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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 12TH DAY OF AUGUST 2021 / 21ST SRAVANA, 1943 ITA NO. 226 OF 2015 AGAINST THE COMMON ORDER DATED 17.10.2014 IN ITA 184/2014 OF I.T.A.TRIBUNAL, COCHIN BENCH, ERNAKULAM APPELLANT/ APPELLANT : M/S.GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD., 34/659-P,CIVIL LINE ROAD, PADIVATTOM, KOCHI-682 024, (PAN AABCG 193E), REPRESENTED BY ITS MANAGING DIRECTOR, MR.C.J.GEORGE BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.BINU MATHEW SRI.ISAAC THOMAS SRI.NOBY THOMAS CYRIAC SRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/ RESPONDENT : THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, ERNAKULAM, KOCHI-682 018 BY ADV.JOSE JOSEPH,SC, INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 12.08.2021, ALONG WITH ITA.244/2015, 265/2015 AND 266 OF 2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA.NO. 226 of 2015 & connected cases 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 12TH DAY OF AUGUST 2021 / 21ST SRAVANA, 1943 ITA NO. 244 OF 2015 AGAINST THE COMMON ORDER DATED 17.10.2014 IN ITA 216/2014 OF I.T.A.TRIBUNAL, COCHIN BENCH, ERNAKULAM APPELLANT/ RESPONDENT : M/S.GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD., 34/659-P, CIVIL LINE ROAD, PADIVATTOM, KOCHI-682 024. (PAN - AABCG 1935E), REPRESENTED BY ITS MANAGING DIRECTOR, MR.C.J.GEORGE. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.BINU MATHEW SRI.ISAAC THOMAS SRI.NOBY THOMAS CYRIAC SRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/ APPELLANT : THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, ERNAKULAM-682 018. BY ADV.SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 12.08.2021, ALONG WITH ITA.226/2015 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA.NO. 226 of 2015 & connected cases 3 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 12TH DAY OF AUGUST 2021 / 21ST SRAVANA, 1943 ITA NO. 265 OF 2015 AGAINST THE COMMON ORDER DATED 17.10.2014 IN ITA 217/2014 OF I.T.A.TRIBUNAL, COCHIN BENCH, ERNAKULAM APPELLANT/ RESPONDENT : M/S.GEOJIT BNP PARIBAS FINANCIAL SERVICE LTD., 34/659-P, CIVIL LINE ROAD, PADIVATTOM, KOCHI-682 024, (PAN AABCG 1935E), REPRESENTED BY ITS MANAGING DIRECTOR MR.C.J.GEROGE. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.V.SREEHARI SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.BINU MATHEW SRI.ISAAC THOMAS SRI.NOBY THOMAS CYRIAC SRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/ APPELLANT : THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-I, ERNAKULAM, KOCHI - 682 018. BY ADV.SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 12.08.2021, ALONG WITH ITA.226/2015 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA.NO. 226 of 2015 & connected cases 4 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 12TH DAY OF AUGUST 2021 / 21ST SRAVANA, 1943 ITA NO. 266 OF 2015 AGAINST THE COMMON ORDER DATED 17.10.2014 IN ITA 185/2014 OF I.T.A.TRIBUNAL, COCHIN BENCH, ERNAKULAM APPELLANT/ APPELLANT : M/S.GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD., 34/659-P, CIVIL LINE ROAD, PADIVATTOM, KOCHI - 682 024 (PAN AABCG 1935E) REPRESENTED BY ITS MANAGING DIRECTOR MR.C.J.GEORGE. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.BINU MATHEW SRI.ISAAC THOMAS SRI.NOBY THOMAS CYRIAC SRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/ RESPONDENT : THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE - 1, ERNAKULAM - 682 018. BY ADV.SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 12.08.2021, ALONG WITH ITA.226/2015 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA.NO. 226 of 2015 & connected cases 5 JUDGMENT [ITA Nos.226/2015, 244/2015, 265/2015, 266/2015] Dated this the 12th day of August, 2021 Bechu Kurian Thomas, J. These four appeals by the assessee challenge a common order of remand passed by the Income Tax Appellate Tribunal, Cochin. Of the four appeals before the Tribunal, two were filed by the assessee and two were filed by the Department. All four appeals were allowed and remanded to the assessing authority. One set of appeals arise from orders of penalty issued under section 271D of the Income Tax Act, while the other set arise from orders of penalty issued under section 271E of the Income Tax Act. 2. The assessing officer, during the course of assessment for the year 2008-09, noticed that the assessee had accepted Rs.10,85,000/- as commission from various persons apart from other sums aggregating to Rs.25.50 Crores from a sister concern. Alleging the acceptance of the aforesaid sums as otherwise than through account payee cheques or the clearing system through the bank, the assessing officer imposed a penalty under Section 271D of the Income Tax Act, 1961 (for short ‘the Act’). A penalty of Rs.3,70,000/- and a penalty of Rs.5,15,87,000/-
ITA.NO. 226 of 2015 & connected cases 6 were imposed under the said Section. Since the incentives amounting to Rs.11,47,655/- and loan repayment of Rs.25.50 Crores were allegedly paid by the assessee to its sister concern, otherwise than through bank accounts, further penalties of Rs. 2,36,165/- and Rs.5,10,0000/- under Section 271E of the Act were also imposed on the assessee. 3. The assessee challenged the imposition of penalties before the First Appellate Authority through two appeals as ITA.No.18/2011-12 and ITA.No.19/2011-12. The First Appellate Authority, by two separate orders, interfered with the levy of penalty of 5.15 Crores, Rs.5.10 Crores imposed under Section 271D and Section 271E of the Act but confirmed the levy of Rs.3.7 lakhs under Section 271D and the levy of Rs.2.36 lakhs under Section 271E of the Act. Against the order of First Appellate Authority, assessee preferred two appeals as ITA.No.184 of 2014 and ITA.No.185 of 2014. The department also preferred two appeals as ITA.No.216 of 2014 and ITA.No.217 of 2014. The Tribunal after taking note of the circumstances, allowed all the appeals and remitted the issue back to the assessing officer for fresh consideration. Thus, the assessee has preferred these four appeals against the common order of the Tribunal.
