COMMISSIONER OF INCOME TAX - II VSP. V. M/S RAJAM EXTRACTIONS PVT. LTD.SRIKAKULA

ITTA/109/2003

AI Insights

The case revolves around a dispute concerning the classification of a Rs.3,00,000/- cash receipt by a company, which was treated as a loan by the Assessing Officer for tax purposes. Initially, the amount was included in the company's tax returns, and tax was paid on it. However, four years later, a penalty was imposed under Section 271D of the Income Tax Act for contravening Section 269SS, which regulates the acceptance of loans and deposits in cash. The Tribunal found the penalty proceedings to be time-barred and ruled that the amount could not be classified as a loan or deposit, leading to the dismissal of the appeal by the High Court.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 677881 (HC-VISAKHAPATNAM)
• Appeal Type: Others
• Pronouncement Date: 09-09-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment; Deposit; Limitation; Loan; Penalty; Tax
• Section: 271D; 269SS; 275

Judgement Text

"THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. No.109 OF 2003 JUDGMENT: (Per Hon’ble Sri Justice L. Narasimha Reddy) The respondent is a Company and is assessed to tax. For the assessment year 1991-92, it filed returns. In the course of processing of returns, the Assessing Officer pointed out that a sum of Rs.3,00,000/- was received in the form of cash. He proceeded to treat it as loan on the ground that the explanation offered by the respondent is not acceptable. In the appeal preferred before the Commissioner, the order passed by the Assessing Officer was upheld and levied tax thereon. Four years thereafter, the Assessing Officer passed an order, dated 30.09.1996, exercising the power under Section 271D of the Income Tax Act (for short, ‘the Act’) levying penalty of Rs.3,00,000/-. According to him, the receipt of amount of Rs.3,00,000/- by the respondent was in contravention of Section 269SS of the Act and thereby, the penalty is levied. The respondent carried the matter before the Commissioner of Appeals and order of the Assessing Officer was upheld. Thereupon, he filed the I.T.A.No.796/H/1997 before the Income Tax Appellate Tribunal, Visakhapatnam. The Tribunal allowed the appeal through order, dated 20.11.2002. Hence, this further appeal by the respondent under Section 260A of the Act. Heard Sri S.R. Ashok, learned Senior Counsel for the appellant, and the respondent did not enter appearance. There is no denial of the fact that the respondent received a sum of Rs.3,00,000/- in cash. All the same, the amount was reflected in the returns and it was brought under the purview of tax. The explanation offered by the respondent was that at the inception of its activity, several amounts have been gathered by the shareholders for the purpose of construction of building and pending finalization of allotment of shares, the amount was released and treated as loan. The Assessing Authority, however, treated the amount as loan. The respondent did not feel any inconvenience on account of that order, since it was otherwise agreeable to pay the tax on that amount also. Four years later, the Assessing Officer initiated proceedings under Section 271D of the Act proposing to levy 100% penalty and a show cause notice was issued. The explanation offered by the respondent was not accepted and penalty was imposed. The respondent was unsuccessful before the Commissioner, but not before the Tribunal. The Tribunal took note of two aspects. The first is that the initiation of proceedings are barred by limitation and the second is that the amount of Rs.3,00,000/- cannot be treated either as loan or as deposit. Section 275 of the Act prescribes the limitation in respect of the proceedings initiated for imposing penalty under various provisions of law. As regards the penalty referable to Sections 271D and 271(1)(c ) of the Act stipulates period of six months. Admittedly, in the instant case, the proceedings were initiated long thereafter and nearly four years after the order of assessment. That ground alone is sufficient to set aside the order of the Assessing Officer passed under Section 271D of the Act. The plea of the appellant that the ground of limitation was not urged before the Commissioner is hardly of any use. If the facts in relation to the grounds of limitation are not in dispute, it becomes the one of law and can be raised at any stage. On merits also, there is nothing on record to support the plea of the appellant that the amount was received towards the loan or deposit. The mere allegation or assertion is not sufficient. When penalty to the extent of 100% is sought to be levied, that too even after collecting the tax on the amount, heavy burden rested upon the Assessing Officer to establish that the said amount was received from a person either as loan or deposit. In this behalf, identification of the person from whom the amount is received, becomes essential. When law confers extensive powers upon the Assessing Officer either to verify the record or to summon the person or even to reopen the proceedings, which have already become final, it would not be difficult to undertake an exercise in that behalf. As the Tribunal has taken the correct view of the matter, we do not find any basis to interfere with the order under appeal. The appeal is, accordingly, dismissed. There shall be no order as to costs. The miscellaneous petition filed in this writ appeal shall also stand disposed of. ____________________ L. NARASIMHA REDDY, J. ______________________ CHALLA KODANDA RAM, J. 09.09.2014 KH "