Harpal Singh Chawla, New Delhi V. JCIT Central Range, Gurgaon

ITA 5610/DEL/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3584 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 28-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TEJASVI JAIN
• Keywords: Bogus purchase; Search and seizure; Application of stay; Initiation of penalty proceedings; Block assessment; Set aside
• Section: 271(1)(c); 153A; 271D; 271E; 68; 132; 2; 15

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BEN CH, NEW DELHI BEFORE SHRI A.D. JAIN, VICE PRESIDENT, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER SA NO.797/DEL/2019 AND ITA NO.5614/DEL/2019 ASSESSMENT YEAR: 2013-14 M/S K. S. CHAWLA & SONS (HUF), KHASRA NO.482-483, KS FARMS, NEAR AIR FORCE STATION, RAJOKARI, DELHI VS JCIT, CENTRAL RANGE, GURGAON, TAN/PAN: AADHK7622M (APP ELL ANT) (RESPONDENT) SA NOS.765 TO 770/DEL/2019 AND ITA NOS.5629 TO 5634/DEL/2019 ASSESSMENT YEARS: 2010-11 TO 2015-16 SHRI DEEPAK KUMAR, FARM-I, GRAND WESTEND GREENS, BEHIND AIR FORCE STATION, RAJOKARI, DELHI-110038 VS JCIT, CENTRAL RANGE, GURGAON, TAN/PAN: AAAPK4112D (APP ELL ANT) (RESPONDENT) 2 SA NOS.771 TO 776/DEL/2019 AND ITA NO.5641 TO 5646/DEL/2019 ASSESSMENT YEARS: 2010-11 TO 2015-16 SHRI VIPIN SHARMA, KHASRA NO.387, FARM-16, NEAR AIR FORCE STATION, RAJOKARI, DELHI VS JCIT, CENTRAL RANGE, GURGAON TAN/PAN: AARPS7647C (APP ELL ANT) (RESPONDENT) SA NOS.777 TO 782/DEL/2019 AND ITA NOS.5647 TO 5652/DEL/2019 ASSESSMENT YEARS: 2010-11 TO 2015-16 SHRI AMAN SHARMA KHASRA NO.387, FARM-16, NEAR AIR FORCE STATION, RAJOKARI, DELHI VS JCIT, CENTRAL RANGE, GURGAON TAN/PAN: AAQPS9820C (APP ELL ANT) (RESPONDENT) SA NOS.790 TO 796/DEL/2019 AND ITA NOS.5622 TO 5628/DEL/2019 ASSESSMENT YEARS: 2010-11 TO 2016-17 3 SHRI SURINDER PAL SINGH CHAWLA KS FARMS, HOUSE NO.482- 483, NEAR AIR FORCE STATION, RAJOKARI, DELHI VS JCIT, CENTRAL RANGE, GURGAON TAN/PAN: AAEPC7222J (APP ELL ANT) (RESPONDENT) SA NOS.752 TO 758/DEL/2019 AND ITA NOS.5615 TO 5621/DEL/2019 ASSESSMENT YEARS: 2010-11 TO 2016-17 SHRI JASPAL SINGH CHAWLA KS FARMS, HOUSE NO.482- 483, NEAR AIR FORCE STATION, RAJOKARI, DELHI VS JCIT, CENTRAL RANGE, GURGAON TAN/PAN: AABPC4793R (APP ELL ANT) (RESPONDENT) SA NOS.783 TO 789/DEL/2019 AND ITA NOS.5607 TO 5613/DEL/2019 ASSESSMENT YEARS: 2010-11 TO 2016-17 4 SHRI HARPAL SINGH CHAWLA KS FARMS HOUSE NO.482- 483, NEAR AIR FORCE STATION, RAJOKARI, DELHI VS JCIT, CENTRAL RANGE, GURGAON TAN/PAN: ADEPC2466P (APP ELL ANT) (RESPONDENT) SA NOS.759 TO 764/DEL/2019 AND ITA NOS.5635 TO 5640/DEL/2019 ASSESSMENT YEARS: 2010-11 TO 2015-16 BHARAT BHUSHAN KUMAR FARM-I, GRAND WESTEND GREENS, BEHIND AIR FORCE STATION, RAJOKARI, DELHI-110038 VS JCIT, CENTRAL RANGE, GURGAON TAN/PAN: AAEPK8742M (APP ELL ANT) (RESPONDENT) A PP ELL ANT BY: SHRI AJAY VOHRA, SHRI ROHIT JAIN, SHRI PARIKSHIT AGARWAL & MS. TEJASVI JAIN RESPONDENT BY: SHRI N. K. BANSAL SR. DR DATE OF HEARING: 13/08/2019 DATE OF PRONOUNCEMENT: 2 8 /08/2019 5 O R D E R PER BENCH THIS BUNCH OF APPEALS IS BY DIFFERENT APPELLANTS PR EFERRED AGAINST SEPARATE ORDERS OF THE LD. CIT(A) PERTAINING TO THE CAPTIONED ASSESSMENT YEARS. SINCE THE UNDERLYING FACTS IN TH E CAPTIONED APPEALS ARE IDENTICAL FOR LEVY OF PENALTY U/ S 271D R.W.S 2 69SS OF THE INCOME- TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT], ALL THESE APPEALS ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FACTS, AS CULLED OUT FROM THE ORDERS OF THE AUTH ORITIES BELOW SHOW THAT SEARCH AND SEIZURE OPERATION U/S 132 OF T HE ACT WAS CARRIED OUT ON 17.02.2016 IN THE CASE OF M/S SPAZE TOWERS P VT LTD. PURSUANT THERETO, PROCEEDINGS U/S 153A OF THE ACT WERE INITI ATED. 3. DURING THE PENDENCY OF THE ASSESSMENT PROCEEDING S U/S 153A OF THE ACT, ON 30.11.2016, M/S SPAZE TOWERS PVT LTD FI LED AN APPLICATION UNDER CHAPTER XIXA OF THE ACT BEFORE THE SETTLEMENT COMMISSION. IN THE APPLICATION SO FILED, M/S SPAZE TOWERS PVT LTD OFFERED FOR TAX INTER ALIA, AN INCOME OF RS. 52.74 CRORES ON ACCOUNT OF B OGUS PURCHASES 6 RECORDED IN ITS BOOKS OF ACCOUNT. M/S SPAZE TOWERS PVT LTD. CLAIMED TELESCOPING OF EXPENSES OF RS. 16.43 CRORES INCURRE D BY IT TOWARDS PERSONAL EXPENSES OF THE PROMOTERS/DIRECTORS OF THE COMPANY. 4. WHILE THE APPLICATION FILED BEFORE THE SETTLEMEN T COMMISSION WAS PENDING FOR SETTLEMENT, ON THE BASIS OF STATEME NT OF FACTS AND FUND FLOW STATEMENT FILED BY M/S SPAZE TOWERS PVT L TD., THE ASSESSING OFFICER MADE ADDITIONS IN THE ASSESSMENT ORDER OF T HE CAPTIONED APPELLANTS BY MAKING ADDITION OF THE AMOUNT IN THE RELATED CAPTIONED APPELLANTS BY TREATING THE PERSONAL EXPENSES INCURR ED BY M/S SPAZE TOWERS PVT LTD. AND RELATING TO THE PROMOTERS/DIREC TORS AS INCOME, DISREGARDING THE CONTENTION OF THE APPELLANTS THAT THE VERY SAID AMOUNT HAS ALREADY BEEN OFFERED FOR TAX BY M/S SPAZ E TOWERS PVT LTD. IN THE SETTLEMENT COMMISSION APPLICATION FILED BEFO RE THE SETTLEMENT COMMISSION. 5. THE SETTLEMENT APPLICATION FILED BY M/S SPAZE TO WERS PVT LTD. WAS FINALLY SETTLED BY THE SETTLEMENT COMMISSION VI DE ORDER DATED 25.04.2018 FRAMED U/S 245D(4) OF THE ACT. THE SETT LEMENT COMMISSION ACCEPTED THE OFFER OF ADDITIONAL INCOME OF RS. 52.7 4 CRORES ON ACCOUNT 7 OF BOGUS PURCHASES AND ALLOWED THE BENEFIT OF TELES COPING OF PERSONAL EXPENSES OF PROMOTERS/DIRECTORS AGGREGATING TO RS. 16.43 CRORES. 6. MEANWHILE, THE APPELLANTS PREFERRED APPEAL BEFOR E THE LD. CIT(A) IN RESPECT OF THE ADDITIONS MADE IN THEIR RESPECTIV E HANDS BY THE ASSESSING OFFICER, TREATING THE PERSONAL EXPENSES I NCURRED BY M/S SPAZE TOWERS PVT LTD AS THEIR INCOME. 7. THE FIRST APPELLATE AUTHORITY DELETED THE ADDITI ONS MADE BY THE ASSESSING OFFICER FROM THE HANDS OF THE CAPTIONED A PPELLANTS. HOWEVER, WHILE ALLOWING THE APPEALS OF THE APPELLAN TS, THE LD. CIT(A) OBSERVED AS UNDER: IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSING OFF ICER IS ADVISED TO TAKE NECESSARY ACTION IN THE CASE OF THE APPELLA NT IN THE YEAR UNDER CONSIDERATION WITH RESPECT TO LOAN/DEPOSIT TA KEN FROM M/S SPAZE TOWERS PVT LTD IN CASH AND THUS OTHERWISE THA N BY SPECIFIED MODES AS PER THE PROVISIONS OF THE ACT. 8. TAKING A LEAF OUT OF THE ABOVE OBSERVATIONS OF T HE FIRST APPELLATE AUTHORITY, PENALTY PROCEEDINGS U/S 271D OF THE ACT WERE INITIATED IN THE CASES OF THE APPELLANTS ALLEGING THAT BY ACCEPT ING LOANS FROM M/S 8 SPAZE TOWERS PVT LTD, ALL THE APPELLANTS HAVE VIOLA TED THE PROVISIONS OF SECTION 269SS OF THE ACT, THEREBY EXPOSING THEM TO THE PENAL PROVISIONS OF SECTION 271D OF THE ACT. PENALTY WAS ACCORDINGLY LEVIED IN THE RESPECTIVE HANDS OF THE PROMOTERS/DIRECTORS. 9. PENALTY SO LEVIED WAS AGITATED BEFORE THE FIRST APPELLATE AUTHORITY BUT WITHOUT ANY SUCCESS. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEH EMENTLY STATED THAT ONCE THE ASSESSING OFFICER HAS TREATED THE PER SONAL EXPENSES INCURRED BY M/S SPAZE TOWERS PVT LTD AS INCOME OF T HE ASSESSEE, THEN THE SAME AMOUNT CANNOT BE TREATED AS LOAN IN VIOLAT ION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THE LD. CO UNSEL FOR THE ASSESSEE POINTED OUT THAT AGAINST THE DELETION OF THE QUANTU M ADDITION, THE REVENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL BY TAKING A SPECIFIC GROUND: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE IS NO EVIDEN CE THAT THE AMOUNTS SHOWN TO HAVE INCURRED AS EXPENSES OR INVES TED IN ASSETS HAVE BEEN RECEIVED BY THE ASSESSEE AS LOAN/D EPOSIT FROM M/S SPAZE TOWERS PVT LTD IN CASH AND THE LEDGER ACC OUNT AND CONFIRMATIONS SUBMITTED BY THE ASSESSEE BEFORE HIM SHOWING 9 RECEIPT OF AMOUNT IN CASH AND REPAYMENT BY CHEQUE I S AN AFTERTHOUGHT TO REDUCE THE TAX LIABILITY. 11. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE REVENUE AUTHORITIES ARE BLOWING HOT AND COLD IN THE SAME BR EATH. ON THE ONE HAND, THE AMOUNT SPENT BY M/S SPAZE TOWERS PVT LTD IS TREATED AS INCOME AND ON THE OTHER HAND, THE SAME AMOUNT IS TR EATED AS LOAN IN VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT . 12. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANC E ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF STAN DARD BRANDS LTD 285 ITR 295. 13. PROCEEDING FURTHER, THE LD. COUNSEL FOR THE ASS ESSEE ALTERNATIVELY PLEADED THAT PENALTY HAS BEEN IMPOSED ON THE DIRECT ION/DICTATES OF THE LD. CIT(A), WHICH IS BAD IN LAW. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER WHO HAS BEE N CONFERRED THE POWERS TO MAKE ASSESSMENT AND/OR IMPOSE PENALTY MUS T ACT INDEPENDENT WITHOUT BEING INFLUENCED BY THE DIRECTI ONS/DICTATES OF ANY AUTHORITY. 10 14. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT NOWHERE THE ASSESSING OFFICER/JCIT HAS RECORDED ANY SATISFACTIO N BEFORE LEVYING ANY PENALTY U/S 271D OF THE ACT. STRONG RELIANCE WAS P LACED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF JAI LA XMI RICE MILLS AMBALA CITY 379 ITR 521. 15. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THA T NOWHERE THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO LEVY P ENALTY. ON THE CONTRARY, HE HAS ONLY ADVISED THE ASSESSING OFFICER TO LOOK INTO THE MATTER IN THE LIGHT OF RELEVANT PROVISIONS OF THE A CT. THE LD. DR FURTHER RELIED UPON THE DECISION OF THE SUPREME COURT IN TH E CASE OF ADINATH BUILDERS [P] LTD 261 TAXMANN.COM 168. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GI VEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELO W. WE HAVE ALSO CAREFULLY PERUSED THE ASSESSMENT ORDER AND ORDER OF THE FIRST APPELLATE AUTHORITY IN QUANTUM PROCEEDINGS. THE UNDISPUTED FA CT IS THAT THE SETTLEMENT COMMISSION, WHILE ACCEPTING THE SETTLEME NT OFFER OF ADDITIONAL INCOME OF RS. 52.74 CRORES ON ACCOUNT OF BOGUS PURCHASES HAS ALSO ACCEPTED THE TELESCOPING OF PERSONAL EXPEN SES OF THE 11 PROMOTERS/ DIRECTORS AGGREGATING TO RS. 16.43 CRORE S. THE RELEVANT FINDINGS OF THE SETTLEMENT COMMISSION READ AS UNDER : 'AN ACTION OF SEARCH / SURVEY WAS CONDUCTED ON APPL ICANT U/S 132 OF THE INCOME TAX ACT, 1962 (ACT) ON 17.02.2016. THE A PPLICANT SUBMITTED LETTER DT. 11.3.2016 TO LD DD1T- INVESTIG ATION UNIT-ILL, GURGAON (EVEN WELL BEFORE RECEIVING COPIES OF SEIZE D DOCUMENTS), STATING THE DISCREPANCIES IN RECORDS TOTALING TO RS . 81.00 CRS. (AND NOT UNDISCLOSED INCOME OR SURRENDER AS STATED IN THE RU LE-9 REPORT BY LD PR CIT). IT IS RESPECTFULLY SUBMITTED THAT THE APPL ICANT HAS ADDRESSED AND CONSIDERED EACH AND EVERY ISSUE STATED IN THE S AID LETTER DT. 11.3.2016 AND OFFERED A SUM OF RS. 53.04 CR., IN TH E PRESENT SOF, WHICH SHALL BE DEALT WITH, IN THE SUBSEQUENT PARAS APART FROM ADDITIONAL SURRENDER OF RS. 1.65 CRS IN THE HANDS O F SH ARVINDER DHINGRA (WHICH RS ALSO PENDING FOR ADJUDICATION BEF ORE THE HONBLE BENCH). THEREFORE, THE TOTAL AMOUNT OFFERED BEFORE THE HONBLE SETTLEMENT COMMISSION PERTAINING TO BOTH THE APPLIC ATIONS COMES TO RS.54.69 CR. THE APPLICANT ACCEPTED THAT IT HAD REC ORDED INFLATED PURCHASES TO THE TUNE OF RS.52.74 CRS (APP) UNDER T HE HEAD OF CONSTRUCTION EXPENSES