ACIT, CENTRAL CIRCLE-2(3), PUNE, PUNE V. MANTRA PROPERTIES, VARANASI

ITA 2116/PUN/2024

AI Insights

The case involves Mantra Properties, a real estate development firm, which was penalized for accepting a cash loan of Rs.1,90,00,000 in violation of section 269SS of the Income Tax Act, 1961. The penalty was initially contested by the firm but was upheld by the Income Tax Appellate Tribunal after reviewing the incriminating documents and the testimony of Shri Sachin Nahar, the finance broker involved. The Tribunal found that the firm had not only accepted the cash but also failed to provide adequate rebuttal during the cross-examination of Shri Sachin Nahar, who confirmed the identity of 'Mantra' as Mantra Properties.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398339 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: DCIT Vs Sneh Builders, Navin Kumar Vs JCIT, Ashu Bagla Vs JCIT, Starptex (India) Pvt. Ltd. Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P MURKUNDE
• Assessee Lawyers: HAND; THERE WAS NO RESPONSE
• Keywords: Opportunity of being heard; Reasonable cause; Document seized; Documents seized; Search and seizure
• Section: 147; 148; 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA No.2116/PUN/2024 Assessment year : 2017-18 ACIT, Central Circle 2(3), Pune Vs. Mantra Properties S-20/53-1, Sunderam Villa, Cantonment Varuna Bridge, Varanasi, Uttar Pradesh – 221002 PAN: AAOFM1283H (Appellant) (Respondent) Assessee by : None Department by : Shri Ramnath P Murkunde Date of hearing : 03-06-2025 Date of pronouncement : 04-06-2025 O R D E R PER R. K. PANDA, VP : This appeal filed by the Revenue is directed against the order dated 26.07.2024 of the Ld. CIT(A), Pune - 12 relating to assessment year 2017-18. 2. This appeal was fixed for a number of times but no one was appearing on behalf of the assessee. Subsequently, the notice was issued through the Ld. DR. Despite such notice being served on the assessee by hand, there was no response from the side of the assessee. Therefore, this appeal is being decided on the basis of material available on record and after hearing the Ld. DR. 3. Facts of the case, in brief, are that the assessee is engaged in business of real estate development and construction. It filed its return of income on 30.10.2017 2 ITA No.2116/PUN/2024 declaring total income of Rs.27,66,64,920/-. Subsequently the assessee revised its return on 30.10.2018 declaring total income of Rs.16,76,37,960/-. The case was selected for scrutiny and the assessment proceedings were completed by passing an order u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 01.05.2019 assessing the total income at Rs.17,26,37,960/- by making addition of Rs.50 lakhs. Subsequently on the basis of search and seizure action conducted in the case of one Shri Sachin Nahar on 01.08.2017 during which various incriminating documents were found and seized. On perusal of the seized documents it was gathered that the assessee M/s. Mantra Properties has taken cash loan of Rs.1,90,00,000/- from the various parties through finance broker Shri Sachin Nahar during the financial year 2016-17 and has paid interest amounting to Rs.12,97,500/- which includes Rs.12,78,750/- in financial year 2016-17 and Rs.18,750/- in financial year 2017-18 against these loans. Accordingly, the case of the assessee was reopened by issue of notice u/s 148 of the Act. The assessee filed its return of income in response to notice u/s 148 of the Act on 30.09.2021 declaring total income of Rs.16,76,37,960/-. The Assessing Officer completed the assessment u/s 143(3) / 147 of the Act determining the total income of the assessee at Rs.19,06,80,151/- by making various additions. 4. Since the assessee had taken cash loan of Rs.1,90,00,000/- from various persons through Shri Sachin Nahar, the Assessing Officer vide letter dated 31.05.2023 submitted before the Joint / Addl. Commissioner that the assessee has violated the provisions of section 269SS of the Act for which the penalty 3 ITA No.2116/PUN/2024 proceedings u/s 271D of the Act should be initiated. Accordingly, the Joint / Addl. Commissioner issued a notice u/s 274 r.w.s. 271D of the Act giving an opportunity of being heard to the assessee. The assessee filed elaborate submissions before the JCIT challenging the levy of penalty u/s 271D of the Act. 5. However, the JCIT was not satisfied with the arguments advanced before him and levied the penalty of Rs.1,90,00,000/- u/s 271D which is equivalent to the loan accepted by the assessee in cash during the financial year 2016-17 by observing as under: “6. On perusal of the above submission, it is seen that the assessee mainly contended that penalty has been initiated solely on the presumption that the abbreviation Mantra means 'Mantra Properties'. The assessee claimed that there was no concrete proof that the assessee has actually accepted cash loan. The assessee stated that during search action Shri Sachin Nahar had stated that the abbreviation „3000 Mantra' is entry regarding cash loan of Rs. 30,00,000/- given to Shri Satish Gupta (Mantra Group) and also mentioned mobile number of Satish Gupta'. The assessee submitted that Shri Satish Gupta is an individual, separately assessed to tax, therefore, the penalty on alleged cash loan cannot be levied in the hands of the assessee. The assessee also stated that Mantra is a huge group and cannot be presumed as Mantra Properties. In this regard, the assessee relied upon decision of Pune ITAT in the case of DCIT Vs Sneh Builders and ITAT Amritsar decision in the case of Navin Kumar Vs JCIT and Ashu Bagla Vs JCIT (2006) 98itd 242 (Amritsar). 