Akash Education & Development Trust Vs Addl. CIT (ITAT Bangalore)
In the present case, the assessee is a registered society u/s. 12AA of the Act and its income is exempt u/s. 11 of the Act. The assessee in the stage of establishment of educational institution has undertaken the construction activity of building for the purpose of achieving the object of assessee society. In the course of construction of the building, the assessee needed urgent funds to meet the day to day requirement of the In that course of time, the assessee received Rs.15,64,50,000 in cash from the managing trustee viz., Shri K. Muniraju. This happened 8 times in the assessment year under consideration. As seen from the above, it is not a deliberate and intentional violation of the provisions of section 269SS of the Act. Penalty like 271D of the Act will not be imposed unless the party concerned has acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of its obligation and penalty will not be imposed merely because it is lawful to do so. Imposition of penalty for failure to perform statutory obligation is only a discretionary power of the authority exercising judicial functions in consideration of all the relevant circumstances. If the assessee acted on genuine belief that penal provisions have no application to deposits when it is between the trustee and assessee, then penalty could not be levied. In the present case, in our opinion, there exists reasonable cause in accepting loan in cash. Therefore, the assessee is exonerated from levy of penalty.
Further, the term “any other person” in the context of section 269SS appears to mean persons who are not very closely and independently connected with the assessee. In the present case, the assessee accepted loan from its managing trustee, who is looking after the day to day affairs of the present assessee. This being so, the transaction between the assessee and managing trustee cannot be termed as loan so as to apply the provisions of section 269SS of the Act. The transaction between the assessee and managing trustee is in the course of discharge of duty of the managing trustee in the day to day affairs of the assessee trust and when the assessee needed some funds to meet the day to day operation of the construction of the college building, it was facilitated by the managing trustee and assessee is having running account with the managing trustee and the transaction between these two parties cannot be termed as loan transaction so as to levy penalty u/s. 269SS of the Act. More so, the transaction undertaken by the assessee with managing trustee is incidental to attainment of main object of assessee society and in this context, if the assessee has not paid money to the contractors who have undertaken construction of the building, the managing trustee himself is liable for all the consequences of non-payment even bouncing of cheques for insufficient funds and in that view the money advanced by the managing trustee to the assessee to meet the urgent business exigency amounts to reasonable cause within the purview of section 273B of the Act and on this count also, the penalty cannot be levied. Further, the concept of mutuality is primarily based on the principle that one cannot profit from himself. Thus, when the managing trustee provided funds to the society to meet urgent business exigency, it cannot be said that it was a loan transaction so as to attract penalty u/s. 269SS of the Act. Further, as held by the Hyderabad ITAT in the case of Citizen Co-operative Society Ltd. (supra), the term “various persons” and “such other persons” which relates to “such situation” as the section itself was introduced to meet such situation only. Thus, the managing trustee of the society is not covered by the expression “any other persons” occurring in section 269SS or 269T of the Act. The transaction also is attributed to various exigencies relied by the assessee which constitute reasonable cause contemplated by section 273B of the Act.
With respect to assessee’s claim that the transaction in question was neither loan nor deposit because the amount having been received from the trustee, was receipt to oneself, there was no reason for levy of penalty under s. 271D of the Act and that the default, if any, was of technical and venial nature; in the absence of any decision, contrary to the decision relied upon by the counsel for the assessee, such as the decision of Tribunal, Jaipur Bench, in the case of Chandra Cement Ltd., 68 TTJ 35 (Jp), decision of Tribunal Indore Bench in the case of Mohan Karkare (51 TTJ 599 (Indore), decision of Tribunal Ahmedabad Bench in the case of Shrepak Enterprises , 60 TTJ 199 (Ahd) and the decision of Hon’ble Supreme Court in the case of Hindustan Steels Ltd., 83 ITR 26 (SC), we are of the opinion that the assessee’s case is fully covered by the proposition of law, laid down in the aforesaid decisions and consequently, following these decisions, cancel the penalty.
In the totality of facts and circumstances of the case, we, after following the decision relied upon by the counsel, cancel the penalty imposed in this case.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by the assessee is directed against the order dated 16.12.2021 of the CIT(Appeals)-1 1, Bangalore for the assessment year 2016-1 7.
2. The assessee has raised the following grounds:-
“1. The order of the Additional Commissioner of Income Tax is against the fact and circumstances of the case and equity.
2. On the fact and circumstances of the case, under the provision of the law, and under the judicial precedence, the Additional Commissioner of Income Tax erred in levying the penalty u/s 271D(2) of the
Income Tax Act, 1961 as the loan is received from the trustee to the trust, who is controlling the financial affairs of his own and the trust, as such the trustee is not any other person for the applicability of Sec. 269SS of the Income Tax Act, 1961.
3. On the fact and circumstances of the case, the Additional Commissioner of Income Tax erred in levying the penalty u/s 271D(2) of the Income Tax Act, 1961 wherein the transaction between the trustee and the trust has not been doubted during the course of scrutiny assessment and found to be genuine.
4. On the fact and circumstances of the case, the Additional Commissioner of Income Tax erred in levying the penalty u/s 271D(2) of the Income Tax Act, 1961 as the Appellant Trust was under the genuine belief that Sec. 269SS of the Income Tax Act, 1961 is not applicable between the trust and the trustee wherein the trustee is maintaining a running account with the trust which is the reasonable cause u/s 273B of the Income Tax Act, 1961.
5. On the fact and circumstances of the case, under the provision of the law, and under the judicial precedence, the Commissioner of Income Tax (Appeals) erred in upholding the penalty levied u/s 271D(2) of the Income Tax Act, 1961 as the loan is received from the trustee to the trust, who is controlling the financial affairs of his own and the trust, as such the trustee is not any other person for the applicability of Sec. 269SS of the Income Tax Act,
6. For these and other reasons which may be adduced at the time of the hearing, the Appellant prays before this Honourable Bench to delete the penalty levied by the Additional Commissioner of Income Tax u/s 271D of the Income Tax Act, 1961 for substantial cause of justice and equity.
7. The Appellant Trust craves leaves to add, to alter, to amend or to delete any other grounds at the time of the hearing. ”
3. In brief, the facts of this case are that assessment order was passed by the AO vide order dt. 07.12.2018. During assessment proceedings the AO noted that there was violation of provisions of Section 269SS of the Act. So he referred the matter to the Addl. CIT on 20.03.2019. Accordingly, a penalty notice under Section 271 D of the Act was issued by the Addl. CIT requiring the appellant to show cause as to why an order imposing penalty should not be made u/s. 271 D of the Act. Finally, an order under Section 271 D of the Act was passed by the Addl. CIT on 27.09.201 9, imposing a penalty of Rs.15,64,50,000/- on the appellant. The appellant challenges this order of penalty under Section 271 D of the Act.
4. The reason for the imposition of the penalty is that the during the year the appellant had received an amount of Rs 15,64,50,000/- in cash from one of the trustees namely Sh. K Muniraju. The appellant had argued that Sh. Muniraju was acting in two capacities, one as the Managing Trustee of the appellant trust and other in his individual capacity. It was submitted that he was having a running account with the trust and so he used to contribute his own money towards the trust or withdrew it when required by him. During the year he had made total cash deposits of Rs 15,64,50,000/- in the bank account of the appellant trust for the purpose of construction work of medical college and hospital building and it is submitted that the same could not be treated as a loan or deposit to attract the provisions of Section 269SS of the Act. The words `any other person’ in Section 269SS of the Act does not cover the Managing trustee, `any other person’ denotes such persons who are not intimately or closely connected with the assessee. The appellant has relied upon CBDT Circular no. 387 dated 06.09.1984 as well as some case laws viz., CIT v Idhayam Publications 285 ITR 281; CIT v Indore Plastics Pvt Ltd 262 ITR 163; to support its contentions.
5. However these arguments of the appellant did not find favor with the AO. He noted that the appellant had failed to show any urgency or any reasonable cause for accepting cash deposits in the bank account by the Managing trustee. He noted that the cash deposits of Rs 15,64,50,000/- were made on 8 different dates and on four such occasions the amounts (total Rs 10,72,78,300/-) were transferred to the bank account of the Managing trustee on the very same day. So this modus operandi was followed to avoid direct deposit of cash in the bank account of the Managing trustee and the appellant was acting as a conduit for the same. The bank accounts of the appellant as well as the Managing trustee were in the same bank. The AO also placed reliance on the decision in the case of Auto Piston Mfg. Co. Ltd. V CIT [2013) 38 taxmann.com 61 (Punjab & Haryana) to support his reasoning for imposition of penalty. In addition, he also relied upon the following decisions:
