GRANDHI SRI VENKATA AMARENDRA V. JOINT COMMISSIONER OF INCOME TAX CENTRA CIRCLE

WP/32873/2023

AI Insights

The case involves Grandhi Sri Venkata Amarendra, the petitioner, challenging a penalty of Rs. 2,00,00,000 imposed by the Income Tax Department under Section 271D of the Income Tax Act, 1961, for alleged violations related to cash transactions. The penalty was based on findings from a search and seizure operation and subsequent assessments, which allegedly revealed unrecorded cash transactions amounting to Rs. 6,00,00,000 with V.V. Balakrishna Rao. The petitioner contended that all transactions were conducted through banking channels and denied any cash loans. The court examined whether the necessary satisfaction for imposing the penalty was recorded in the assessment order and concluded that it was not, leading to the setting aside of the penalty.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 761804 (HC-AMARAVATI)
• Appeal Type: Others
• Pronouncement Date: 04-10-2024
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Jai Laxmi Rice Mills, Ambala City, M. Sougoumarin Vs. Assistant Commissioner of Income Tax, Puducherry, Vasan Healthcare (P) Ltd. Vs. Additional Commissioner of Income Tax, Central Range-2, Chennai, Five Star Marine Exports (P) Ltd. Vs Deputy Commissioner of Income Tax, Chennai, Vasan Healthcare (P.) Ltd. Vs. Additional Commissioner of Income Tax, Range 2, Al Ameen Educational Trust Vs. Commissioner of Income Tax, Assistant Director of Inspection Investigation Vs. Kum.A.B. Shanthi, Ashok Kumar Vs. State of Haryana, Dilip N. Shroff Vs. CIT
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VIJAY KUMAR PUNNA
• Assessee Lawyers: VIVEK CHANDRA S
• Keywords: Assessment Order; Assessment year 2018-19; Banking channels; Cash loan; Incriminating documents; Penalty; Search and seizure; Writ of Mandamus
• Section: 142(1); 143(2); 132; 69A; 153C; 271D; 269SS

Judgement Text

"IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI (Special Original Jurisdiction) FRIDAY, THE FOURTH DAY OF OCTOBER TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SRI JUSTICE G.NARENDAR AND THE HONOURABLE SMT JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 32873 OF 2023 Between: Grandhi Sri Venkata Amarendra, S/o. G. Narendra, Aged about 58 Years, Occ: Business, R/o. 7A-P-21/1, Main Bazar Eluru, Andhra Pradesh-534001 ...PETITIONER AND 1. Joint Commissioner of Income Tax, Central Circle, Central Range Visakhapatnam 2. Assistant Commissioner of Income Tax, Central Circle -1, Visakhapatnam. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ of Mandamus or any other appropriate Writ, Order or Direction, setting aside the impugned Order dated 23/11/2023 passed by the Respondent No. 1 for the Assessment Year 2018-19 in PAN ABIPA7175R under Section 271D of the Income Tax Act, 1961 bearing DIN ITBA/PNL/F/271 D/2023-24/1058173995(1), levying penalty to a tune of Rs. 2,00,00,000/- as being void, illegal, arbitrary, violative of Articles 14 and 265 of the Constitution of India and consequently set aside the same. lA NO: 1 OF 2023 Petition under Section 151 CPC praying that in the circumstances « stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further actions including recovery of tax pursuant to the ^sOrder .dated 23/11/2023 passed by the Respondent No. 1 for the V Assessment Year 2018-19 in PAN ABIPA7175R under Section 27ID of the Income Tax Act, 1961 bearing DIN ITBA/PNL/F/271 D/2023- 24/1058173995(1.) Counsel for the Petitioner; SRI VIVEK CHANDRA SEKHAR S Counsel for the Respondent Nos.1 & 2:SRI VIJAY KUMAR PUNNA, SC FOR INCOME TAX ^ V The Court made the following: ORDER 1 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI THE HONOURABLE SRI JUSTICE G.NARENDAR HONOURABLE SMT. JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 32873/2023 THE ORDER; (PerHon’ble Smt. Justice Kiranmayee Mandava) the W.P. No.32873 of 2023 is the The order under challenge in proceedings of the assessing officer passed under Section 271D of the as ‘Act’) levying penalty of Income Tax Act, 1961, (hereinafter referred to Rs.2,00,00,000/-. counsel for the petitioner contends that penalty under Section 271D of the Act, is levied without recording any satisfaction in contemplating levy of penalty. 2. The learned search and seizure operation was conducted of M/s. Usha Bala Group the case of It is stated that a 3. under Section 132 of the Income Tax Act, the case V.V.Balaksirshna Rao. During the search proceedings in certain incriminating documents relating to the petitioner and V.V.Balakrishna Rao were found. Applying the provisions of Section 153C of the Act, the petitioner . Pursuant thereto, the petitioner has asked to submit his return of income was 18-04-2022 admitting total income 143(2) of the Act, furnished his return of income Rs.22,20,000/-. Notice under on Section of 2 dated 25-04-2022 was issued to the assessee for making assessment under Section 143(3) read with Section 153C of the Act. Simultaneously notice under Section 142(1) of the Act was issued requiring the petitioner to produce certain copies of bank accounts, explain the cash transaction with Balakrishna Rao etc., amounting to Rs. 6,00,00,000/-. Pursuant to the same, the petitioner submitted his reply dated 12-05-2022 stating that that he did not take any loans in cash as alleged. The loans were received through Banking channels. Thereafter another notice under Section 142(1) of the Act, dated 15-06-2022, was issued requesting the petitioner to furnish the information by 22-06-2022. The petitioner submitted his explanation reiterating his previous explanation regarding loans stated to have obtained in cash. It is further contended that a similar notice was issued to the creditor of the petitioner, Venkata Balakrishna Rao, under Section 133(6) of the Act, dated 06.07.2022, who, after requesting for time till 22-07-2022 did not respond to the notice issued, therefore, summons under Section 131 of the Act, dated 27.07.2022, was issued. In response to the same, the said Balakrishna Rao, submitted his reply. After examining the reply of the said Balakrishna Rao, with reference to the seized material, the department issued show cause notice dated 10-08-2022, requiring the petitioner to submit reply by 16-08-2022. In the said notice, it was observed that on cross verification of the details furnished by the petitioner and Balakrishna Rao, there are no discrepancies, however,*- the seized 3 material contains document(s), which includes a letter dated 02-06-2014, stated to have been issued by the petitioner to Balakrishna Rao, acknowledging the availment cash loan of Rs.6 crores, and pledging of immovable properties as collateral security. By pointing out from the material before it, the AO concluded that (pg.14 of assessment order) the petitioner had financial transaction with Balakrishna Rao, outside the books and outside banking channels for the subject assessment year. The relevant material relied upon by the AO was copied/scanned and pasted in the assessment order (Pgs.15 to 54) making the same as part of the assessment order. From the said transactions, 11 transactions were tabulated which indicate advances to the petitioner and repayment by the petitioner. The Assessing Officer on the basis of the said material observed that Usha Bala Group had received an amount of Rs.28,18,344/- towards interest. And it was concluded that the petitioner had accepted an amount of Rs. 2,00,00,000/- as loan and repaid an amount of Rs.1,43,18,344/- on various dates. The petitioner was thus asked to to why the interest amount of Rs.28,18,344/- should not be show cause as treated as unexplained money under Section 69A of the Act. The petitioner in reply to the show cause notice has stated that no cash loans were either obtained or cash repayments were made much less the interest was paid, the assessment Officer while concluding note of the letter of the petitioner dated 02.06.2014 The Assessing proceedings taking 4 acknowledging the receipt of amount of Rs.6,00,00,000/- on 22.11.2013 made addition of Rs.28,18,344/- under Section 69A of the Act. After passing of the assessment order the Assessing Officer, has referred the file to the Joint Commissioner of Income-tax, intimating the violations said to have been committed by the petitioner and for appropriate action. The learned Joint Commissioner of Income-tax, has initiated the penalty proceedings under Section 271D of the Income Tax Act, and levied penalty of Rs. 2,00,00,000/-. Challenging the same, the present Writ Petition is filed. 4. Heard, submissions of the learned counsel for the petitioner and the respondents. 5. Perused the material on record. 6. The main contention of the petitioner is that no satisfaction was recorded in the assessment order with regard to levy of penalty under Section 271D of the Act. The petitioner relying on the decision of the Apex Court in the case of CIT Vs. Jai Laxmi Rice Mills, Ambala City contends that there was no evidence before the Assessing Officer to show that the petitioner has accepted the loans in cash. As noted from the assessment proceedings,the assessee was put on notice as regards the loans received in cash. The petitioner has stated that he has not received any cash loans and he has denied to have received any cash loans, what all taken as loans were through ^ (2015)64 Taxmann.com75(SC) 5 banking channels alone. There was never any element any element of cash involved in the transaction. The learned Senior Standing Counsel Sri Vijay Kumar Punna, appearing for the respondents would contend that against the order impugned alternative remedy of appeal is provided under the provisions of the Act. Without availing such remedy filed the present Writ Petition, which would not be maintainable. He relies on the following decisions in support of his case;- 7. an In the case of M. Sougoumarin Vs. Assistant Commissioner Puducherry, I. Circle-1 Tax, (2018) 95 taxman.com 240 (Madras) II. In the case of Vasan Healthcare (P) Ltd. Vs. Additional Commissioner of Income Tax, Central Range-2, Chennai. of Income (2019)411 ITR499 (Madras) III. In the case of Five Star Marine Exports (P) Ltd. Vs Deputy Chennai, Tax Income of Commissioner (2018) 92 Taxman.com 404 (Madras) IV. In the case of Vasan Healthcare (P.) Ltd. Vs. Additional Commissioner of Income Tax Range 2 (2021) 278 Taxman 273 (SC) V. In the case of Al Ameen Educational Trust Vs. Commissioner of Income Tax, (2021) 283 Taxman 285 (SC) VI. In the case of Assistant Director of Inspection Investigation Vs. Kum.A.B. Shanthi, (2002) 255 ITR 258 (SC) VII. In the case of Ashok Kumar Vs. State of Haryana, Chennai (2010) 12 see 350 6 i In the case of Dilip N. Shroff Vs. CIT, (2007) 6 SCC 329 VIII. We have gone through the material placed on record. The Assessing 8. Officer, except to base his addition on the letter of the assessee dated 02-06-2014, did not record any finding that there has been any violation of the provisions of Sec.269SS of the Act by the assessee, nor was any satisfaction recorded to the effect that the alleged transaction of acceptance of loan in cash would attract penal consequences. In the absence of any finding to the said effect, in our considered view, the penalty cannot be levied. A presumption can be drawn, in the absence of a finding by the Assessing Officer to the effect that the petitioner has violated the provisions of Sec.269SS of the Act, that the department has accepted the explanation furnished by the petitioner denying allegation of loan in cash. Therefore, it can unhesitatingly be said that, having satisfied with the explanation of the Assessing Officer did not record any satisfaction in the assessment order contemplating levy of penalty under Sec.271 D of the Act. 9. In our view, the satisfaction of the Assessing Officer is required to be recorded because the officer, who passed the assessment order would not be levying the penalty under Sec.271 D of the Act, unless it is recorded in the assessment order, he cannot refer the file to superior officer i.e., Joint Commissioner, for initiating levy of penalty. Unless the Assessing Officer, 7 who is the primary authority, based on the material before it, during assessment proceedings, arrives at a finding that there has been a violation of the provisions, like in the present case, of Section 269SS, there will not be any occasion to the Joint Commissioner, who is not the Assessing Officer, to exercise his jurisdiction to levy Penalty under Section 271D. Following the decision of the Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills referred supra, we set aside the order passed by the 1®' respondent dated 23.11.2023 under Sec.271 D of the Act. 10. The Writ Petition is accordingly allowed. There shall be no order as to costs. As a sequel, interlocutory applications pending, if any, shall stand closed. SDI- N.NAGAMMA ASSISTANT REGISTRAR //TRUE COPY// SECTION OFFICER To, 1. The Joint Commissioner of Income Tax, Central Circle, Central Range, Visakhapatnam 2. The Assistant Commissioner of Income Tax, Central Circle -1, Visakhapatnam. 3. One CC to Sri Vivek Chandra Sekhar S, Advocate [OPUC] 4. One CC to Sri Vijay Kumar Punna, SC for Income Tax [OPUC] 5. Three CD Copies. ssb HIGH COURT DATED:04/10/2024 ORDER WP.No.32873 of 2023 O 5 2 8 OCT 202^ ALLOWING THE W.P. WITHOUT COSTS "