IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 6TH JANUARY 2010 / 16TH POUSHA 1931 ITA.No. 694 of 2009() --------------------- ITA.431/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT --------------------------------------- THE COMMISSIONEROF INCOME TAX, TRICHUR. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ M/S.POLSONS DISTILLERY,MURINGOOR, CHALAKUDY. ADV. SRI.T.M.SREEDHARAN FOR R1 SMT.C.K.SHERIN FOR R1 SRI.V.P.NARAYANAN FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06/01/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & V.K. MOHANAN, JJ. -------------------------------------------- I. T. A. No. 694 OF 2009 -------------------------------------------- Dated this the 6th day of January, 2010 JUDGMENT Ramachandran Nair, J. Heard senior standing counsel appearing for the appellant and Sri. T.M. Sreedharan, counsel appearing for the respondent-assessee. The challenge is against the order of the Tribunal confirming the order of the C.I.T. (Appeals), cancelling penalty levied on the respondent- assessee under Section 271 D of the IT Act. The allegation based on which penalty was levied is receipt of loan in excess of Rs. 20,000/- from several persons in cash, the total of which is Rs. 5,51,850/-. Penalty levied is equal to the amount of cash loans received in excess of Rs. 20,000/-. The contention of the revenue is that assessee has not established circumstances beyond it's control justifying cash borrowings to avoid penalty by virtue of exemption contained in Section 273 B of the Act. Counsel appearing for the respondent- assessee referred to the finding in the CIT (Appeals)'s order and that of the Tribunal wherein they have consistently held that assessee was 2 steadily in cash shortage and it exceeded OD limits with banks justifying frequent cash borrowings. However, after going through the orders of the first appellate authority and the Tribunal we notice that there has been shift in the stand taken by the assessee at different times. Before the assessing officer, the assessee contended that assessee had in fact debited various amounts totalling around to Rs. 31.97 lakhs towards commission, sales promotion, incentives, etc. in the names of various employees and credited the same in their personal accounts. However, the assessee later filed a revised return offering the entire amount for tax. The contention of the assessee that the very same amounts shown as credit in the name of the employees are treated as loan by the assessing officer for the purpose of levy of penalty. We notice that none of the authorities has gone into the details of the claims of the assessee even though Tribunal briefly states this also. If this is the true fact, then we see no reason why the assessee did not make an elaborate attempt by producing cash flow statement, bank accounts, etc., before the CIT (Appeals) to establish that there was steady shortage of cash justifying borrowings in cash from employees. Therefore there is inconsistent stand adopted by the assessee before 3 different authorities. If the amount in fact represents the expenditure originally claimed by the assessee and later withdrawn as commission and incentives paid to employees, then the credit shown in the name of the employees are not the actual borrowings but it is assessee's own money. In view of the subsequent case put forward by the assessee which is not consistent with the case put forward before the assessing officer, we allow the appeal by setting aside the order of the tribunal and that of the first appellate authority and remand the matter to the assessing officer for reconsideration after verifying the true facts with reference to books of accounts and if necessary after collecting information from employees. Assessee should be given an opportunity to produce records and accounts and other evidence in support of their contentions and for completing the assessment afresh. (C.N.RAMACHANDRAN NAIR) Judge. (V.K. MOHANAN) Judge. kk 4