M/s Drosia Constructions Pvt. Ltd., Lucknow V. The Additional Commissioner of Income Tax, Lucknow

ITA 264/LKW/2013

• Counselvise Citation: 26423714 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O N PATHAK
• Assessee Lawyers: K R RASTOGI
• Keywords: Gift; Document seized; Principle of natural justice; Period of limitation; Reasonable cause; Time period of passing order; Documents seized
• Section: 273B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.264/LKW/2013 ASSESSMENT YEAR:2008-2009 M/S DROSIA CONSTRUCTIONS PVT. LTD. 4 TH FLOOR, DROSIA TOWER, 5/5, PARK ROAD, HAZRATGANJ LUCKNOW V. ACIT CENTRAL RANGE LUCKNOW TAN/PAN:AAACD8490J (APPELLANT) (RESPONDENT) ITA NO.265/LKW/2013 ASSESSMENT YEAR:2008-2009 M/S DROSIA HOTELS LTD. 4 TH FLOOR, DROSIA TOWER, 5/5, PARK ROAD, HAZRATGANJ LUCKNOW V. ACIT CENTRAL RANGE LUCKNOW TAN/PAN:AACCD1465H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. K. R. RASTOGI, C.A. RESPONDENT BY: SHRI. O. N. PATHAK, D.R. DATE OF HEARING: 21 10 2014 DATE OF PRONOUNCEMENT: 10 12 2014 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE ASSESSEES AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE PENALTY LEVIED UNDER SECTION 271E OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). :- 2 -: 2. SINCE BOTH THESE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED THROUGH THIS CONSOLIDATED ORDER. WE, HOWEVER, PREFER TO ADJUDICATE THESE APPEALS ONE AFTER THE OTHER. I.T.A. NO. 265/LKW/2013: 3. IN THIS APPEAL, THE ASSESSEE HAS ASSAILED THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. THE LD. C. I. T. (A)-III, LUCKNOW ERRED ON FACTS AND IN LAW IN UPHOLDING THE PENALTY OF RS.3,25,000/- U/S 271E OF I. T. ACT, INSPITE OF THE FACT THESE TRANSACTIONS DO NOT BELONG TO THE APPELLANT COMPANY HENCE NO PENALTY SHOULD BE IMPOSED. 2. THE LD. C.I.T. (A)-III DID NOT APPRECIATE THAT THE TIME OF SURVEY NO PROPER BOOKS OF ACCOUNTS WERE FOUND WITH RESPECT TO THE APPELLANT COMPANY, AND OTHER GROUP CONCERN AND MIXED DETAILS, INCOMPLETE RECORDS WERE IMPOUNDED. IT IS EXPLAINED THAT THESE ENTRIES DO NOT PERTAINS TO APPELLANT COMPANY. 3. THE LD. C.I.T. (A) DID NOT APPRECIATED THAT W. H. SIDDIQUI AND SWALEHA NAIRN CONTROLLING THE AFFAIRS OF THE COMPANY AND GROUP CONCERNS AND KEEPING THE CASH BALANCES IN OWN CUSTODY. THUS, IT IS NEITHER LOAN OR DEPOSIT BUT MOVEMENT OF FUNDS FOR THE PURPOSE OF BUSINESS. 4. THERE WAS A REASONABLE CAUSE, HENCE THE PENALTY SHOULD NOT BE UPHELD U/S 271E OF I.T. ACT. 5. THE PENALTY UPHELD IS HIGHLY EXCESSIVE, CONTRARY TO THE FACTS, LAW AND PRINCIPLE OF NATURAL JUSTICE AND WITHOUT PROVIDING SUFFICIENT TIME AND OPPORTUNITY TO HAVE ITS SAY ON THE REASONS RELIED UPON BY HIM. 4. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND THAT THE PENALTY ORDER IS BARRED BY LIMITATION, AS IT WAS NOT PASSED WITHIN THE PERIOD OF SIX :- 3 -: MONTHS FROM THE ORDER OF THE ASSESSMENT AS PRESCRIBED UNDER SECTION 275(1)(C) OF THE ACT, WITH THE SUBMISSION THAT SINCE THE GROUND GOES TO THE ROOT OF THE CASE, THE SAME MAY BE ADMITTED IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT, 229 ITR 383 AND VARIOUS JUDICIAL PRONOUNCEMENTS. 5. FINDING FORCE IN THE CONTENTIONS OF THE ASSESSEE, WE ADMIT THE ADDITIONAL GROUND AND PREFER TO ADJUDICATE THE SAME AT THRESHOLD. 6. THE LD. COUNSEL FOR THE ASSESSEE ON THE GROUND OF PERIOD OF LIMITATION HAS ARGUED THAT THE ASSESSMENT WAS COMPLETED ON 13.12.2010, IN WHICH DIRECTION WAS GIVEN TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271E OF THE ACT, THEREFORE, THE LIMITATION STARTS FROM 31.12.2010 AND AS PER SECTION 275(1)(C) OF THE ACT, THE PENALTY ORDER IS TO BE PASSED EITHER BEFORE THE EXPIRY OF THE FINANCIAL YEAR OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED. THEREFORE, PENALTY ORDER SHOULD HAVE BEEN PASSED BEFORE 31.6.2011. SINCE THE PENALTY ORDER WAS PASSED ON 25.10.2011, THE SAME IS BARRED BY LIMITATION. IN SUPPORT THIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS:- 1. LODHA BUILDERS (P) LTD. VS. ACIT, 106 DTR 226. 2. CIT VS. WORLDWIDE TOWNSHIP PROJECTS LTD., 106 DTR 139. 3. CIT VS. HISSARIA BROS., 291 ITR 244. 7. THE LD. D.R., ON THE OTHER HAND, HAS CONTENDED THAT AS PER PROVISIONS OF SECTION 275(1)(C) OF THE ACT, THE PENALTY ORDER IS TO BE PASSED EITHER BEFORE THE EXPIRY OF THE FINANCIAL YEAR OR BEFORE SIX MONTHS FROM THE END OF THE MONTH, IN WHICH ACTION FOR PENALTY IS INITIATED, WHICHEVER PERIOD EXPIRES LATER. THE LEGISLATURE HAS MADE A REFERENCE OF THE INITIATION OF ACTION FOR IMPOSITION OF PENALTY; MEANING THEREBY THE ASSESSING OFFICER HAS TO INITIATE AN ACTION FOR LEVYING PENALTY. MERE MAKING A REFERENCE IN THE ASSESSMENT :- 4 -: ORDER DOES NOT MEAN THAT THE ACTION FOR IMPOSING PENALTY WAS INITIATED, AS THE PENALTY CAN ONLY BE LEVIED BY THE JOINT COMMISSIONER OF INCOME-TAX. THEREFORE, UNTIL AND UNLESS REFERENCE IS MADE TO THE JOINT COMMISSIONER OF INCOME-TAX FOR IMPOSING PENALTY UNDER SECTION 271E OF THE ACT, THE ACTION FOR IMPOSING PENALTY CANNOT BE CALLED TO HAVE BEEN INITIATED. THE LD. D.R. HAS FURTHER INVITED OUR ATTENTION TO THE PENALTY ORDER WITH THE SUBMISSION THAT NOTICE WAS ISSUED ON 15.4.2011 BY THE JOINT COMMISSIONER OF INCOME- TAX FOR IMPOSING PENALTY, THEREFORE, THE LIMITATION STARTS FROM 15.4.2011. THEREFORE THE LIMITATION COMES TO AN END ON 31.10.2011; WHEREAS THE PENALTY ORDER WAS PASSED ON 25.10.2011. THEREFORE, IT WAS PASSED WELL WITHIN THE PERIOD OF LIMITATION. 8. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES AND THE JUDGMENTS REFERRED TO BY THE ASSESSEE, WE FIND THAT UNDISPUTEDLY THE ASSESSMENT ORDER WAS PASSED ON 31.12.2010, IN WHICH THE ASSESSING OFFICER HAS MADE A REFERENCE FOR INITIATION OF PENALTY UNDER SECTION 271E OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT. IT IS ALSO A FACT THAT THE ASSESSMENT WAS FRAMED BY THE DY. COMMISSIONER OF INCOME- TAX, WHO IS NOT COMPETENT TO LEVY PENALTY UNDER SECTION 271E OF THE ACT. AS PER SECTION 271E OF THE ACT, THE PENALTY UNDER THIS SECTION CAN ONLY BE LEVIED BY THE JOINT COMMISSIONER OF INCOME-TAX. THEREFORE MERE MAKING A REFERENCE IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER FOR INITIATION OF PENALTY CANNOT BE CALLED TO BE AN ACTION INITIATED FOR IMPOSING PENALTY IN THE REAL SENSE. IN SUCH TYPE OF CASES, THE ASSESSING OFFICER IS REQUIRED TO MAKE REFERENCE TO THE JOINT COMMISSIONER OF INCOME-TAX, WHO IS COMPETENT TO IMPOSE THE PENALTY UNDER SECTION 271E OF THE ACT. ON A REFERENCE OF THE ASSESSING OFFICER, THE JOINT COMMISSIONER OF INCOME-TAX HAS TO TAKE A DECISION WITH REGARD TO THE IMPOSITION OF PENALTY UNDER SECTION 271E OF THE ACT AND THEREAFTER HE HAS TO ISSUE A NOTICE TO THE ASSESSEE TO INITIATE :- 5 -: PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271E OF THE ACT. IT IS ALSO APPARENT FROM THE PENALTY ORDER THAT THE JOINT COMMISSIONER OF INCOME-TAX HAS ISSUED A NOTICE UNDER SECTION 274 OF THE ACT FOR IMPOSING PENALTY UNDER SECTION 271E OF THE ACT ON 15.4.2011. THEREFORE, IN THE REAL SENSE ACTION FOR IMPOSING PENALTY WAS INITIATED BY ISSUANCE OF NOTICE BY THE JOINT COMMISSIONER OF INCOME-TAX. IF THAT DATE IS TAKEN, THEN THE PENALTY ORDER IS PASSED WITHIN THE PERIOD OF LIMITATION. 9. OUR ATTENTION WAS ALSO INVITED TO THE ORDER OF THE TRIBUNAL IN THE CASE OF LODHA BUILDERS (P) LTD. VS. ACIT (SUPRA), IN WHICH THE TRIBUNAL HAS HELD THAT LIMITATION PERIOD IS TO BE COUNTED FROM THE DATE OF ASSESSMENT ORDER I.E. THE DATE ON WHICH THE ASSESSING OFFICER HAS TAKEN A DECISION TO MAKE REFERENCE TO THE JOINT COMMISSIONER OF INCOME-TAX, WHO IS AUTHORIZED TO IMPOSE PENALTY. BUT IN THIS CASE, IT IS NOT CLEAR FROM THE FACTS AS TO WHEN REFERENCE WAS MADE TO THE JOINT COMMISSIONER OF INCOME-TAX FOR IMPOSING THE PENALTY. MOREOVER, THE JOINT COMMISSIONER OF INCOME-TAX IS NOT BOUND BY THE REFERENCE MADE BY THE ASSESSING OFFICER. HE HAS TO APPLY HIS OWN MIND BEFORE INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271E OF THE ACT. 10. IN THE CASE OF CIT VS. WORLDWIDE TOWNSHIP PROJECTS LTD (SUPRA), NO DISPUTE WAS RAISED WITH REGARD TO THE ISSUE THAT PENALTY ORDER WAS PASSED BEYOND THE PRESCRIBED PERIOD. BUT IN THE INSTANT CASE, THE REVENUE HAS STRONGLY CONTENDED THAT THE PENALTY ORDER WAS PASSED WITHIN THE PERIOD OF LIMITATION. 11. SIMILAR IS THE POSITION IN THE CASE OF CIT VS. HISSARIA BROS. (SUPRA), IN WHICH NOWHERE IT HAS BEEN HELD THAT LIMITATION STARTS FROM THE DATE OF ASSESSMENT ORDER. 12. NOTHING HAS BEEN PLACED ON RECORD WITH REGARD TO THE DATE OF REFERENCE TO THE JOINT COMMISSIONER OF INCOME-TAX FOR IMPOSING THE :- 6 -: PENALTY. THEREFORE, IN THE ABSENCE OF THIS INFORMATION, WE ARE OF THE VIEW THAT ACTION FOR IMPOSING THE PENALTY UNDER SECTION 271E OF THE ACT WAS INITIATED BY ISSUANCE OF NOTICE BY THE JOINT COMMISSIONER OF INCOME-TAX. THEREFORE, THE PENALTY ORDER WAS PASSED WITHIN THE PERIOD OF LIMITATION. 13. SO FAR AS ON MERIT IS CONCERNED, IT HAS BEEN CONTENDED BEFORE US THAT NO REPAYMENT IN CASH WAS MADE. IN FACT, SHRI. Z. H.SIDDIQUI, WHO IS THE DIRECTOR OF THE COMPANY, HAS A CURRENT ACCOUNT WITH THE COMPANY AND IN THE SAID ACCOUNT THERE IS A CREDIT BALANCE OF RS.60,03,60,022/- AND THE SAME HAS BEEN VERIFIED AND ACCEPTED BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE-COMPANY IS NOT PAYING ANY INTEREST IN THE SAID CURRENT ACCOUNT AND THE SAME IS NEITHER LOAN NOR DEPOSIT IN THE ASSESSEE-COMPANY. IN ADDITION TO THIS, THERE ARE TWO OTHER DIRECTORS OF THE COMPANY, NAMELY SHRI. W. H. SIDDIQUI AND SMT. SWALEHA NAIM. SHRI. W. H. SIDDIQUI IS THE FATHER OF SHRI. Z. H. SIDDIQUI AND SMT. SWALEHA NAIM IS THE WIFE OF SHRI. W. H. SIDDIQUI. THUS, THE DIRECTORS ARE SHRI. Z. H. SIDDIQUI (SON), SHRI. W. H. SIDDIQUI (FATHER) AND SMT. SWALEHA NAIM (MOTHER OF SHRI. Z. H. SIDDIQUI). OUT OF NATURAL LOVE AND AFFECTION, SHRI. Z. H. SIDDIQUI HAS GIFTED RS.31.50 LAKHS TO HIS FATHER SHRI. W. H. SIDDIQUI THROUGH TRANSFER ENTRY BY DEBITING THE CURRENT ACCOUNT OF SHRI. Z. H. SIDDIQUI AND CREDITED THE CURRENT ACCOUNT OF SHRI. W. H. SIDDIQUI IN THE BOOKS OF THE COMPANY. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE GIFT DEED WAS FILED AND COPIES OF LEDGER ACCOUNTS WERE ALSO FILED SHOWING THE TRANSFER ENTRY THROUGH JOURNAL. THUS, THERE IS NO PAYMENT THROUGH CASH AND IT IS ONLY THROUGH BOOK ENTRY. THE ASSESSING OFFICER HAS ALSO EXAMINED ALL THE DETAILS AND ACCEPTED THE GIFT GIVEN BY SHRI. Z. H. SIDDIQUI THROUGH TRANSFER OF BOOK ENTRY BY DEBITING THE ACCOUNT OF SHRI. Z. H. SIDDIQUI AND CREDITING THE ACCOUNT OF SHRI. W. H. SIDDIQUI. FURTHER, EQUITY SHARES OF THE COMPANY FOR RS.25.91 LAKHS WERE ALLOTTED TO SHRI. W. H. SIDDIQUI OUT OF CREDIT BALANCE IN HIS CURRENT ACCOUNT THROUGH TRANSFER OF THE BOOK ENTRY. THE ASSESSING OFFICER HAS EXAMINED :- 7 -: THESE DETAILS IN THE ASSESSMENT PROCEEDINGS AND ACCEPTED THE SAME AS GENERAL. THE COPY OF THE LEDGER ACCOUNT OF SHRI. Z. H. SIDDIQUI AND SHRI. W. H. SIDDIQUI IN THE BOOKS OF THE ASSESSEE-COMPANY AND COPY IS PLACED ON RECORD. 14. SHRI. Z. H. SIDDIQUI HAS ALSO GIFTED RS.7.50 LAKHS THROUGH TRANSFER BY MEANS OF THE BOOK ENTRY TO HIS MOTHER, SMT. SWALEHA NAIM FROM HIS CURRENT ACCOUNT. ACCORDINGLY THE BOOK ENTRY WAS PASSED BY CREDITING THE SAID SUM IN THE ACCOUNT OF SMT. SWALEHA NAIM. THE ASSESSING OFFICER HAS ACCEPTED THE GIFT IN THE CASE OF THE DONOR AND DONEE AND TREATED THE TRANSACTION AS GENUINE. FURTHER THE EQUITY SHARES OF THE COMPANY FOR RS.25 LAKHS WERE ALLOTTED TO SMT. SWALEHA NAIM OUT OF CREDIT BALANCE IN HER CURRENT ACCOUNT THROUGH TRANSFER OF BOOK ENTRY. THIS TRANSACTION WAS ALSO EXAMINED BY THE ASSESSING OFFICER AND FOUND TO BE GENUINE. THE COMPANY HAS ALSO ALLOTTED SHARES TO SHRI. Z. H. SIDDIQUI FOR RS.10 LAKHS, WHICH WAS TRANSFERRED THROUGH JOURNAL ENTRY FROM HIS ACCOUNT TO THE SHARE CAPITAL ACCOUNT. THE ASSESSING OFFICER HAS EXAMINED THIS TRANSACTION ALSO AND FOUND TO BE GENUINE. BUT THE ASSESSING OFFICER CONSIDERED THESE TRANSACTIONS TO BE IN VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT AND ACCORDINGLY PENALTY UNDER SECTION 271E OF THE ACT WAS IMPOSED. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT SINCE THERE WAS NO REPAYMENT OF ANY LOAN OR DEPOSIT IN CASH, THE PROVISIONS OF SECTION 269T OF THE ACT CANNOT BE INVOKED. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. WORLDWIDE TOWNSHIP PROJECTS LTD. (SUPRA) AND ALSO ON THE FOLLOWING JUDGMENTS:- 1. ANIRBAN NATH SUSHMITA, HUF VS. DCIT (I.T.A. NO. 276 OF 2000) (ALLD.) 2. CIT VS. TRIUMPH INTERNATIONAL FINANCE (I) LTD., 345 ITR 270 :- 8 -: 3. INCOME TAX OFFICER VS. M/S VIJAY LAKSHMI PRINTING WORKS PVT. LTD., NEW DELHI (I.T.A. NO. 4653/DELHI/2009), ITAT DELHI BENCH. 15. THE LD. D.R., ON THE OTHER HAND, HAS SUBMITTED THAT SINCE THE ASSESSEE HAS MADE REPAYMENT OF THE DEPOSIT TO THE DIRECTORS OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT DRAWN IN THE NAME OF THE PERSONS, PROVISIONS OF SECTION 269T OF THE ACT WAS RIGHTLY INITIATED. UNDER SECTION 269T OF THE ACT, NOTHING WAS STATED WITH REGARD TO THE BOOK ENTRIES, THROUGH WHICH SUBSTANTIAL AMOUNT WAS TRANSFERRED FROM ONE PERSON TO THE OTHER. BESIDES, HE HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 16. HAVING CAREFULLY EXAMINED THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS REFERRED TO BY THE PARTIES AND THE DOCUMENTS PLACED ON RECORD, WE FIND THAT THE ASSESSEE HAS CATEGORICALLY STATED BEFORE THE LD. CIT(A) AS WELL AS BEFORE US THAT THERE WAS NO REPAYMENT OF LOAN IN CASH. IT WAS MERELY AN ADJUSTMENT ENTRY IN THE BOOKS OF ACCOUNT. ONE OF THE DIRECTORS, SHRI. Z. H. SIDDIQUI HAS GIFTED A SUM OF RS.31.50 LAKHS TO HIS FATHER, SHRI. W. H. SIDDIQUI THROUGH TRANSFER ENTRY BY DEBITING HIS CURRENT ACCOUNT AND CREDITING THE CURRENT ACCOUNT OF SHRI. W. H. SIDDIQUI IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE COPY OF THE LEDGER ACCOUNT OF SHRI. Z. H. SIDDIQUI; SHRI. W. H. SIDDIQUI AND SMT. SWALEHA NAIM IN THE COMPANYS ACCOUNT ARE PLACED ON RECORD AND FROM A CAREFUL PERUSAL OF THE SAME, WE ALSO FIND THAT BY WAY OF TRANSFER ENTRY, SHRI. Z. H. SIDDIQUI HAS GIFTED A SUM OF RS.7.50 LAKHS TO HIS MOTHER, SMT. SWALEHA NAIM. OUT OF CREDIT AMOUNT IN THE NAME OF SHRI. W. H. SIDDIQUI AND SMT. SWALEHA NAIM, SHARES OF RS.25.91 LALKHS WERE ALLOTTED TO SHRI. W. H. SIDDIQUI AND SHARES FOR RS.25 LAKHS WERE ALLOTTED TO SMT. SWALEHA NAIM. ALL THESE TRANSACTIONS WERE UNDERTAKEN BY MAKING TRANSFER ENTRY IN THE BOOKS OF ACCOUNT. THERE WAS NO MOVEMENT OF CASH FROM ONE PLACE TO THE OTHER. LIKEWISE, THE SHARES FOR :- 9 -: RS.10 LAKHS WERE ALSO ALLOTTED TO THE ASSESSEE. SINCE THERE WAS NO TRANSACTION IN CASH, THE SOLE QUESTION ARISES IS WHETHER THE PENALTY UNDER SECTION 271E OF THE ACT CAN BE INITIATED IN SUCH A CIRCUMSTANCE? THE ANSWER WAS GIVEN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. WORLDWIDE TOWNSHIP PROJECTS LTD. (SUPRA), IN WHICH THEIR LORDSHIPS HAVE HELD THAT LIABILITY RECORDED IN THE BOOKS OF ACCOUNTS BY WAY OF JOURNAL ENTRIES, I.E. CREDITING THE ACCOUNT OF A PARTY TO WHOM MONIES ARE PAYABLE OR DEBITING THE ACCOUNT OF A PARTY FROM WHOM MONIES ARE RECEIVABLE IN THE BOOKS OF ACCOUNTS, IS CLEARLY OUTSIDE THE AMBIT OF THE PROVISION OF SECTION 269SS OF THE ACT. THE RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT ARE EXTRACTED HEREUNDER:- A PLAIN READING OF THE AFORESAID SECTION INDICATES THAT (THE IMPORT OF THE ABOVE PROVISION IS LIMITED) IT APPLIES TO A TRANSACTION WHERE A DEPOSIT OR A LOAN IS ACCEPTED BY AN ASSESSEE, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR AN ACCOUNT PAYEE DRAFT. THE AMBIT OF THE SECTION IS CLEARLY RESTRICTED TO TRANSACTION INVOLVING ACCEPTANCE OF MONEY AND NOT INTENDED TO AFFECT CASES WHERE A DEBT OR A LIABILITY ARISES ON ACCOUNT OF BOOK ENTRIES. THE OBJECT OF THE SECTION IS TO PREVENT TRANSACTIONS IN CURRENCY. THIS IS ALSO CLEARLY EXPLICIT FROM CLAUSE (III) OF THE EXPLANATION TO SECTION 269SS OF THE ACT WHICH DEFINES LOAN OR DEPOSIT TO MEAN LOAN OR DEPOSIT OF MONEY. THE LIABILITY RECORDED IN THE BOOKS OF ACCOUNTS BY WAY OF JOURNAL ENTRIES, I.E. CREDITING THE ACCOUNT OF A PARTY TO WHOM MONIES ARE PAYABLE OR DEBITING THE ACCOUNT OF A PARTY FROM WHOM MONIES ARE RECEIVABLE IN THE BOOKS OF ACCOUNTS, IS CLEARLY OUTSIDE THE AMBIT OF THE PROVISION OF SECTION 269SS OF THE ACT, BECAUSE PASSING SUCH ENTRIES DOES NOT INVOLVE ACCEPTANCE OF ANY LOAN OR DEPOSIT OF MONEY. IN THE PRESENT CASE, ADMITTEDLY NO MONEY WAS TRANSACTED OTHER THAN THROUGH BANKING CHANNELS. M/S PACL INDIA LTD. MADE CERTAIN PAYMENTS THROUGH BANKING CHANNELS TO LAND OWNERS. THIS PAYMENT MADE :- 10 -: ON BEHALF OF THE ASSESSEE WAS RECORDED BY THE ASSESSEE IN ITS BOOKS BY CREDITING THE ACCOUNT OF M/S PACL INDIA LTD. IN VIEW OF THIS ADMITTED POSITION, NO INFRINGEMENT OF SECTION 269SS OF THE ACT IS MADE OUT. 17. SIMILAR VIEW WAS EXPRESSED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ANIRBAN NATH SUSHMITA, HUF VS. DCIT (SUPRA), IN WHICH THEIR LORDSHIPS HAVE HELD THAT THE TRANSACTION IN QUESTION BEING THAT A REPAYMENT OF LOAN BY DEBIT ENTRY DID NOT COME WITHIN THE MISCHIEF OF SECTION 269T OF THE ACT. THE RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT ARE EXTRACTED HEREUNDER:- 16. WE FIND THAT THE ASSESSING OFFICER, APPELLATE AUTHORITY AS WELL AS TRIBUNAL DID NOT CONSIDER THE METHOD OF TRANSACTION, WHICH WAS BY WAY OF DISCHARGE OF THE LIABILITY OF THE LOAN. THE ASSESSEE WAS PAYING INTEREST ON THE LOAN REGULARLY AS REFLECTED IN HIS STATEMENT OF AFFAIRS AND PROFIT AND LOSS ACCOUNT IN THE FINANCIAL YEARS 1992-93 AND 1993- 94. THE REPAYMENT OF LOAN WAS NOT MADE AFTER SALE OF SHARES. THE ASSESSEE APPELLANT HAD DEBITED THE ACCOUNT BEING COST OF SHARES. THE TRANSACTION BETWEEN KARTA OF HUF AND THE HUF COULD NOT BE TERMED AS DEPOSITS AS PROVIDED UNDER SECTION 269-T AT THE RELEVANT TIME. THE TRANSACTIONS WERE MADE BETWEEN TWO TAXABLE ENTITIES. THE REPAYMENT WAS MADE, BY DEBIT ENTIRES. IN THE CIRCUMSTANCES, THE PROVISIONS OF SECTION 269-T PROVIDING FOR DEPOSITS TO BE MADE OVER AND ABOVE RS. 20, 000/- ONLY BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, WERE NOT ATTRACTED. 17. WE ARE OF THE OPINION RELYING UPON THE REASONING GIVEN IN THE JUDGMENTS CITED AS ABOVE, THAT THE TRANSACTIONS IN QUESTION BEING THAT OF REPAYMENT OF LOAN BY DEBIT ENTRY DID NOT COME WITHIN THE MISCHIEF OF SECTION 269-T. WE ARE ALSO OF THE VIEW, THAT THE EXPLANATION (III) EXPLAINING THE TERMS 'LOAN' OR 'DEPOSIT' WOULD NOT :- 11 -: MAKE ANY DIFFERENCE AND IS AS IT DOES NOT CHANGE THE METHOD OF THE TRANSACTION IN THE PRESENT CASE. 18. THE APPEAL IS ALLOWED. THE QUESTIONS OF LAW ARE DECIDED IN FAVOUR OF ASSESSEE-APPELLANT AND AGAINST THE REVENUE. THE DEPARTMENT WILL PROCEED ACCORDINGLY. 18. IN THE CASE OF CIT VS. TRIUMPH INTERNATIONAL FINANCE (I) LTD. (SUPRA), SIMILAR VIEWS WERE EXPRESSED BY THE HON'BLE BOMBAY HIGH COURT BY HOLDING THAT SETTLING CLAIMS BY MAKING JOURNAL ENTRIES IN THE RESPECTIVE BOOKS IS ALSO ONE OF THE RECOGNIZED MODES OF REPAYING LOAN OR DEPOSIT. THEREFORE, ON THE FACTS, IN THE ABSENCE OF ANY FINDING RECORDED IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER TO THE EFFECT THAT THE REPAYMENT OF LOAN OR DEPOSIT WAS NOT A BONA FIDE TRANSACTION AND WAS MADE WITH A VIEW TO EVADE TAX, THE CAUSE SHOWN BY THE ASSESSEE WAS A REASONABLE CAUSE AND IN VIEW OF SECTION 273B OF THE ACT, NO PENALTY UNDER SECTION 271E COULD BE IMPOSED FOR CONTRAVENING THE PROVISIONS OF SECTION 269T OF THE ACT. 19. AGAIN IN THE CASE OF CIT VS. SAURABH ENTERPRISES, 106 DTR 137, THE JURISDICTIONAL HIGH COURT HAS HELD THAT THERE IS NO VIOLATION OF SECTION 269SS OR 269T OF THE ACT; WHERE ONLY ADJUSTMENT ENTRIES ARE PASSED AND NO CASH IS INVOLVED AND THEREFORE PENALTY UNDER SECTION 271D OR 271E OF THE ACT IS NOT LEVIABLE IN SUCH CASES. 20. IN THE LIGHT OF THE AFORESAID JUDGMENTS, WE ARE OF THE CONSIDERED VIEW THAT SINCE THE AFORESAID FINANCIAL TRANSACTION WAS UNDERTAKEN THROUGH BOOK ENTRIES, THERE IS NO VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT. THEREFORE, PENALTY UNDER SECTION 271E OF THE ACT IS NOT LEVIABLE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE PENALTY LEVIED UNDER SECTION 271E OF THE ACT. I.T.A. NO. 264/LKW/2013: :- 12 -: 21. IN THIS CASE, THE ASSESSEE HAS ASSAILED THE ORDER OF THE LD. CIT(A), ON VARIOUS GROUNDS WHICH ARE AS UNDER:- 1. THE LD. C. I. T. (A)-III, LUCKNOW ERRED ON FACTS AND IN LAW IN UPHOLDING THE PENALTY OF RS. 3,25,000/- U/S 27IE OF I. T. ACT, INSPITE OF THE FACT THESE TRANSACTIONS DO NOT BELONG TO THE APPELLANT COMPANY HENCE NO PENALTY SHOULD BE IMPOSED. 2. THE LD. C.I.T. (A)-III DID NOT APPRECIATE THAT THE TIME OF SURVEY NO PROPER BOOKS OF ACCOUNTS WERE FOUND WITH RESPECT TO THE APPELLANT COMPANY, AND OTHER GROUP CONCERN AND MIXED DETAILS, INCOMPLETE RECORDS WERE IMPOUNDED. IT IS EXPLAINED THAT THESE ENTRIES DO NOT PERTAINS TO APPELLANT COMPANY. 3. THE LD. C.I.T. (A) DID NOT APPRECIATED THAT W. H. SIDDIQUI AND SWALEHA NAIRN CONTROLLING THE AFFAIRS OF THE COMPANY AND GROUP CONCERNS AND KEEPING THE CASH BALANCES IN OWN CUSTODY. THUS, IT IS NEITHER LOAN OR DEPOSIT BUT MOVEMENT OF FUNDS FOR THE PURPOSE OF BUSINESS. 4. THERE WAS A REASONABLE CAUSE, HENCE THE PENALTY SHOULD NOT BE UPHELD U/S 271E OF I.T. ACT. 5. THE PENALTY UPHELD IS HIGHLY EXCESSIVE, CONTRARY TO THE FACTS, LAW AND PRINCIPLE OF NATURAL JUSTICE AND WITHOUT PROVIDING SUFFICIENT TIME AND OPPORTUNITY TO HAVE ITS SAY ON THE REASONS RELIED UPON BY HIM. 22. BESIDES, THE ASSESSEE HAS ALSO RAISED TWO ADDITIONAL GROUNDS, WHICH ARE EXTRACTED AS UNDER:- 1. THE PRESENT PENALTY ORDER IS BARRED BY LIMITATIONS AS IT IS PASSED BEYOND THE PERIOD OF SIX MONTH FROM THE ORDER OF ASSESSMENT AS PRESCRIBED UNDER SECTION 275(1)(C) OF INCOME- TAX ACT. 2. THAT THE AMOUNT HAS BEEN CONSIDERED AS UNDISCLOSED INCOME BY INVOKING PROVISIONS OF SECTION 68 OF INCOME-TAX ACT IN THE :- 13 -: ASSESSMENT, IT CANNOT BE AGAIN CONSIDERED AS DEPOSIT FOR LEVY OF PENALTY UNDER SECTION 271E OF THE ACT. 23. IN SUPPORT OF ADMISSION OF ADDITIONAL GROUNDS, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT SINCE THESE GROUNDS GO TO THE ROOT OF THE CASE, THE SAME MAY BE ADMITTED IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT, 229 ITR 383 AND OTHER VARIOUS JUDICIAL PRONOUNCEMENTS. 24. FINDING FORCE IN THE CONTENTIONS OF THE ASSESSEE, WE ADMIT THE ADDITIONAL GROUND AND PREFER TO ADJUDICATE THE SAME AT THE THRESHOLD. 25. WITH REGARD TO GROUND NO.1 RELATING TO PERIOD OF LIMITATION FOR PASSING THE PENALTY ORDER, WE HAVE EXAMINED THE ISSUE IN THE FOREGOING APPEAL AND WE ARE OF THE VIEW THAT IN THE ABSENCE OF ANY DATE OF REFERENCE BY THE ASSESSING OFFICER TO THE JOINT COMMISSIONER OF INCOME-TAX FOR INITIATING ACTION FOR IMPOSING PENALTY UNDER SECTION 271E OF THE ACT, THE NOTICE ISSUED BY THE JOINT COMMISSIONER OF INCOME-TAX IS TO BE TAKEN AS THE DATE FOR INITIATION OF ACTION FOR IMPOSING PENALTY UNDER SECTION 271E OF THE ACT. SINCE IN THIS CASE ALSO THE NOTICE UNDER SECTION 274 OF THE ACT WAS ISSUED FOR LEVYING PENALTY UNDER SECTION 271E OF THE ACT ON 14.10.2011, THE SAID DATE IS TO BE TAKEN AS THE DATE FOR INITIATION FOR ACTION FOR IMPOSING THE PENALTY. SINCE THE PENALTY ORDER WAS PASSED ON 25.10.2011, IT WAS WELL WITHIN THE PERIOD OF LIMITATION AS DISCUSSED IN THE FOREGOING APPEAL. WE ACCORDINGLY REJECT THIS GROUND OF THE ASSESSEE. 26. THROUGH ADDITIONAL GROUND NO.2, IT WAS CONTENDED THAT THE AFORESAID AMOUNT, WHICH WAS CONSIDERED TO BE REPAYMENT OF LOAN OR ADVANCE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 271E OF THE ACT, WAS CONSIDERED FOR AN ADDITION MADE UNDER SECTION 68 OF THE ACT. BUT FROM A PERUSAL OF THE ASSESSMENT ORDER, THIS CONTENTION OF THE ASSESSEE IS FOUND TO BE INCORRECT, AS THERE WAS NO ADDITION OF THIS AMOUNT IN THE ENTIRE ORDER. THE ADDITION :- 14 -: UNDER SECTION 68 OF THE ACT WAS MADE WITH REGARD TO DIFFERENT RECEIPTS OF MONEY FROM DIFFERENT PERSONS. THE REPAYMENT, WHICH WAS CONSIDERED TO BE IN VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT, WAS NOT ADDED ANYWHERE UNDER SECTION 68 OF THE ACT. THEREFORE, THE ARGUMENT OF THE ASSESSEE THAT SINCE THIS AMOUNT WAS ADDED UNDER SECTION 68 OF THE ACT, THE PROVISIONS OF SECTION 269T OF THE ACT CANNOT BE INVOKED, CANNOT BE ACCEPTED. WE ACCORDINGLY FIND NO MERIT IN THIS GROUND AND WE REJECT THE SAME. 27. NOW COMING ON MERIT, WE FIND THAT THE ASSESSING OFFICER HAS NOTED DURING THE COURSE OF ASSESSMENT THAT THE ASSESSEE-COMPANY HAS MADE REPAYMENT OF LOAN TO THE FOLLOWING PARTIES IN CASH, IN VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT:- 1. SHRI. ASHFAQ RS.1,94,000/- 14.6.2007 2. W.H. SIDDIQUE RS.50,000/- 13.4.2007 3. DO- RS.27,000/- 27.4.200 4. SWALEHA NAIM RS.26,000/- 07.4.2007 5. DO- RS.28,000/- 06.6.2007 28. THE PROCEEDINGS UNDER SECTION 271E OF THE ACT WAS INITIATED AND DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSEE HAS TAKEN A STAND THAT THE TRANSACTION WAS TAKEN PLACE BY THE DIRECTORS AND THEIR RELATIVES IN THEIR PERSONAL CAPACITY AND THESE TRANSACTIONS DO NOT BELONG TO THE ASSESSEE-COMPANY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE-COMPANY HAS DENIED AND DISOWNED ABOUT THE ALLEGED TRANSACTIONS AND DESIGNS. IT WAS ALSO CONTENDED BEFORE THE ASSESSING OFFICER THAT SINCE THE ADDITIONS ON THE SAID TRANSACTION WAS MADE IN THE HANDS OF THE ASSESSEE-COMPANY AND THE MATTER IS PENDING BEFORE THE LD. CIT(A), THE SAME CANNOT BE TREATED TO BE REPAYMENT OF LOAN BY THE ASSESSEE-COMPANY. BUT THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ACIT AND :- 15 -: ACCORDINGLY PENALTY OF RS.3.25 LAKHS WAS LEVIED AGAINST THE ASSESSEE, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) AND THE ASSESSEE REITERATED ITS CONTENTIONS. IT WAS EMPHATICALLY ARGUED BEFORE THE LD. CIT(A) THAT THESE TRANSACTIONS ARE NOT REFLECTED IN THE CASH BOOK OF THE ASSESSEE- COMPANY. THEREFORE, THESE TRANSACTIONS NEITHER BELONG TO THE ASSESSEE- COMPANY NOR ARE ENTERED IN THE BOOKS OF ACCOUNT. THEREFORE, IT CANNOT BE CONSIDERED FOR INVOKING THE PROVISIONS OF SECTION FOR VIOLATION OF SECTION 269T OF THE ACT. IT WAS FURTHER EXPLAINED BEFORE THE LD. CIT(A) THAT THE ASSESSEES LADY CLERK WAS MAINTAINING THE ACCOUNTS AND ARE MAKING CERTAIN ENTRIES IN THE HANDWRITTEN LEDGERS. SINCE THERE WAS NO ENTRY RECORDED IN THE REGULAR BOOKS OF ACCOUNT WITH REGARD TO THE REPAYMENT OF LOAN, PROVISIONS OF SECTION 269T OF THE ACT CANNOT BE INVOKED. THE LD. CIT(A) EXAMINED THE CLAIM OF THE ASSESSEE AND HAVING MADE REFERENCE TO VARIOUS JUDICIAL PRONOUNCEMENTS, HE CONFIRMED THE PENALTY LEVIED UNDER SECTION 271E OF THE ACT. 29. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT SINCE BEGINNING IT WAS CONTENDED THAT WHATEVER ENTRIES ARE FOUND RECORDED, THEY DO NOT RELATE TO THE REPAYMENT OF LOAN BY THE ASSESSEE TO THESE PARTIES. THE ISSUE OF REPAYMENT CAN ONLY ARISE WHEN THE ASSESSEE HAS RECEIVED CERTAIN LOAN OR ADVANCE FROM THE AFORESAID PARTIES. UNLESS AND UNTIL IT IS PROVED THAT THE ASSESSEE HAS RECEIVED AMOUNT FROM THESE PARTIES, QUESTION OF REPAYMENT DOES NOT ARISE. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE WITH REGARD TO RECEIPT OF LOAN OR ADVANCE FROM THESE PARTIES, PROVISIONS OF SECTION 269T OF THE ACT CANNOT BE INVOKED. 30. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT SINCE BEGINNING THE ASSESSEE HAS TAKEN A PLEA THAT THESE ENTRIES DO NOT RELATE TO THE ASSESSEE-COMPANY. IT MAY BE RELATED TO THE DIFFERENT DIRECTORS IN THEIR PERSONAL CAPACITY, BUT THE ASSESSING OFFICER HAS TAKEN A :- 16 -: STAND THAT IT RELATE TO THE ASSESSEE-COMPANY. MOREOVER, PROVISIONS OF SECTION 269T OF THE ACT RELATE TO THE REPAYMENT OF LOAN OR ADVANCE RECEIVED FROM THE PARTIES. IN THIS CASE, NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS EVER RECEIVED THE SAID AMOUNT FROM THESE PARTIES, WHICH WAS REPAID IN CASH. THERE IS NO CORRESPONDING ENTRY FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNT. WHEN THE ASSESSEE HAS TAKEN A STAND THAT THESE ENTRIES DO NOT RELATE TO THE COMPANY, THE ONUS WAS ON THE ASSESSING OFFICER TO CO-RELATE THE ENTRIES WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE PROVISIONS OF SECTION 269T OF THE ACT WERE INVOKED ON THE BASIS OF CERTAIN ENTRIES FOUND ON CERTAIN SEIZED DOCUMENTS. UNLESS AND UNTIL IT IS PROVED THAT THE SEIZED DOCUMENTS RELATE TO THE ASSESSEE-COMPANY, THE REPAYMENT OF LOAN OR ADVANCE IN CASH TO DIFFERENT PARTIES CANNOT BE HELD TO BE DONE IN VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT, FOR WHICH PENALTY UNDER SECTION 271E OF THE ACT CAN BE INVOKED. EVEN THE LD. CIT(A) DOES NOT DELIBERATE ON THE ISSUE AND HAVING MADE REFERENCE TO VARIOUS PRONOUNCEMENTS ON THIS ASPECT, HE CONFIRMED THE PENALTY. UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE PENALTY LEVIED UNDER SECTION 271E OF THE ACT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE PENALTY. 31. IN THE RESULT, APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH DECEMBER, 2014 JJ:0412 :- 17 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR