfactual situation while proceeding with the matter afresh.In other words, there is clear direction that all receiptsbelow Rs.20,000/- need not be taken into consideration andonly those receipts which are Rs. 20,000/- and above shouldbe taken into consideration. However, going through theorders of Assessing Officer, Appellate Authority andAppellate Tribunal, we do not find any consistency in theexplanation of the appellant-assessee. What was thereasonable cause for receiving such amounts in cash inviolation of the provisions of Section 269SS? Apparently,several transactions are beyond and above Rs. 20,000/-.One of the defence was they were adopting cash system ofaccounting right from the beginning, which was neverobjected to. Therefore, they were receiving amountsremitted in cash, especially as the person who was in chargeof the branch was a person with matriculation qualification,and was not well versed with the Income-tax Act.Unfortunately, an assessee which is dealing in financeactivity cannot take such a stand as the assessee is expected I.T. Appeal No. 19 of 2014 -: 5 :- to know the person who maintains the day-to-dayadministration of the society, including receipt of amounts.So far as the present controversy is concerned, as indicatedby learned standing counsel for Revenue, the case whichwas relied upon by the Tribunal, ie. K.V. George's case,came up for consideration before this Court in I.T.A. No.279/2013, wherein scope of Sections 269SS and 271D wasdiscussed with reference to various judgments of other HighCourts and also Supreme Court. While referring to scopeof Section 269SS read with Section 271D, it was clearly heldthat the only consideration would be what was thereasonable cause for receiving such a huge amount by wayof cash or what was the reason for not receiving the loan ordeposit by way of account payee cheque or demand draft amatter to be explained by the assessee. In other words,the burden is on the assessee to establish what was thereasonable cause for not receiving the loan or deposit byway of account payee cheque or a demand draft. It is not asingle transaction but several transactions which have to beexplained by the appellant assessee. Though there is nospecific consistent stand as stated above on behalf of theappellant-assessee, since the matter is remitted back to theAssessing Officer for fresh consideration, so far as thefactual situation whether all transactions were Rs. 20,000/-and above, we are of the opinion, no prejudice would becaused to Revenue if an opportunity is given to theappellant- assessee to explain such transactions which are I.T. Appeal No. 19 of 2014 -: 6 :- I.T. Appeal No. 19 of 2014 -: 6 :- Rs. 20,000/- and above. After giving an opportunity to theappellant assessee, the Assessing Officer shall proceed withthe matter and decide controversial issue either acceptingor rejecting the explanation depending upon the nature ofexplanation. Accordingly, the appeal is disposed of. Sd/- Manjula Chellur, Chief Justice. Sd/- A.M. Shaffique, Judge. Tds/ [True copy] P.S. to Judge.