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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI PAVAN KUMAR GADALE
O R D E R Per Shri A.K. Garodia, Accountant Member These appeals are filed by the assessee and these are directed against two separate orders of ld. CIT(A)-2, Bangalore both dated 31.01.2017 for Assessment Year 2010-11. In one appeal, the issue involved is regarding quantum addition and in the second appeal, the issue involved is about penalty u/s. 271D. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
First we take up the quantum appeal in ITA No. 780/Bang/2017. The grounds raised
by assessee in this appeal are as under. “1. The learned Commissioner of Income-tax (A) erred in upholding the additions of (Rs.6,00,000/- + Rs.2,00,000/-) = Rs.8,00,000/- under the provisions of Sec.68 of the Act.
2. The learned Commissioner (A) ought to have accepted the explanation offered by the appellant and refrained from upholding the impugned additions.
3. The learned Commissioner (A) ought to have appreciated that the provisions of Sec.68 of the Act were not applicable and accordingly the additions as made are opposed to law and liable to be deleted.
4. The learned Commissioner (A) ought to have appreciated that there was no entries in the books of accounts of the appellant with regard to & 781/Bang/2017 Page 2 of 7 the alleged receipt of part consideration from Mr.Debashish Sheel to the tune of Rs.6 lakhs and Rs.2 lakhs from Mr.Abida Sayed and Mrs. Nishad Begum Shah to justify the application of Sec.68 of the Act.
5. The learned Commissioner (A) ought to have appreciated that the appellant having denied the receipts and there being no examination of the payers of the amounts, the impugned additions as made on the unsigned documents was opposed to law and accordingly the impugned additions are liable to be deleted.
6. Without prejudice, the additions are excessive, arbitrary and unreasonable and liable to be deleted in toto.
7. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
3. It was submitted by ld. AR of assessee that copy of agreement to sale in favour of Debashish Sheel dated 31.07.2009 is available on pages 31 to 36 of the paper book. The second agreement with Shri Abid Sayed and Mrs. Nishad Begum Shah dated 28.07.2009 is available on pages 37 to 42 of the paper book. Thereafter it was submitted that on page no. 3 of the first agreement, it is noted that buyer Debashish Sheel has paid a sum of Rs. 6 Lakhs by way of cash to the vendor i.e. the present assessee M/s. DRA Projects Pvt. Ltd. Similarly, in para 2 of the second agreement available on page no. 39 of the paper book, it is stated that the purchaser have agreed to pay total sale consideration of Rs. 185 Lakhs and has paid a sum of Rs. 2 Lakhs by way of cash to the vendor as the advance amount towards the sale consideration. Thereafter it was submitted that both these agreements are although signed by the representative of the assessee company represented the Director Mr. Dinesh Ranka but in none of these two agreements, the purchaser Shri Debashish Sheel and Shri Abid Sayed has signed. It was the main submission of ld. AR of assessee that both these agreements were never executed and the amount of cash noted in these two agreements were never received by the assessee and therefore, the addition made by the AO is not justified. It was also submitted by ld. AR of assessee that this issue was discussed and decided by ld. CIT(A) as per para nos. 4 to 4.5 of his order and the basis of the decision of ld. CIT(A) is this that the assessee is unable to show that the said agreements were not entered into either at the time of assessment or during the course of appeal. It was further submitted that it is further noted by ld. CIT(A) that the mere claim that the payer has not signed & 781/Bang/2017 Page 3 of 7 and therefore, the said agreements are not complete cannot be accepted because the said agreements were found in the possession of the assessee who has already signed as having received the amounts mentioned. He submitted that under these facts, the order of AO and ld. CIT(A) should be set aside and this addition should be deleted. Our attention was also drawn to the copy of letter dated 24.01.2013 submitted before the AO, copy available on pages 1 to 6 of the paper book and in particular our attention was drawn to page no. 6 of the paper book and it was pointed out that these two properties in question were sold in Assessment Year 2011-12 to a different buyer and the profit was declared in that year. Our attention was also drawn to pages 29 and 30 of the paper book which contain the copy of ledger account of Site No. 24 and Site No. 19 sold for Rs. 1,09,10,735/- and Rs. 76,23,440/- respectively in Financial Year 2010-11 relevant to Assessment Year 2011-12. Reliance was placed on two judicial pronouncements. a) PCIT Vs. Talwalkars Fitness Club, (2018) 409 ITR 37 (Bom) b) CIT Vs. Kulwant Rai, (2007) 291 ITR 36 (High Court of Delhi). The ld. DR of revenue supported the orders of authorities below.
4. We have considered the rival submissions. First of all, we find that the whole allegation is on the basis of these two agreements in question which are available on pages 31 to 36 and 37 to 42 of the paper book. This is true that in both these agreements, it is stated that an amount of Rs. 6 Lakhs and Rs. 2 Lakhs respectively was paid by the two buyers to the present assessee in cash but this is also true that these two agreements are although signed by the Director of the assessee company, these are not signed by the buyers. The department is asking the assessee to establish that the agreements were not executed which is the claim of the assessee. Merely because a proposed agreement was kept ready after typing and signature of the Director of the assessee company, it cannot be said that the agreement was executed and all the contents of such agreement were actually done when the agreements in question were admittedly not signed by the respective buyers. The complete name and address of both these buyers are available in those agreements to sale and if the AO wanted to establish that the agreements were in fact executed and the amount was paid by the respective buyers to assessee in cash, he could have examined these buyers ITA Nos. 780 & 781/Bang/2017 Page 4 of 7 but this is not done by the AO. In fact, even no effort was made by the AO to do so. On page no. 7 of the assessment order, the AO has reproduced the letter of the assessee dated 24.01.2013 in which it is stated by the assessee that this document is a copy of draft agreement to sale dated 31.07.2009 between assessee company and Mr. Debashish Sheel which was not executed and it was also submitted before the AO that the agreement was not signed and stamp duty was also not paid. It was also submitted that payment of Rs. 6 Lakhs was not received and therefore, addition of Rs. 6 Lakhs is not maintainable. In para 5.6 of the assessment order on the same page, the AO has stated that the contention of the assessee is not acceptable because it is clearly noted from the impounded material that the assessee company has agreed to sell 6,101 sft of the plot to one Mr. Debashish Sheel for an amount of Rs. 61,86,300/- and the assessee has also received a part consideration of Rs. 6 Lakhs in cash. This agreement regarding Site No. 19 of Smilee Anandavana Project and the second agreement of advance of Rs. 2 Lakhs is regarding Plot No. 24 of Smilee Anandavanam and as per details available on pages 29 and 30 of the paper book, these two sites being Site No. 24 of Smilee Ananda Vana project was sold for Rs. 1,09,10,735/- in Financial Year 2010-11 and Site No. 19, Smilee Ananda Vana was sold in Financial Year 2010-11 for a sum of Rs. 76,23,440/-. Income on these two sales were offered to tax in that year whereas as per the earlier agreements in question, the consideration was of Rs. 61,86,300/- for Site No. 19 and Rs. 185 Lakhs for Site No.
Considering the facts of present case in its entirety, we are of the considered opinion that the addition made by the AO on the basis of the two draft agreements is not justified in the facts of present case. Hence, we delete this addition.
In the result, the appeal filed by the assessee in is allowed.
Now we take up the next appeal filed by the assessee in . The grounds raised
by the assessee in this appeal are as under. “1. The learned Commissioner of Income-tax (Appeals) erred in upholding the levy of penalty u/s.271D of the Act.
2. The learned Commissioner (A) erred in holding that the appellant & 781/Bang/2017 Page 5 of 7 did not offer any plausible explanation without looking into the submissions made along with evidence furnished in the course of hearing and accordingly the order passed was opposed to law and accordingly liable to be set aside.
3. The learned Commissioner (A) ought to have appreciated that the amount received was neither a loan nor deposit and consequently the provisions of Sec.269SS have no application and accordingly the penalty levied u/s.271D of the Act was opposed to law and liable to be deleted.
4. On the facts the learned Commissioner (A) ought to have accepted the explanation offered and refrained from upholding the penalty u/s.271D of the Act.
5. The learned Commissioner (A) ought to have appreciated that the amount received from Sri.Dinesh Ranka was under compelled circumstances and the appellant was prevented by sufficient cause and consequently the penalty as levied u/s.271D of the Act was opposed to law and liable to be deleted.
6. Without prejudice the levy of penalty as confirmed by the learned Commissioner (A) is excessive and arbitrary and liable to be deleted in toto.
7. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
6. Various arguments were made by ld. AR of assessee and main argument was this that section 273B is applicable because reasonable cause was there which are noted in letter dated 21.01.2013 submitted to the AO copy available on pages 3 to 8 of the paper book and in particular, our attention was drawn to para no. 2 of this letter in which it is explained that the Director of the assessee company Mr. Dinesh Ranka was compelled to pay cash on behalf of the company to Suffia Khatooon & Others who in turn paid the same to the occupants / tenants who were occupying the property. This was also submitted that these tenants would not have vacated if the cash was not paid by company and thereby our property would have been litigated for a long time. It is submitted that the relevant cash book for the month of December 2009 is available on page no. 1 of the paper book as per which it is seen that Rs. 4 Lakhs and Rs. 5 Lakhs were received from Dinesh Ranka, Director of the assessee company and the same amount was paid on the same date to Sufia Khatoon & Others. Therefore, there was reasonable cause. Reliance was placed on the judgment of Hon’ble Allahabad High Court rendered in the ITA Nos. 780 & 781/Bang/2017 Page 6 of 7 case of CIT Vs. Dimpal Yadav as reported in (2015) 379 ITR 0177 (All). Reliance was also placed on the judgment of Hon'ble Karnataka High Court rendered in the case of Shri H.S. Ananthasubraya Vs. DCIT in of 2003 dated 09.03.2004 and copy was submitted. Reliance was also placed on another judgment of Hon'ble Karnataka High Court rendered in the case of Pramati Educational & Cultural Trust Vs. Addl. CIT in ITA No. 149 of 2009 dated 28.11.2014, copy submitted. Our attention was drawn to para nos. 9 and 10 of the first judgment of Hon'ble Karnataka High Court and para nos. 7 and 8 of the second judgment of Hon'ble Karnataka High Court. The ld. DR of revenue supported the orders of authorities below.
We have considered the rival submissions. We find that this is admitted position of law as per the provisions of section 273B of the IT Act that if assessee can prove that there was reasonable cause regarding violation of the provisions of section 269SS then penalty cannot be imposed u/s. 271D of the IT Act. Now we are to decide and examine only this aspect as to whether there was reasonable cause which prompted the assessee to accept the loan in cash. In this regard, we find that the reasons in this regard are explained by the assessee before the AO in penalty proceedings that the assessee company was compelled to pay cash on behalf of the assessee company to Suffia Khatooon & Others who in turn paid the same to the occupants / tenants who were occupying the property. It was submitted before the AO that if the cash was not paid by company, the property of the assessee would have been litigated for a long time. It was also submitted that this is only out of compulsion this cash was paid by Shri Dinesh Ranka, Director of the assessee company and the same has been accounted for in the books of the assessee company. This explanation was rejected by the AO simply on this basis that why the assessee company has not paid this amount directly instead of paying it through its Director. The second objection of the AO is this that assessee company has not produced any proof to pay in the form of cash. Hence it is seen that this is not the objection of the AO that the money in question was not paid in cash. Regarding this objection that assessee has not furnished any documentary evidence in support of its claim then this was under compulsion, we are of the considered opinion that for such payments to illegal occupants, there cannot be any evidence. As per the copy of cash & 781/Bang/2017 Page 7 of 7 book available on page no. 1 of the paper book, it is seen that opening balance is Rs. 40,423/- and this payment of Rs. 9 Lakhs was paid out of the money provided by the Director Shri Dinesh Ranka. Hence, this is the fact that no cash was available with the assessee company as per the cash book to make this cash payment and hence. Cash borrowing to make this urgent cash payments appears to be reasonable. Under these facts, we are satisfied that the assessee has been able to establish that there was reasonable cause for accepting this loan in cash and hence, in view of section 273B of the IT Act, we delete the penalty.
In the result, the appeal filed by the assessee is allowed.
In the combined result, both the appeals filed by the assessee are allowed. Order pronounced in the open court on the date mentioned on the caption page.