Deputy Commissioner of Income-tax, V. Shri Suresh Kumar Bhikamchand Jain (HUF),

ITA 53/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1547 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHIJIT HALDER
• Keywords: Gift; Search and seizure; Bonafide belief; Additional evidence; Reasonable cause; Fair market value; Block assessment
• Section: 273B; 6

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NOS.52 AND 53/PN/2014 % % / ASSESSMENT YEAR : 2009-10 DCIT, CIRCLE-1, JALGAON . / APPELLANT V/S SHRI SURESHKUMAR BHIKAMCHAND JAIN (HUF), 7, SHIVAJINAGAR, JALGAON - 425001 PAN NO.AAAHJ8491A . / RESPONDENT / APPELLANT BY : SHRI SUNIL GANOO / RESPONDENT BY : SHRI ABHIJIT HALDER / ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 25-10-2013 OF THE C IT(A)-II, NASHIK RELATING TO THE ASSESSMENT YEAR 2009-10. 2. DELETION OF PENALTY OF RS.40,00,000/- EACH U/S.271D AND 271E BY THE CIT(A) IS THE ONLY ISSUE RAISED BY THE REV ENUE IN THE GROUNDS OF APPEAL. / DATE OF HEARING :07.07.2016 / DATE OF PRONOUNCEMENT:22.07.2016 2 ITA NOS.52 & 53/PN/2014 3. FIRST WE TAKEN UP ITA NO.52/PN/2014. FACTS OF THE C ASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN HUF AND FILED ITS RETURN OF INCOME ON 22-09-2009 DECLARING TOTAL LOSS OF RS.88,82,866/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A QUESTIONNAIRE WAS ISS UED BY THE JOINT COMMISSIONER OF INCOME TAX IN WHICH ONE OF THE QU ERIES WAS REGARDING THE WEALTH TAX RETURN & ITS COMPUTATION. W HILE REPLYING TO THE SAID QUERY, THE ASSESSEE HAD REPLIED THA T THE FAIR MARKET VALUE OF FLAT NO.1403, GODAWARI BUILDING, SIR POCHKANWALA ROAD, WORLI SAGAR CO-OPERATIVE HOUSING SOCIETY, WORLI, MUMBAI WAS TAKEN ON THE BASIS OF AGREEMENT TO SALE WHICH WAS MADE DURING THIS YEAR . HOWEVER, THE DEAL DID NOT MATERIALIZE DUE TO BREACH OF AGREEMENT COMMITTED BY PURCHASER UNDER AGREEMENT TO SALE, COPY OF WHICH WAS ALSO SUBMITTED. FURTHER, COPY OF ACCOUNT EXTR ACT OF SHRI . PRALHAD KASHIRAM PATIL (WITH WHOM AGREEMENT TO SALE OF TH E SAID FLAT WAS ENTERED) WAS ALSO SUBMITTED. FURTHER, ON REQU ISITION MADE BY THE AO, THE ASSESSEE HAD ALSO SUBMITTED THE CO PY OF CASH BOOK OF SHRI . PRALHAD KASHIRAM PATIL AND THE COPY OF ASSESSMENT ORDER OF SHRI . PRALHAD KASHIRAM PATIL ALONG WITH THE BALANCE SHEET. ON THE BASIS OF THE BALANCE SHEET, COPY OF THE CASH BOO K AND ASSESSMENT ORDER U/S.143(3) OF SHRI PRALHAD KASHIRAM PATIL, THE AO ACCEPTED THE EXPLANATION OF CASH CREDIT OF RS.40 LACS REC EIVED ON ACCOUNT OF AGREEMENT TO SALE THE SAID FLAT. THE SAID SALE CONSIDERATION OF FLAT WAS RECEIVED ON 22-06-2008. 4. ALTHOUGH THE AO ACCEPTED THE SOURCE OF MONEY AS EX PLAINED, HOWEVER, HE OBSERVED THAT SINCE THE DEAL WAS NOT MATER IALIZED FOR WHICH CASH WAS REPAID BY THE ASSESSEE ON 19-03-2009. T HUS, THE ABOVE AMOUNT WAS LYING AS DEPOSIT WITH THE ASSESSEE FRO M 22-06-2008 TO 18-03-2009 AND IN THIS WAY THE ASSESSEE HAS NOT 3 ITA NOS.52 & 53/PN/2014 ONLY VIOLATED THE PROVISIONS OF SECTION 269SS BUT ALSO OF S ECTION 269T. HE THEREFORE INITIATED PENALTY PROCEEDINGS U/S.271D FOR ACCEPTANCE OF CASH AGAINST SALE CONSIDERATION OF FLAT UNDER AGREEMENT TO SALE. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED A DETAILED REPLY STATING THAT HE IS NOT LIABLE FOR VIOLATION OF PROVISIONS OF SECTION 269SS SINCE AMOUNT WAS RE CEIVED AGAINST AGREEMENT TO SALE THE FLAT. RELYING ON VARIOUS D ECISIONS IT WAS SUBMITTED THAT THE AMOUNT RECEIVED BY THE ASSESSE E ON ACCOUNT OF AGREEMENT TO SELL THE FLAT WILL NOT COME UNDER T HE PURVIEW OF LOAN OR DEPOSIT IN THE NATURE OF LOAN AND THERE FORE PROVISIONS OF SECTION 271D ARE NOT APPLICABLE. 5. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS MADE BY THE ASSESSEE AND HELD THAT THE ASSESSEE HAS VIOLATED THE P ROVISIONS OF SECTION 269SS BY ACCEPTING THE CASH ON ACCOUNT OF SALE OF FLAT AND SUBSEQUENTLY REPAID THE SAME. THE AUDITOR HAS NOT PO INTED OUT THE SAME IN THE AUDIT REPORT ALTHOUGH IT WAS OBLIGATORY ON HIS PART TO POINT OUT THE SAME. HE OBSERVED THAT SUCH ENTRIES HAV E BEEN MADE AFTER COMPLETION OF SUCH AUDIT REPORT AS THERE WILL BE NO S UCH EFFECT ON THE PART OF FINALIZATION OF ACCOUNTS AS CASH BALANCE WILL BE THE SAME SINCE THE AMOUNT TAKEN AS WELL AS RETURNED IS DUR ING THE SAME YEAR AND NOT AT THE BEGINNING OR END OF THE YEAR. FURTHER, IT WILL HAVE NO EFFECT IN THE TRADING ACCOUNT, PROFIT AND LOSS A CCOUNT OR BALANCE SHEET. ON THE OTHER HAND SUCH ENTRIES ARE BEIN G MADE IN ORDER TO ACCOMMODATE THE OTHER PERSON OR HIMSELF FOR TH E REASONS BEST KNOWN TO THE ASSESSEE. FURTHER, EVEN IF IT IS ASSUM ED THAT SUCH A TRANSACTION INFACT HAS TAKEN PLACE THEN ALSO IT IS NORMAL THAT WHENEVER ANY SUCH TRANSACTION OF PURCHASE OR SALE OF IMM OVABLE PROPERTY IS UNDERTAKEN THERE IS ALWAYS A CLAUSE FIXED T HAT IF THE 4 ITA NOS.52 & 53/PN/2014 PURCHASER FAILS TO MAKE THE PAYMENT WITHIN THE PRESCRIBED TIME LIMIT IT WILL BE THE RIGHT OF THE SELLER TO FORFEIT THE AMOUNT PA ID BY THE PURCHASER. HOWEVER, THE SAME IS LACKING HERE. FURTH ER THE SO CALLED SAUDA PAVTI PURCHASE AGREEMENT AND CANCELLATION AG REEMENT WAS PREPARED WITHIN A GAP OF MORE THAN 8 TO 9 MONTHS W HICH RAISES DOUBT. SINCE THE STAMP PAPER OF RS.50/- EACH TOTALING TO RS.100/- HAS BEEN PURCHASED ON 31-03-2008 WHEREAS THE SAUDA PAVTI AGREEMENT WAS CONDUCTED ON 22-06-2008 WHICH IS NOT RE GISTERED AND NOT EVEN NOTARIZED, THEREFORE, THE SO CALLED AGREEMEN T TO PURCHASE AND CANCELLATION THEREOF IS NOTHING BUT A MADE-U P STORY IN ORDER TO ESCAPE FROM THE PENAL PROVISIONS OF SECTION 269SS/269T. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO LEVIED PENALTY OF RS.40 LAKHS U/S.271D AND ANOTHER RS.40 LAKHS U/S.271E. 6. BEFORE CIT(A) IT WAS SUBMITTED THAT THE AO IS NOT JUST IFIED IN LEVYING PENALTY U/S.271D IN RESPECT OF EARNEST MONEY TOWA RDS SALE CONSIDERATION RECEIVED AGAINST AGREEMENT TO SALE FLAT NO.1 403, GODAWARI BUILDING, WORLI SAGAR COOPERATIVE HOUSING SOCIETY L TD. WORLI, MUMBAI. IT WAS SUBMITTED THAT AS PER THE AGREEMEN T TO SALE, THE EARNEST MONEY OF RS.40 LAKHS WAS RECEIVED AGAINST AG REEMENT TO SALE THE ABOVE SAID FLAT. DUE TO INSUFFICIENCY OF FUNDS THE PURCHASER UNDER AGREEMENT TO SALE SHOWED HIS INABILITY TO PERFORM HIS PART OF THE PROMISE GIVEN TO THE SELLER UNDER AGREEM ENT TO SALE TO EXECUTE THE SALE DEED ON OR BEFORE 25-03-2009 AS PER CONDITION NO.3 OF THE AGREEMENT TO SA LE. THEREFORE, THE SAID AGREEMENT TO SALE WAS CANCELLED ON 19-03-2009 AND THE AMOUNT OF RS.40 LAKHS RECEIVED EARL IER WAS RETURNED BACK IN CASH TO THE PURCHASER UNDER AGREEMENT TO SALE. I N 5 ITA NOS.52 & 53/PN/2014 THE AGREEMENT TO SALE, NO PROVISION REGARDING EITHER CHAR GING OF INTEREST ON EARNEST MONEY OR FORFEITURE OF EARNEST MONEY WAS MADE. FURTHER, BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERAT ION WERE AUDITED BY THE INDEPENDENT CHARTERED ACCOUNTANTS WHO HAS NOT POINTED OUT ANY VIOLATION OF PROVISIONS OF SECTION 269SS. F URTHER SHRI PRALHAD KASHIRAM PATIL, THE PROPOSED PURCHASER VIDE AGREEMENT TO SALE, HAD FURNISHED HIS DAY-TO-DAY CASH FLOW STATEMENT WHICH SHOWS THE AMOUNT OF RS.40 LAKHS PAID TO THE ASSESSEE AS EARNEST MONEY. THERE IS ALSO NO BUSINESS TR ANSACTION BETWEEN THE ASSESSEE AND PURCHASER OF FLAT UNDER AGRE EMENT TO SALE EITHER BEFORE ENTERING THE AGREEMENT TO SALE OR THEREAFT ER. REFERRING TO THE CBDT CIRCULAR NO.387 DATED 06-07-1984 REPORTED IN 152 ITR (STATUTE) 22 AT PARA NO.32.5 IT WAS SUBMITTED THAT AS PER THE SAID CIRCULAR PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE TO S ALE AND PURCHASE TRANSACTIONS. 7. IT WAS ALTERNATIVELY SUBMITTED THAT THE ALLEGED ADVA NCE WAS IN FACT THE EARNEST MONEY TOWARDS THE SALE CONSIDERATION OF SALE OF HOUSE PROPERTY AND THEREFORE THE SAME WAS OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 269SS. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT THE EARNEST MONEY RECEIVED ON ACCOUNT OF SALE OF FLAT UNDER AGREEMENT TO SALE IS NEITHER DEPOSIT OR LOAN AND D OES NOT BECOME LOAN OR DEPOSIT IF THE AGREEMENT TO SALE IS ON ACC OUNT OF REPUDIATION BASED ON ANTICIPATORY BREACH OF CONTRACT WHIC H IS EXERCISED BEFORE THE DUE DATE ON PERFORMANCE OF CONTRAC T AND HENCE THE PENALTY CANNOT BE LEVIED U/S.271D. IN YET ANOTHER ALTERNATE SUBMISSION, IT WAS SUBMITTED THAT THERE WAS ALSO A REASON ABLE CAUSE FOR THE ASSESSEE IN NOT COMPLYING WITH THE PROVISIO NS OF 6 ITA NOS.52 & 53/PN/2014 SECTION 269SS OF THE ACT AND THEREFORE THE JCIT OUGHT N OT TO HAVE LEVIED PENALTY U/S.271D OF THE I.T. ACT. 8. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE PENALTY LEVIED BY THE AO U/S.271D OF T HE I.T. ACT. HE OBSERVED THAT THE TRANSACTION OF SALE AND PURC HASE UNDER AGREEMENT TO SALE IS DULY SUPPORTED BY THE COPY OF AGR EEMENT TO SALE WHICH IS FURTHER FORTIFIED BY THE LETTER OF THE PURCHASE R UNDER AGREEMENT TO SALE AND THE CASH FLOW STATEMENT, ASSESSME NT ORDER AND ADMISSION BY THE PURCHASER UNDER AGREEMENT TO SALE , VIZ. SHRI PRALHAD KASHIRAM PATIL. FURTHER, CLARIFICATION HAS BEEN ISSU ED BY THE AUDITOR WHO AUDITED THE BOOKS OF ACCOUNT BY ISSUING A CERTIFICATE TO THIS EFFECT DURING THE REMAND PROCEEDINGS. T HE TRANSACTION OF RS.40 LAKHS IS DULY REFLECTED BY THE ASSESS EE AS WELL AS THE PURCHASER UNDER AGREEMENT TO SALE IN THEIR RES PECTIVE BOOKS OF ACCOUNT. THUS, THERE IS NO SUPPRESSION OR ATTEMPT T O EVADE TAX PAYABLE BY EITHER PARTY. FURTHER, THE AMOUNT OF RS.40 LAK HS IS RECEIVED ON ACCOUNT OF SALE CONSIDERATION UNDER AGREEMEN T TO SALE AND THEREFORE IT DOES NOT AMOUNT TO EITHER DEPOSIT OR LO AN WITHIN THE MEANING OF SECTION 269SS OF THE I.T. ACT, 1961. AS S UCH NO PENALTY IS IMPOSABLE U/S.271D. RELYING ON VARIOUS DECISIONS AND THE CBDT CIRCULAR NO.387 DATED 06-07-1984 THE LD.CIT(A) HE LD THAT THE PENALTY IS NOT LEVIABLE U/S.271D OF THE I.T. ACT. THE TRANSACTION UNDER CONSIDERATION OF SALE OF IMMOVABLE PROPER TY UNDER AGREEMENT TO SALE ON WHICH THE ASSESSEE HAS REC EIVED RS.40 LAKHS AS EARNEST MONEY IS NOT DEPOSIT WITHIN THE MEANING OF SECTION 269SS. EVEN OTHERWISE ALSO, THE TRANSACTION BEING BONAFID E ONE COUPLED WITH GENUINENESS, THEREFORE, THERE IS NO INTENTION T O EVADE THE TAX. THE EXPLANATION GIVEN BY THE ASSESSEE APPEARS TO BE 7 ITA NOS.52 & 53/PN/2014 REASONABLE ONE WITHIN THE MEANING OF SECTION 273B R.W.S.2 71D. HE ACCORDINGLY DIRECTED THE AO TO DELETE THE PENALTY LEVIED U/S.271D OF THE I.T. ACT. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE HON ' BLE CIT(A) , NASHIK HAS ERRED IN DELETING THE PENALTY LEV I ED U/S 271 D OF THE INCOME TAX ACT , 1961 , AT RS.40,00,000/- . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE HON'BLE CIT(A), NASHIK HAS ERRED IN CONSIDERING THE FACT THAT THE ASSESSEE IS NOT ENGAGED IN TAKING DEPOSIT FROM PUBLIC IS NOT CORRECT . INFACT IN INCOME TAX PROCEEDINGS FOR AY. 2010-11 IT WAS SEEN THAT THE A SSESSEE HAS TAKEN GIFTS FROM PERSONS AND THEN HAS SHOWN THIS AMOUNT O F GIFTS RECEIVED AS OTHER SOURCES AND HAS REVISED HIS OWN INCOME . 3. ON THE FACTS AND IN THE C I RCUMSTANCES OF THE CASE , THE HON ' BLE CIT(A) , NASHIK HAS NOT CONSIDERED THE FACT THAT IS AN ACCOMMODA T I ON ENTRY TO EXPLAIN THE F I NANCE/ MONEY DEPOSIT IN BOOKS OF ACCOUNTS OF THE ASSESSEE . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE HON'BLE CIT(A), NASHIK HAS ERRED IN NOT CONSIDERING THE FACT THAT THE AO . DURING ASSESSMENT PROCEEDING AND PENALTY PROCEEDING HAS NOT DEN IED THE TRANSACTION BUT HAS CHALLENGED THE VALIDITY BY V I RTUE OF CONTENT OF AUDIT REPORT RIGHTLY . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE HON ' BLE CIT(A) , NASH I K HAS RELIED TO THE APPLICABILITY OF CBDT ' S CIRCULAR. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY, DELETE AMEND ANY OF THE GROUNDS WITH PRIOR PERMISSION OF THE HON ' BLE CIT , AS PER THE CIRCUMSTANCES OF THE CASE . 7. THE APPELLANT PRAYS TO FILE ANY OF THE ADDITIONAL EVIDENCE APPROPRIATE TO THE GROUNDS TAKEN IN APPEAL . 10. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT THE ASSESSEE HAS RECEIVED THE AMOUNT OF RS.40 LAKHS IN CASH IN VIOLATION OF THE PROVISIONS OF SECTION 269SS. THE SO CALLED AGREEMENT TO SELL THE FLAT FOR WHICH CASH HAS BEEN RECEIVED AND SUBSEQUENTLY RETURNED BA CK IS ONLY A MAKE BELIEVE THEORY. THE AGREEMENT TO SALE AND THE SUB SEQUENT 8 ITA NOS.52 & 53/PN/2014 CANCELLATION DEED ON STAMP PAPER OF RS.50/- EACH WHICH A RE NOT REGISTERED ARE ONLY SELF-SERVING DOCUMENTS. THE ASSESS EE IN THE INSTANT CASE HAS CLEARLY VIOLATED THE PROVISIONS OF SECTION 269SS AND THEREFORE THE AO WAS FULLY JUSTIFIED IN LEVYING PENALTY U /S.271D OF THE I.T. ACT. 11. REFERRING TO THE DECISION OF HONBLE KARNATAKA HIGH C OURT IN THE CASE OF GRIHALAKSHMI VISION VS. ACIT REPORTED IN 379 ITR 100 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DEC ISION HAS HELD THAT WHERE ASSESSEE RECEIVED DEPOSITS FROM PARTNE RS AND SISTER CONCERNS IN CASH, PENALTY LEVIED U/S.271D FOR VIOLATION OF SE CTION 269SS HAS TO BE CONFIRMED. HE ACCORDINGLY SUBMITTED THA T THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE AO BE RESTORED. 12. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.40 LAKHS FROM SHRI PRALHAD KA SHIRAM PATIL ON ACCOUNT OF SALE OF FLAT AT WORLI, MUMBAI. THE AMOUNT IS REFLECTED IN THE BOOKS OF BOTH SHRI PRALHAD KASHIRAM PATIL AS WELL AS THE ASSESSEE. THE AMOUNT HAS BEEN RETURNED DURING TH E SAID YEAR SINCE THE TRANSACTION DID NOT MATERIALISE. SHRI PRALHAD KAS HIRAM PATIL IS AN INCOME-TAX ASSESSEE. THE AO IN THE BODY OF TH E ASSESSMENT ORDER HAS ACCEPTED THE TRANSACTION AS GEN UINE. UNDER THESE CIRCUMSTANCES SINCE THE AMOUNT HAS BEEN RECEIVED AS EARNEST MONEY AS PER THE AGREEMENT FOR SALE OF PROPERTY, THEREFO RE, IN VIEW OF VARIOUS DECISIONS RELIED ON BEFORE THE CIT(A) AS WELL AS TH E CBDT CIRCULAR NO.387, PENALTY IS NOT LEVIABLE U/S.271D OF THE ACT. 9 ITA NOS.52 & 53/PN/2014 13. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. CHANDRAKANT KASHINATH KALE (HUF) VIDE TAX APPEAL NO.27/2007 ORDER DATED 02-07-2007 HE SUBMITTED THAT U NDER SOMEWHAT IDENTICAL CIRCUMSTANCES THE HONBLE HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE. IN THAT CASE T HE TRIBUNAL HAD DELETED THE PENALTY LEVIED U/S.271D OF THE I.T . ACT WHERE PENALTY WAS IMPOSED BECAUSE THE ASSESSEE HAD BO RROWED LOAN OF RS.10 LAKHS FROM ONE SMT. UMADEVI GINDODIYA IN CASH . HOWEVER, IN THE RETURN OF INCOME TAX FILED BY SMT. UMADEVI, WHICH WAS REFERRED, REFLECTED THE TRANSACTION. ACCORDINGLY, THE HONBLE HIGH COURT HELD THAT THERE WAS NO SUPPRESSION OR ANY A TTEMPT TO EVADE THE TAX PAYABLE ON THE PART OF EITHER OF THE TWO. 13.1 REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT, THANE VS. MAHABAL SHETTY REPORTED IN 2011 (9) TMI 189, A COPY OF WHICH WAS FILED, HE SUBMITTED THAT THE HONB LE HIGH COURT IN THE SAID DECISION UPHELD THE ORDER OF THE TRIBUNA L DELETING THE PENALTY U/S.271D/271E ON THE GROUND THAT THE TRAN SACTIONS RECORDED WERE GENUINE AND THE DECLARATION MADE BY THE ASSESSEE HAS BEEN ACCEPTED WITHOUT MAKING ANY ADDITION IN THE BLOC K ASSESSMENT ORDER. IT WAS FURTHER HELD THAT UNDER PRO VISIONS OF SECTION 273B IF THERE IS A GENUINE AND BONAFIDE TRANSACTION THEN THE AO IS VESTED WITH A DISCRETIONARY POWER NOT TO IMPOS E PENALTY. ACCORDINGLY, THE HONBLE HIGH COURT UPHELD THE ORDER OF T HE TRIBUNAL IN DELETING THE PENALTY LEVIED U/S.271D AND 271E. 14. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHAMUNDI GRANITES PVT. LTD. VS. DCIT REPORTED IN 2 55 ITR 258 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN TH E SAID 10 ITA NOS.52 & 53/PN/2014 DECISION HAS HELD THAT THE OBJECT OF INTRODUCING THE SECT ION 269SS IS TO ENSURE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY, OR IF HE HAS GIVEN SOME FALSE ENT RIES, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. T HE MAIN OBJECT OF 269SS WAS TO CURB THIS MENACE OF MAKING FALSE E NTRIES IN THE ACCOUNT BOOKS AND ALLOW GIVING AN EXPLANATION FOR THE SAME. IT HAS FURTHER BEEN HELD THAT THE UNDUE HARDSHIP OF THE P ROVISIONS OF SECTION 271D, WHICH REPLACES SECTION 276DD PROVIDING FOR A PENALTY IS SUBSTANTIALLY MITIGATED BY INCLUSION OF SECTION 273B PROVID ED THAT IF THERE WAS A GENUINE AND BONAFIDE TRANSACTION AND THE TAXPAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PA YEE CHEQUE OR DEMAND DRAFT FOR SOME BONAFIDE REASON, THE AUTHORITY VES TED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETIONARY POWER N OT TO LEVY THE PENALTY. HE ACCORDINGLY SUBMITTED THAT THE TRANSAC TION BEING GENUINE NO PENALTY IS LEVIABLE. 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND LD.CIT(A) AND TH E PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDE RED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS RECEIVED AN AMOUNT OF RS.40 LAKHS FROM S HRI PRALHAD KASHIRAM PATIL AS EARNEST MONEY TOWARDS SALE CONSIDERATION RECEIVED AGAINST AGREEMENT TO SELL FLAT NO.1 403, GODAWARI BUILDING, WORLI SAGAR COOPERATIVE HOUSING SOCIETY L TD., WORLI, MUMBAI AS PER AGREEMENT DATED 22-06-2008. THE AS SESSEE REPAID THE ABOVE EARNEST MONEY OF RS.40 LAKHS ON 19-03-2009 AS PER THE CANCELLATION OF AGREEMENT ON THE GROUND THAT THE DEAL DID NOT MATERIALISE. IN THE BODY OF THE ASS ESSMENT ORDER THE AO HAS ACCEPTED THE TRANSACTION AS GENUINE. HE, 11 ITA NOS.52 & 53/PN/2014 HOWEVER, LEVIED PENALTY U/S.271D OF THE I.T. ACT ON THE GR OUND THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS OF THE I.T. ACT. ACCORDING TO THE AO THE MONEY WHICH IS LYING IN TH E BOOKS OF ASSESSEE FROM 22-06-2008 TILL 18-03-2009 FOR A SUBSTANTIA L PERIOD IS NOTHING BUT A LOAN OR ADVANCE IN THE NATURE OF LOAN WH ICH WAS TAKEN BY THE ASSESSEE IN CASH. WE FIND THE LD.CIT(A) DELET ED SUCH PENALTY ON THE GROUND THAT THE AMOUNT OF RS.40 LAKHS PA ID BY SHRI PRALHAD KASHIRAM PATIL, WHO IS AN INCOME-TAX ASSESSEE, APP EARS IN HIS BOOKS OF ACCOUNT AND THE TRANSACTION IS A GENUINE ON E. ACCORDING TO HIM, THE PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE TO TRANSACTION OF IMMOVABLE PROPERTY. FURTHER, A S PER THE CBDT CIRCULAR NO.387 DATED 06-07-1984 REPORTED IN 1 52 ITR STATUTE 22 THE PROHIBITION CONTAINED IN SECTION 269SS IS C ONFINED TO LOANS AND DEPOSITS ONLY AND DOES NOT EXTEND TO PU RCHASE/SALE TRANSACTIONS. THE LD.CIT(A) FURTHER HELD THAT THE TRANSAC TION IN THE INSTANT CASE IS A BONAFIDE ONE COUPLED WITH GENUINENES S AND THERE IS NO EVIDENCE TO EVADE TAX AND THE EXPLANATION G IVEN BY THE ASSESSEE APPEARS TO BE REASONABLE ONE WITHIN THE MEANIN G OF SECTION 273B R.W.S.271D. HE ACCORDINGLY CANCELLED THE PE NALTY LEVIED BY THE AO U/S.271D OF THE I.T. ACT. WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. ADMITTEDLY , THE AO IN THE BODY OF THE ASSESSMENT ORDER WHILE DISCUSSING T HE CASH RECEIVED FROM SHRI PRALHAD KASHIRAM PATIL HAS OBSERVED AS UNDER : 7. CASH RECEIVED FROM PRALHAD KASHIRAM PATIL : SHRI PATIL VIDE WRITTEN REPLY DT.06-09-2011 VIDE PO INT NO.2 HAS STATED AS UNDER : DETAILS OF TRANSACTIONS WITH SHRI SURESHKUMAR B. JAIN (HUF) DURING F.Y. 2008-09. EARNEST MONEY OF RS.40,00,000/- WAS PA ID TO SHRI SURESHKUMAR BHIKANCHAND JAIN HUF ON 22-06-2008 AGAIN ST AGREEMENT TO PURCHASE FLAT NO.1403, GODAWARI BUILDING, WORALI SAGAR CO-OP HSG. 12 ITA NOS.52 & 53/PN/2014 SOCIETY LTD.,WORALI, MUMBAI VIDE AGREEMENT TO SALE E XECUTED ON 22-06-2008. HOWEVER, THE SAID EARNEST MONEY PAID WAS RECEIVED BACK ON 19-03-2009. COPY OF AGREEMENT TO SALE IS ENCLOSED HEREWITH. 7.1 I HAVE CONSIDERED THE ABOVE REPLY. SHRI PATILS SCRUTINY ASSESSMENT FOR THE A.Y.2008-09 WAS MADE AND AS ON 31-3-08 HE HAS SHOWN CASH IN HAND AT RS.51,19,759.75 AND OUT OF IT HE HAS PAID RS.40.00 LAKH TO THE ASSESSEE. THUS SOURCE OF MONEY IS E XPLAINED AND IS ACCEPTED. HOWEVER, SINCE THE DEAL WAS NOT MATERIAL IZED HENCE CASH WAS RECEIVED BY HIM BACK ON 19-03-2009. THUS THE ABO VE AMOUNT WAS LYING AS DEPOSIT WITH THE ASSESSEE FROM 22-6-2008 TO 18-0 3-2009 AND IN THIS WAY THE ASSESSEE HAS NOT ONLY VIOLATED THE PROVISI ON OF SECTION 269SS BUT ALSO OF SECTION 269T. INITIATE THEREFORE P ENALTY U/S.271D/271E OF THE INCOME TAX ACT, 1961. 16. FROM THE ABOVE, IT IS CLEAR THAT SHRI PRALHAD KASHIRA M PATIL HAD SUFFICIENT SOURCE TO GIVE THE AMOUNT OF RS.40 LAKHS TO THE ASSESSEE AS EARNEST MONEY ON ACCOUNT OF AGREEMENT TO PURCHASE OF THE FLAT AT WORLI. UNDER THESE CIRCUMSTANCES, WE HAVE TO SEE AS TO WHETHER THE ASSESSEE IS LIABLE TO PENALTY U/S.271D OF THE I.T. ACT FOR VIOLATION OF PROVISIONS OF SECTION 269SS OF THE I.T. ACT. THE CBDT CIRCULAR NO.387 DATED 06-07-1984 REPORTED IN 152 I TR STATUTE 22 SAYS THAT THE PROHIBITION CONTAINED IN SECTION 269SS IS CONFINED TO LOANS AND DEPOSITS ONLY AND DOES NOT EXTEND TO PURCHASE/SALE TRANSACTIONS. 17. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CHANDR AKANT KASHINATH KALE (SUPRA) WHILE UPHOLDING THE ORDER OF THE TRIBUN AL IN DELETING THE PENALTY LEVIED U/S.271D OF THE I.T. ACT HAS OBSERVED AS UNDER : 3. WE HAVE REFERRED TO THE JUDGMENT RENDERED BY TH E COMMISSIONER OF INCOME TAX (A) AND THE REASONS RECORDED BY HIM WHICH ARE ULTIMATELY UPHELD BY THE INCOME TAX APPEL LATE TRIBUNAL. WE FIND THAT THE BREACH OF REQUIREMENT OF SECTION 2 69SS WAS BONAFIDE AND COMPELLED BY THE FACTUAL BUSINESS CIRCUMSTANCES. ON 22-09-1998 WHEN THE ASSESSEE TOOK THE LOAN IN CASH, HE HAD BANK BAL ANCE OF RS.5,930/- AND HE HAD ALREADY ISSUED CHEQUES TO HIS CRED ITORS DURING THE COURSE OF BUSINESS. HAD THERE BEEN ABSENCE OF SUFFIC IENT BALANCE IN HIS ACCOUNT, THE CHEQUES WOULD HAVE BEEN DISHONOURED AND ASSESSEE 13 ITA NOS.52 & 53/PN/2014 WOULD HAVE SUFFERED LOSS OF CREDIT IN THE BUSINESS AND WO ULD HAVE BEEN REQUIRED TO FACE PROSECUTION. 4. IT IS PERTINENT TO NOTE THAT THE RETURN OF INCOME TAX FILED BY SMT. UMADEVI WHICH WAS REFERRED, REFLECTED THE TRANSACTION . THUS, THERE WAS NO SUPPRESSION OR ANY ATTEMPT TO EVADE THE TAX PAYA BLE ON THE PART OF EITHER OF THE TWO. WE FIND THAT THE COMMISSI ONER OF INCOME TAX (A) AND THE INCOME TAX APPELLATE TRIBUNAL JUSTIF IABLY ACCEPTED THE EXPLANATION OF THE ASSESSEE IN SETTING ASIDE PENALTY. 18. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHABA L SHETTY (SUPRA) WHILE DISMISSING THE APPEAL OF THE REVENUE AN D UPHOLDING THE ORDER OF THE TRIBUNAL DELETING THE PENALTY LE VIED U/S.271D AND 271E OF THE ACT HAS OBSERVED AS UNDER : 9. ON PERUSAL OF THE ORDER PASSED BY THE ITAT, PARTIC ULARLY PARA 20 THEREOF, IT IS SEEN THAT THE TRIBUNAL HAS DELETED THE PENALTY ON THE FOLLOWING GROUNDS: (A) THAT THE ASSESSEE WHO IS EDUCATED UPTO ONLY 3 RD STANDARD WAS UNDER THE BONAFIDE BELIEF THAT HE HAS NOT VIOLATED A NY PROVISIONS OF LAW. (B) THE ASSESSEE HAD A REASONABLE CAUSE FOR ACCEPTING THE LOANS IN CASH AS THE SAME WERE RECEIVED FROM CREDITORS WHO WERE AGRI CULTURISTS RESIDING IN REMOTE VILLAGES AND MANY OF THEM WERE NOT HAVING BANK ACCOUNTS. (C) THAT THE ASSESSEE WAS NOT PROFESSIONALLY MANAGED NOR PROFESSIONALLY ADVISED. (D) THAT THE ENQUIRY CONDUCTED BY THE REVENUE IN TH E BLOCK ASSESSMENT PROCEEDINGS SUBSEQUENT TO THE SEARCH AND SEIZURE ACTION REVEALED THAT ALL THE TRANSACTIONS IN QUESTION WERE GE NUINE TRANSACTIONS. 10. THE TRIBUNAL HAS FURTHER HELD THAT WHEN THE TRAN SACTIONS ARE GENUINE, THEN THE VIOLATION OF SECTIONS 269SS AND 269 T CAN AT BEST BE TERMED AS A TECHNICAL VIOLATION AND IN THE FACTS OF T HE PRESENT CASE, THE ASSESSEE HAS DEMONSTRATED THAT HE HAD A REASONABLE CAUSE FOR ACCEPTING /REPAYING THE LOAN IN CASH IN EXCESS OF RS.20 ,000/AND THEREFORE, IT IS NOT A FIT CASE FOR IMPOSING PENALTY. 11. WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY OF SE CTIONS 269(SS), THE APEX COURT IN THE CASE OF ASST. DIRECTOR OF INSPECTION (INVESTIGATION) VS. KUMARI A.B. SHANTI REPORTED IN (2002) 255 ITR 258 ( SC) HAS HELD THAT THE MAIN OBJECT OF SECTION 269(SS) WAS TO CURB THE ME NACE OF MAKING FALSE ENTRIES IN THE BOOKS AND LATER ON GIVE EXPLANATI ON FOR THE SAME. IN THE PRESENT CASE, THE FINDING OF FACT RECORDED BY THE IT AT IS THAT THE TRANSACTIONS RECORDED WERE GENUINE AND IN FACT THE DE CLARATION MADE 14 ITA NOS.52 & 53/PN/2014 BY THE ASSESSEE HAVE BEEN ACCEPTED WITHOUT MAKING ANY A DDITIONS IN THE BLOCK ASSESSMENT ORDER. MOREOVER, S.2738 OF THE INCO ME TAX ACT, 1961 PROVIDES THAT IF THERE IS A GENUINE AND BONAFIDE TRANSACTION THEN, THE ASSESSING OFFICER IS VESTED WITH A DISCRETIONARY POWER NOT TO IMPOSE PENALTY. THEREFORE, IN THE FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE, THE DECISION OF THE IT AT IN HOLDING TH AT THE ASSESSEE HAS SHOWN REASONABLE CAUSE FOR NOT COMPLYING WITH THE PROV ISIONS OF S.267SS AND 269T CANNOT BE FAULTED. CONSEQUENTLY, THE DECISION OF THE ITAT IN DELETING THE PENALTY CANNOT BE FAULTED. 19. THE HONBLE SUPREME COURT IN THE CASE OF CHAMUNDI GRANITES PVT. LTD. (SUPRA) HAS OBSERVED THAT THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENSURE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY OR IF HE MAKES SOME FALSE ENTRIES HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. THE MAIN OBJECT OF SECTION 269S S WAS TO CURB THIS MENACE BY GIVING FALSE ENTRIES IN THE ACCOUNT BO OKS AND ALLOW GIVING AN EXPLANATION FOR THE SAME. AS MENTIONED EAR LIER, THE AO IN THE INSTANT CASE HAS ALREADY ACCEPTED THE GENUINE NESS OF THE TRANSACTION AND HELD THAT SHRI PRALHAD KASHIRAM PATIL HAD SUFFICIENT CASH BALANCES TO GIVE THE ADVANCE TO THE ASSES SEE FOR WHICH NO ADDITION HAS BEEN MADE. SINCE SHRI PRALHAD KASHIR AM PATIL WHO IS AN INCOME-TAX ASSESSEE HAS SHOWN THE AMOUN T IN HIS BOOKS OF ACCOUNT AS EARNEST MONEY PAID TO THE ASSESSE E AS PER THE AGREEMENT TO PURCHASE THE FLAT AT WORLI AND SINCE THE CB DT CIRCULAR 387 SAYS THAT PROVISIONS OF SECTION 269SS ARE NO T APPLICABLE TO TRANSACTION FOR PURCHASE AND SALE, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT PROVISIONS OF SECTION 269SS AR E NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, THE LEVY OF PENALTY U/S.271D IS NOT JUSTIFIED. IN VIEW OF THE ABOVE DIS CUSSION AND IN VIEW OF THE DETAILED REASONINGS GIVEN BY THE CIT(A) WE DO NOT FIND ANY INFIRMITY IN HIS ORDER. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 15 ITA NOS.52 & 53/PN/2014 ITA NO.53/PN/2014 : 20. THE REVENUE IN THE GROUNDS OF APPEAL HAS CHALLENGED THE ORDER OF THE CIT(A) IN DELETING THE PENALTY OF RS.40 LAKHS LEVIED BY THE AO U/S.271E OF THE I.T. ACT. 21. AFTER HEARING BOTH THE SIDES, WE FIND THE AO LEVIED THE PENALTY OF RS.40 LAKHS U/S.271E OF THE I.T. ACT ON ACCOUNT OF REFUND OF RS.40 LAKHS IN CASH, WHICH WAS RECEIVED BY THE AS SESSEE FROM SHRI PRALHAD KASHIRAM PATIL, ON ACCOUNT OF THE CANCELL ATION OF THE SALE AGREEMENT. WHILE DECIDING ITA NO.52/PN/2014 WE HAVE ALREADY HELD IN THE PRECEEDING PARAS THAT THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS OF SECTION 269SS BY RECEIVING THE A MOUNT OF RS.40 LAKHS AS EARNEST MONEY FOR SALE OF THE FLAT AT WORLI. CONSEQUENTLY, THE ORDER OF THE CIT(A) DELETING THE PENALTY LEVIED U/S.271D OF THE I.T. ACT HAS BEEN UPHELD. SINCE THE AO H AS LEVIED PENALTY U/S.271E FOR VIOLATION OF THE PROVISIONS OF SECTION 26 9T FOR RETURNING THE AMOUNT IN CASH, THEREFORE, IN VIEW OF OUR RE ASONINGS GIVEN IN ITA NO.52/PN/2014 WE ARE OF THE CONSIDERED OPIN ION THAT THE PROVISIONS OF SECTION 269T ARE NOT APPLICABLE TO THE FA CTS OF THE PRESENT CASE. CONSEQUENTLY, NO PENALTY U/S.271E OF THE ACT IS LEVIABLE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DET AILED REASONINGS GIVEN BY THE CIT(A) ON THIS ISSUE WE FIND NO INFIRM ITY IN HIS ORDER. ACCORDINGLY, THE SAME IS UPHELD. GROUNDS RAISE D BY THE REVENUE ARE DISMISSED. 16 ITA NOS.52 & 53/PN/2014 22. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-07-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 22 ND JULY , 2016. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A)-2,NASHIK 4. % S / THE CIT-2, NASHIK 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , ( + //TRUE COPY// 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE