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

WP/32875/2023

AI Insights

The case revolves around a writ petition filed by Grandhi Sri Venkata Amarendra challenging the penalty imposed by the Income Tax Department under Section 271D of the Income Tax Act, 1961, for alleged violations related to cash transactions. The petitioner contended that the penalty was levied without any recorded satisfaction in the assessment order regarding the acceptance of cash loans, which is necessary under Section 269SS of the Act. The Income Tax Department had conducted a search and seizure operation and found incriminating documents, leading to the reassessment of the petitioner's income and the imposition of the penalty. The petitioner argued that all transactions were conducted through banking channels and denied any cash transactions. The court, referencing the Supreme Court's decision in CIT Vs. JaiLaxmi Rice Mills, held that the penalty was improperly levied as there was no explicit finding of a violation of Section 269SS in the assessment order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 756695 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 04-10-2024
• Assessment Year: misc
• Other Referred Cases: CIT Vs. JaiLaxmi Rice Mills, Ambala City, M. Sougoumarin Vs. Assistant Commissioner Puducherry, Circle-1, Income, Vasan Healthcare (P) Ltd. Vs. Additional Commissioner of Income Tax, Central Range-2, Chennai, Five Star Marine Exports (P) Ltd. Vs Deputy Commissioner, Vasan Healthcare (P.) Ltd. Vs. Additional Commissioner of Income Tax Range 2, Chennai, Al Ameen Educational Trust Vs. Commissioner of Income Tax, Chennai, 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 SEKHAR
• Keywords: Assessment Year 2017-18; Banking channels; Cash loans; Incriminating documents; Penalty; Search and seizure; Writ of Mandamus
• Section: 142(1); 143(2); 132; 131; 69A; 153C; 271D; 269SS

Judgement Text

"I 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 f AND THE HONOURABLE SMT JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 32875 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, AndhraPradesh-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 2017-18 in PAN ABIPA7175R under Section 271D of the Income Tax Act, 1961 bearing DIN ITBA/PNL/F/271 D/2023- 24/1058173985(1), levying penalty to a tune of Rs.1,50,00,000/-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 Order dated 23/11/2023 passed by the Respondent No. 1 for the Assessment Year 2017-18 in PAN ABIPA7175R under Section 271D of the Income Tax Act, 1961 bearing DIN ITBA/PNL/F/27ID/2023- 24/1058173985(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 The Court made the following: ORDER 1 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI THE HONOURABLE SRI JUSTICE G.NARENDAR THE HONOURABLE SMT. JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 32875/2023 ORDER: (Per Hon’ble Smt. Justice Kiranmayee Mandava) The order under challenge in the W.P. No.32875 of 2023 is the proceedings of the assessing officer passed under Section 271D of the Income Tax Act, 1961, (hereinafter referred to as ‘Act’) levying penalty of Rs.1,50,00,000/-. The learned counsel for the petitioner contends that penalty 2. under Section 271D of the Act, is levied without recording any satisfaction in the assessment order to the effect that the penalty under Section 271D of the Act, had been contemplated. It is stated that a search and seizure operation was conducted 3. under Section 132 of the Income-tax Act, the case of M/s Usha Bala Group and V.V.Balaksirshna Rao. During the search proceedings in the case of V.V.Balakrishna Rao, certain incriminating documents relating to the petitioner were found. Applying the provisions of Sec.153C of the Act, the petitioner was asked to submit his return of income. Pursuant thereto, the 2 petitioner has furnished his return of income income of Rs.24,13,920/- 25-04-2022 was issued to the assessee for on 15-04-2022 admitting total . Notice under Section 143(2) of the Act dated assessment under Section 143(3) of the Act 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.. Pursuant to the same, the petitioner submitted his reply dated any loans in cash as alleged. The loans were received through Banking channels. Thereafter 12-05-2022 stating that that he did not take another notice dated 15-06-2022 was issued requesting the petitioner to furnish the information by 22-06-2022. The petitioner submitted his reply 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 under Section 133(6) of the Act, dated 06.07.2022 to the creditor of the assessee/petitioner Venkata Balakrishna Rao, who, after requesting for time tiil 22-07-2022 did not respond to the notice issued therefore, summons under Section 131 of the Act 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 3 the details furnished by the petitioner and Balakrishna Rao, there are no discrepancies, however, the seized material contains document(s), which includes a letter dated 02-06-2014, stated to have been issued by the petitioner to Balakrishnarao, depicting the availing 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 was copied and pasted in the assessment order (Pgs.15 to 56) making the same as part of the assessment order. From the said transactions, 17 transactions were tabulated which indicate advances to the petitioner and recoveries made from the petitioner. The assessing officer on the basis of the said material observed that Usha Bala Group had received an amount of Rs.29,03,267/- towards interest. And it was concluded that the petitioner had accepted an amount of Rs. 1,50,00,000/- as loan on various dates and repaid an amount of Rs.3,29,03,267/- on various dates. He thus paid an amount of Rs.1,50,27,007/- in excess, apart from interest of Rs.29,03,267/- paid to Usha Bala. The petitioner was thus asked to show cause as to why the excess amount should not be treated as the amount paid by the petitioner during the year, without sources and shall not be treated unexplained money under Section 69A of the Act. The petitioner had stated 4 that no cash loans were either obtained or any repayments in cash were made much less the interest payment. The assessing officer while concluding the assessment proceedings taking note of the letter of the petitioner dated 02.06.2014, acknowledging the receipt of amount of Rs.6,00,00,000/- made addition of Rs.47,12,325/-, under Section 69A of the Act, which according to the Assessing Officer is excess payment over and above the loans accepted. 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. 6,65,00,000/-. Challenging the same, the instant Writ Petition is filed. Heard, submissions of the learned counsel for the petitioner and 4. the respondents. 5. Perused material on record. The main contention of the petitioner is that no satisfaction was recorded in the assessment order with regard to levy of penalty under Section 271 D of the Act. The petitioner relying on the decision of the Apex Court in the case of CIT Vs. JaiLaxmi Rice Mills, Ambala City contends that there was no evidence before the Assessing Cfficer to show that the petitioner has 6. ^ (2015)64 Taxmann.com75(SC) 5 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 denied to have received any cash loans, what all was taken was through banking channels. The learned Senior Standing Counsel Sri Vijay Kumar Punna, 7. appearing for the respondents would contend that against the order impugned an alternative remedy of appeal is provided under the provisions of the Act. Without availing such remedy filing the present Writ Petition would not be maintainable. He relies on the following decisions in support of his case. In the case of M. Sougoumarin Vs. Assistant Commissioner Puducherry, Circle-1, Income (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. (2019)411 ITR499 (Madras) HI. In the case of Five Star Marine Exports (P) Ltd. Vs Deputy Commissioner (2018) 92 Taxman.com 404 (Madras) IV. In the case of Vasan Healthcare (P.) Ltd. Vs. Additional Commissioner of Income Tax Range 2, Chennai, (2021)278 Taxman 273 (SC) V. In the case of Al Ameen Educational Trust Vs. of Tax Tax, Chennai, of Income Commissioner of Income Tax, (2021) 283 Taxman 285 (SC) 6 VI. In the case of Assistant Director of Inspection Investigation Vs. Kum.A.B. Shanthi, (2002) 255 ITR 258 (SC) In the case of Ashok Kumar Vs. State of Haryana, (2010) 12 see 350 VIII. In the case of Dilip N. Shroff Vs. CIT, (2007) 6 SCC 329 VII. 8. We have gone through the material placed on record. The Assessing 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 from 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 given by the petitioner denying acceptance of loan in cash, therefore, having satisfied with the same the Assessing Officer did not record any satisfaction or contemplated initiating the penalty under Sec.291D of the Act. In our view, the satisfaction of the Assessing Officer is required to be recorded because the same officer, who passed the assessment order 9. would not be levying the penalty under Sec.271D of the Act. Unless the 7 Assessing Officer, 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.271D of the Act. The Writ Petition is accordingly allowed. There shall be no order 10. as to costs. As a sequel, interlocutory applications pending, if any, shall stand closed. SOI- 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.32875 of 2023 5 2 8 OCT 202^ m ALLOWING THE W.P. WITHOUT COSTS "