ITO, New Delhi V. M/s Rajkot Buildwell (P) Ltd., New Delhi

ITA 3069/DEL/2011

• Counselvise Citation: 306920114 RSA 2011
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 27-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDESH GARGDR
• Assessee Lawyers: GOPAL NATHANIAR
• Keywords: Income from undisclosed sources; Question of law; Reasonable cause
• Section: 273B; 143(3); 260A; 271D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI F BENC H BEFORE SMT. DIVA SINGH, JM & SHRI A.N. PAHUJA, AM ITA NO.3069/DEL/2011 ASSESSMENT YEAR:2007-08 INCOME TAX OFFICER, WARD-15(2), ROOM NO.213, C.R. BUILDING, IP ESTATE,NEW DELHI V/S . M/S RAJKOT BUILDWELL PVT. LTD., FLAT NO.1104, 11 TH FLOOR, 89, NEHRU PLACE, NEW DELHI-19 [PAN : AADCR 3128 E] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI GOPAL NATHANI,AR REVENUE BY SHRI SUDESH GARG,DR DATE OF HEARING 27-01-2012 DATE OF PRONOUNCEMENT 31-01-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 9 TH JUNE, 2011 BY THE REVENUE AGAINST AN ORDER DATED 3 RD MARCH, 2011 OF THE LEARNED CIT(A)-XVIII, NEW DELHI , RAISES THE FOLLOWING GROUNDS:- 1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S 271D OF INCOME-TAX ACT, AS LOAN OF ` ` 14,32,57,724/- IS NOT TAKEN/ACCEPTED BY THE ASSESSEE THROUGH ACCOUNT PAYE E CHEQUES OR ACCOUNT PAYEE BANK DRAFT, IN VIOLATION O F THE PROVISIONS OF SECTION 269SS OF INCOME-TAX ACT. THE ASSESSEE FAILED TO PRODUCE ANY BONAFIDE EVIDENCE REGARDING P AYMENT THROUGH ACCOUNT PAYEE CHEQUES. 2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THE PRESENT CASE IS DISTINGUISHABLE FROM THE DECISION OF THE HONBLE HI GH COURT IN THE CASE OF NOIDA TOLL BRIDGE COMPANY LTD. (2003) 2 62 ITR 260. 3) THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY F RESH GROUNDS OF APPEAL AND/OR DELETED OR AMEND ANY OF THE GROUNDS O F APPEAL. ITA N O.3069 /DEL./2011 2 2. ADVERTING FIRST TO GROUND NOS.1 & 2 IN THE APP EAL, FACTS IN BRIEF, AS PER RELEVANT ORDERS ARE THAT ASSESSMENT IN THIS CAS E WAS COMPLETED ON AN INCOME OF ` ` 14,39,580/- VIDE ORDER DATED 18 TH DECEMBER, 2009 U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT), IN PURSUANCE TO RETURN DECLARING NIL INCOME FILED ON 25.09.2007. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THE FOLLOWING AMOUNT OF ` `14,32,57,724/- WAS RECEIVED BY THE ASSESSEE BY WAY OF UNSECURED LOANS FROM M/S DUCE PROPERTIES AND SERVICES PVT. LTD. (NO W KNOWN AS M/S JINDAL REALITY PVT. LTD.)[DUCE IN SHORT] OTHERWISE THAN B Y ACCOUNT PAYEE CHEQUES OR ACCOUNT PAYEE BANK DRAFT, AS STIPULATED IN SECTION 269SS OF THE ACT.: S.NO. DATE AMOUNT[IN ` ] 1. 11 AUGUST, 2006 8,03,250.00 2 11 AUGUST, 2006 1,32,53,750 3 17 AUGUST, 2006 2,58,87,563 4 17 AUGUST, 2006 14,24,820 5 17 AUGUST, 2006 2,36,64,188 6 17 AUGUST, 2006 16,16,100 7 17 AUGUST, 2006 2,38,75,940 8 17 AUGUST, 2006 13,19,700 9 17 AUGUST, 2006 15,58,750 10. 