7. The claim of the assessee that the penalty has been initiated on presumption basis only and not on the basis of concrete evidences. This contention of the assessee is not acceptable as the penalty has been initiated on the basis of incriminating material found during search action in the case of Shri Sachin Nahar who has confirmed the fact that cash loan was provided to Shri Satish Gupta who is a partner of the firm. Therefore, there it is not a presumption but evidences. However, if the cash loan was taken by some other entity/person of the group, then onus lies with the assessee to prove the same. Further, during the assessment proceedings, the Authorised representative of assessee was provided cross examination of Shri Sachin Nahar. During cross examination, in the reply of question number 4, Shri Sachin Nahar indentified Mantra as Mantra Properties. During the cross examination this fact was not rebutted by the AR of the assessee. Therefore, there is no doubt that the abbreviation matra is Mantra Properties. The above facts prove that the penalty was correctly initiated. Further, the assessee 4 ITA No.2116/PUN/2024 relied upon the two case laws as mentioned above. However, facts of both the quoted cases are different from facts of this case. Penalty in both the quoted case laws were levied mere on the basis of statement of third party, however in the instant case, the penalty has been initiated on the basis of Incriminating material corroborated by the statement recorded u/s 132(4) of the I.T. Act. Therefore, decision of the above mentioned both the cases are not applicable on this case. 8. It is to reiterate that the assessee accepted cash loan of Rs.1,90,00,000/-through Sachin Nahar who admitted that the loan was provided to the assessee in cash. In this respect, it is to state that as per the provisions of S.269SS of the Act, no person shall take or accept from any other person any loan or deposit or any specified sum otherwise than by an account pay cheque or account payee bank draft or use of electronic clearing system through a bank account (or through such other electronic mode as may be prescribed). For ready reference, the relevant portion of the S.269SS of the Act, is reproduced here as under: \"269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account for through such other electronic mode as may be prescribed), if - 1. the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum, or 2. on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or 3. the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b). is twenty thousand rupees or more: ……………………………………………………….. Explanation. - For the purposes of this section, - (i)………. ……………….. (iv) \"specified sum\" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.\" From the plain reading of the above provisions, it is clear that the assessee has violated the aforesaid provisions of S.269SS of the Act by accepting loan in 5 ITA No.2116/PUN/2024 cash more than prescribed limit. Further, Shri Sachin Nahar admitted that the cash was accepted by partner of the assessee firm. 9. From the above facts, it is clear that the assessee has accepted loan in cash amounting to Rs.1,90,00,000/-. Further from the incriminating documents and statement of Shri Sachin Nahar wherein he had admitted the fact that cash loan was provided to the assessee. Therefore, by accepting cash more than Rs.20,000/- the assessee has violated provisions of S. 269SS of the Act. As per provisions of S. 271D of the Act, if a person violates the provisions of S.269SS of the Act, then he/she/it may be liable for levy of penalty u/s 271D of the Act. Thus, for accepting loan in cash to the tune of Rs. 1,90,00,000/-, the assessee is liable to pay penalty as per provisions of S. 271D of the Act. 10. In view of the above discussion, it is proved that that the assessee has violated the provisions of S. 269SS of the Act without having any reasonable cause within the meaning of S.273B of the Act, making itself liable for levy of penalty u/s. 271D of the Act. I, therefore, levy a penalty of Rs. 1,90,00,000/- which is equal to the said loan accepted by the assessee in cash in the FY 2016-17 relevant to A.Y. 2017-18. 11. Demand Notice is being issued accordingly.” 6. In appeal, the Ld. CIT(A) deleted the penalty so levied by the Joint / Addl. CIT by observing as under: “3.5 I find merit in the submission of the appellant that there is no concrete evidence that the impugned amount was in fact received in cash by the appellant firm except the statement of Shri Sachin Nahar. General statement of third person cannot be a valid basis for taking action against the appellant. The statement was recorded during the cross examination on 21.03.2022, after expiry of more than four years since the search was conducted at Shri Sachin Nahar's premises, he identified the code 'Mantra' as 'Mantra Group‟. In my opinion, the Ld. AO does not have any other proof other than the statement of Shri Sachin Nahar. Thus, levying penalty on the basis of a rough book, written by third party (Schin Nahar) based on his memory on which only \"Mantra‟ has been mentioned, is not justifiable. The Ld. AO cannot rely upon the statement of third party only especially in the absence of any corroborative evidence. Therefore, in the absence of any corroborative evidence, it cannot be held that the appellant firm had borrowed any cash through Shri Sachin Nahar. In this regard, reliance is placed on the judgement of Hon'ble Mumbai ITAT in case of Starptex (India) Pvt. Ltd. Vs. DCIT (2003) 84 ITD 320 (Mumbai) wherein it is held that presumption under section 132(4A) is only against person in whose possession document is found and not against any other person. It is also decided in favour of the assessee in this case as to whether presumption under section 132(4A) is a rebuttable presumption and not conclusive, and cannot be applied in absence of corroborative evidence. 6 ITA No.2116/PUN/2024 3.6 Respectfully following the ratio of the decisions relied upon by the appellant, it is held that the appellant cannot be penalized just on the basis of general statement of third person and the same cannot be valid basis for taking action against the appellant, without any corroborative evidence. The quantum appeal in this case for the year under consideration is already decided in favour of the appellant holding that the Ld. AO has failed to establish that the appellant has received cash loan of Rs.1,90,00,000/- from Shri Sachin Nahar and the addition in respect of interest payment on this amount is also deleted. Thus, there is no basis left for any action u/s 276SS r.w.s. 271D of the Act. Accordingly, penalty levied of Rs.1,90,00,000/- u/s 271D is hereby deleted. Grounds No. 1 to 4 raised by the appellant are. therefore, allowed.” 7. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds: 1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the penalty u/s 271D of the Act of Rs.1,90,00,000/- holding that the assessee cannot be penalized just on the basis of general statement of third party without appreciating the facts that Shri. Sachin Nahar in his statement recorded u/s 132(4) of the Act and during cross examination had affirmed the identification of code 'Mantra' as 'Mantra Properties and Authorized Representative of the assessee was not able to rebut the same. 2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in not considering the incriminating evidences/material found during the search action, establishing that the assessee had taken cash loan of Rs. 1,90,00,000/- from various parties through Shri Sachin Nahar. 3) The appellant craves to add, amend, alter or delete any of the above ground of appeal during the course of appellate proceedings before the Hon'ble Tribunal. 8. The Ld. DR strongly challenged the order of the Ld. CIT(A) in deleting the penalty of Rs.1,90,00,000/- levied by the Joint / Addl. CIT u/s 271D of the Act. He submitted that the incriminating evidence / material was found during the course of search action establishing that the assessee had taken cash loan of Rs.1,90,00,000/- from various persons through Shri Sachin Nahar. Under these circumstances and in view of the admission of Shri Sachin Nahar during his cross 7 ITA No.2116/PUN/2024 examination that the identification of code ‘Mantra’ relates to Mantra Properties, the Ld. CIT(A) was not justified in deleting the penalty. 9. We have heard the Ld. DR and perused the record. It is an admitted fact that during the course of search at the premises of Shri Sachin Nahar, incriminating documents were seized. On perusal of the seized documents it was noticed that the assessee M/s. Mantra Properties had taken cash loan of Rs.1,90,00,000/- from various persons through finance broker Shri Sachin Nahar during the financial year 2016-17 and has paid interest amounting to Rs.12,97,500/- i.e. Rs.12,78,750/- in financial year 2016-17 and Rs.18,750/- in financial year 2017-18 against the cash loans. Although the assessee during the course of penalty proceedings has stated that there was no concrete proof that the assessee has actually accepted the cash loans, however, it is an admitted fact that Shri Sachin Nahar in his statement recorded during the course of search action has confirmed the fact that the cash loan was provided to Shri Satish Gupta who is the partner of M/s. Mantra Properties. Thus, there is no presumption but evidence. Further, during the course of assessment proceedings the AR of the assessee was provided cross examination of Shri Sachin Nahar. During such cross examination, in reply to question No.4, Shri Sachin Nahar identified ‘Mantra’ as Mantra Properties. This fact was not rebutted by the AR of the assessee during the course of cross examination. Since the AR of the assessee could not rebut the facts mentioned by Shri Sachin Nahar during the course of such cross examination, therefore, the finding of the Ld. CIT(A) that there is no concrete evidence that the impugned amount was in fact 8 ITA No.2116/PUN/2024 received in cash by the assessee firm is without any merit. In our opinion, there cannot be any foolproof evidence of giving or receiving money in cash such as photograph or videograph other than the entries found in the books of account. The observations of the Ld. CIT(A) that the Assessing Officer does not have any other proof other than the statement of Shri Sachin Nahar is without any basis especially when the incriminating documents so seized from the premises of Shri Sachin Nahar gives the details of cash loans accepted by the assessee with the narration of amount taken and interest paid thereon. Even during the course of cross examination, the AR of the assessee could not rebut the statement of Shri Sachin Nahar that ‘Mantra’ relates to Mantra Properties. Under these circumstances, we are of the considered opinion that the Ld. CIT(A) was not justified in deleting the penalty levied by the JCIT / Addl.CIT u/s 271D of the Act. We accordingly reverse the order of the Ld. CIT(A) and allow the grounds raised by the Revenue. 10. In the result, the appeal filed by the Revenue is allowed. Order pronounced in the open Court on 4th June, 2025. Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 4th June, 2025 GCVSR 9 ITA No.2116/PUN/2024 आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 03.06.2025 Sr. PS/PS 2 Draft placed before author 04.06.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "