Late Shri Madanlal N. Singalkar, Jalna V. Additional Commissioner of Income-tax,

ITA 2183/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84993 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Initiation of penalty proceedings
• Section: 273B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2183/PN/2013 (ASSESSMENT YEAR : 2006-07) LATE SHRI MADANLAL N. SINGALKAR, THROUGH LEGAL HEIR SHRI MANJEET M. SINGALKAR, MADANLAL AUTOMOBILES SERVICES, MANTHA ROAD, JALNA-431203 PAN NO. AVJPS3266Q .. APPELLANT VS. ADDL.CIT, RANGE-1, AURANGABAD .. RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 18-09-2014 DATE OF PRONOUNCEMENT : 19-09-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 22-11-2013 OF THE CIT(A), AURANGABAD RELATING TO ASSESSMENT YEAR 2006-07. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT AN ACTION U/S.132 OF THE I.T. ACT WAS CONDUCTED AT THE BUSINESS AND RESIDENTIAL P REMISES OF RUDRANEE GROUP OF AURANGABAD. DURING THE SAID SEAR CH OPERATION, IT WAS NOTICED THAT SHRI KACHRULAL NATHMAL MUTHA OF JA LNA HAD GIVEN CASH LOAN OF RS.25 LAKHS TO RUDRANEE CONSTRUCTION C OMPANY OF RUDRANEE GROUP OF AURANGABAD. CONSEQUENTIAL SURVEY ACTION 2 U/S.133A OF THE I.T. ACT WAS CONDUCTED ON 02-02-200 6 AT BUSINESS- CUM-RESIDENTIAL PREMISES OF SHRI KACHRULAL NATHMAL MUTHA WHO WAS ENGAGED IN UNAUTHORISED MONEY LENDING. AS PER THE MODUS OPERANDI, SHRI KACHRULAL NATHMAL MUTHA WAS TO GIVE CASH LOAN IN HUNDIES AND KEEP THE SIGNED DATED/ UNDATED CHEQUES FROM THE BOR ROWERS AS SECURITY. THE CHEQUES WOULD BE RETURNED WHEN THE H UNDIES WERE CANCELLED. FROM THE IMPOUNDED HUNDIES, IT WAS NOT ICED THAT THE ASSESSEE SHRI MADANLAL SINGALKAR HAS TAKEN CASH LOA N OF RS.6 LAKHS FROM SHRI KACHRULAL NATHMAL MUTHA DURING THE A.Y. 2 006-07 AND THE SAME HAS BEEN REPAID IN CASH. ACCORDINGLY, THE AO SENT A PROPOSAL TO THE ADDL.CIT VIDE LETTER DATED 25-06-2009 FOR INITI ATION OF PENALTY PROCEEDINGS U/S.271D AND 271E OF THE I.T. ACT. AFT ER REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ADDL .CIT HELD THAT THE ASSESSEE HAS ACCEPTED THE LOAN/DEPOSIT OF RS.6 LAKH S IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE I.T. ACT AND THEREFORE IS LIABLE FOR LEVY OF PENALTY U/S.271D OF THE I.T. ACT . HE, THEREFORE, DIRECTED THE ASSESSEE TO PAY RS.6 LAKHS BY WAY OF P ENALTY U/S.271D OF THE I.T. ACT. 3. IN APPEAL THE LD.CIT(A) UPHELD THE PENALTY SO LE VIED BY THE ADDL.CIT BY OBSERVING AS UNDER : 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTIC ED THAT SHRI K.N. MUTHA IS UNDISPUTEDLY ENGAGED IN THE BUSINESS OF MONEY LENDING IN CASH. IT IS ALSO UNDISPUTED FACT THAT SHRI K.N. MUTHA H AS GIVEN CASH LOAN ON HUNDIES TO VARIOUS BORROWERS AND HAS OBTAINED DATED/ UNDATED DULY SIGNED CHEQUES OF THE BORROWERS AS SECURITY. IT IS ALSO A FACT THAT SUCH HUNDIES & CHEQUES AMOUNTING TO RS.6,00,000/-, DULY SIGNED OF THE APPELLANT, HAVE BEEN FOUND WITH SHRI KACHRULAL NATHMAL MUTHA. THEREFORE, THE A.O. HAS HELD THAT THE APPELLANT HAS A CCEPTED CASH LOAN OF RS.6,00,000/- FROM SHRI K.N. MUTHA. ON THE OTHER HAND, THE 3 APPELLANT HAS CLAIMED THAT HE HAS APPROACHED SHRI K.N . MUTHA WITH THE PROPOSAL OF LOAN AND HAS HANDED OVER A CHEQUES & H UNDIES OF RS.6,00,000/- AS SECURITY TO SHRI K.N. MUTHA, HOWEVER, THE SAID LOAN PROPOSAL DID NOT MATERIALIZED. HOWEVER, THE SAID CHEQ UES AND HUNDIES REMAINED WITH SHRI K.N. MUTHA. THE CONTENTION OF THE APPELLANT THAT HE HAS GIVEN DU LY SIGNED HUNDIES & CHEQUES OF RS.6,00,000/- TO SHRI K.N. MUTHA WITHOUT OBTAINING CASH LOAN OF RS.6,00,000/- AND THE SAME HAS BEEN REMAINED W ITH SHRI K.N. MUTHA APPEARS TO BE IMPROBABLE AND HENCE CANNOT BE A CCEPTED. THE APPELLANT HAS ALSO RAISED ANOTHER CONTENTION THA T AS EITHER APPELLANT OR SHRI K.N. MUTHA HAS NOT MADE ANY ENTRY OF LOAN RECEIVED OR LOAN ADVANCED IN THEIR BOOKS OF ACCOUNTS, RESPECTIV ELY, THE PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE. ON PER USAL OF SECTION 269SS OF THE ACT, THIS CONTENTION OF THE APPELLANT I S ALSO FOUND TO BE INCORRECT AS IT IS NOWHERE PROVIDED IN THE SAID SECTION OR IN THE PROVISOS PROVIDING FOR EXCEPTIONS THAT IF THE ENTRIES O F LOAN ACCEPTED OR GIVEN HAVE NOT BEEN MADE IN THE BOOKS OF ACCOUNT S OF THE BORROWER AND LENDER, THEN THE PROVISIONS OF SECTION 269SS SHALL NOT BE APPLICABLE. THE SECOND CONTENTION RAISED BY THE APPE LLANT IS ALSO REJECTED. THE A.O. IS, THEREFORE, JUSTIFIED IN HOLDING THAT THE APPELLANT HAS ACCEPTED CASH LOAN OF RS.6,00,000/- FROM SHRI K.N. MU THA. THE CASE OF THE APPELLANT IS CLEARLY COVERED BY THE PROVISIONS OF SECTION 269SS OF THE ACT AND NOT COVERED BY EXCEPTIONS PROVIDED IN TH E SAID SECTION. THE APPELLANT HAS NOT BROUGHT ON RECORD ANY REASONABL E CAUSE FOR COMMITTING DEFAULT U/S 269SS OF THE ACT AS ENVISAGED B Y PROVISIONS OF SECTION 273B OF THE ACT. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS JUSTIFIED IN HOLDING THAT THE APPELL ANT HAS ACCEPTED CASH LOAN OF RS.6,00,000/- FROM SHRI K.N. MUTHA AND HENCE PENALTY OF RS.6,00,000/- IS LEVIABLE U/S 271D OF THE ACT. THE PE NALTY LEVIED U/S 271D OF THE ACT OF RS.6,00,000/- IS CONFIRMED. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE PENALTY LEVIED BY THE ADDL. CIT UNDER S. 271-D FOR VIOLATION OF S. 269SS OF THE ACT AND CONFIRMED BY CIT(A) IS ILLEGAL AND WI THOUT JURISDICTION SINCE NO VIOLATION OF S. 269SS HAS BEEN PROVED BY THE REVENUE. THE PENALTY BE QUASHED. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. ADDL. CIT FAILED TO DISCHARGE THE BURDEN THAT WAS ON HIM AS PER S. 292C OF THE ACT TO PROVE THAT ANY DEPOSIT WAS ACCEPTE D BY THE APPELLANT IN CASH OF RS. 6,00,000/-. THE PENALTY LEV IED BEING ILLEGAL BE QUASHED. 4 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND SINCE NO ASSESSMENT ORDER WAS PASSED BY THE A.O. IN THIS CASE NO SATISFACTION OF THE A.O. IS AVAILABLE REGARDING VIOLAT ION OF THE PROVISIONS OF S. 269SS OF THE ACT TO ATTRACT PENAL PR OVISIONS OF S. 271- D OF THE ACT. THE PENALTY BE DELETED. 4) THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE AO VIDE LETTER DATED 25-06-2009 HAS MADE REFERENCE FOR INITIATION OF PENALTY PROCEEDINGS U/S.271D AND 271E OF THE I.T. A CT. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF LODHA BUILDERS PVT. LTD. AND OTHERS VS. ACIT REPORT ED IN (2014) 34 ITR (TRIBUNAL) 157 (MUMBAI) HE SUBMITTED THAT THE T RIBUNAL IN THE SAID DECISION WHILE EXPLAINING THE MEANING OF ACTI ON FOR IMPOSITION OF PENALTY HAS HELD THAT THE AO MAKING REFERENCE T O ADDL.CIT FOR INITIATION OF PENALTY IS DATE OF ACTION FOR IMPOSI TION OF PENALTY AND NOT DATE OF SHOW CAUSE NOTICE BY ADDL.CIT. REFERRI NG TO PROVISIONS OF SECTION 275(1)(C) OF THE I.T. ACT, HE SUBMITTED THA T PENALTY ORDER HAS TO BE PASSED WITHIN 6 MONTHS FROM THE END OF THE MO NTH IN WHICH THE ACTION WAS INITIATED OR BEFORE THE END OF THE FINAN CIAL YEAR IN WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED WHICHEVER IS LATER. HE SUBMITTED THAT IN THE INSTANT CASE THE ORDER HAS BEEN PASSED ON 26- 11-2010 WHEREAS THE SAME SHOULD HAVE BEEN PASSED ON OR BEFORE 31- 03-2010. HE ACCORDINGLY SUBMITTED THAT THE ORDER P ASSED BY THE ADDL.CIT, BEING BARRED BY LIMITATION SHOULD BE HELD AS INVALID AND THE PENALTY SO LEVIED HAS TO BE CANCELLED. 5 5.1 SO FAR AS THE MERIT OF THE CASE IS CONCERNED, T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO VIOLATION O F THE PROVISIONS OF SECTION 269SS FOR WHICH PENALTY PROVISIONS ARE ATTR ACTED. HE SUBMITTED THAT THE ASSESSEE HAD CATEGORICALLY STATE D THAT HE HAS NOT TAKEN ANY CASH LOAN FROM SHRI KACHRULAL NATHMAL MUT HA NOR THE SAME HAS BEEN RECORDED IN HIS BOOKS OF ACCOUNT. SIMILAR LY, NO SUCH CASH LOAN GIVEN TO THE ASSESSEE WAS RECORDED IN THE BOOK S OF SHRI KACHRULAL NATHMAL MUTHA. THE PENALTY HAS BEEN LEVIED MERELY ON THE BASIS OF PRESUMPTIONS AND SURMISES. FURTHER, THE ASSESSEE I N THE MEANTIME IS NO MORE AND HAS EXPIRED. HE ACCORDINGLY SUBMITTED THAT IN ABSENCE OF ANY DIRECT EVIDENCE THAT THE ASSESSEE HAS ACCEPTED CASH LOAN FROM SHRI KACHRULAL NATHMAL MUTHA, NO PENALTY U/S.271D IS LEV IABLE SINCE THERE IS NO VIOLATION OF THE PROVISIONS OF SECTION 269SS. HE ACCORDINGLY SUBMITTED THAT THE PENALTY LEVIED BY THE ADDL.CIT A ND UPHELD BY THE CIT(A) BE CANCELLED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT T HE SAME IS NOT BARRED BY LIMITATION. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND THE AO REFERRED THE MATTER TO THE ADDL.CIT FOR INITIATION OF PENALTY PR OCEEDINGS U/S.271D AND 271E OF THE I.T. ACT SINCE A NUMBER OF SIGNED D ATED/UNDATED CHEQUES WERE IMPOUNDED FROM THE PREMISES OF ONE SHR I KACHRULAL 6 NATHMAL MUTHA ACCORDING TO WHICH THE ASSESSEE APPEA RS TO HAVE TAKEN A CASH LOAN OF RS.6 LAKHS FROM SHRI KACHRULAL NATHM AL MUTHA DURING THE A.Y. 2006-07. WE FIND BEFORE THE CIT(A) THE AS SESSEE SUBMITTED THAT HE HAS ONLY APPROACHED SHRI KACHRULAL NATHMAL MUTHA WITH THE PROPOSAL OF LOAN FOR WHICH HE HAD HANDED OVER THE C HEQUES AND HUNDIES OF RS.6 LAKHS AS SECURITY. HOWEVER, THE SA ID PROPOSAL DID NOT MATERIALISE. HOWEVER, THE SAID HUNDIES REMAINED WI TH SHRI KACHRULAL NATHMAL MUTHA. WE FIND THE LD.CIT(A) DID NOT ACCEP T THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE SAME APPEARS TO BE IMPROBABLE FOR WHICH THE ARGUMENT OF THE ASSESSEE WAS REJECTED . THE OTHER CONTENTION OF THE ASSESSEE THAT THERE IS NO ENTRY E ITHER IN THE BOOKS OF SHRI KACHRULAL NATHMAL MUTHA OR IN THE BOOKS OF THE ASSESSEE WAS ALSO REJECTED BY THE CIT(A). 7.1 IN OUR OPINION, FOR IMPOSING PENALTY U/S.271D T HERE MUST BE SOME DIRECT EVIDENCE TO SUBSTANTIATE THAT THE ASSES SEE HAS INFACT ACCEPTED CASH LOAN IN VIOLATION OF THE PROVISIONS O F SECTION 269SS. IN THE INSTANT CASE, THERE IS NO DIRECT EVIDENCE BROUG HT ON RECORD BY THE REVENUE. THE ASSESSEE WAS CATEGORICALLY DENYING OF ANY SUCH CASH LOAN FROM SHRI KACHRULAL NATHMAL MUTHA. THERE IS N OTHING ON RECORD TO SUGGEST THAT ANY SUCH STATEMENT HAS BEEN RECORDE D FROM EITHER OF THE PERSONS SO AS TO PROVE THAT SUCH CASH LOAN HAS BEEN GIVEN OR TAKEN. THE ENTIRE PROCESS IS ON THE BASIS OF SURMISES AND PRESUMPTIONS. IT IS ALSO A FACT THAT THE ASSESSEE IS NO MORE AND HAS EX PIRED. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF TH E OPINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271D OF THE I.T. A CT IN ABSENCE OF ANY 7 DIRECT EVIDENCE TO SHOW THAT THE ASSESSEE, IN THE I NSTANT CASE, HAS ACCEPTED CASH LOAN IN VIOLATION OF PROVISIONS OF SE CTION 269SS. IN THIS VIEW OF THE MATTER, WE SET-ASIDE THE ORDER OF THE C IT(A) AND DIRECT THE AO TO CANCEL THE PENALTY LEVIED U/S.271D OF THE I.T . ACT, 1961. SINCE THE ASSESSEE SUCCEEDS ON MERIT, WE REFRAIN OURSELVE S FROM DECIDING THE LEGAL ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE TO THE PROPOSITION THAT THE PENALTY ORDER IS BARRED BY LIM ITATION. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 19-09-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT M EMBER PUNE DATED: 19 TH SEPTEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. THE D.R, A PUNE BENCH 6. 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