17 AUGUST, 2006 2,65,21,688 11 17 AUGUST, 2006 14,37,600 12 17 AUGUST, 2006 2,18,94,375 TOTAL 14,32,57,724 2.1 SINCE THE AMOUNT WAS RECEIVED IN VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT, THE AO REFERRED THE MATTER TO ADDITIONAL CIT, RANGE-15, NEW DELHI .IN RESPONSE TO A SHOW CAUSE NOTICED ISSUED BY ADDL. CI T, THE ASSESSEE REPLIED THAT DURING THE YEAR UNDER CONSIDERATION, THEY EXECUTED A DEVELOPMENT AGREEMENT ITA N O.3069 /DEL./2011 3 WITH M/S DUCE FOR DEVELOPMENT OF A RESIDENTIAL TOWN SHIP AT RATHDANA ,SONEPAT. IN TERMS OF THE AGREEMENT, M/S DUCE AGREED TO PROVI DE FINANCE FOR PURCHASE OF LAND BY THE ASSESSEE COMPANY. HOWEVER, IN ORDER TO SAFE GUARD THEIR INTERESTS, M/S DUCE MADE PAYMENTS TO VENDORS(LAND OWNERS) ON B EHALF OF THE ASSESSEE BY ACCOUNT PAYEE CHEQUES TOWARDS PURCHASE OF LAND. R ELYING ON THE DECISION IN CIT VS. NOIDA TOLL BRIDGE CO. LTD., (2003) 262 ITR 260(DEL.); HAMARASHEHAR CO. PVT. LTD. VS. ADDL. CIT (2009) 319 ITR (AT) 437 (H YD); HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26(S.C.), OMEC ENGI NEERS VS. CIT (2007) 294 ITR 599; CIT VS. BALAJI TRADERS (2008) 303 ITR 312; CIT VS. LAKSHMI TRUST CO. (2008) 303 ITR 99 (MADRAS), THE ASSESSEE CONTENDED THAT PENALTY COULD NOT BE LEVIED IN BONAFIDE TRANSACTIONS. HOWEVER, THE ADDL . CIT DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT:- I) IT IS A FACT THAT THE SAID LOAN IS NOT TAKEN/ACC EPTED BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES OR ACCOUNT P AYEE BANK DRAFT, WHICH IS A CLEAR VIOLATION OF SECTION 2 69SS. II) THE ASSESSEE HAS CLAIMED THAT IT DID NOT HAVE A BANK ACCOUNT. THE SAME CANNOT BE AN EXCUSE TO CONTRAVENE THE PROV ISION OF SECTION 269SS. THESE DAY'S BANK ACCOUNT IS OPENED IN A DAY OR TWO. THERE IS NO CONTINGENCY WHICH PREVENTED THE AS SESSEE TO HAVE A BANK ACCOUNT OR TO GET INTO THE HURRIED TRAN SACTIONS. THE LEDGER ACCOUNT SHOWS TRANSACTIONS ON VARIOUS DATES; WHICH MEANS THAT THE ASSESSEE HAD CONSCIOUSLY IGNORED THE PROVISION OF SECTION 269SS AND THE SAME IS A LAME EXCUSE GIVE N AS AN AFTERMATH IN REPLY TO THE PENALTY NOTICE. (III) THE PAYMENT MADE BY 'DUCE' WAS WITH A CLEAR INTENT OF GIVING LOAN TO THE ASSESSEE, WHICH WAS GIVEN OTHERWISE BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. (IV) THE DECISION OF HON'BLE DELHI HIGH COURT IN TH E CASE OF NOIDA TOLL BRIDGE IS NOT APPLICABLE TO THE ASSESSEE AS IN THAT CASE THE LENDER WAS HOLDING A SUBSTANTIAL INTEREST IN THE AP PELLANT COMPANY. THE SAME HAS BEEN A FINDING AND JUSTIFICAT ION FOR DELETING THE PENALTY U/S.271D, WHICH IS NOT THE CAS E, AS FAR AS THE ASSESSEE IS CONCERNED. FURTHER THE ASSESSEE HAS NOT GIVEN ANY PROOF OF THE COPIES OF THE CHEQUES BEING ACCOUN T PAYEE TO THE RELEVANT PARTIES TO WHOM THE PAYMENT HAS BEEN M ADE ON ITA N O.3069 /DEL./2011 4 BEHALF OF THE ASSESSEE. THE BANK ACCOUNT SUBMITTED BY ASSESSEE MERELY REFLECTS CLEARING OF AMOUNTS AND NO MENTION REGARDING PAYMENT TO PARTIES IS THERE IN THE BANK A CCOUNT. THE BANK ACCOUNT STATES REGARDING CLEARING OF AMOUNTS W ITH A NARRATION AS UNDER: ' MICR INWARD, HT HOUSE NEW DELHI', WHICH HAS NO MEANINGFUL OR JUSTIFIABLE INTERPRETATI ON VIS-A-VIS THE: PAYMENTS/MADE TO SELLER OF THE LAND THROUGH AL E PAYEE CHEQUES. THUS AS THE ASSESSEE HAS NOT GIVEN ANY BON AFIDE EVIDENCE REGARDING ACCOUNT PAYEE CHEQUE, THEREFORE THE DECISION OF HON'BLE HIGH COURT OF DELHI IS NOT APPL ICABLE IN THE CASE OF THE ASSESSEE. THEREFORE THE ASSESSEE'S CON TENTIONS ON APPLICATION OF JUDGMENT IN ITS CASE IS REJECTED. (V) THE DECISION OF HYDERABAD BENCH IN THE C ASE OF HAMARASHEHAR CO. PVT. LTD. VS. ADDITIONAL COMMISSIONER OF INCOME -TAX IS NOT APPLICABLE AS IN THAT CASE FUNDS WERE RECEIVED BY T HE APPELLANT THROUGH FIRC. IN THE INSTANT CASE THE ASSESSEE HAS NOT RECEIVED FUNDS AT ALL, SO THE DECISION IS NOT APPLICABLE AND HENCE THE ASSESSEE'S CONTENTION IS REJECTED. (VI) THE ASSESSEE'S SUBMISSION THAT ON TECHNICAL/VE NIAL BREACH, THE PENALTY IS NOT LEVIABLE. THE ASSESSEE IN THIS CASE HAS CONSCIOUSLY FLOUTED THE PROVISION OF SECTION 269SS, AS THE LENDER VERY CLEARLY INTENDED TO PAY THE SELLER OF L AND DIRECTLY, AND THE TRANSACTION WAS EFFECTIVELY A LOAN TO THE A SSESSEE, SO THE SAME CANNOT BE CALLED A TECHNICAL/VENIAL BREACH . THE LOAN RIGHT FROM DAY ONE WAS TAKEN/ACCEPTED IN VIOLATION TO SECTION 269SS. (VII) THE ASSESSEE HAS FURTHER NOTED THE PENALTY IS NOT LEVIABLE BY RELYING ON THE HON'BLE MADRAS HIGH COURT DECISION I N THE CASE OF COMMISSIONER OF INCOME-TAX VS. BARAJI TRADERS(2008) 303 ITR 312 WHICH HAS GIVEN RELIEF TO APPELLANT ON ACCOUNT OF BUSINESS EXIGENCY. THE ASSESSEE HAS FAILED TO JUSTIFY BUSINE SS EXIGENCY, SO THE ABOVE DECISION IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THERE WAS NO BONAFIDE REASON WITH THE ASS ESSEE TO CONTRAVENE SECTION 269SS, AS IT WAS A CONSCIOUS ARR ANGEMENT BETWEEN THE LENDER AND THE ASSESSEE. (VIII) THE ASSESSEE IS NOTHING BUT AN SPV USED BY THE LENDER AND IT WAS A CONSCIOUS DECISION TO IGNORE PROVISION OF SEC TION 269SS BY THE ASSESSEE COMPANY, WHICH IS EFFECTIVELY CONTR OLLED BY THE LENDER, THE SAME IS APPARENT FROM THE STRUCTURE OF THE TRANSACTIONS AND AGREEMENT. THEREFORE THE TRANSACTI ON IS NOT OUT ITA N O.3069 /DEL./2011 5 OF ANY EMERGENCY OR CONTINGENCY. THE SAME HAS BEEN DONE WITH NO REGARD TO PROVISION OF INCOME TAX ACT. IX) THESE TRANSACTIONS HAVE BEEN DONE IN A PRE PLANNED, PREDETERMINED, STRUCTURED MANNER, WITHOUT A REASONA BLE CAUSE AND JUSTIFICATION, BY CONSCIOUSLY IGNORING THE PROV ISIONS OF SECTION 269SS OF THE INCOME-TAX ACT, 1961. ACCORDINGLY, THE ADDL. CIT, LEVIED A PENALTY OF ` `14,32,57,724/- U/S 271D OF THE ACT FOR ACCEPTING LOAN IN CONTRAVENTION OF PROVISIO NS OF SECTION 269SS OF THE ACT. 3. ON APPEAL, THE LEARNED CIT(A) CANCELLED THE PEN ALTY IN THE FOLLOWING TERMS:- 4.2 I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AND THE SUBMISSIONS MADE BY THE ID. AR. AS PER THE FACTS OF THIS CASE, THE APPELLANT COMPANY WAS INCORPORATED ON 18.05.2006. A S SUCH, THIS IS THE FIRST YEAR OF ITS OPERATION. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD EXECUTED A DEVELOP MENT AGREEMENT WITH THE DEVELOPER, M/S DUCE PROPERTIES & INVESTMENT PVT. LTD. (SUBSEQUENTLY KNOWN AS M/S JINDAL REALTY PVT. LTD.) FOR DEVELOPING OF RESIDENTIAL TOWNSHIP AT VILLAGE RATHD HANA IN SONEPAT. UNDER THE SAID AGREEMENT, M/S DUCE HAS PROVIDED NEC ESSARY FINANCES FOR PURCHASE OF LAND BY THE APPELLANT COMP ANY. THE PAYMENT HAS BEEN MADE BY M/S DUCE TO THE LAND-OWNER S (FARMERS) DIRECTLY BY ACCOUNT PAYEE CHEQUES ON BEHALF OF THE APPELLANT COMPANY FOR PURCHASE OF THE SAID LAND FOR THE TOWNS HIP PROJECT. THE AMOUNT TOTALING RS.14,32,57,724/- IS SHOWN IN THE B OOKS OF THE APPELLANT AS UNSECURED LOAN FROM M/S DUCE FOR THE Y EAR ENDING 31.03.2007. IT IS ARGUED BY THE ID. AR THAT NECESSA RY DISCLOSURES IN THIS REGARD HAVE BEEN MADE IN THE BALANCE SHEETS OF BOTH THE APPELLANT COMPANY AND M/S DUCE FOR THE YEAR ENDING 31.03.2007. IT IS ARGUED BY THE ID. AR THAT THE APPELLANT COMPANY DID NOT MAINTAIN ANY BANK ACCOUNT DURING THE YEAR UNDER CONSIDERATIO N AND THAT THE PAYMENTS HAVE BEEN MADE BY M/S DUCE DIRECTLY TO THE FARMERS VIDE ACCOUNT PAYEE CHEQUES AND NO CASH LOAN WHATSOEVER H AS BEEN RECEIVED BY THE APPELLANT COMPANY FROM M/S DUCE AND HENCE SECTION 269SS READ WITH SECTION 271D IS NOT ATTRACT ED. IT IS ARGUED THAT THE CASE IS COVERED DIRECTLY BY THE DECISION O F HON'BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT V. NOIDA TOLL BRIDGE CO. LTD. (2003) 262 ITR 260. THE ID. AR HAS ALSO RELIED UPON THE DECISIONS IN THE CASE OF HAMARASHEHAR CO. PVT. LTD. V. ADD!. CIT (2009) 319 ITR AT 437 (ITAT HYDERABAD BEN CH), OMEC ENGINEERS V. CIT (2007) 294 ITR 599 (JHARKHAND) AND HINDUSTAN ITA N O.3069 /DEL./2011 6 STEEL LTD. V. STATE OF ORISSA (1972) 83 ITR 26, 29 (SC). IT IS ALSO ARGUED THAT THE TRANSACTIONS IN QUESTION ARE COVERE D UNDER REASONABLE CAUSE AS PER PROVISIONS OF SECTION 273B OF THE ACT AS THE APPELLANT DID NOT HAVE ANY BANK ACCOUNT AND THE PAYMENT WAS MADE BY M/S DUCE BY ACCOUNT PAYEE CHEQUES DIRECTLY TO THE FARMERS TO ENSURE THAT THE MONIES ADVANCED UNDER TH E AGREEMENT ARE UTILIZED FOR THE PURPOSE OF ACQUISITION OF LAND FOR THE SAID PROJECT. 4.3 ON CAREFUL CONSIDERATION OF THE MATTER, I FIND THAT THE ABOVE SUBMISSIONS HAD BEEN DULY MADE BY THE ID. AR BEFORE THE AO DURING THE PENALTY PROCEEDING. THE AO HAS NOT DOUBT ED THE GENUINENESS OF THE TRANSACTIONS AND THE FACT THAT T HE PAYMENTS TO FARMERS WAS MADE BY ACCOUNT PAYEE CHEQUES AND THAT THERE WAS NO CASH LOAN INVOLVED IN THE ABOVE TRANSACTIONS. AL L THE NECESSARY EVIDENCES INCLUDING COPIES OF ACCOUNT PAYEE CHEQUES , COPIES OF BANK STATEMENT OF M/S DUCE WITH MARKINGS FOR EACH P AYMENT, COPY OF TITLE DEEDS OF LAND PURCHASED, COPY OF AUDITED B ALANCE SHEETS AND STATEMENT OF ACCOUNTS OF M/S DUCE, COPY OF JOIN T DEVELOPMENT AGREEMENT, RECONCILIATION OF LAND PAYMENTS WITH THE ACCOUNT OF M/S DUCE AND CONFIRMATION FROM M/S DUCE WERE URNISHED B EFORE THE AO DURING THE ASSESSMENT AND PENALTY PROCEEDINGS. IN FACT, AS ARGUED BY THE ID. AR, THE APPELLANT AND M/S DUCE ARE ASSOC IATE COMPANIES BELONGING TO THE SAME GROUP AND THE SAID TRANSACTIO NS WERE DONE IN BONAFIDE AND GENUINE MANNER UNDER THE JOINT DEVE LOPMENT AGREEMENT IN ACCORDANCE WITH THE HARYANA LAND CEIL ING & TOWNSHIP DEVELOPMENT REGULATIONS. THE PAYMENTS MADE BY M/S DUCE FOR PURCHASE OF THE ABOVE LAND ,TO THE FARMERS ON BEHALF OF THE APPELLANT HAS BEEN DULY SHOWN BY THE APPELLANT AS UNSECURED LOAN AS PER BOOK ENTRY. IN THIS REGARD, I FIND THAT SECTION 269SS WAS INTRODUCED W.E.F. 01.04.1984 TO CURB INTRODUCTION O F BLACK MONEY IN THE FORM OF CASH THROUGH LOANS AND DEPOSITS. THE PU RPOSE OF INTRODUCTION OF SECTION 269SS BY THE FINANCE ACT, 1 984 W.E.F. 01.04.1984 AS PER THE BOARD'S CIRCULAR WAS TO PLUG THE LOOPHOLE IN CASES WHERE UNACCOUNTED CASH FOUND DURING SEARCH OP ERATION WAS SOUGHT TO BE EXPLAINED BY THE TAXPAYERS AS REPRESEN TING CASH LOANS/DEPOSITS TAKEN FROM VARIOUS PARTIES AND TO PR EVENT UNACCOUNTED INCOME BEING INTRODUCED IN THE BOOKS OF TAX PAYERS THROUGH SUCH LOANS/DEPOSITS. THEREFORE, THE ARGUMEN T OF THE ID. AR THAT SAID PROVISIONS OF SECTION 26988 WOULD NOT APP LY TO THE INSTANT CASE WHERE THE TRANSACTION IS DONE THROUGH JOURNAL ENTRY BETWEEN THE APPELLANT COMPANY AND ITS SISTER CONCERN WHO AR E REGULARLY ASSESSED TO INCOME TAX AND OUT OF THE FUNDS AVAILAB LE IN THE BANK ACCOUNT OF THE SISTER CONCERN CANNOT BE DENIED. THE CASE IS CLEARLY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL D ELHI HIGH COURT IN THE CASE OF CIT V. NOIDA TOLL BRIDGE CO. LTD. (2003 ) 262 ITR 260 ITA N O.3069 /DEL./2011 7 WHEREIN UNDER VERY SIMILAR CIRCUMSTANCES, THE HON'B LE HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE CONFIRMIN G THE FINDING OF THE ITAT THAT AS NO CASH LOAN WAS INVOLVED, PENALTY U/S 271 D CANNOT BE IMPOSED. THE DECISION OF THE HON'BLE HI GH COURT IS REPRODUCED HEREUNDER: ' THIS APPEAL BY THE REVENUE UNDER SECTION 260A OF TH E INCOME- TAX ACT, 1961 (FOR SHORT 'THE ACT'), IS DIRECTED AG AINST THE ORDER, DATED MAY 16, 2002, PASSED BY THE INCOME-TAX APPELLATE TR IBUNAL, NEW DELHI (FOR SHORT 'THE TRIBUNAL'), IN I.T.A. NO. 238 /DELHI OF 2002, PERTAINING TO THE ASSESSMENT YEAR 1998-99. ACCORDING TO THE REVENUE, THE SAID ORDER INVOLVES T HE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: '1. WHETHER THE INCOME-TAX APPELLATE TRIBUNAL HAS E RRED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271D OF THE ACT B Y HOLDING THAT THE APPELLANT DID NOT CONTRAVENE THE PROVISIONS OF SECT ION 269SS OF THE INCOME-TAX ACT? 2. WHETHER THE ORDER OF THE INCOME-TAX APPELLATE TR IBUNAL IS PERVERSE ON BOTH LAW AND MERITS?' BRIEFLY STATED, THE FACTS GIVING RISE TO THE PRESEN T APPEAL ARE THAT THE RESPONDENT-ASSESSEE, REFERRED TO AS THE 'SPECIAL PU RPOSE VEHICLE', WAS PROMOTED BY ONE INFRASTRUCTURE LEASING AND FINANCE SERVICES LTD. (FOR SHORT, THE 'IL & FS'), WITH 30 PER CENT. HOLDING, T O CONSTRUCT AND OPERATE A BRIDGE ON THE RIVER YAMUNA ON A BUILD, OW N, OPERATE AND TRANSFER BASIS. FOR UNDERTAKING THE SAID PROJECT TH E ASSESSEE HAD TO MAKE A PAYMENT OF RS. 4.85 CRORES TO THE GOVERNMENT OF DELHI IN RELATION TO THE ACQUISITION OF LAND FOR THE SAID PR OJECT. WHILE COMPLETING THE ASSESSMENT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1998-99, THE ASSESSING OFFICER INITIATED PENAL TY PROCEEDINGS UNDER SECTION 271D OF THE ACT AS HE WAS OF THE VIEW THAT THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT BECAUSE THE PAYMENT OF RS. 4.85 CRORES TO THE DELHI GOVERNMENT WAS NOT MADE IN THE MANNER PRESCRIBED IN SECTION 269SS OF THE ACT. WE MAY NOTE AT THIS STAGE ITSELF THAT THE SAID PAYMENT HAD IN FACT BEEN MADE BY IL & FS VIDE ACCOUNT PAYEE CHEQUE TO THE DELHI GOVERNMEN T AND THE AMOUNT WAS DEBITED TO THE ACCOUNT OF THE ASSESSEE I N ITS BOOKS OF ACCOUNT. NOT BEING SATISFIED WITH THE REPLY FILED BY THE ASS ESSEE TO THE SHOW CAUSE NOTICE, THE ASSESSING OFFICER LEVIED A PENALT Y OF RS. 4.85 CRORES UNDER SECTION 271D OF THE ACT ON THE ASSESSEE FOR A LLEGED VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL TO THE COM MISSIONER OF INCOME TAX (APPEALS) BUT WITHOUT ANY SUCCESS. THE A SSESSEE CARRIED THE MATTER IN FURTHER APPEAL TO THE TRIBUNAL. BY TH E IMPUGNED ORDER, ITA N O.3069 /DEL./2011 8 THE TRIBUNAL HAD DELETED THE SAID PENALTY. W HILE HOLDING THAT THE PROVISIONS OF SECTION 269SS OF THE ACT WERE NOT ATT RACTED, THE TRIBUNAL HAS NOTICED THAT:(I) IN THE INSTANT CASE, THE TRANS ACTION WAS BY AN ACCOUNT PAYEE CHEQUE, (II) NO PAYMENT ON ACCOUNT WA S MADE IN CASH EITHER BY THE ASSESSEE OR ON ITS BEHALF, (III) NO L OAN WAS ACCEPTED BY THE ASSESSEE IN CASH, AND (IV) THE PAYMENT OF RS. 4 .85 CRORES MADE BY THE ASSESSEE THROUGH IL & FS, WHICH HOLDS MORE THAN 30 PER CENT. OF THE PAID-UP CAPITAL OF THE ASSESSEE, BY JOURNAL ENT RY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE BY CREDITING THE ACCOUNT OF IL & FS. HAVING REGARD TO THE AFORENOTED FINDINGS, WHICH ARE ESSENTIALLY FINDINGS OF FACT, WE ARE IN COMPLETE AGREEMENT WITH THE TRIB UNAL THAT THE PROVISIONS OF SECTION 269SS WERE NOT ATTRACTED ON T HE FACTS OF THE CASE. ADMITTEDLY, NEITHER THE ASSESSEE NOR IL & FS HAD MADE ANY PAYMENT IN CASH. THE ORDER OF THE TRIBUNAL DOES NOT GIVE RISE TO ANY QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION O F LAW. WE ACCORDINGLY DECLINE TO ENTERTAIN THE APPEAL. DIS MISSED. CONSIDERING THE ABOVE AND RESPECTFULLY FOLLOWING TH E JUDICIAL PRECEDENTS AS MENTIONED ABOVE AND RELIED UPON BY THE LD. AR,I FIN D THAT THE IMPUGNED PENALTY IS NOT SUSTAINABLE EITHER ON FACTS OR IN LAW. THE S AME IS, THEREFORE, DELETED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED TH E ORDER OF THE ADDL. CIT WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE DID NOT HAVE ANY BANK AC COUNT AT THE RELEVANT TIME WHEN AFORESAID PAYMENTS WERE MADE BY M/S DUCE PROPE RTIES AND SERVICES PVT. LTD. TO LANDOWNERS ON BEHALF OF THE ASSESSEE. ADMIT TEDLY, NEITHER THE ASSESSEE NOR M/S DUCE PROPERTIES AND SERVICES PVT. LTD. HAD MADE ANY PAYMENT IN CASH. HERE, WE MAY HAVE A LOOK AT THE RELEVANT PROVISION S OF SEC. 269SS OF THE ACT, WHICH READ AS UNDER: ' NO PERSON SHALL, AFTER THE 30TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SECTION REFERRE D TO AS THE DEPOSITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PA YEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF,- (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGRE GATE AMOUNT OF SUCH LOAN AND DEPOSIT; OR ITA N O.3069 /DEL./2011 9 (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEPOSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH PERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HA S FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID; OR (C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT RE FERRED TO IN CLAUSE (B), IS TWENTY THOUSAND RUPEES OR MORE: .. EXPLANATION: FOR THE PURPOSE OF THIS SECTION, (III) 'LOAN OR DEPOSIT' MEANS LOAN OR DEPOSIT OF MO NEY.' 5.1 THE AFORESAID PROVISIONS OF S. 269SS SA Y THAT IF THE STIPULATED AMOUNT OF LOAN OR DEPOSIT IS ACCEPTED OTHERWISE THAN BY CROS SED CHEQUE OR ACCOUNT PAYEE BANK DRAFT, THERE IS A VIOLATION OF THE SAID PROVIS IONS. BUT THE EXPLANATION APPENDED TO THE PROVISIONS OF S. 269SS OF THE ACT M AKES IT CLEAR THAT DEPOSIT OR LOAN MUST BE MADE THROUGH MONEY. HERE, IN THE INSTA NT CASE, DETAILS OF UNSECURED LOANS REVEALED THAT THE ASSESSEE HAD ACCE PTED UNSECURED LOANS OTHERWISE THAN BY CROSSED CHEQUE OR ACCOUNT PAYEE B ANK DRAFT AND ALL THE TRANSACTIONS WERE THROUGH BOOK ADJUSTMENT CARRIED OUT BY THE ASSESSEE. THERE BEING NO TRANSFER OF MONEY, IT CANNOT BE SAID THAT SUCH DEPOSIT OR LOAN COMES WITHIN THE MISCHIEF OF SEC. 269SS OF THE ACT. FOR V IOLATION OF S. 269SS OF THE ACT, IT IS NECESSARY THAT THERE SHOULD BE TRANSFER OF M ONEY, WHICH IS NOT IN THE INSTANT CASE. THEREFORE, IN OUR VIEW, THE CLAIM OF THE REVE NUE THAT SINCE THE LOAN OR DEPOSIT IS NOT AS PER MODE PRESCRIBED UNDER S. 269S S OF THE ACT, THERE IS VIOLATION OF THE SAID PROVISIONS, CANNOT BE ACCEPTE D. IN THIS CASE , IT IS UNDISPUTED FACT THAT ALL THE TRANSACTIONS MENTION ED IN PARA 2 ABOVE WERE THROUGH BOOK ADJUSTMENT . THERE IS NOTHING ON RECOR D TO INDICATE THAT THE ASSESSEE HAD INDULGED IN ANY TAX PLANNING OR TAX EV ASION NOR THERE IS ANYTHING TO SUGGEST THAT BY MAKING THE BOOK ENTRIES THE ASSESSE E HAS MADE THE ADJUSTMENT MALA FIDE. THERE IS NOTHING ON RECORD TO SHOW THAT THE TRANSACTIONS WERE ATTACHED ITA N O.3069 /DEL./2011 10 WITH CERTAIN CONDITIONS OR STIPULATION AS TO PERIOD OF REPAYMENT, RATE OF INTEREST, MANNER OF REPAYMENT, ETC. . 5.2 . THE PROVISIONS OF SECTION 269SS WERE BRO UGHT IN THE STATUTE BOOK TO COUNTER THE EVASION OF TAX IN CERTAIN CASES, AS CLE ARLY STATED IN THE HEADING OF CHAPTER XXB OF THE INCOME-TAX ACT, 1961 WHICH READS 'REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX'. LEGISLATIVE INTENTIO N IN BRINGING SECTION 269SS IN THE INCOME-TAX ACT WAS TO AVOID CERTAIN CI RCUMSTANCES OF TAX EVASION, WHEREBY HUGE TRANSACTIONS ARE MADE OUTSIDE THE BOOK S OF ACCOUNT BY WAY OF CASH. AS FAR AS THE APPEAL BEFORE US IS CONCERNED, THERE IS NO CASE AGAINST THE ASSESSEE THAT THESE TRANSACTIONS HAD ANYTHING TO DO WITH EVASION OF TAX OR CONCEALMENT OF INCOME. HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT V BHAGWATI PRASAD BAJORIA (HUF), 263 ITR 487 (GAUHATI ) HELD THAT WHEN THERE IS AN IMMEDIATE NEED OF MONEY AND TO SATISFY THE IMMED IATE REQUIREMENTS, THE PERSON APPROACHES THE MONEY-LENDER OR HIS FRIEND O R RELATIVE, WHO COULD LEND MONEY TO HIM TO SATISFY HIS IMMEDIATE REQUIREMENT, IN THOSE CIRCUMSTANCES IT CANNOT BE SAID THAT THE TAXPAYER HAS ENTERED INTO A TRANSACTION TO AVOID THE PAYMENT OF TAX OR TO DEFRAUD THE REVENUE. IT WAS FU RTHER HELD THAT THE ELEMENT OF MENSREA BEING NOT BORNE OUT FROM THE NATURE AND THE MANNER IN WHICH THE TRANSACTION WAS CARRIED OUT, THERE WAS NO JUSTIFICA TION IN IMPOSING THE PENALTY U/S 271D OF THE ACT. 5.3 IN THE CASE OF M/S SUNFLOWER BUILDERS PVT. LTD. VS. DCIT, 61 ITD 227(PUNE), ACIT VS. GUJRAT AMBUJA PROTEINS LTD., 89 TTJ 324 (AHD.),ACIT VS. RUCHIKA CHEMICALS & INDUSTRIES PVT. LTD.,88 TTJ85(D EL),AND JAGVIJAY AUTO FINANCE PVT. LTD. VS. ACIT,52 ITD504(JAIPUR), THE I TAT HAVE CONSISTENTLY HELD THAT THE ACKNOWLEDGEMENT OF DEBT BY THE ASSESSEE-COMPAN Y BY PASSING A JOURNAL ENTRY IN ITS BOOKS OF ACCOUNT WOULD NOT COM E WITHIN THE AMBIT OF THE WORDS 'LOAN OR DEPOSIT' AS MENTIONED IN SECTION 269SS AND 269T OF THE ACT. SIMILAR VIEW WAS TAKEN IN THE CASE OF BOMBAY CONDUCTORS & ELECTR ICALS LTD. VS. DCIT,56 TTJ 580(AHD.). THIS DECISION OF THE ITAT HAS BEEN UPHEL D BY HONBLE HIGH COURT IN ITA N O.3069 /DEL./2011 11 THE CASE OF CIT VS. BOMBAY CONDUCTORS & ELECTRICAL S LTD, 301 ITR 328(GUJ).A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDIC TIONAL HIGH COURT IN NOIDA TOLL BRIDGE CO. LTD.(SUPRA),FOLLOWED BY THE LD. CIT(A). 5.4 WE FIND THAT THE ITAT COCHIN BENCH IN THEI R DECISION IN THE CASE OF MUTHOOT M GEORGE BANKERS(SUPRA) HELD THAT THE TRANS ACTIONS INTER SE BETWEEN THE SISTER CONCERNS AND THE ASSESSEE CANNOT PARTAKE OF THE NATURE OF EITHER DEPOSIT ' OR ' LOAN ', THOUGH INTEREST MIGHT HAVE BEEN PAID ON THE SAME. EXCEPTING FOR THE TRANSFER OF FUNDS BEING WITNESSED IN THE BOOKS OF ACCOUNTS OF THE CONCERNED FIRMS, THERE IS NO EVIDENCE OF ACCEPT ING A DEPOSIT OR ACCEPTING A LOAN. ACCORDINGLY, IT WAS HELD THAT THE TRANSACTION S AS ARE FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE TERMED AS DEPOSI TS OR LOANS AS UNDERSTOOD IN COMMON PARLANCE. IT ONLY REPRESENTS DIVERSION OF FUNDS FROM ONE CONCERN TO ANOTHER DEPENDING UPON THE EXIGENCIES OF THE BUSINE SS. FURTHER, THE TRANSACTIONS HAVE NOT BEEN IMPEACHED AS NON-GENUINE OR BOGUS. HE NCE THE PROVISIONS OF SECTIONS 269SS AND 269T ARE NOT ATTRACTED TO THE FA CTS OF THE CASE. IT WAS FURTHER HELD THAT BONA FIDE BELIEF COUPLED WITH THE GENUINE NESS OF THE TRANSACTIONS WILL CONSTITUTE REASONABLE CAUSE FOR NOT INVOKING THE PR OVISIONS OF SECTION 271D OF THE ACT. 5.5 THE HONBLE APEX COURT, INTERPRETING TH E POWERS CONFERRED ON THE REVENUE UNDER SECTION 273B OF THE ACT IN ASST. DIRE CTOR OF INSPECTION (INVESTIGATION) V. KUM. A.B. SHANTHI [2002] 255 ITR 258 HELD THAT IF THERE WAS A GENUINE AND BONA FIDE TRANSACTION AND THE ASSESSEE COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONA FIDE REASON, THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENAL TY HAS A DISCRETION NOT TO LEVY PENALTY . 5.6 IN VIEW OF THE FOREGOING, ESPECIALLY WHEN BY MAKING THE BOOK ENTRIES THE ASSESSEE HAS MADE THE ADJUSTMENT BONA FIDE WITHOUT HAVING THE KNOWLEDGE THAT SUCH BOOK ENTRIES MAY RENDER THE ASSESSEE LIABLE TO PENALTY UNDER SECTION 271D OF THE ACT ON ACCOUNT OF VIOLATION OF THE PROVISION S OF SECTION 269SS OF THE ACT, ITA N O.3069 /DEL./2011 12 WHILE THE LD. DR DID NOT PLACE ANY MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NOS. 1 AND 2 IN THE A PPEAL ARE DISMISSED. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BE FORE US IN TERMS OF RESIDUARY GROUND NO.3 IN THE APPEAL, ACCORDINGLY, T HIS GROUND IS ALSO DISMISSED. 7. IN THE RESULT, APPEAL IS DISMISSED. SD/- SD/- ( DIVA SINGH ) ( A.N. PAHUJA ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. INCOME TAX OFFICER, WARD 15(2), ROOM NO.213, C.R . BUILDING, NEW DELHI. 2. M/S RAJKOT BUILDWELL PVT. LTD., FLAT NO.1105, 11 TH FLOOR, 89, NEHRU PLACE, NEW DELHI-19 3. CIT CONCERNED. 4. DR, ITAT,F BENCH, NEW DELHI 5. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT