Growth Avenue Ltd., Surat V. The Jt.CIT.,Range-1, Surat

ITA 1939/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6659 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH OJHA SRDR
• Assessee Lawyers: J P SHAH SRAR
• Keywords: Income from undisclosed sources; Question of law; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI G.D. AGARWAL, HONBLE VICE-PRESIDENT (AZ) AND SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER ITA NO.1939-1940/AHD/2009 ASSESSMENT YEAR:2003-04 DATE OF HEARING:13.4.11 DRAFTED:4.5.11 GROWTH AVENUES LTD., 409, SUPER TEX TOWER, OPP. KINNERY CINEMA, RING ROAD, SURAT PAN NO.AAACG8681Q V/S. JT. CIT, RANGE-1, SURAT, AAYKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI J.P. SHAH, SR-AR REVENUE BY:- SHRI RAJESH OJHA, SR-DR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THESE ARE TWO ASSESSEES APPEALS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX(APPEALS)-I, SURAT OF EVE N DATE I.E. 31-03-2009 FOR THE ASSESSMENT YEAR 2003-04. FIRST WE TAKE UP ITA NO.1939/AHD/2009. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUND:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN CONFORMING PENALTY OF RS.25,00,000/ U/S.27 1E OF THE ACT WHICH IS ABSOLUTELY ERRONEOUS AND BAD IN LAW REQUIRING OU TRIGHT ANNULMENT. 3. THE BRIEF FACTS OF THE CASE AS EMERGED FROM THE ORDER OF LD. CIT(APPEALS) ARE THAT A SEARCH OPERATION U/S.132 WA S CARRIED OUT AT THE RESIDENCE OF SHRI KIRTIBHAI K SHROFF ( KKS FOR SHOR T), WHEREIN IT WAS FOUND THAT THE ASSESSEE HAD REPAID LOAN OF RS.25 LAKH TO SHRI KKS IN CASH. THE JCIT ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 2 THEREFORE ISSUED A NOTICE U/S.271E R.W.S.S 269T REQ UIRING IT TO SHOW CAUSE AS TO WHY PENALTY U/S.271E BE NOT LEVIED. THE ASSESSEE REPLIED THAT SHRI KKS WAS SUB-BROKER OF THE ASSESSEE-COMPANY AND HAD REGU LAR DEALINGS WITH THE ASSESSEE-COMPANY IN THIS REGARD. AS A PART OF BUSIN ESS AGREEMENT, SHRI KKS HAD AGREED TO PAY THE ASSESSEE-COMPANY A SECURITY D EPOSIT FOR WHICH THE ASSESSEE-COMPANY HAD EXECUTED PROMISSORY NOTE IN HI S FAVOUR. HOWEVER, AS AGAINST THE PROMISSORY NOTE GIVEN BY THE ASSESSEE-C OMPANY CHEQUES OF ONLY RS.6 LAKH WAS CLEARED ON 11-07-2003 IN THE ACCOUNT OF THE ASSESSEE- COMPANY AND THE BALANCE AMOUNT WAS PENDING. THIS PR OMISSORY NOTE WAS EXECUTED FOR THE SAFETY POINT OF VIEW BY THE SAID S HRI KKS AGAINST THE PAYMENTS TO BE MADE BY HIM DURING THE REGULAR BUSIN ESS DEALINGS. THE ASSESSEE STATED THAT HOWEVER THE ACTUAL PAYMENT REC EIVED WAS ONLY RS.6 LAKH THAT TOO THROUGH ACCOUNT PAYEE CHEQUE. IT WAS SUBMI TTED BY ASSESSEE- COMPANY THAT EVEN DURING THE COURSE OF RECORDING OF PRELIMINARY STATEMENT OF ONE OF THE DIRECTORS OF THE COMPANY, MR. VIREN SHAH BEFORE THE REVENUE, HE HAD CATEGORICALLY STATED THAT HE HAD RECEIVED ONLY RS.6 LAKH BY ACCOUNT PAYEE CHEQUE AGAINST THE PROMISSORY NOTE AND THE BALANCE AMOUNT WAS PENDING. IN VIEW OF THIS REASON, THE ASSESSEE CONTENDED THAT TH ERE WAS NO VIOLATION OF PROVISIONS OF SECTION 269T. WITHOUT PREJUDICE TO TH IS ARGUMENT, THE ASSESSEE ALSO SUBMITTED THAT IF THE AMOUNT HAS NOT BEEN RECO RDED IN THE REGULAR BOOKS OF ACCOUNT THE REVENUE CANNOT RESORT TO PENALTY PRO CEEDINGS U/S.271D/271E BY ALLEGING THE AMOUNT AS UNDISCLOSED. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V. STANDARD BRANDS LTD. (2006) 285 ITR 295 (DEL), WHEREIN IT WAS HELD THAT REVENUE HAVING TAKEN THIS STAND THAT THE ALLEGED DEPOSIT WAS UNDISCLOSED AND THEREBY UNACCOUNTED TAKEN RESORT TO PENALTY PROCEEDINGS U/S.271D. THE A SSESSEE ALSO RELIED ON THE DECISION OF ITAT MUMBAI IN THE CASE OF DCIT V. G.S. ENTERTAINMENT (2007) 109 TTJ 54 (MUM), WHEREIN IT WAS HELD THAT THE PENA LTY LEVIED U/S.271D IN RESPECT OF AMOUNT ADDED AS UNDISCLOSED INCOME IS IN VALID. ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 3 4. THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTE D BY ASSESSING OFFICER ON THE GROUND THAT DURING THE COURSE OF SEA RCH AT THE RESIDENCE OF SHRI KKS BY THE PROMISSORY NOTES OF RS.5 LAKH EACH TOTAL ING TO RS.25 LAKH WERE FOUND AND SHRI KKS HAD STATED IN HIS STATEMENT RECO RDED U/S.132(4) IN REPLY TO QUESTION NO.22 THAT HE HAD GIVEN AN AMOUNT OF RS.25 LAKH TO M/S GROWTH AVENUES LTD. ON 23-01-2003. IT WAS ALSO STATED BY H IM THAT THESE FIVE PROMISSORY NOTES WERE IN RESPECT OF SAID AMOUNT. IN REPLY TO QUESTION NO.2 OF HIS STATEMENT RECORDED ON 25-01-2005 SHRI SAMAIR K SHROF STATED THAT LOAN OF RS.25 LAKH GIVEN TO GROWTH AVENUES LTD. HAD BEEN RE CEIVED BACK WHICH HAD GIVEN OUT THE UNACCOUNTED INCOME, WHICH CLEARLY IND ICATED THAT THE ASSESSEE HAD ACCEPTED THE LOAN OF RS.25 LAKH AND REPAID THE SAME IN CASH. IT WAS ALSO MENTIONED BY THE ASSESSING OFFICER THAT IN VIEW OF REPLY AT QUESTION NO.22 OF SHRI KKS OF HIS STATEMENT RECORDED U/S.132(4) THE C ONTENTION OF THE ASSESSEE THAT THE PROMISSORY NOTES WERE EXECUTED FOR SAFETY POINTS HAS NO RELEVANCE. ACCORDING TO HIM, SHRI KKS HAS CLEARLY MADE A STATE MENT U/S.132(4) THAT PROMISSORY NOTE FOUND DURING THE COURSE OF SEARCH I N RESPECT OF RS.25 LAKH GIVEN AS LOAN TO THE ASSESSEE-COMPANY. THIS IS FURT HER REINFORCED BY THE REPLY TO QUESTION NO.2 OF THE STATEMENT RECORDED ON 25-01 -2005 WHERE SHRI SAMIRBHAI K SHROFF STATED THAT LOAN OF RS.25 LAKH G IVEN TO THE ASSESSEE- COMPANY WAS RECEIVED BACK WHICH WAS GIVEN OUT OF UN ACCOUNTED INCOME. THE ASSESSEE FAILED TO BRING ANY EVIDENCE ON THE RECORD TO SHOW THAT PROMISSORY NOTES WERE ISSUED AGAINST REGULAR BUSINESS DEALINGS AND NOT FOR OBTAINING LOANS. THE LEGAL POSITION OF STATEMENT U/S.132(4) I S THAT A PERSON WHO IS IN POSSESSION OF THE EVIDENCE HAS TO EXPLAIN THE SAME. THE PRESUMPTION IS THAT THESE DOCUMENTS/EVIDENCES WERE TRUE AND THE GENUINE NESS IS CAST ON THE ASSESSEE TO DISPROVE THE SAME OR PROVE IT OTHERWISE . THE ASSESSING OFFICER FURTHER STATED THAT THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF STANDARD BRANDS LTD. (SUPRA) AND THE DECISION OF ITAT MUMBAI BENCH IN T HE CASE OF G.S. ENTERTAINMENT (SUPRA) WERE NOT APPLICABLE IN THE PRESENT CASE OF ASSESSEE AS THEY ARE REGARDING TREATING UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE AND ALSO INITIATING PROCEEDINGS FOR VI OLATION OF SECTION ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 4 269SS/271D. IN THE PRESENT CASE, THE AMOUNT OF RS.2 5 LAKH HAS NOT BEEN TAXED AS UNDISCLOSED INCOME IN THE HANDS OF GROWTH AVENUES LTD. AND THEREFORE DECISIONS ARE NOT APPLICABLE ON THE FACTS OF THE ASSESSEES CASE. THE AO THEREFORE STATED THAT SECTION 269T ENVISAGES THAT NO PERSON SHALL REPAY ANY LOAN OR DEPOSIT TO ANY OTHER PERSON OTHER WISE BY ANY ACCOUNT PAYEE CHEQUE OF ACCOUNT PAYEE BANK DRAFT AND IF THE AMOUN T OF SUCH LOAN OR DEPOSIT IS RS.20,000/- OR MORE THAN THE PENALTY U/S.271E WO ULD BE LEVIED EQUAL TO THE LOAN OR DEPOSIT AMOUNT. THE ASSESSEE HAS REPAID THE LOAN OF RS.25 LAKH IN CASH IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269T. THE AO THEREFORE LEVIED PENALTY OF RS.25 LAKH U/S.271E FOR VIOLATING THE PROVISIONS OF SECTION 269T. 5. AGGRIEVED BY THIS ORDER ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A). IT WAS SUBMITTED ON BEHALF OF ASSESSEE THAT ASSESSING OFFICER HAS LEVIED THE PENALTY MERELY ON THE BASIS OF STATEMENT OF SHRI KK S WITHOUT THERE BEING ANY OTHER EVIDENCE. IT WAS FURTHER ARGUED THAT THE STAT EMENT OF SHRI KKS WAS NOT RELEVANT THAT IT WAS AGAINST LOGIC AND FACTS BECAUS E IF CASH WAS REPAID PROMISSORY NOTES WOULD BE TAKEN BACK BY THE BORROWE R AND THEY COULD NOT BE FOUND IN HIS POSSESSION. NO BORROWER WOULD LEAVE TH E PROMISSORY NOTE WITH THE LENDER ONCE THE AMOUNT WAS REPAID. IT WAS FURTH ER ARGUED ON BEHALF OF ASSESSEE THAT THE STATEMENT TAKEN AT THE BACK OF TH E ASSESSEE CANNOT BE RELIED UPON WITHOUT PROVIDING OPPORTUNITY OF CROSS- EXAMINATION. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF HONBLE PUNJ AB & HARYANA IN THE CASE OF CIT V. ARJUN DASS SURINDER KUMAR AND CO. (1999) 239 ITR 859 (P & H), WHEREIN THE HONBLE HIGH COURT HELD THAT THE STATEM ENT NOT CONFRONTED TO THE ASSESSEE CANNOT BE RELIED UPON FOR ADVERSE INFERENC ES. THE ASSESSEE ALSO RELIED ON THE DECISION OF ITAT AMRITSAR BENCH IN TH E CASE OF RAAJESH MEHTA V. ITO (2006) 100 TTJ 453 (ASR) IN THIS REGARD. THE PRESU MPTION U/S 132(4) CANNOT BE RESORTED TO SINCE NO EVIDENCE WAS FOUND I N THE POSSESSION OF THE ASSESSEE. IT WAS FURTHER ARGUED THAT PROMISSORY NOT ES WERE NOT FOUND IN THE POSSESSION OF ASSESSEE AND HENCE PROVISIONS OF SEC TION 132(4A) WERE NOT ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 5 APPLICABLE TO THE ASSESSEE IN THIS REGARD. THE ASSE SSEE RELIED ON THE DECISION OF ITAT VISHAKAPATTNAM IN THE CASE OF SMT. BOMMANA SWARNA REKHA V. ACIT (2005) 94 TTJ 885 (VISAKHA), WHEREIN IT WAS HELD TH AT PRESUMPTION U/S.132(4A) WAS AVAILABLE ONLY AGAINST THE PERSON F ROM WHOSE POSSESSION THE DOCUMENT WAS FOUND. 6. THE LD. CIT(A) IN ORDER TO THIS SUBMISSION OF TH E ASSESSEE TO ASSESSING OFFICER FOR GIVING CROSS-EXAMINATION OF SHRI KKS AN D THEREAFTER SUBMITTING TO HIS REMAND REPORT. IN THE REMAND REPORT, THE ASSESS ING OFFICER STATED THAT FIVE PROMISSORY NOTES OF RS.5 LAKH EACH WAS FOUND DURING THE COURSE OF SEARCH OPERATION AT THE RESIDENCE OF SHRI KKS. THESE PROMI SSORY NOTES WERE ISSUED BY SHRI RAKESH DOSHI AND SHRI VIREN SHAH, WHO WERE THE DIRECTORS OF THE ASSESSEE-COMPANY TO SHRI KKS ON 23-01-2003 AGAINST RECEIPT OF CASH. IN THE STATEMENT RECORDED U/S 132(4) IN RESPONSE TO QUESTI ON NO.22 SHRI KKS CLEARLY STATED THAT AN AMOUNT OF RS.25 LAKH IN CASH WAS GIVEN ON 23-01-2003 TO GROWTH AVENUES LTD. AND THE PROMISSORY NOTES WER E FOUND IN RESPECT OF SAID AMOUNT SHRI VIREN SHAH, DIRECTOR OF THE ASSESS EE-COMPANY WAS ALSO QUESTIONED AND IN HIS STATEMENT RECORDED ON 07-07-2 005 STATED IN REPLY TO QUESTION NO.11 THAT HE HAD RECEIVED ONLY RS.6 LAKH BY CHEQUE AND THE PROMISSORY NOTES OF RS.25 LAKH WERE ISSUED IN GOOD FAITH. IN REPLY TO QUESTION NO.22 OF HIS STATEMENT DATED 25-01-2005 SHRI SSK ST ATED THAT A SUM OF RS.25 LAKH HAD BEEN RECEIVED BACK. DURING THE REMAND PROC EEDINGS, THE CROSS- EXAMINATION OF SHRI KKS WAS CARRIED OUT BY SHRI VIR EN SHAH ON 24-12-2008 AND DIN THIS CROSS-EXAMINATION SHRI KKS REPEATED HI S EARLIER STATEMENT THAT HE HAD GIVEN LOAN OF RS.25 LAKH IN CASH AND THE SAME H AD BEEN RECEIVED BACK IN CASH TO SHRI VIREN SHAH AND SHRI RAKESH DOSHI. SHRI KKS FURTHER SATED THAT PROMISSORY NOTES HAD REMAINED WITH HIM EVEN AFTER R EPAYMENT OF LOAN IN GOOD FAITH. THIS COPY OF THIS REMAND REPORT WAS GIVEN TO ASSESSEE FOR HIS COMMENTS. THE ASSESSEE IN HIS COUNTER COMMENTS WHO REPEATED THE SAME ARGUMENTS AND WE HAVE ALREADY MENTIONED AND ALSO PL ACED RELIANCE ON THE SAME DECISION WHICH HAVE ALSO BEEN RECORDED BY US. IT WAS FURTHER ARGUED ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 6 THAT DURING THE CROSS-EXAMINATION THE ASSESSEE HAD STATED THAT AMOUNT WAS GIVEN TO MR.VIREN SHAH AND SHRI RAKESH DOSHI AND IT WAS RETURNED BY THEM. SHRI KKS HAS MADE NO ALLEGATION AGAINST THE ASSESSE E-COMPANY AND THEREFORE THE PENALTY SHOULD NOT BE LEVIED ON THE A SSESSEE-COMPANY. 7. AFTER TAKING INTO THE SUBMISSIONS OF ASSESSEE, T HE REMAND REPORT OF THE ASSESSING OFFICER AND COUNTER-COMMENTS OF THE ASSES SEE ON THIS REMAND REPORT LD. CIT(A) CONFIRMED THIS PENALTY BY OBSERVI NG AS UNDER:- 2.3.1 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. THE FACTS IN THIS CASE ARE VERY CLEAR. FIVE PROMISSORY NOTES OF RS .FIVE LAKHS EACH WERE FOUND DURING THE COURSE OF SEARCH OPERATION AT THE RESIDENCE OF SHRI KIRTIB HAI K SHROFF. THESE PROMISSORY NOTES WERE ISSUED BY SHRI RAKESH DOSHI A ND SHRI VIREN SHAH, WHO ARE THE DIRECTORS OF THE ASSESSEE COMPANY TO SHRI KIRTIBHAI K SHROFF ON 23.01.2003 AGAINST RECEIPT OF CASH. IN THE STATEMENT RECORDED U/S.132(4) IN RESPONSE TO QUESTION NO.22, SHRI KIRTIBHAI K. SHROFF HAD CLEARLY STATED THAT AN AMOUNT OF RS.25,0 0,000/ IN CASH WAS GIVEN ON 23.01.2003 TO GROWTH AVENUES LTD. AND THE PROMISSORY NOTES FOUND WERE IN RESPECT OF SAID AMOUNT. SHRI VIREN SH AH, DIRECTOR OF THE APPELLANT COMPANY WAS ALSO QUESTIONED AND IN HIS ST ATEMENT RECORDED ON 07.07.2005 STATED IN REPLY TO QUESTION NO.11 THA T HE HAD RECEIVED ONLY RS.6,00,000/P- BY CHEQUE AND THE PROMISSORY NO TES OF RS.25,00,000/- WERE ISSUED IN GOOD FAITH. FURTHER I N REPLY TO QUESTION NO.22 OF STATEMENT DATED 25.01.2005, SHRI SAMAIRBHA I K SHROFF STATED THAT SUM OF RS.255,00,000/P HAD BEEN RECEIVED BACK. EVEN DURING THE REMAND PROCEEDINGS, THE CROSS-EXAMINATION OF SHRI K IRTIBHAI K SHROFF WAS CARRIED OUT BY SHRI VIREN SHAN ON 24.12.2008 AN D IN THIS CROSS- EXAMINATION SHRI KIRTIBHAI K SHROFF REPEATED HIS EA RLIER STATEMENT THAT HE HAD GIVEN LOAN OF RS.25,00,000/- IN CASH AND THE SAME HAD BEEN RECEIVED BACK IN CASH THROUGH SHRI VIREN SHAH AND S HRI RAKESH DOSHI. SHRI KIRTIBHAI K SHROFF FURTHER STATED THAT THE PRO MISSORY NOTES HAVE REMAINED WITH HIM EVEN AFTER REPAYMENT OF LOAN IN G OOD FAITH. THE RELEVANT PORTION OF THE CROSS EXAMINATION IS AS UND ER:- Q.1 PLEASE CLARIFY THE STATEMENT AS GIVEN BY YOU I N RESPECT OF MY PROMISSORY NOTES FOUND FROM YOUR POSSESSION DURING THE COURSE OF SEARCH AT YOUR PREMISES? A.1 I HAVE STATED THAT I HAVE GIVEN LOAN TO MR. VIR EN SHAH AND RAKESH DOSHI OF RS.25 LAKCS FOR WHICH PROMISSORY NO TES WERE OBTAINED. I DONT REMEMBER THE EXACT DATE SINCE THE SAME HAVE BEEN GIVEN AROUND 5 TO 6 YEARS BACK. ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 7 Q.2 WHETHER THE PROMISSORY NOTES WERE IN THE NAME O F THE COMPANY GROWTH AVENUES LTD. OR IN THE INDIVIDUAL NA ME? A.2 IT WAS IN THE INDIVIDUAL NAME OF VIREN SHAH AND RAKESH DOSHI. Q.3 HAVE THE LOAN GIVEN BY YOU IS REPAID TO YOU OR NOT? A.3 YES I HAVE RECEIVED BACK THE LOAN. Q.4 WHEN WAS THE LOAN REPAID TO YOU AND HOW? A.4 I DO NOT REMEMBER THE EXACT DATED \E AND THE SA ID LOAN WAS REPAID I CASH. Q.5 BY WHOM WAS THE LOAN REPAID TO YOU? A.5 THE LOAN WAS REPAID BY SHRI VIREN SHAH AND RAKE SH DOSHI. Q.6 DO YOU HAVE ANY RECEIPT OR ANY OTHER EVIDENCE I N RESPECT OF LOAN GIVEN OR RECEIVED BACK? A.6 NO APART FROM PROMISSORY NOTE I HAVE NO OTHER E VIDENCE. Q.9 WHETHER YOU OR YOUR FAMILY MEMBERS OR ANY OF YO UR CONCERN HAVE ANY BUSINESS RELATION OR BUSINESS TRANSACTION WITH ME PERSONALLY OR MY COMPANY GROWTH AVENUE LTD. IN CONN ECTION WITH WHICH THE PROMISSORY NOTE WAS EXECUTED? A.9 THE PROMISSORY NOTE WAS EXECUTED ONLY ON ACCOUN T OF LOAN TRANSACTION AND NOT FOR ANYTHING ELSE. AS REGARDS B USINESS RELATION I WOULD LIKE TO STATE THAT I DO NOT HAVE A NY BUSINESS TRANSACTION WITH YOU OR YOUR COMPANY TO THE BEST OF MY KNOWLEDGE. AS REGARDS BUSINESS RELATION OF MY FAMIL Y MEMBERS I WOULD LIKE TO STATE THAT I DO NOT EXACTLY REMEMBER ANY THING AS REGARDS BUSINESS TRANSACTIONS OF MY FAMILY MEMBER. 2.3.2 FROM THE ABOVE IT IS CLEAR THAT THE CASH TRAN SACTION OF GIVING LOAN TO THE ASSESSEE COMPANY AND THE ASSESSEE COMPANY RE PAYING THE SAME IN CASH HAS BEEN ESTABLISHED NOT ONLY BY THE F ACT THAT THE PROMISSORY NOTES WERE ISSUED WHICH ARE NOT DENIED B Y THE APPELLANT COMPANY BUT ALSO BY THE CROSS-EXAMINATION STATEMENT RECORDED BY SHRI VIREN SHAH, DIRECTOR OF THE APPELLANT COMPANY. MR. VIREN SHAH COULD NOT REBUT THE STATEMENT MADE BY SHRI KIRTIBHAI K SH AH WHO REITERATED DURING THE CROSS-EXAMINATION WHAT HE HAD STATED EAR LIER. SINCE THE FACT OF RECEIVING AND REPAYING THE LOAN IN CASH HAS BEEN ESTABLISHED THE ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 8 DECISION OF THE HON;BLE DELHI HIGH COURT IN THE CAS E OF STANDARD BRAND LTD. (SUPRA) AND THE DECISION OF THE HONB;E I.T.A.T ., MUMBAI IN THE CASE OF G.S. ENTERTAINMENT (SUPRA) ARE NOT APPLICABLE BE CAUSE THIS IS NOT A CASE WHERE THE A.O HAS TREATED THE SAME AMOUNT AS U NDISCLOSED INCOME OF THE APPELLANT AS WELL AS LEVIED PENALTY F OR RECEIVING THE AMOUNT IN CASH AS LOAN/DEPOSIT. IN THE CASE OF STANDARD BRAND, THE FACTS AND DECISION OF THE HONBLE HIGH COURT IS AS UNDER:- THE ASSESSEE RECEIVED AN AMOUNT OF RS 3 LAKHS IN C ASH FROM A COMPANY WHICH WAS IN VIOLATION OF SECTION 269SS OF THE INCOME- TAX ACT, 1961.ACCORDING TO THE ASSESSEE, IT WAS A D EPOSIT BY THE ASSESSING OFFICER TREATED THE AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE AND INITIATED PENALTY PROCEEDINGS AGAI NST THE ASSESSEE UNDER SECTION 271D. THE COMMISSIONER (APPEALS) CONFIRMED THE PENALTY. IN THE QUANTUM ISSUE, THE CO MMISSIONER (APPEALS) HELD THAT THE ADDITION UNDER SECTION 158B C COULD NOT BE SUSTAINED AND THAT THE ASSESSING OFFICER COULD HAVE TAKEN ACTION UNDER SECTION 147. THE TRIBUNAL UPHELD THE VIEW TAK EN BY THE COMMISSIONER (APPEALS) IN THE QUANTUM APPEAL AND HE LD THAT THE RECEIPT WAS OUTSIDE THE SCOPE OF UNDISCLOSED INCOME DEFINED UNDER SECTION 158B(B) AND DISMISSED THE DEPARTMENTS APPEAL. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE REVENUE HAVIN G TAKEN THE STAND THAT THE AMOUNT WAS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE, IT COULD NOT RESORT TO PROCEEDINGS UN DER SECTION 269SS READ WITH SECTION 271D. SINCE THE BLOCK ASSESSMENT COULD NOT BE SUSTAINED, PENAL ACTION MAY BE PERMISSIBLE ( IF AT ALL) ONLY AFTER A REGULAR ASSESSMENT WAS MADE. NO SUBSTANTIAL QUESTION OF LAW AROSE IN THE APPEAL. 2.3.3 FROM THE ABOVE DECISION, IT IS SEEN THAT THE A.O IN THE CASE OF STANDARD BRAND HAD NOT ONLY TREATED THE AMOUNT AS L OAN RECEIVED BUT HAD ALSO TREATED THE AMOUNT AS ASSESSEES OWN UNDIS CLOSED INCOME. BOTH THE STANDS ARE CONTRADICTORY AND, THEREFORE, T HE PENALTY WAS DELETED. IN FACT, THE HONBLE HIGH COURT OBSERVED THAT THE PENAL ACTION MAY BE PERMISSIBLE ONCE THE REGULAR ASSESSMENT WAS MADE. THE PROVISIONS OF SECTION 269SS AND 269T R.W.S. 271D & 271E WERE BROUGHT ON THIS STATUTE TO PREVENT LAUNDERING OF UN ACCOUNTED MONEY. IN THE PRESENT CASE, IT IS ESTABLISHED THAT THE ASSESS EE HAD TAKEN CASH LOAN OF RS.25,00,000/P AND REPAID THE SAME THEREBY VIOLATING THE PROVISIONS OF SECTION 269SS AND 269T INVITING UPON ITSELF THE PENAL PROVISIONS OF SECTION 271D & 271E. THEREFORE, THE P ENALTY LEVIED BY THE JT. CIT U/S.271E IS CONFIRMED AND THE GROUND OF APP EAL IS DISMISSED. ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 9 8. FURTHER AGGRIEVED BY THIS ORDER OF LD. CIT(A) NO W ASSESSEE IS IN APPEAL BEFORE US. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT FIVE PROMISSORY NOTES OF RS.5 LAKH EACH WERE FOUND DURIN G THE COURSE OF SEARCH OPERATION AT THE RESIDENCE OF SHRI KKS. THESE PROMI SSORY NOTES WERE ISSUED BY SHRI RAKESH DOSHI AND VIREN SHAH SHRI KKS AGAINS T RECEIPT OF CASH. IN THE STATEMENT RECORDED U/S.132(4) IN RESPONSE TO QUESTI ON NO.22 SHRI KKS STATED THAT AN AMOUNT OF RS.25 LAKH IN CASH WAS GIVEN ON 2 3-01-2003 TO GROWTH AVENUES LTD. AND THE PROMISSORY NOTES WERE IN RESPE CT OF THAT AMOUNT. HOWEVER, DURING THE REMAND PROCEEDINGS, THE CROSS-E XAMINATION OF SHRI KKS WAS CARRIED OUT BY SHRI VIREN SHAH ON 24-12-2008. I N THIS CROSS-EXAMINATION, SHRI KKS IN REPLY TO QUESTION NO.1 HAS CATEGORICALL Y STATED THAT HE HAD GIVEN LOAN TO SHRI VIREN SHAN AND RAKESH DOSHI OF RS.25 L AKH FOR WHICH PROMISSORY NOTES WERE OBTAINED. IN REPLY TO QUESTION NO2 HE ME NTIONED THAT PROMISSORY NOTES WERE IN THE NAME OF INDIVIDUALS AND NOT IN TH E NAME OF GROWTH AVENUES LTD.. IN REPLY TO QUESTION NO.5 HE HAS MENTIONED TH AT THE LOAN WAS REPAID BY SHRI VIREN SHAH AND RAKESH DOSHI. IT IS CLEAR FROM THIS THAT ASSESSEE- COMPANY NEITHER TOOK ANY LOAN FROM SHRI KKS NOR REP AID ANY AMOUNT TO HIM IN CASH. THE PROVISIONS OF SECTION 271E WHICH READ AS UNDER:- 271E IF A PERSON REPAYS ANY [LOAN OR] DEPOSIT REFE RRED TO IN SECTION 269T OTHERWISE THAN IN ACCORDANCE WITH THE PROVISIO NS OF THAT SECTION, HE SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE [LOAN OR] DEPOSIT SO REPAID. IT IS CLEAR THAT PENALTY U/S.271E CAN BE LEVIED AGA INST THE PERSON WHO HAS REPAID ANY LOAN OR DEPOSIT REFERRED TO IN SECTION 2 69T OTHERWISE THAN IN ACCORDANCE WITH THE PROVISIONS OF THAT SECTION. SIN CE IN THIS CASE THERE IS NO SUCH VIOLATION ON THE PART OF ASSESSEE-COMPANY THE PENALTY CANNOT BE LEVIED AGAINST IT. IF AT ALL THERE IS ANY VIOLATION OF THE PROVISIONS OF SECTION 269T, IT WAS ON THE PART OF SHRI RAKESH DOSHI AND VIREN SHAH AS IS CLEARE FROM THE CROSS-EXAMINATION OF SHRI KKS. IN VIEW OF THIS, THE PENALTY IMPOSED BY ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 10 ASSESSING OFFICER U/S.271E/269T AND SUSTAINED BY LD . CIT(A) IS HEREBY DELETED. NOW COMING TO ITA NO.1940/AHD/2009. 10. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN CONFIRMING PENALTY OF RS.25,00,000/- U /S.271D OF THE ACT WHICH IS ABSOLUTELY ERRONEOUS AND BAD IN LAW REQUIR ING OUTRIGHT ANNULMENT. 11. THE BRIEF FACTS OF THE CASE AS EMERGED FROM THE ORDER OF LD. CIT(A) ARE THAT A SEARCH OPERATION WAS CARRIED OUT AT THE RESI DENCE OF SHRI KKS U/S. 132, WHEREIN IT WAS FOUND THAT THE ASSESSEE HAD ACCEPTED A LOAN OF RS.25 LAKH FRO SHRI KKS IN CASH. THE JCIT ISSUED A NOTICE U/S.271D R.W.S. 269SS REQUIRING IT TO SHOW CAUSE AS TO WHY PENALTY U/S.271D BE NOT LEV IED. THE ASSESSEE REPLIED THAT SHRI KKS WAS SUB-BROKER OF THE ASSESSEE-COMPAN Y AND HAD REGULAR DEALINGS WITH THE ASSESSEE-COMPANY IN THIS REGARD. AS A PART OF BUSINESS AGREEMENT, SHRI KKS HAD AGREED TO PAY THE ASSESSEE- COMPANY A SECURITY DEPOSIT FOR WHICH THE COMPANY HAD EXECUTED PROMISSO RY NOTE IN HIS FAVOUR. HOWEVER, AS AGAINST THE PROMISSORY NOTE GIVEN BY TH E ASSESSEE-COMPANY CHEQUES OF ONLY RS.6 LAKHS WAS CLEARED ON 11-07-200 3 IN THE ACCOUNT OF THE ASSESSEE-COMPANY AND THE BALANCE AMOUNT WAS PENDING . THIS PROMISSORY NOTE WAS EXECUTED FOR THE SAFETY POINT OF VIEW BY T HE SAID BROKER AGAINST THE PAYMENTS TO BE MADE BY HIM DURING THE REGULAR BUSIN ESS DEALINGS. IT WAS SUBMITTED BY ASSESSEE-COMPANY THAT THE ACTUAL PAYME NT RECEIVED WAS ONLY RS.6 LAKH THAT TOO THROUGH ACCOUNT PAYEE CHEQUE AND EVEN DURING THE COURSE OF RECORDING OF PRELIMINARY STATEMENT OF ONE OF THE DIRECTORS OF THE ASSESSEE- COMPANY, MR. VIREN SHAH BEFORE THE REVENUE HAD CATE GORICALLY STATED THAT HE HAD RECEIVED ONLY RS.6 LAKH BY ACCOUNT PAYEE CHEQUE AGAINST THE PROMISSORY NOTE AND THE BALANCE AMOUNT WAS PENDING. IN VIEW OF THIS REASON, THE ASSESSEE CONTENDED THAT THERE WAS NO VIOLATION OF P ROVISIONS OF SECTION 269SS. WITHOUT PREJUDICE TO THIS ARGUMENT, THE ASSE SSEE ALSO SUBMITTED THAT IF THE AMOUNT HAS NOT BEEN RECORDED IN THE REGULAR BOO KS OF ACCOUNT, THE ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 11 REVENUE CANNOT RESORT TO PENALTY PROCEEDINGS U/S.27 1D/271E BY ALLEGING THE AMOUNT AS UNDISCLOSED. THE ASSESSEE RELIED ON THE D ECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF STANDARD BRANDS LTD. (SUPRA), WHEREIN IT WAS HELD THAT THE REVENUE HAVING TAKEN THIS STAND THAT THE ALLEGED DEPOSIT WAS UNDISCLOSED AND THEREBY UNACCOUNTED TAKEN RESORT TO PENALTY PROCEEDINGS U/S.271D. AGAIN ASSESSEE ALSO RELIED ON THE DECISIO N OF ITAT MUMBAI IN THE CASE OF G.S. ENTERTAINMENT (SUPRA), WHEREIN IT WAS HELD THAT THE PENALTY LEVI ED U/S.271D IN RESPECT OF AMOUNT ADDED AS UNDISCLOSED INCOME IS INVALID. 12. THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPT ED BY ASSESSING OFFICER ON THE GROUND THAT DURING THE COURSE OF SEA RCH AT THE RESIDENCE OF SHRI KKS BY THE PROMISSORY NOTES OF RS.5 LAKH EACH TOTAL ING TO RS.25 LAKH WERE FOUND AND SHRI KKS HAD STATED IN HIS STATEMENT RECO RDED U/S 132(4) IN REPLY TO QUESTION NO.22 THAT HE HAD GIVEN AN AMOUNT OF RS.25 LAKH TO M/S GROWTH AVENUES LTD. ON 23-01-2003. IT WAS ALSO STATED BY H IM THAT THESE FIVE PROMISSORY NOTES WERE IN RESPECT OF SAID AMOUNT. IN REPLY TO QUESTION NO.2 OF HIS STATEMENT RECORDED ON 25-01-2005, SHRI SAMIR K SHROFF STATED THAT LOAN OF RS.25 LAKH GIVEN TO M/S. GROWTH AVENUES LTD HAD BEE N RECEIVED BACK WHICH HAD GIVEN OUT THE UNACCOUNTED INCOME, WHICH CLEARLY INDICATED THAT ASSESSEE HAD ACCEPTED THE LOAN OF RS.25 LAKH AND REPAID THE SAME IN CASH. IT WAS ALSO MENTIONED BY THE ASSESSING OFFICER THAT IN VIEW OF REPLY AT QUESTION NO.22 OF SHRI KKS OF HIS STATEMENT RECORDED U/S 132(4) THE C ONTENTION OF THE ASSESSEE THAT THE PROMISSORY NOTES WERE EXECUTED FOR SAFETY POINTS HAS NO RELEVANCY. ACCORDING TO HIM, SHRI KKS HAS CLEARLY MADE A STATE MENT U/S.132(4) THAT PROMISSORY NOTE FOUND DURING THE COURSE OF SEARCH I N RESPECT OF RS.25 LAKH GIVEN AS LOAN TO THE ASSESSEE-COMPANY. THIS IS FURT HER REINFORCED BY THE REPLY TO QUESTION NO.2 OF THE STATEMENT RECORDED ON 25-01 -2005 WHERE SHRI SAMIRBHAI K SHROFF STATED THAT LOAN OF RS.25 LAKH G IVEN TO THE ASSESSEE- COMPANY WAS RECEIVED BACK WHICH WAS GIVEN OUT OF UN ACCOUNTED INCOME. THE ASSESSEE FAILED TO BRING ANY EVIDENCE ON THE RECORD TO SHOW THAT PROMISSORY NOTES WERE ISSUED AGAINST REGULAR BUSINESS DEALINGS AND NOT FOR OBTAINING ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 12 LOANS. THE LEGAL POSITION OF THE STATEMENT U/S.132( 4) IS THAT A PERSON WHO IS IN POSSESSION OF THE EVIDENCE HAS TO EXPLAIN THE SAME. THE PRESUMPTION IS THAT THESE DOCUMENTS/EVIDENCES WERE TRUE AND THE GENUINE NESS IS CAST ON THE ASSESSEE TO DISPROVE THE SAME OR PROVE IT OTHERWISE . THE AO FURTHER STATED THAT THE DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF STANDARD BRANDS LTD. (SUPRA) AND THE DECISION OF ITAT MUMBAI BENCH IN T HE CASE OF G.S. ENTERTAINMENT (SUPRA) WERE NOT APPLICABLE IN THE PRESENT CASE OF ASSESSEE AS THEY ARE REGARDING TREATING UNDISCLOSED INCOME IN T HE HANDS OF THE ASSESSEE AND ALSO INITIATING PROCEEDINGS FOR VIOLATION OF SE CTION 269SS/271D. IN THE PRESENT CASE, THE AMOUNT OF RS.25 LAKH HAS NOT BEEN TAXED AS UNDISCLOSED INCOME IN THE HANDS OF GROWTH AVENUES LTD. AND THER EFORE DECISIONS ARE NOT APPLICABLE ON THE FACTS OF THE ASSESSEES CASE. THE AO THEREFORE STATED THAT SECTION 269T ENVISAGES THAT NO PERSON SHALL TAKE OR ACCEPT ANY LOAN DEPOSIT FROM ANY OTHER PERSON OTHERWISE BY ANY ACCOUNT PAYE E CHEQUE OR ACCOUNT PAYEE BANK DRAFT AND IF THE AMOUNT OF SUCH LOAN OR DEPOSIT OF RS.20,000/- OR MORE THEN PENALTY U/S.271D WOULD BE LEVIED EQUAL TO THE LOAN OR DEPOSIT AMOUNT. THE ASSESSEE HAS ACCEPTED LOAN OF RS.25 LAK H IN CASH IN CONTRAVENTION OF PROVISION OF SECTION 269SS. THE AO THEREFORE LEVIED THE PENALTY OF RS.25 LAKH U/S.271D FOR VIOLATING THE PR OVISION U/S.269SS. 13. AGGRIEVED BY THIS ORDER ASSESSEE WENT IN APPEAL BEFORE FIRST APPELLATE AUTHORITY. IT WAS SUBMITTED ON BEHALF OF ASSESSEE T HAT ASSESSING OFFICER HAS LEVIED THE PENALTY MERELY ON THE BASIS OF STATEMENT OF SHRI KKS WITHOUT THERE BEING ANY OTHER EVIDENCE. IT WAS FURTHER ARGUED THA T THE STATEMENT OF SHRI KKS WAS NOT RELEVANT THAT IT WAS AGAINST LOGIC AND FACT S BECAUSE IF CASH WAS REPAID PROMISSORY NOTES WOULD BE TAKEN BACK BY THE BORROWE R AND THEY COULD NOT BE FOUND IN HIS POSSESSION. NO BORROWER WOULD LEAVE TH E PROMISSORY NOTE WITH THE LENDER ONCE THE AMOUNT WAS REPAID. IT WAS FURTH ER ARGUED ON BEHALF OF ASSESSEE THAT THE STATEMENT TAKEN AT THE BACK OF TH E ASSESSEE CANNOT RELIED UPON WITHOUT PROVIDING OPPORTUNITY OF CROSS-EXAMINA TION. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF HONBLE PUNJA B & HARYANA HIGH COURT ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 13 IN THE CASE OF ARJUN DASS SURINDER KUMAR AND CO. (SUPRA), WHEREIN THE HONBLE HIGH COURT HELD THAT THE STATEMENT NOT CONF RONTED TO THE ASSESSEE CANNOT BE RELIED UPON FOR ADVERSE INFERENCES. THE A SSESSEE ALSO RELIED ON THE DECISION OF ITAT AMRITSAR BENCH IN THE CASE OF RAJESH MEHTA (SUPRA). THE PRESUMPTION U/S.132(4) CANNOT BE RESORTED TO SINCE NO EVIDENCE WAS FOUND IN THE POSSESSION OF THE ASSESSEE. IT WAS FURTHER ARGU ED THAT PROMISSORY NOTES WERE NOT FOUND IN THE POSSESSION OF ASSESSEE AND HE NCE PROVISIONS OF SECTION 132(4A) WERE NOT APPLICABLE TO THE ASSESSEE IN THIS REGARD. THE ASSESSEE RELIED ON THE DECISION OF ITAT VISHAKAPTNAM IN THE CASE OF SMT. BOMMANA SWARNA REKHA (SUPRA), WHEREIN IT WAS HELD THAT PRESUMPTION U/S. 132(4A) WAS AVAILABLE ONLY AGAINST THE PERSON FROM WHOSE POSSES SION THE DOCUMENT WAS FOUND. 14. THE LD. CIT(A) IN ORDER TO THIS SUBMISSION OF T HE ASSESSEE TO ASSESSING OFFICER FOR GIVING CROSS-EXAMINATION OF SHRI KKS AN D THEREAFTER SUBMITTING TO HIS REMAND REPORT. IN THE REMAND REPORT, THE ASSESS ING OFFICER STATED THAT FIVE PROMISSORY NOTES OF RS.5 LAKH EACH WAS FOUND DURING THE COURSE OF SEARCH OPERATION AT THE RESIDENCE OF SHRI KKS. THESE PROMI SSORY NOTES WERE ISSUED BY SHRI RAKESH DOSHI AND SHRI VIREN SHAH, WHO WERE THE DIRECTORS OF THE ASSESSEE-COMPANY TO SHRI KKS ON 23-01-2003 AGAINST RECEIPT OF CASH. IN THE STATEMENT RECORDED U/S 132(4) IN RESPONSE TO QUESTI ON NO.22 SHRI KKS CLEARLY STATED THAT AN AMOUNT OF RS.25 LAKH IN CASH WAS GIVEN ON 23-01-2003 TO GROWTH AVENUES LTD. AND THE PROMISSORY NOTES WER E FOUND IN RESPECT OF SAID AMOUNT SHRI VIREN SHAH, DIRECTOR OF THE ASSESS EE-COMPANY WAS ALSO QUESTIONED AND IN HIS STATEMENT RECORDED ON 07-07-2 005 STATED IN REPLY TO QUESTION NO.11 THAT HE HAD RECEIVED ONLY RS.6 LAKH BY CHEQUE AND THE PROMISSORY NOTES OF RS.25 LAKH WERE ISSUED IN GOOD FAITH. IN REPLY TO QUESTION NO.22 OF HIS STATEMENT DATED 25-01-2005 SHRI SSK ST ATED THAT A SUM OF RS.25 LAKH HAD BEEN RECEIVED BACK. DURING THE REMAND PROC EEDINGS, THE CROSS- EXAMINATION OF SHRI KKS WAS CARRIED OUT BY SHRI VIR EN SHAH ON 24-12-2008 AND DIN THIS CROSS-EXAMINATION SHRI KKS REPEATED HI S EARLIER STATEMENT THAT HE ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 14 HAD GIVEN LOAN OF RS.25 LAKH IN CASH AND THE SAME H AD BEEN RECEIVED BACK IN CASH TO SHRI VIREN SHAH AND SHRI RAKESH DOSHI. SHRI KKS FURTHER SATED THAT PROMISSORY NOTES HAD REMAINED WITH HIM EVEN AFTER R EPAYMENT OF LOAN IN GOOD FAITH. THIS COPY OF THIS REMAND REPORT WAS GIVEN TO ASSESSEE FOR HIS COMMENTS. THE ASSESSEE IN HIS COUNTER COMMENTS WHO REPEATED THE SAME ARGUMENTS AND WE HAVE ALREADY MENTIONED AND ALSO PL ACED RELIANCE ON THE SAME DECISION WHICH HAVE ALSO BEEN RECORDED BY US. IT WAS FURTHER ARGUED THAT DURING THE CROSS-EXAMINATION THE ASSESSEE HAD STATED THAT AMOUNT WAS GIVEN TO MR.VIREN SHAH AND SHRI RAKESH DOSHI AND IT WAS RETURNED BY THEM. SHRI KKS HAS MADE NO ALLEGATION AGAINST THE ASSESSE E-COMPANY AND THEREFORE THE PENALTY SHOULD NOT BE LEVIED ON THE A SSESSEE-COMPANY. 15. AFTER TAKING INTO THE SUBMISSIONS OF ASSESSEE, THE REMAND REPORT OF THE ASSESSING OFFICER AND COUNTER-COMMENTS OF THE ASSES SEE ON THIS REMAND REPORT LD. CIT(A) CONFIRMED THIS PENALTY BY OBSERVI NG AS UNDER:- 2.3.1 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. THE FACTS IN THIS CASE ARE VERY CLEAR. FIVE PROMISSORY NOTES OF RS .FIVE LAKHS EACH WERE FOUND DURING THE COURSE OF SEARCH OPERATION AT THE RESIDENCE OF SHRI KIRTIB HAI K SHROFF. THESE PROMISSORY NOTES WERE ISSUED BY SHRI RAKESH DOSHI A ND SHRI VIREN SHAH, WHO ARE THE DIRECTORS OF THE ASSESSEE COMPANY TO SHRI KIRTIBHAI K SHROFF ON 23.01.2003 AGAINST RECEIPT OF CASH. IN THE STATEMENT RECORDED U/S.132(4) IN RESPONSE TO QUESTION NO.22, SHRI KIRTIBHAI K. SHROFF HAD CLEARLY STATED THAT AN AMOUNT OF RS.25,0 0,000/ IN CASH WAS GIVEN ON 23.01.2003 TO GROWTH AVENUES LTD. AND THE PROMISSORY NOTES FOUND WERE IN RESPECT OF SAID AMOUNT. SHRI VIREN SH AH, DIRECTOR OF THE APPELLANT COMPANY WAS ALSO QUESTIONED AND IN HIS ST ATEMENT RECORDED ON 07.07.2005 STATED IN REPLY TO QUESTION NO.11 THA T HE HAD RECEIVED ONLY RS.6,00,000/P- BY CHEQUE AND THE PROMISSORY NO TES OF RS.25,00,000/- WERE ISSUED IN GOOD FAITH. FURTHER I N REPLY TO QUESTION NO.22 OF STATEMENT DATED 25.01.2005, SHRI SAMAIRBHA I K SHROFF STATED THAT SUM OF RS.255,00,000/P HAD BEEN RECEIVED BACK. EVEN DURING THE REMAND PROCEEDINGS, THE CROSS-EXAMINATION OF SHRI K IRTIBHAI K SHROFF WAS CARRIED OUT BY SHRI VIREN SHAN ON 24.12.2008 AN D IN THIS CROSS- EXAMINATION SHRI KIRTIBHAI K SHROFF REPEATED HIS EA RLIER STATEMENT THAT HE HAD GIVEN LOAN OF RS.25,00,000/ IN CASH AND THE SAME HAD BEEN RECEIVED BACK IN CASH THROUGH SHRI VIREN SHAH AND S HRI RAKESH DOSHI. SHRI KIRTIBHAI K SHROFF FURTHER STATED THAT THE PRO MISSORY NOTES HAVE ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 15 REMAINED WITH HIM EVEN AFTER REPAYMENT OF LOAN IN G OOD FAITH. THE RELEVANT PORTION OF THE CROSS EXAMINATION IS AS UND ER:- Q.1 PLEASE CLARIFY THE STATEMENT AS GIVEN BY YOU I N RESPECT OF MY PROMISSORY NOTES FOUND FROM YOUR POSSESSION DURING THE COURSE OF SEARCH AT YOUR PREMISES? A.1 I HAVE STATED THAT I HAVE GIVEN LOAN TO MR. VIR EN SHAH AND RAKESH DOSHI OF RS.25 LAKCS FOR WHICH PROMISSORY NO TES WERE OBTAINED. I DONT REMEMBER THE EXACT DATE SINCE THE SAME HAVE BEEN GIVEN AROUND 5 TO 6 YEARS BACK. Q.2 WHETHER THE PROMISSORY NOTES WERE IN THE NAME O F THE COMPANY GROWTH AVENUES LTD. OR IN THE INDIVIDUAL NA ME? A.2 IT WAS IN THE INDIVIDUAL NAME OF VIREN SHAH AND RAKESH DOSHI. Q.3 HAVE THE LOAN GIVEN BY YOU IS REPAID TO YOU OR NOT? A.3 YES I HAVE RECEIVED BACK THE LOAN. Q.4 WHEN WAS THE LOAN REPAID TO YOU AND HOW? A.4 I DO NOT REMEMBER THE EXACT DATED \E AND THE SA ID LOAN WAS REPAID I CASH. Q.5 BY WHOM WAS THE LOAN REPAID TO YOU? A.5 THE LOAN WAS REPAID BY SHRI VIREN SHAH AND RAKE SH DOSHI. Q.6 DO YOU HAVE ANY RECEIPT OR ANY OTHER EVIDENCE I N RESPECT OF LOAN GIVEN OR RECEIVED BACK? A.6 NO APART FROM PROMISSORY NOTE I HAVE NO OTHER E VIDENCE. Q.9 WHETHER YOU OR YOUR FAMILY MEMBERS OR ANY OF YO UR CONCERN HAVE ANY BUSINESS RELATION OR BUSINESS TRANSACTION WITH ME PERSONALLY OR MY COMPANY GROWTH AVENUE LTD. IN CONN ECTION WITH WHICH THE PROMISSORY NOTE WAS EXECUTED? A.9 THE PROMISSORY NOTE WAS EXECUTED ONLY ON ACCOUN T OF LOAN TRANSACTION AND NOT FOR ANYTHING ELSE. AS REGARDS B USINESS RELATION I WOULD LIKE TO STATE THAT I DO NOT HAVE A NY BUSINESS TRANSACTION WITH YOU OR YOUR COMPANY TO THE BEST OF MY KNOWLEDGE. AS REGARDS BUSINESS RELATION OF MY FAMIL Y MEMBERS I ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 16 WOULD LIKE TO STATE THAT I DO NOT EXACTLY REMEMBER ANY THING AS REGARDS BUSINESS TRANSACTIONS OF MY FAMILY MEMBER. 2.3.2 FROM THE ABOVE IT IS CLEAR THAT THE CASH TRAN SACTION OF GIVING LOAN TO THE ASSESSEE COMPANY AND THE ASSESSEE COMPANY RE PAYING THE SAME IN CASH HAS BEEN ESTABLISHED NOT ONLY BY THE F ACT THAT THE PROMISSORY NOTES WERE ISSUED WHICH ARE NOT DENIED B Y THE APPELLANT COMPANY BUT ALSO BY THE CROSS-EXAMINATION STATEMENT RECORDED BY SHRI VIREN SHAH, DIRECTOR OF THE APPELLANT COMPANY. MR. VIREN SHAH COULD NOT REBUT THE STATEMENT MADE BY SHRI KIRTIBHAI K SH AH WHO REITERATED DURING THE CROSS-EXAMINATION WHAT HE HAD STATED EAR LIER. SINCE THE FACT OF RECEIVING AND REPAYING THE LOAN IN CASH HAS BEEN ESTABLISHED THE DECISION OF THE HON;BLE DELHI HIGH COURT IN THE CAS E OF STANDARD BRAND LTD. (SUPRA) AND THE DECISION OF THE HONB;E I.T.A.T ., MUMBAI IN THE CASE OF G.S. ENTERTAINMENT (SUPRA) ARE NOT APPLICABLE BE CAUSE THIS IS NOT A CASE WHERE THE A.O HAS TREATED THE SAME AMOUNT AS U NDISCLOSED