Rudranee Construction Company, Aurangabad V. JCIT Cent. Range, Nashik

ITA 484/PUN/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9811 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K SINGHSHRI K K OJHA
• Assessee Lawyers: ARVIND SHONDE
• Keywords: Documents seized
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.629 & 484/PN/2010 (ASSTT. YEAR : 2006-07) DCIT, CENTRAL CIRCLE, AURANGABAD. .. APPELLANT VS. M/S.RUDRANEE CONSTRUCTIONS CO., A-9, UDYAM BHAVAN, MIDC AREA, RAILWAY STATION ROAD, AURANGABAD 431005. .. RESPONDENT PAN: AAEFR0447G AND M/S.RUDRANEE CONSTRUCTIONS CO., A-9, UDYAM BHAVAN, MIDC AREA, RAILWAY STATION ROAD, AURANGABAD 431005. .. APPELLANT VS. DCIT, CENTRAL CIRCLE, AURANGABAD. .. RESPONDENT ASSESSEE BY : SHRI ARVIND SHONDE DEPARTMENT BY : SHRI S.K.SINGH/SHRI K.K.OJHA DATE OF HEARING : 11.10.2012 DATE OF PRONOUNCEMENT : 23.11.2012 ORDER PER SHAILENDRA KUMAR YADAV, JM : BOTH THESE CROSS APPEALS PERTAIN TO SAME ISSUE FOR SAME ASSESSMENT YEAR, I.E. A.Y. 2006-07. SO THEY ARE BE ING DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA.NO.629/PN/2010, THE REVENUE HAS OPPOSED R ESTRICTING THE PENALTY LEVIED BY JT.CIT, CENTRAL RANGE, NASHIK , U/S.271D FOR ALLEGED DEFAULT COMMITTED BY THE ASSESSEE U/S.269SS OF THE ACT AT RS.25,00,000/- FROM RS.11,38,64,000/-. ON THE OTHE R HAND, THE ASSESSEE HAS OPPOSED SUSTAINING OF THE PENALTY U/S. 271D AT 2 RS.25,00,000/-. IN EARLIER YEARS IN A.Y. 2003-04, 2004-05 AND 2005-06 IN THE CIT(A) DISCUSSED AND DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: I HAVE CONSIDERED FACTS OF THE CASE, SUBMISSION O F THE AR, DCIT, CENTRAL CIRCLE, AURANGABAD/JCIT, CENTRAL RANG E, NASHIK'S REPORT & POSITION OF LAW. IN MY OPINION, T HE APPELLANT DESERVES TO SUCCEED PARTLY. THE UNDISPUTED FACTS OF THE CASE ARE THAT FOUR REGI STERS MARKED AS ANNEXURE A-25, A-26, A-32 & A-33 EVIDENCI NG HUGE CASH TRANSACTIONS WERE FOUND AND SEIZED FROM THE BU SINESS PREMISES OF THE APPELLANT. THE RECEIPT OF CASH FROM VARIOUS PERSONS ON DIFFERENT DATES WERE RECORDED IN THE SEI ZED REGISTERS USING ABBREVIATION 'H.L.' IT WAS EXPLAINED BY ONE O F THE KEY PERSONS THAT THE ABBREVIATION 'H.L.' STANDS FOR 'HA ND LOAN'. DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS, ONE OF THE PARTNERS OF THE APPELLANT SHRI VIVEK S. DESHPANDE O FFERED ADDITIONAL INCOME OF RS.1. 75 CRORE WHICH WAS SUBSE QUENTLY INCLUDED IN THE RETURNS FILED BY THE APPELLANT AND TAXES WERE DULY PAID. FROM TRANSACTIONS RECORDED IN SEIZED REGISTERS MARK ED AS ANNEXURE A-25, A-26, A-32 & A-33 IT WAS APPARENT TH AT THE CASH LOAN WAS ACCEPTED ON DIFFERENT DATES. IN A.Y.2 006-07, CLINCHING EVIDENCE OF ACCEPTANCE OF CASH/HUNDI LOAN BY THE APPELLANT FROM SHRI KACHRULAL MUTHA WAS REVEALED DU RING THE COURSE OF SURVEY IN THE BUSINESS PREMISES OF THE LO AN CREDITOR. ON THE BASIS OF AFORESAID FACTS, THE ACIT, CENTRAL CIRCLE, AURANGABAD PROPOSED THE INITIATION OF PENAL PROCEED INGS U/S 271D OF THE ACT FOR THE APPELLANT'S ACT OF ACCEPTIN G CASH LOAN/DEPOSITS EXCEEDING RS.20,000/- IN CONTRAVENTIO N OF SECTION 269SS OF THE ACT. ACCORDINGLY, JCIT, CENTRA L RANGE, NASHIK IMPOSED PENALTIES U/S 271D OF THE ACT IN RES PECT OF TRANSACTIONS RECORDED IN REGISTERS SEIZED AND MARKE D AS ANNEXURE A-25, A-26, A-32 & A-33 AS WELL AS ON HUND I LOAN OF RS.25 LAKH ACCEPTED BY THE APPELLANT FROM SHRI KACH RULAL MUTHA IN THE YEAR 2006-07. THE APPELLANT CHALLENGED THE AFORESAID ACT OF JCIT, CENTRAL RANGE, NASHIK MAINLY ON THE GROUND THAT THE TRANSACTIONS RECORDED IN REGISTERS SEIZED AS ANNEXU RE A-25, A- 26, A-32 & A-33 WERE CONSIDERED BY THE APPELLANT WH ILE OFFERING ADDITIONAL INCOME OF RS.1.75 CRORE. ACCORD INGLY, IT WAS CONTENDED THAT ONCE THE UNACCOUNTED FUND RECORDED I N SEIZED REGISTERS MARKED AS ANNEXURE A-25, A-26, A-32 & A-3 3 WERE SURRENDERED AS INCOME OF THE FIRM, IT CEASES ITS CH ARACTER AS LOAN AND QUESTION OF LEVY OF PENALTY U/S 271D OF TH E ACT DOES NOT ARISE. 3 THOUGH, WHILE ADVANCING THE GROUNDS RAISED BY IT, T HE APPELLANT ALSO CHALLENGED THE IMPOSITION OF PENALTY ON THE GROUND THAT SEIZED REGISTERS WERE NOT MAINTAINED BY THE APPELLANT AND, THEREFORE, IT CANNOT BE CONSIDERED A S APPELLANT'S RECORD, I DO NOT FIND ANY FORCE IN APPELLANT'S SUBM ISSION. IT IS IRRELEVANT WHETHER OR NOT THE REGISTERS WERE MAINTA INED ON SPECIFIC INSTRUCTION OR UNDER CLOSE SUPERVISION OF THE APPELLANT. IT IS UNDISPUTED FACT THAT THE TRANSACTI ONS RECORDED IN THE SEIZED REGISTERS MARKED AS ANNEXURE A-2S, A- 26, A-32 & A-33 WERE FOUND TRUE AND CORRECT DEPICTION O~ THE A PPELLANT'S AFFAIRS. THE CREDIBILITY AND INTEGRITY OF THE TRANS ACTIONS REFLECTED IN AFORESAID REGISTERS WERE NEVER CHALLEN GED BY THE APPELLANT EITHER DURING THE COURSE OF SEARCH OR IN ANY SUBSEQUENT PROCEEDINGS EMANATING FROM THE SEARCH. O N THE CONTRARY, THE KEY PERSONS OF THE APPELLANT FIRM, IN CLUDING ONE OF THE SENIOR PARTNERS, ADMITTED THE GENUINENESS OF THE TRANSACTIONS RECORDED IN THE ABOVE REFERRED SEIZED REGISTERS AND OWNED IT. SIMILARLY, THE PENALTY ORDERS PASSED BY THE JCIT, C ENTRAL RANGE, NASHIK WERE ALSO CHALLENGED ON THE GROUND TH AT WHILE IDENTIFYING THE TRANSACTIONS, LIABLE FOR IMPOSITION OF PENALTY U/S 2710, THE JCIT, CENTRAL RANGE, NASHIK INCLUDED VARIOUS TRANSACTIONS WITH SUB-CONTRACTORS AND STAFF WHICH W ERE NORMAL BUSINESS TRANSACTIONS IT WAS CONTENDED THAT THESE TRANSACTIONS WERE ALSO NOT IDENTIFIED WITH THE ABBR EVIATION 'H.L.' BY THE PERSON MAINTAINING ABOVE REFERRED REG ISTERS. AN ANNEXURE WITH COMPLETE DETAILS OF SUCH TRANSACTIONS WAS FURNISHED BY THE APPELLANT AND IT WAS ARGUED THAT I NCLUSION OF SUCH TRANSACTION SHOWS LACK OF APPLICATION OF MIND BY THE AUTHORITY IMPOSING THE PENALTY. THOUGH, I AGREE WIT H THE APPELLANT THAT SUCH TRANSACTION CANNOT BE CONSIDERE D FOR IMPOSITION OF PENALTY U/S 271D, MERELY ERROR IN IDE NTIFYING FEW TRANSACTIONS LIABLE FOR PENALTY U/S 271D IS NOT SUF FICIENT TO ESTABLISH THE PERVERSE NATURE OF THE ORDER. SUCH MI NOR ERROR WILL NOT VITIATE THE TENOR OF ORDER IMPOSING PENALT Y. THUS, THE KEY QUESTION WHICH IS REQUIRED TO BE ANSW ERED IS WHETHER OR NOT THE UNACCOUNTED TRANSACTIONS RECO RDED IN SEIZED REGISTERS MARKED AS A-25, A-26, A-32 & A-33 WERE CONSIDERED AND INCORPORATED BY THE APPELLANT WHILE OFFERING ADDITIONAL INCOME OF RS.1.75 CRORE DURING THE COURS E OF HIS STATEMENT U/S 132(4) OF THE ACT RECORDED AT THE TIM E OF SEARCH PROCEEDINGS. IF THE ANSWER OF THIS QUESTION IS AFFI RMATIVE, THE SECOND ISSUE REQUIRED ADJUDICATION IS WHETHER THE R EVENUE, HAVING ACCEPTED THE APPELLANT'S STAND THAT UNACCOUN TED TRANSACTIONS RECORDED IN ABOVE REFERRED SEIZED MATE RIAL WAS ITS UNDISCLOSED INCOME CAN RESORT TO PROCEEDINGS U/S.26 9SS R.W.S. 271D OF THE ACT OR NOT. IN THE APPELLANTS CASE DURING THE COURSE OF PROCEE DINGS U/S.132 OF THE ACT, VARIOUS INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED FROM THE OFFICE PREMISES EVIDENCIN G 4 UNRECORDED CASH TRANSACTIONS. IN THIS REGARD, TWO S ETS OF SEIZED MATERIAL ARE CRUCIAL AND RELEVANT. ONE SET O F REGISTERS WAS SEIZED AND MARKED AS ANNEXURE A-13, A-16, A-19, A-21, A-28 & A-40 .. OTHER SET OF REGISTERS WAS MARKED AS ANNEXURE A-25, A-26, A-32 & A-33. DURING THE COURSE OF APPELLATE PROCEEDINGS( IN THE APPELLANT'S OWN CASE, AGAINST ORDERS PASSED U/S 153 A R.W.S. 143(3) OF THE ACT FROM A.YS.2000-01 TO 2005-06 AND U/S 143(3) FOR A.Y.2006-07, BOTH THE SETS OF REGISTERS WERE ANALYZED AND THE MATTER WAS DISCUSSED AT LENGTH. IT WAS FOUND DURING THE AFORESAID PROCEEDINGS THAT THESE TWO SET S OF REGISTERS ARE COMPLIMENTARY TO EACH OTHER AND ALL E NTRIES RECORDED IN THE FIRST SET OF SEIZED MATERIAL ARE DU LY REFLECTED IN THE SECOND SET. WHEN CONFRONTED WITH THE ENTRIES RE CORDED IN THE DOCUMENTS SEIZED IN THE COURSE OF SEARCH, ONE O F THE PARTNERS OF THE APPELLANT FIRM, SHRI VIVEK S. DESHP ANDE ADMITTED UNDISCLOSED INCOME OF RS.1. 75 CRORE ON AC COUNT OF INVESTMENT IN THE FORM OF UNRECORDED WORK-IN-PROGRE SS IN VARIOUS PROJECTS UNDERTAKEN BY THE APPELLANT FIRM A S WELL AS FICTITIOUS/INFLATED EXPENSES DEBITED IN THE P&L ACC OUNT OF A.Y.2006-07. IT IS EVIDENT FROM THE STATEMENT RECOR DED THAT THE AFORESAID AMOUNT WAS OFFERED ON THE BASIS OF ENTRIE S RECORDED IN THE SEIZED CASH BOOK MARKED AS ANNEXURE A-25, A- 26, A-32 & A-33. THE MODUS-OPERANDI OF EVASION WAS ALSO EXPL AINED BY THE PARTNER OF THE FIRM AND IT WAS CATEGORICALLY ST ATED THAT UNACCOUNTED INC.OME WAS INTRODUCED FROM TIME TO TIM E AS PER THE REQUIREMENT OF THE BUSINESS ON ACCOUNT OF HAND LOAN FROM VARIOUS PARTIES. IT WAS ALSO EXPLAINED THAT SUCH UN ACCOUNTED FUND WAS RECOUPED BY GENERATING SURPLUS CASH ON ACC OUNT OF FICTITIOUS EXPENSES. THE RELEVANT PART OF STATEMEN T OF KEY PARTNER SHRI VIVEK S. DESHPANDE WAS ALREADY CITED B Y THE APPELLANT IN ITS SUBMISSION ADVERTED ABOVE. IT IS CLEARLY EVIDENT FROM THE FACTS OF THE CASE THAT ADDITIONAL INCOME OF RS.1. 75 CRORE WAS OFFERED BY THE APPELLANT ON THE BASIS OF UNACCOUNTED CASH TRANSACTIONS RECORDED IN ABOVE REF ERRED SEIZED MATERIAL AND WHILE DOING SO, THE PEAK OF ALL CASH TRANSACTIONS RECORDED IN THE ABOVE REFERRED SEIZED MATERIAL UNDER ABBREVIATION 'H.L.' WAS OFFERED AS UNDISCLOSE D INCOME OF THE APPELLANT INVESTED IN THE WORK-IN-PROGRESS NOT REFLECTED IN REGULAR BOOKS OF ACCOUNT. IN VIEW OF THE ABOVE, THE ENTIRE CASH LOAN ACCEPTED BY THE APPELLANT AND RECORDED IN SEIZ ED REGISTERS MARKED AS ANNEXURE A-25, A-26, A-32 & A-33 WAS DISC LOSED BY THE APPELLANT AND ASSESSED AS APPELLANT'S UNDISC LOSED INCOME. ONCE THE HAND LOAN RECORDED IN THE SEIZED MATERIAL IS OFFERED BY THE APPELLANT AS ITS UNDISCLOSED INCOME AND THE REVENUE ACCEPTED THE SURRENDER OF THE AMOUNT AND AS SESSED IT AS INCOME OF THE ASSESSEE, THE PROVISIONS OF SECTIO N 269SS R.W.S. 271D CANNOT BE RESORTED TO. WHILE DECIDING T HE SIMILAR ISSUE THE HON'BLE DELHI HIGH COURT IN THE CASE OF D IWAN ENTERPRISES VS. CIT & OTHERS (2000) 246 ITR 571, OB SERVED 5 THAT IT WAS OPEN TO THE AO NOT TO ACCEPT THE SURREN DER, TREAT THE AMOUNT AS LOAN AND THEN HOLD THE ASSESSEE LIABL E TO PENALTY U/S 271D FOR NON-COMPLIANCE WITH THE SECTIO N 269SS. IT WAS FURTHER OBSERVED BY THE HON'BLE COURT THAT T HE AO COULD NOT BE PERMITTED TO TREAT THE AMOUNT OF LOAN AS INC OME FOR THE PURPOSE OF COMPUTING ASSESSEE'S TAX AND AT THE SAME TIME TO TREAT IT AS A LOAN FOR THE PURPOSE OF SECTION 269SS AND SUBJECT THE TRANSACTION TO PENALTY U/S 271D. SIMILAR VIEW W AS TAKEN IN THE CASE OF COMMISSIONER OF INCOME TAX VS. STAND ARD BRAND LTD. (2006) 285 ITR 295. IN THIS CASE, ASSESS EE HAD RECEIVED AN AMOUNT OF RS.3 LAKH IN CASH FROM ONE M/ S.D. ACCORDING TO THE AO THE AMOUNT REPRESENTED AS UNDIS CLOSED INCOME IN THE HANDS OF THE ASSESSEE. NOTWITHSTANDIN G THE FACT THAT THE AO WAS OF THE VIEW THAT THE AMOUNT WAS UND ISCLOSED INCOME, PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE FOR THE VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT. THE HON'BLE DELHI HIGH COURT OBSERVED THAT THE REVENUE, HAVING TAKEN THE STAND THAT THE AMOUNT OF RS.3 LAKH WAS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE, IT COULD NOT RESORT TO PROCEEDINGS U/S 269SS R.W.S. 271D. RELYING UPON THE AFORESAID ORDER OF HON'BLE DELHI H IGH COURT, THE RELIEF WAS ALSO GRANTED BY THE HON'BLE I TAT, MUMBAI 'B' BENCH IN THE CASE OF DCIT VS. G.S. ENTER TAINMENT (2007) 109 TTJ (MUM) 54. IN THIS CASE ALSO, IT WAS HELD BY THE HON'BLE TRIBUNAL THAT ONCE THE AMOUNT IN QUESTION I S ASSESSED AS THE UNDISCLOSED INCOME OF THE ASSESSEE IN THE BL OCK ASSESSMENT FOR THE BLOCK PERIOD, THE PROVISIONS OF SECTION 269SS R.W.S. 271D CANNOT BE RESORTED TO. IN VIEW OF THE ABOVE, ONCE THE UNACCOUNTED FUND WAS SURRENDERED BY THE ASSESSEE AND IT WAS ACCEPTED BY THE AO AS INCOME OF THE ASSESSEE, IT CEASED TO BE A LOAN AND THEREFORE, THE VERY FOUNDATION FOR INITIATING THE PROCEEDINGS FOR AND LEVYING PENALTY U/S 271D WAS LOST. THEREFORE, PENAL TIES IMPOSED BY THE JCIT, CENTRAL RANGE, NASHIK U/S 271D R.W.S. 269SS ON THE BASIS OF ENTRIES RECORDED ON SEIZED RE GISTERS MARKED AS ANNEXURE A-25, A-26, A-32 & A-33 CANNOT B E SUSTAINED. HOWEVER, FACTS AND CIRCUMSTANCES OF THE CASE ARE TO TALLY DIFFERENT SO FAR AS PENALTY OF RS.25 LAKH IMPOSED O N THE ACCEPTANCE OF CASH/HUNDI LOAN FROM SHRI KACHRULAL M UTHA IS CONCERNED. AS DISCUSSED ABOVE, DURING THE COURSE OF SURVEY PROCEEDINGS AT THE BUSINESS PREMISES OF SHRI KACHRU LAL MUTHA THE CLINCHING EVIDENCES ESTABLISHING ACCEPTANCE OF CASH/HUNDI LOAN BY THE APPELLANT WAS RECOVERED. THE AFORESAID TRANSACTION WAS NEITHER RECORDED IN SEIZED REGISTERS MARKED AS ANNEXURE A-25, A-26, A-32 & A-33 NOR IN ANOTHER SET OF INCRI MINATING DOCUMENTS SEIZED AS PER ANNEXURE A-13, A-16, A-19, A-21, A- 28 & A-40. THE AFORESAID HUNDI LOAN OF RS.25 LAKH W AS ALSO NOT OFFERED BY THE APPELLANT AS ITS UNDISCLOSED INC OME AND THE SAME WAS NOT ASSESSED BY THE AO TREATING UNACCOUNTE D FUND 6 OF THE APPELLANT. THE PERUSAL OF THE ASSESSMENT ORD ER PASSED U/S 143(3) BY THE AO FOR A.Y.2006-07 SHOWS THAT THE AMOUNT WAS ADDED UNDER DEEMING PROVISIONS OF SECTION 69D. SINCE THE AMOUNT WAS NOT ACCEPTED AS UNDISCLOSED INCOME OF TH E APPELLANT, MERELY ITS INCLUSION IN TAXABLE INCOME B Y OPERATION OF DEEMING PROVISIONS OF SECTION 69D, WILL NOT CHAN GE THE CHARACTER OF THE TRANSACTION. ON THE BASIS OF AO'S ACT OF ASSESSING THE AFORESAID AMOUNT U/S 69D, IT CANNOT B E CLAIMED THAT HUNDI LOAN OF RS.25 LAKH ACCEPTED BY THE APPEL LANT FROM SHRI KACHRULAL MUTHA CEASES TO BE A LOAN AND, THERE FORE, OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 269SS. I, THEREFORE, DO NOT FIND ANY INFIRMITY IN JCIT, CENTR AL RANGE, NASHIK'S ACTION OF IMPOSING PENALTY U/S 271D FOR NO N- COMPLIANCE OF PROVISIONS OF SECTION 269SS BY THE AP PELLANT WHILE ACCEPTING HUNDI LOAN OF RS.25 LAKH FROM SHRI KACHRULAL MUTHA IN A.Y.2006-07. IN VIEW OF ABOVE, I CANCEL THE PENALTIES U/S 271D F OR A.YS.2003-04, 2004-05 & 2005-06 AND RESTRICT THE PE NALTY AT AN AMOUNT OF RS.25 LAKH IN A.Y.2006-07. 3. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR SO FOLLOWING SAME REASONING WE ARE NOT INC LINED TO INTERFERE WITH THE FINDING OF THE CIT(A) WHO HAS RESTRICTED T HE PENALTY TO RS.25,00,000/- FROM RS.11,38,64,000/-. 4. COMING TO THE ASSESSEES APPEAL WHEREBY SUSTAINI NG OF PENALTY IS CONCERNED, WE FIND THAT PENALTY OF RS.25,00,000/ - IMPOSED FOR ACCEPTANCE OF CASH/HUNDI LOAN FROM SHRI KACHRULAL M UTHA. DURING THE COURSE OF SURVEY OPERATIONS IN THE BUSINESS PRE MISES OF SHRI KACHRULAL MUTHA, CLINCHING EVIDENCE ESTABLISHI NG THE FACT OF ACCEPTANCE OF CASH/HUNDI LOAN BY THE ASSESSEE WAS R ECOVERED. THE AFORESAID TRANSACTION WAS NEITHER RECORDED IN SEIZE D REGISTERS MARKED AS ANNEXURES A-25, A-26, A-32 AND A-33 NOR I N ANOTHER SET OF INCRIMINATING DOCUMENTS SEIZED AS PER ANNEXURES A-13, A-16, A-19, A-21, A-28 AND A-40. THE AFORESAID HUNDI LOAN OF RS.25,00,000/- WAS NOT OFFERED BY THE ASSESSEE AS I TS UNDISCLOSED INCOME AND THE SAME WAS NOT ASSESSED BY THE ASSESSI NG OFFICER TREATING AS UNACCOUNTED FUND OF THE ASSESSEE. ON P ERUSAL OF THE ASSESSMENT ORDER U/S.143(3) BY THE ASSESSING OFFICE R FOR A.Y. 2006-07, IT WAS FOUND THAT THE AMOUNT WAS ADDED UND ER DEEMING PROVISIONS OF SECTION 69D. SINCE THE AMOUNT WAS NO T ACCEPTED AS 7 UNDISCLOSED INCOME OF THE ASSESSEE, MERELY ITS INCL USION IN TAXABLE INCOME BY OPERATION OF DEEMING PROVISIONS OF SECTIO N 69D WILL NOT CHANGE THE CHARACTER OF THE TRANSACTION. ON THE BA SIS OF ASSESSING OFFICERS ACT OF ASSESSING THE AFORESAID AMOUNT U/S .69D, IT CANNOT BE CLAIMED THAT HUNDI LOAN OF RS.25,00,000/- ACCEPT ED BY THE ASSESSEE FROM SHRI KACHRULAL MUTHA CEASES TO BE LOA N AND, THEREFORE, OUTSIDE THE PURVIEW OF PROVISIONS OF SEC TION 269SS. THEREFORE, CIT(A) CONFIRMED THE ORDER OF THE ASSESS ING OFFICER WHO HAS IMPOSED THE PENALTY U/S.271D FOR NON-COMPLIANCE OF PROVISIONS OF SECTION 269SS BY THE ASSESSEE WHILE ACCEPTING HU NDI LOAN OF RS.25,00,000/- FROM SHRI KACHRULAL MUTHA IN A.Y. 20 06-07. ACCORDINGLY, THE CIT(A) UPHELD THE PENALTY OF RS.25 ,00,000/- FOR A.Y. 2006-07. SAME HAS BEEN OPPOSED BEFORE US. 5. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY U/S.271 D OF THE ACT ON HUNDI LOAN OF RS.25,00,000/- PARTICULARLY WHEN THE ADDITION OF THE SAID AMOUNT WAS CONFIRMED AS INCOME OF THE ASSESSEE FOR THE YEAR. THE CIT(A) ERRED IN TAKING A VIEW THAT SINCE THE AD DITION WAS CONFIRMED U/S.69D WHICH IS DEEMING PROVISION OF THE ACT, PROVISIONS OF SECTION 269SS ARE STILL ATTRACTED AND THE PENALTY IS LEVIABLE. ON THE OTHER HAND, LD. DEPARTMENTAL REP RESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MA TERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE WITH THE F INDING OF THE CIT(A) WHO HAS SUSTAINED THE PENALTY OF RS.25,00,000/- IMP OSED ON ACCEPTANCE OF CASH/HUNDI LOAN FROM SHRI KACHRULAL M UTHA. DURING THE COURSE OF SURVEY PROCEEDINGS AT THE BUSINESS PR EMISES OF SHRI KACHRULAL MUTHA, EVIDENCE ESTABLISHING THE FAC T OF ACCEPTANCE OF CASH/HUNDI LOAN BY THE ASSESSEE WAS RECOVERED. THIS TRANSACTION WAS NEITHER RECORDED IN SEIZED REGISTER S MARKED AS ANNEXURES A-25, A-26, A-32 AND A-33 NOR IN OTHER SE T OF INCRIMINATING DOCUMENTS SEIZED AS PER ANNEXURES A-1 3, A-16, A-19, A-21, A-28 AND A-40. THE AFORESAID HUNDI LOAN OF RS .25,00,000/- WAS NOT OFFERED BY THE ASSESSEE AS ITS UNDISCLOSED INCOME AND THE 8 SAME WAS NOT ASSESSED BY THE ASSESSING OFFICER TREA TING AS UNACCOUNTED FUND OF THE ASSESSEE. RECORDS OF LOWER AUTHORITIES MAKES IT CLEAR THAT AMOUNT WAS ADDED UNDER DEEMING PROVISIONS OF SECTION 69D OF THE ACT. THE AMOUNT WAS NOT ACCEPTE D AS UNDISCLOSED INCOME OF THE ASSESSEE. HOWEVER, IT WA S INCLUDED IN THE TAXABLE INCOME BY OPERATION OF DEEMING PROVISIO NS OF SECTION 69D WHICH DOES NOT CHANGE THE CHARACTER OF TRANSACT ION. ON THE BASIS OF ASSESSING OFFICERS ACTION IN ASSESSING TH E AFORESAID AMOUNT U/S.69D IT CANNOT BE CLAIMED THAT HUNDI LOAN OF RS.25,00,000/- ACCEPTED BY THE ASSESSEE FROM SHRI K ACHRULAL MUTHA CEASES TO BE LOAN AND, THEREFORE, OUTSIDE THE PURVIEW OF SECTION 269SS. IN VIEW OF ABOVE, THE CIT(A) WAS JU STIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IMPOS ING PENALTY U/S.271D FOR NON-COMPLIANCE OF PROVISIONS OF SECTIO N 269SS BY THE ASSESSEE WHILE ACCEPTING HUNDI LOAN OF RS.25,00,000 /- FROM SHRI KACHRULAL MUTHA IN A.Y. 2006-07. SAME IS UPHE LD. 7. AS A RESULT, THE APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF NOVEMBER, 2012. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 23 RD NOVEMBER, 2012 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE JCIT, CENTRAL RANGE, NASHIK. 3. THE CIT(A), AURANGABAD. 4. THE CIT(CENTRAL), NAGPUR. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.