The questions of law raised in all the appeals are
ITA.NO. 226 of 2015 & connected cases 7 identical and the same are extracted as below :- 1. Whether, on the facts and in the circumstances of the case and in the light of the bank confirmation certificates produced, the Appellate Tribunal was right in setting aside the order of the Commissioner (Appeals) and remanding the issue back to the assessing officer? 2. Whether, on the facts and in the circumstances of the case, the direction of the Appellate Tribunal to examine the copies of cheques physically to decide whether the cheques in question are account payee cheque is unreasonable and erroneous? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in confirming the penalty of Rs.3,70,000/- with respect to deposits received by the appellant?
We heard Senior Advocate Joseph Markose instructed by Adv.Sharad Joseph Kodianthara and the Senior Standing Counsel for the respondent.
Two separate orders of penalties are under consideration in these four appeals. One set of penalties was issued under Section 271D of the Act, while the other was under Section 271E of the Act. Each set contained two categories of penalties. Under Section 271D, a penalty of Rs.3.7 lakhs and a penalty of Rs. 5.10 crores were levied. Under Section 271E a penalty of Rs. 2.29 lakhs and Rs. 5.10 Crores were imposed.
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As observed by us earlier, the reason for imposing penalty under Section 271D by the assessing officer was based on a finding that an amount of Rs.10,85,000/- and Rs.25.5 Crores were received by the assessee otherwise than through account payee cheques. According to the assessee, the loan was received through cheques and the cheque numbers were also given. Further, assessee had produced a certificate of confirmation from the Bank before the First Appellate Authority in support of the contention. Relying upon the cheque numbers and the ledger folio number available with the assessing officer, the First Appellate Authority allowed the assessee’s appeal against the imposition of penalty under Section 271D of the Act.
Similarly, the reason for imposing penalty under Section 271E by the assessing officer was that an amount of Rs.11,47,655/- and Rs.25.5 Crores were paid by the assessee otherwise than through account payee cheques.
In the second appeal preferred by both the assessee as well as the department, the Tribunal remanded all the appeals to the assessing authority. The Tribunal decided to remand the cases to the assessing authority, after finding that the First Appellate Authority had accepted evidence without receiving a remand report from the assessing officer as per Rule 46A of the Income Tax Rules.
ITA.NO. 226 of 2015 & connected cases 9 While remanding the case, the assessing officer was directed to conduct necessary enquiries and also permitted the assessee to produce necessary evidence in support of its claim. 10. The First Appellate Authority allowed the appeal relying upon certain documents like the certificate issued by the Bank contrary to rule 46A. The assessing officer was not confronted with the document produced at the appellate stage by the assessee. The Tribunal has only remanded the matter for fresh consideration and has given opportunity to the assessee to bring in evidence also. The assessee cannot be said to be prejudiced on account of the remand to the assessing officer. In such circumstances, we are of the view that the Tribunal was justified in remitting the matter to the assessing authority.
However, while remanding the case, the Tribunal made certain observations, which, according to the learned Senior Counsel causes prejudices to the assessee. The learned Counsel invited our attention specifically to the observations in paragraph 10 of the order passed by the Tribunal that “Without examining the copy of cheques physically, she deleted the penalty which is not proper” and the further observation that “ ….if the assessee fails to produce the necessary evidence the assessing officer is at liberty to take adverse inference…”. It was submitted that such observations
ITA.NO. 226 of 2015 & connected cases 10 were uncalled for and can have adverse effect upon the assessee while considering the matter after remand. 12. On an appreciation of the circumstances of the case and the purpose for which the matter is remanded, we find force in the contention of the learned Senior Counsel. The observations of the Tribunal, especially those extracted in the earlier paragraph may have the effect of serving as a guiding factor or as a controlling observation over the discretion of the assessing authority while it comes to the conclusion regarding the nature of transactions. The assessee apprehends that the observations may denude the assessing officer of any discretion, especially since at this distance of time, making the cheques physically available for examination may be next to impossible especially since the cheques had been handed over to the Banks. The apprehension is not unfounded. 13. For the purpose of entering into a conclusion on the veracity of the claim of the assessee that the transactions in question were through Bank accounts, different modes of proof would be available. Physical examination of the cheque alone is not the only method. Direct, indirect or circumstantial evidence can be adduced to satisfy the assessing authority while coming to the conclusion on the issue remanded to it. In the aforesaid
ITA.NO. 226 of 2015 & connected cases 11 circumstances, we are of the firm view that the observations of the Tribunal restricting the option of the assessing authority to physical examination of the cheques in question can cause prejudice to the assessee. 14 In the above circumstances, while we affirm the order of remand in all these cases to the assessing authority, we clarify that the assessing authority will consider and pass orders untrammelled by the observations in the order of the Tribunal and will be free to accept evidence of any legally acceptable nature produced by the assessee in support of its claim. In the result, we answer the first question against the assessee and the second question in favour of the assessee. The third question does not arise for consideration in the appeal as the appeals have been remitted in full to the assessing officer. The appeals are therefore allowed as above. Sd/- S.V.BHATTI, JUDGE
Sd/- BECHU KURIAN THOMAS, JUDGE RKM
ITA.NO. 226 of 2015 & connected cases 12 APPENDIX OF ITA 226/2015 PETITIONER'S ANNEXURES : ANNEXURE-A TRUE COPY OF THE PENALTY ORDER DATED 29.6.2011 ISSUED BY THE RESPONDENT UNDER SECTION 271D ANNEXURE-B TRUE COPY OF THE APPELLATE ORDER DATED 19.12.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, KOCHI ANNEXURE-C TRUE COPY OF APPEAL ITA NO184/COCH/2014 DATED APRIL,2014 FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE-D TRUE COPY OF THE APPEAL ITA NO.216/COCH/2014 DATED 10.6.2014 FILED BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE-E CERTIFIED COPY OF HE IMPUGNED ORDER DATED 17/10/2014 OF THE INCOME TAX APPELLATE TRIBUNAL, KOCH BENCH
ITA.NO. 226 of 2015 & connected cases 13 APPENDIX OF ITA 244/2015 PETITIONER'S ANNEXURES : ANNEXURE A TRUE COPY OF PENALTY ORDER DATED 29.06.2011 ISSUED BY THE RESPONDENT UNDER SECTION 271D ANNEXURE B TRUE COPY OF APPELLATE ORDER DATED 19.12.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, KOCHI ANNEXURE C TRUE COPY OF APPEAL ITA NO.184/COCH/2014 DATED APRIL, 2014 FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE D TRUE COPY OF APPEAL ITA NO.216/COCH/2014 DATED 10.06.2014 FILED BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE E TRUE COPY OF THE IMPUGNED ORDER DATED 17.10.2014 OF THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH
ITA.NO. 226 of 2015 & connected cases 14 APPENDIX OF ITA 265/2015 PETITIONER'S ANNEXURES : ANNEXURE A TRUE COPY OF PENALTY ORDER DATED 29.06.2011 ISSUED BY THE RESPONDENT UNDER SECTION 271E ANNEXURE B TRUE COPY OF APPELLATE ORDER DATED 19.12.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, KOCHI ANNEXURE C TRUE COPY OF APPEAL ITA NO.185/COCH/2014 DATED APRIL, 2014 FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE D TRUE COPY OF APPEAL ITA NO.217/COCH/2014 DATED 10.06.2014 FILED BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE E TRUE COPY OF THE IMPUGNED ORDER DATED 17.10.2014 OF THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH
ITA.NO. 226 of 2015 & connected cases 15 APPENDIX OF ITA 266/2015 PETITIONER'S ANNEXURES : ANNEXURE A TRUE COPY OF PENALTY ORDER DATED 29.06.2011 ISSUED BY THE RESPONDENT UNDER SECTION 271E ANNEXURE B TRUE COPY OF APPELLATE ORDER DATED 19.12.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, KOCHI ANNEXURE C TRUE COPY OF APPEAL ITA NO.185/COCH/2014 DATED APRIL, 2014 FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE D TRUE COPY OF APPEAL ITA NO.217/COCH/2014 DATED 10.06.2014 FILED BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH ANNEXURE E TRUE COPY OF THE IMPUGNED ORDER DATED 17.10.2014 OF THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH
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