Delhi High Court
Commissioner Of Income Tax vs M/S National Clothing Co. on 12 December, 2014
$~R-181 & R-182
*IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: December 12, 2014
+ ITA 221/2003
COMMISSIONER OF INCOME TAX
..... Appellant
Through Mr.Balbir Singh, Sr. Standing
Counsel with Mr.Abhishek
Singh Baghel, Advocate
versus
M/S NATIONAL CLOTHING CO.
..... Respondent
Through Mr.Prakash Kumar, Advocate
+ ITA 597/2005
COMMISSIONER OF INCOME TAX
..... Appellant
Through Mr.Rohit Madan, Sr. Standing
Counsel with Mr.Ruchir Bhatia,
Advocate
versus
M/S NATIONAL CLOTHING CO.
..... Respondent
Through Mr.Prakash Kumar, Advocate
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J (ORAL)
ITA 221/2003
This appeal by the Revenue under Section 260A of the Income
Tax Act, 1961 ('Act' in short) was admitted for hearing vide order
dated 21.09.2004 on the following substantial question of law:-
"Whether in the facts and circumstances of the case, the
Income Tax Appellate Tribunal was correct in law in
deleting the penalty imposed under Section 271D of the
Income Tax Act, 1961?"
2. The respondent assessee had received loans of Rs.33,75,842/-
and Rs.20,00,000/- respectively on 06.06.1997 from M/s Shakuntla
Export House Pvt. Ltd. and K.N.Bhalla. The Assessing Officer rejected
the submission that the aforesaid amounts being mere book entries did
not result in violation of Section 269SS of the Act. The contention that
entry of Rs.20,00,000/- involved credit to the account of M/s Quality
Clothiers and debit to the account of K.N Bhalla and, therefore, does
not amount to acceptance of loan or deposit was also rejected. The
Assessing Officer held that book entries were covered under the ambit
of Section 269SS of the Act. Penalty of Rs.53,75,840/- under Section
271D of the Act was imposed.
3. In the first appeal, the Commissioner of Income Tax (Appeals)
sustained the penalty in respect of book entry of Rs.33,75,842/- but
restored for fresh examination, the entry relating to K.N Bhalla, in
view of the submission that the debit entry in the name of K.N Bhalla
did not create any liability towards any new loan or deposit. The
submission was that it was a mere transfer entry with name of K.N
Bhalla being substituted for M/s Quality Clothiers.
4. On further appeal, the assessee succeeded before the Tribunal by
the impugned order. Penalty imposed under Section 271D of the Act in
respect of book entry of Rs.33,75,842/- in the name of M/s Shakuntla
Export House Pvt. Ltd. has been deleted on the ground that merely
passing a journal entry would not lead to violation of Section 269SS of
the Act as there was no transfer of money. There was no cash
transaction.
5. The issue in question is covered by decision of this Court dated
20.11.2014 in ITA No.33/2002 titled Commissioner of Income Tax vs.
M/s Ruchika Commercials and Investment Pvt. Ltd. This decision
follows two earlier decisions of this Court in Commissioner of Income
Tax vs. Noida Toll Bridge Co. Ltd. [2003] 262 ITR 260 (Delhi) and
Commissioner of Income Tax-VI vs. Worldwide Townships Project
Ltd. [2014] 367 ITR 433 (Delhi). In the said decisions, in view of the
language of Explanation to Section 269SS, it has been held that the
provision would apply to loan or deposit of money, and not mere
formal entries resulting in debit or credit. Other reasons and grounds
have been elucidated.
6. In view of the aforesaid legal position, the question of law has to
be answered in favour of the respondent assessee and against the
appellant revenue. The appeal is accordingly disposed of.
ITA 597/2005
7. The second appeal bearing ITA No.597/2005 was admitted for
hearing vide order dated 16.08.2005 on the following substantial
question of law:-
"Whether in the facts and circumstances of the case, the
Income Tax Appellate Tribunal was correct in law in
deleting the penalty imposed under Section 271D of the
Income Tax Act, 1961?"
8. This appeal also relates to assessment year 1998-99 and arises
from the remand order passed by the Commissioner of Income Tax
(Appeals) in relation to entry of K.N Bhalla. We have already noted
the relevant facts in this regard above.
9. Upon remand, the Assessing Officer re-imposed penalty under
Section 271D after duly noticing the fact that there were two cross
entries in the case of M/s Quality Clothiers and K.N Bhalla and the
amount outstanding in the name of M/s Quality Clothiers was treated
as outstanding against K.N Bhalla. The Assessing Officer held that this
amounts to violation of Section 269SS and penalty of equal amount i.e.
Rs.20,00,000/- should be imposed.
10. The aforesaid penalty was deleted by the Commissioner of
Income Tax (Appeals) who held that the entry in question was a mere
book entry and the respondent assessee had debited the account of K.N
Bhalla and credited the account of M/s Quality Clothiers.
11. Aggrieved, Revenue preferred an appeal but the same has been
dismissed by the Tribunal in the impugned order dated 27.10.2004. For
the reasons set out in our decision dated 20.11.2014 in ITA
No.330/2002 Commissioner of Income Tax vs. M/s Ruchika
Commercials and Investment Pvt. Ltd., the question of law has to be
answered in favour of the respondent assessee and against the appellant
revenue.
The appeal is accordingly disposed of.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
DECEMBER 12, 2014/km
