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Income Tax Appellate Tribunal, “A”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Dr. A.L. Saini, AM:
The captioned appeal filed by the assessee, pertaining to assessment year 2011-12, is directed against the order passed by the Commissioner of Income Tax (Appeal)-25, Kolkata, in appeal no. 243/CIT(A)-25/Kol/2018-19, which in turn arises out of a penalty order passed by the Assessing Officer u/s 271E of the Income Tax Act, 1961 (in short the “Act”) dated 29.09.2014.
Vivekananda Seva Kendra O SishuUddyan ITA No.2595/Kol/2018 Assessment Year:2011-12 2. At the time of hearing none appeared on behalf of assessee in spite of issuance of notice for hearing more than one occasion and Ld. Departmental Representative(DR), was present for the Revenue. In the absence of any appearance by the assessee, the appeal is being disposed of ex parte qua the assessee, after hearing Ld. DR for the Revenue on merits in terms of Rule 24 of the Income Tax Appellate, Tribunal, Rules, 1963.
Although in this appeal, the assessee has raised a multiple grounds of appeal but at the time of hearing, the solitary grievance of the assessee was that the penalty u/s 271E amounting to Rs. 3,75,000/- imposed by the Assessing Officer is bad in law.
Brief facts qua the issue are that in assessee`s case the assessment was completed u/s 143(3) / 11 of the Act on 11.03.2014, at a total income of Rs. 27,91,960/-. During the course of assessment proceedings it was found by AO that the assessee had made repayment of unsecured loan of Rs. 3,75,000/- to village welfare society in cash. The said fact was also certified by the Auditor at clause 24 (Annexure-VI) of the relevant Tax Audit Report (TAR). Such activities of the assessee lead to initiation of penalty u/s 271E of the Act for contravention of provision of section 269T. These violation was brought to the notice of the assessee vide letter dt. 22/03/2014 issued by the Assessing Officer.
In response, the assessee’s authorized representative, Shri Indranil Banerjee appeared on 19.09.2014 and submitted a written submission. However, Assessing Officer rejected the contention of the assessee and imposed penalty of Rs. 3,75,000/- u/s 271E of the Act.
Vivekananda Seva Kendra O SishuUddyan ITA No.2595/Kol/2018 Assessment Year:2011-12 5. Aggrieved by the order of the penalty imposed by the Assessing Officer , the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the penalty imposed by the Assessing Officer.
Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
The ld. Counsel for the assessee has relied on the submissions made before the authorities below and on the other hand the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
We have heard ld. D.R. for the Revenue and perused the material available on record. We note that the assessee is a society registered under Societies Registration Act, 1860 as well as approved as a charitable Institution u/s 12A/12AA of the Act. It files its return of income in the prescribed form, with the prescribed annexure. The return of income of assessee in relation to A.Y. 2011-12 has been subjected to scrutiny assessment u/s. 143(3) of the Act. During the previous year ended 31.03.2011 it had paid a sum of Rs. 375000/- to M/s. Village Welfare Society, constituting a repayment of loan it had taken earlier to meet the financial needs, towards the fulfillment of its object. The entire loan transaction had been duly recorded in the books of account and had been accepted as genuine by the Ld. AO. The repayment is made in 5 equal installments of Rs. 75000/- each, and had been effected by way of Bank transfer through Axis Bank, A/c. No. 236010100020563 belonging to the lender. Subsequent to the completion of assessment on 11.03.2014, penalty proceeding u/s. 271E had been initiated by the Ld. JDIT(E )- Kolkata after taking a prima-facie view that the above mode of loan repayment had resulted in the violation of the prescribed modes, u/s 269T of the Act. Appropriate explanation had been furnished by the assessee to the Ld. JDIT(E ), Kolkata highlighting the following evidences:
(a) the proof of veracity of loan in course of assessment proceeding. (b) the activity of the appellant being the charitable one Page | 3
Vivekananda Seva Kendra O SishuUddyan ITA No.2595/Kol/2018 Assessment Year:2011-12 (c ) the use of the banking channel for repayment to ensure all transparency (d) the incorporation of RTGS/Bank transfer modes as the recognized ones in the current Finance Act, (e) insistence of the lender to this effect (f) the very purpose of specification of mode vis-a-vis prevention of black money circulation etc.
It was accordingly urged that there being lawful compliance and no violation as such, no penalty u/s. 271E be imposed. Since the assessee made payment through RTGS/Bank transfer modes therefore, penalty u/s 271E should be deleted.
During the appellate proceedings, the assessee filed written submission before ld. CIT(A) which is relevant here and the same is being reproduced below:
“During the previous year ended 31.03.2011, it had paid a sum of Rs. 2,75,000/- to M/s Village Welfare Society (VWS) constituting a repayment of loan it had taken earlier to meet the financial needs, towards the fulfillment of its objects. The details are available by a detailed chart, the entire loan transaction including with the above noted render, had been duly recorded in the books of account and had been accepted as genuine by the Ld. AO. The repayment made in five equal installment of Rs. 75000/- each, had been effected by way of Bank transfer, through Axis Bank, A/c No. 236010100020563 belonging to the above render. As evidence the five corresponding Bank Deposit Slips of Axis Bank Diamond Harbour Branch evidencing the direct deposit to the credit of Village Welfare Society (VWS) are being enclosed, vide Ex. 3A to 3E. The said mode of repayment had to be compiled with solely at the direction of the said lender, vide their letter dated 16.10.2010. (Ex. 4) Subsequent to the completion of assessment on 11.03.2014 penalty proceeding u/s. 271E had been initiated by the Ld. JDIT(E ), Kolkata after taking a prima facie view that the above loan repayment had resulted in the violation of the prescribed modes, u/s. 269T.Appropriate explanation had been furnished to the Ld. JDIT(E ), Kolkata underscoring (a) the proof of veracity of the loan as well as utilization, in course of Assessment proceeding (b) the activity of the appellant being the charitable one, (c) the use of the banking channel for repayment to ensure all transparency (d) the incorporation of RTGS/Bank Transfer modes as the recognized ones in the Current Finance Act, (e ) insistence of the lender to this effect and lastly (f) the very purpose of specification of mode vis-a-vis prevention of black money circulation etc. It was accordingly urged that there being lawful compliance and no violation as such, no penalty u/s. 271E be imposed. However, the Ld. JDIT(E ), Kolkata after taking a superficial and prejudice view with regard to the points highlighted in the above submission, be means of a non-speaking order simply Page | 4
Vivekananda Seva Kendra O SishuUddyan ITA No.2595/Kol/2018 Assessment Year:2011-12 impose penalty of Rs. 375000/- being the amount of loan so repaid u/s. 271E.So, it is on record that the repayment had been made solely by means of banking channel (Ex. 3A to 3E) in order to ensure and fulfill necessary verifiability. You may kindly appreciate just like account payee mode this mode, being equivalent thereto, equally facilitates tracking the flow of money unlike cash transactions. The Govt. of India has recognized that with the banking industry introducing better and more efficient modes of fund transfer in terms of promptness and transparency, there had arisen a need to keep pace with the same. It has accordingly recognized the modes of RTGS, NEFT, EFT, ECS as equally eligible and legitimate modes besides the conventional account payee mode in section 269SS/269T vide Finance Act, 2014. The following preamble will make it self- explanatory."These days banking system offers a variety of electronic payment systems such as RTGS, NEFT, EFT, ECS etc. However only the term 'Account payee cheque' find places in various provisions of IT Act, i.e. sections 40A(3), 269SS/269T. Thus, we recommended that the Finance Bill, 2014 should recognize RTGS, NEFT etc. as valid mode of payment to end any disagreement between taxpayers and AO.The Finance Bill 2014 has accommodated his suggestion by permitting that RTGS, NEFT, EFT, ECS are to be considered as adequate compliance of the provisions. This amendment was long overdue and at least now has been recognized and accepted by the lawmakers.The introduction though inserted subsequently recognizes the availability of the parallel modes of above sort besides account mode. Accordingly, the assessee had never violated the prescribed mode. It had the bona fide belief that directing all loan transactions through banking channels will be view favourably by the Tax Authorities, besides a specific direction from the lender on whom it depended heavily for necessary fund availability.In the Assessment the genuinely of loan transaction had been fully appreciated and therefore there had been no adverse eventuality as to its identify. It is worth appreciating that the very purpose of section 269SS/269T had been to curb the circulation and the evils effects of its multiplying growing manifold. It is evident from the circular no. 387 which reads as under:
Circular No. 387 dated 06.07.1984 on the subject in which it was provided that new section 269SS has been inserted in the Act with a view to counter the device of unaccounted money brought into books of account in the form of loans and deposits in order to explain the deposits. Therefore, by the new provisions such persons are debarred from taking or accepting any loan or deposit. The tribunal therefore opined that the above provisions was introduced to eliminate a proliferation of black money in the society at large and not otherwise. Accordingly keeping in view of theabove circular in the following and many other cases the genuine loan transaction not exactly adhering to the prescribed mode had been provided exoneration from penal consequence. We rely on the judgment of various Hon’ble High Courts in the case of CIT vs. Makhija Construction 257 ITR 8 (MP), CIT vs. Maheswari Nirman Udyog 302 ITR 201 (Rajasthan), CIT vs. Preeti Fuels and Flames (P) Ltd. 330 ITR 129 (Chattisgarh), even in the case of Sharda Educational Trust vs. Assistant CIT (2006) 99 TTJ Agra 212 on having found the loans genuine and fully used for the charitable purposes. Penalty in relation to loan transactions had been deleted. Lastly the repayment having been made through bank deposits and also at the behest of the lender there had existed extenuating and compelling circumstances for resorting to such mode. Section 273B provides that no penalty u/ s 271E could be levied if some reasonable cause is substantiated.”
Vivekananda Seva Kendra O SishuUddyan ITA No.2595/Kol/2018 Assessment Year:2011-12
We note that assessee made repayment of loan in five equal installments of Rs. 75,000/- each by way of Bank Transfer through Axis Bank Account No. 236010100020563 belonging to the lender. It is a recognized mode of payment recommended by Finance Bill, 2014, hence we delete the penalty of Rs. 3,75,000/- .
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 20.03.2020
Sd/- Sd/- (S.S.GODARA) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक/ Date: 20/03/2020 (SB, Sr.PS)
Copy of the order forwarded to: 1. Vivekananda Seva Kendra O Sishu Uddyan 2. JDIT, Exemption, Kolkata 3. C.I.T(A)- 4. C.I.T.- Kolkata. 5. CIT(DR), KolkataBenches, Kolkata. 6. Guard File.