INCOME OF THE APPELLANT AS WELL AS LEVIED PENALTY F OR RECEIVING THE AMOUNT IN CASH AS LOAN/DEPOSIT. IN THE CASE OF STANDARD BRAND, THE FACTS AND DECISION OF THE HONBLE HIGH COURT IS AS UNDER:- THE ASSESSEE RECEIVED AN AMOUNT OF RS 3 LAKHS IN C ASH FROM A COMPANY WHICH WAS IN VIOLATION OF SECTION 269SS OF THE INCOME- TAX ACT, 1961.ACCORDING TO THE ASSESSEE, IT WAS A D EPOSIT BY THE ASSESSING OFFICER TREATED THE AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE AND INITIATED PENALTY PROCEEDINGS AGAI NST THE ASSESSEE UNDER SECTION 271D. THE COMMISSIONER (APPEALS) CONFIRMED THE PENALTY. IN THE QUANTUM ISSUE, THE CO MMISSIONER (APPEALS) HELD THAT THE ADDITION UNDER SECTION 158B C COULD NOT BE SUSTAINED AND THAT THE ASSESSING OFFICER COULD HAVE TAKEN ACTION UNDER SECTION 147. THE TRIBUNAL UPHELD THE VIEW TAK EN BY THE COMMISSIONER (APPEALS) IN THE QUANTUM APPEAL AND HE LD THAT THE RECEIPT WAS OUTSIDE THE SCOPE OF UNDISCLOSED INCOME DEFINED UNDER SECTION 158B(B) AND DISMISSED THE DEPARTMENTS APPEAL. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE REVENUE HAVIN G TAKEN THE STAND THAT THE AMOUNT WAS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE, IT COULD NOT RESORT TO PROCEEDINGS UN DER SECTION 269SS READ WITH SECTION 271D. SINCE THE BLOCK ASSESSMENT COULD NOT BE SUSTAINED, PENAL ACTION MAY BE PERMISSIBLE ( IF AT ALL) ONLY AFTER A REGULAR ASSESSMENT WAS MADE. NO SUBSTANTIAL QUESTION OF LAW AROSE IN THE APPEAL. 2.3.3 FROM THE ABOVE DECISION, IT IS SEEN THAT THE A.O IN THE CASE OF STANDARD BRAND HAD NOT ONLY TREATED THE AMOUNT AS L OAN RECEIVED BUT HAD ALSO TREATED THE AMOUNT AS ASSESSEES OWN UNDIS CLOSED INCOME. ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 17 BOTH THE STANDS ARE CONTRADICTORY AND, THEREFORE, T HE PENALTY WAS DELETED. IN FACT, THE HONBLE HIGH COURT OBSERVED THAT THE PENAL ACTION MAY BE PERMISSIBLE ONCE THE REGULAR ASSESSMENT WAS MADE. THE PROVISIONS OF SECTION 269SS AND 269T R.W.S. 271D & 271E WERE BROUGHT ON THIS STATUTE TO PREVENT LAUNDERING OF UN ACCOUNTED MONEY. IN THE PRESENT CASE, IT IS ESTABLISHED THAT THE ASSESS EE HAD TAKEN CASH LOAN OF RS.25,00,000/P AND REPAID THE SAME THEREBY VIOLATING THE PROVISIONS OF SECTION 269SS AND 269T INVITING UPON ITSELF THE PENAL PROVISIONS OF SECTION 271D & 271E. THEREFORE, THE P ENALTY LEVIED BY THE JT. CIT U/S.271E IS CONFIRMED AND THE GROUND OF APP EAL IS DISMISSED. 16. FURTHER AGGRIEVED BY THIS ORDER OF LD. CIT(A) N OW ASSESSEE IS IN APPEAL BEFORE US. 17. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT FIVE PROMISSORY NOTES OF RS.5 LAKH EACH WERE FOUND DURIN G THE COURSE OF SEARCH OPERATION AT THE RESIDENCE OF SHRI KKS. THESE PROMI SSORY NOTES WERE ISSUED BY SHRI RAKESH DOSHI AND VIREN SHAH SHRI KKS AGAINS T RECEIPT OF CASH. IN THE STATEMENT RECORDED U/S.132(4) IN RESPONSE TO QUESTI ON NO.22 SHRI KKS STATED THAT AN AMOUNT OF RS.25 LAKH IN CASH WAS GIVEN ON 2 3-01-2003 TO GROWTH AVENUES LTD. AND THE PROMISSORY NOTES WERE IN RESPE CT OF THAT AMOUNT. HOWEVER, DURING THE REMAND PROCEEDINGS, THE CROSS-E XAMINATION OF SHRI KKS WAS CARRIED OUT BY SHRI VIREN SHAH ON 24-12-2008. I N THIS CROSS-EXAMINATION, SHRI KKS IN REPLY TO QUESTION NO.1 HAS CATEGORICALL Y STATED THAT HE HAD GIVEN LOAN TO SHRI VIREN SHAN AND RAKESH DOSHI OF RS.25 L AKH FOR WHICH PROMISSORY NOTES WERE OBTAINED. IN REPLY TO QUESTION NO2 HE ME NTIONED THAT PROMISSORY NOTES WERE IN THE NAME OF INDIVIDUALS AND NOT IN TH E NAME OF GROWTH AVENUES LTD.. IN REPLY TO QUESTION NO.5 HE HAS MENTIONED TH AT THE LOAN WAS REPAID BY SHRI VIREN SHAH AND RAKESH DOSHI. IT IS CLEAR FROM THIS THAT ASSESSEE- COMPANY NEITHER TOOK ANY LOAN FROM SHRI KKS NOR REP AID ANY AMOUNT TO HIM IN CASH. THE PROVISIONS OF SECTION 271D READ AS UNDER: - 271D IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPO SIT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS, HE SHALL BE LIA BLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE LOAN OR D EPOSIT SO TAKEN OR ACCEPTED. ITA 1939-40/AHD/2009 A.Y. 2003-04 GROWTH AVENUES LTD. V. JTCIT RNG-1, SRT PAGE 18 IT IS CLEAR THAT PENALTY U/S 271D CAN BE LEVIED AGA INST A PERSON WHO TAKES OR ACCEPTS ANY LOAN OR DEPOSIT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS. SINE IN THIS CASE THERE IS NO SUCH VIOLATION ON THE PART OF ASSESSEE- COMPANY THE PENALTY CANNOT BE LEVIED AGAINST IT. IF AT ALL THERE IS ANY VIOLATION OF THE PROVISIONS OF SECTION 269SS, IT WAS ON THE P ART OF SHRI RAKESH DOSHI AND VIREN SHAH AS IS CLEAR FROM THE CROSS-EXAMINATI ON OF SHRI KKS. IN VIEW OF THIS, THE PENALTY IMPOSED BY ASSESSING OFFICER U/S. 271D/269SS AND SUSTAINED BY LD. CIT(A) IS HEREBY DELETED. 18. IN THE RESULT, BOTH APPEAL OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 19/05/2011 SD/- SD/- ( G.D.AGARWAL ) ( D.K. TYAGI ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 19/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-I, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD