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2015 (11) TMI 535 - ITAT VISAKHAPATNAM

2015 (11) TMI 535 - ITAT VISAKHAPATNAM - TMI - Penalty u/s 271D and 271E - violation u/s 269SS&T - Held that:- The assessee is into the business of fertilizer in a remote place i.e. Jeelakarragudem. The explanation of the assessee is that funds are borrowed for the purpose of business necessity and borrowed funds are kept in the bank. So far as usage of the funds are concerned, it is the assessee who has to decide it has to be withdrawn immediately or thereafter according to the business necessi .....

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lso in the way of cheque. It depends upon the business necessity of the assessee, the assessee has to take a decision. The authorities below admitted that he is into the business of fertilizer and carrying his business in a remote village. There is nothing on record to disbelieve the explanation given by the assessee. In so far as usage of the funds are concerned, it is left to the assessee to decide to use the funds according to the business necessities/demands. In view of the above facts and c .....

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L MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri K. Gopalakrishna, DR ORDER PER V. DURGA RAO, Judicial Member: These appeals are directed against the order of CIT(A), Visakhapatnam dated 24.2.2012 relating to the assessment year 2004- 05. Both the appeals are heard together and for the sake of convenience common order is passed. 2. Facts are in brief that the assessee is a proprietor of M/s. Ramakrishna Traders, Jeelakarragudem .....

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Date of repayment Amount repaid M. Naveen 29.08.2003 40,000/- 09.03.2004 90,000/- M. Sindhuja 29.08.2003 35,000/- 09.03.2004 85,000/- M. Surya Prabha 29.08.2003 34,869/- 09.03.2004 84,869/- TOTAL 1,09,869/- 2,59,869/- 3. From the above, the A.O. came to a conclusion that assessee has violated the provisions of section 269SS & 269T of the Act liable for penalty u/s 271D&E referred the matter to the Addl. CIT Eluru Range and the Ld. Addl. CIT has issued a show cause notice to the assessee .....

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he has observed that the assessee is having a bank account in Hyderabad and the lenders also having a bank account in Hyderabad. The assessee could have been accepted cheque from the lenders as well as repaid through the cheque. The assessee also failed to explain reasonable cause to borrow the funds as well as repaid the funds for the purpose of business necessity. With the above observation, the Ld. Addl. Commissioner has imposed a penalty u/s 271D of the Act as well as 271E of the Act. The as .....

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rawal of money was only on 20.10.2003 i.e. after one month and 22 days. On the basis of above observation, the Ld. CIT(A) came to the conclusion that there is no reasonable cause for the assessee to accept loans in cash and representing in cash and confirm the order of the A.O. On being aggrieved, assessee carried the matter before the Tribunal. 4. The Ld. Counsel for the assessee has submitted that the assessee is in the business of sale of fertilizer which is an unorganized sector, deals with .....

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d u/s 271D&E of the Act. When the assessee is able to substantiate that the funds borrowed and repaid for the purpose of business, the question of violation u/s 269SS & 269T of the Act does not arise and consequent to that no penalty u/s 271D&E of the Act can be levied. He relied on the decision of the CIT Vs. Maa Khodiyar Construction 365 ITR 0474 (Guj.) and submitted that penalty may be deleted. 5. On the other hand, the Ld. D.R. has submitted that it is a clear case of violation u .....

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one through the orders of the authorities below. The assessee is in the business of fertilizer carrying in a remote village i.e. Jeelakarragudem. The assessee has borrowed certain funds from three persons and repaid the amounts as follows: Name of the person Date of acceptance Amount accepted Date of repayment Amount repaid M. Naveen 29.08.2003 40,000/- 09.03.2004 90,000/- M. Sindhuja 29.08.2003 35,000/- 09.03.2004 85,000/- M. Surya Prabha 29.08.2003 34,869/- 09.03.2004 84,869/- TOTAL 1,09,869/- .....

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zed the funds after 52 days. Therefore, there is no business necessity for him to borrow the funds and repaid the same imposed a penalty u/s 271D&E of the Act. In appeal, the Commissioner has confirmed the same. 8. After careful consideration of the orders of the authorities below, we find that the assessee is into the business of fertilizer in a remote place i.e. Jeelakarragudem. The explanation of the assessee is that funds are borrowed for the purpose of business necessity and borrowed fu .....

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s having a bank account in Hyderabad. However, simply because he is having a bank account at Hyderabad, it cannot be said that he has to borrow the funds in the way of cheque or repayment also in the way of cheque. It depends upon the business necessity of the assessee, the assessee has to take a decision. The authorities below admitted that he is into the business of fertilizer and carrying his business in a remote village. There is nothing on record to disbelieve the explanation given by the a .....

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he Act. Therefore, consequently no penalty u/s 271D&E of the Act can be imposed. So far as case laws relied by the Ld. Counsel for the assessee is concerned in the case of Maa Khodiyar Construction Ltd. (supra), the Hon ble Gujarat High Court has observed as under: Transactions reflected in the accounts of the assessee and the advancement of loan to the assessee had been reflected in the books of accounts of those persons from whom the loans had been received, the identity of those persons h .....

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ese transactions were not between the agriculturists having only agricultural income. Not liable to tax which have exempted from such regor of law and yet, the cause advanced is then found to be sufficient reasonable and no interference could be desirable. Penalty will not ordinarily be imposed unless the party observed either acted deliberately or deficient of law or was guilty of conduct contumacious or dishonest or acting in conscious disregard to its application. Even if minimum penalty is p .....

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order of the Tribunal has observed as under: While affirming the said order and holding that the assessee has been able to prove that there was a reasonable cause for receiving the money in cash, the Tribunal has held as follows: Further, we find that there was a reasonable cause because the assessee was going to be directly benefited if the cheques issued to Hindustan Engg. Products are cleared in time, as there was a discount at 2 per cent for cash payment against the bills. The cheques issued .....

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t bank balance with the assessee. The amounts were prepaid through account payee cheques, this is an undisputed fact. We further noted that bona fide intention of the assessee has already been proved because the Assessing Officer has made additions under section 68 by rejecting the explanation of the assessee in regard to the genuineness of these loans. The Commissioner of Income-tax (Appeals) confirmed the additions. However, all these additions were deleted by the Tribunal vide its order dated .....

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licable on the facts of the present case. Therefore, in view of these facts and circumstances, we hold that penalty levied and confirmed by the Commissioner of Incometax (Appeals) was not justified. Accordingly, we delete the same. The afore-extracted portion of the Tribunal s order shows that the conclusion of the Tribunal that there was a reasonable cause in not strictly complying with the provisions of section 269SS of the Act is based on relevant factors. We find it difficult to hold that th .....

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e Delhi High Court in the case of CIT Vs. Paramananda (supra) has observed as under: Whether, in the facts and under the circumstances of the case, the Appellate Tribunal was right in holding that penalty under sections 271D and 271E cannot be imposed for violation of sections 269SS and 269T? A similar question arose before the Delhi High Couirt and while answering the question by its judgement reported in CIT V. Parma Nand [2004] 266 ITR 255, after extracting the relevant portions from the orde .....

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