APART FROM ANOTHER SURRENDER OF RS.30.00 LACS AND THEREBY SUPPRESSED THE PROFITS BY RS. 53.04 CR (APP). THE APPLICANT USED TO PAY TO THE SAID VENDORS TOWARDS T HE INFLATED PURCHASES IN QUESTION BY ACCOUNT PAYEE CHEQUES AND THE APPLICANT USED TO GET CASH AFTER DEDUCTING NOMINAL CHARGES AS STAT ED IN DETAIL IN SOF. 12 PARA 2.2.1 TO PARA 2.2.4 TELESCOPING OF CASH EXPENS ES OF DIRECTORS/PROMOTERS THE LD PR CIT HAS OBJECTED TELESCOPING OF SUCH CASH EXPENSES IN PARA NO, 2.2.1 TO 2.2.3 ON THE GROUND THAT SUCH CASH IS UTILIZED BY DIRECTORS/SHAREHOLDERS FOR THEIR PERSONAL USE. THE APPLICANT HAS ADMITTED TO HAVE SPENT CASH (OUT OF CASH RECEIVED THROUGH INFLATED PURCHASES) ON VARIOUS ACTIVITIES A S STATED IN DETAIL IN SOF TOTALING TO RS. 14,70,67,358/-. SINCE, THE CASH IS SPENT OUT OF AVAILABLE CASH IN HAND GENERATED OUT OF ADDITIONAL INCOME OFFERED FOR TAX, WHICH HAS BEEN DULY RECORDED IN CASH FLOW STAT EMENT SUBMITTED AT PAGE NO. 27-30 OF SOF, AND THE CASH EXPENSES SO INCURRED HAVE NOT BEEN CLAIMED AS EXPENSES IN COMPUTING ADDITIONAL IN COME OFFERED BEFORE HONBLE BENCH, THE SAME DESERVES TO BE DEDUC TED OUT OF CASH FLOW AND THEREBY TELESCOPING SET OFF OF CASH SHOULD BE ALLOWED TO THAT EXTENT. 17. IT IS ALSO NOT IN DISPUTE THAT TAKING A LEAF OU T OF THE STATEMENT OF FACTS AND FUND FLOW STATEMENT FILED BY M/S SPAZE TO WERS PVT LTD, THE ASSESSING OFFICER HAD MADE ADDITION IN THE HANDS OF THE CAPTIONED APPELLANTS BY TREATING THE TELESCOPED PERSONAL EXPE NSES AS INCOME OF THE PROMOTERS/DIRECTORS. THIS MEANS THAT AT THIS S TAGE, THE ASSESSING OFFICER WAS CONVINCED THAT THE TELESCOPED PERSONAL EXPENSES, INCURRED BY M/S SPAZE TOWERS PVT LTD, WERE NOTHING BUT INCOM E OF THE PROMOTERS/DIRECTORS. 13 18. WHEN THIS ADDITION WAS AGITATED BEFORE THE LD. CIT(A), THE LD. CIT(A), TAKING A LEAF OUT OF THE DECISION OF THE SE TTLEMENT COMMISSION, CAME TO THE CONCLUSION THAT THE SAME INCOME CANNOT BE TAXED IN TWO HANDS IN THE SAME ASSESSMENT YEAR AND, ACCORDINGLY, DELETED THE ADDITIONS. 19. HOWEVER, WHILE DELETING THE ADDITION, THE LD. C IT(A) THOUGH OBSERVED THAT THE SAME SHOULD BE CONSIDERED AS LOAN S/DEPOSITS IN THE HANDS OF THE PROMOTERS/DIRECTORS IN THE LIGHT OF TH E RELEVANT PROVISIONS OF THE ACT. IT IS TRUE THAT THE LD. CIT(A) NOWHERE DIRECTED THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS B UT IT IS EQUALLY TRUE THAT PRIOR TO THIS DECISION OF THE LD. CIT(A), THE ASSESSING OFFICER NEVER TOOK A VIEW THAT THE IMPUGNED TELESCOPED EXPENSES I NCURRED BY M/S SPAZE TOWERS PVT LTD WAS IN FACT, LOAN/DEPOSIT GIVE N BY THE SAID COMPANY TO THE PROMOTERS/DIRECTORS. 20. DEHORS THE FATE OF QUANTUM ADDITIONS, THE ASSES SING OFFICER CANNOT TREAT THE SAME AMOUNT AS INCOME OF THE APPEL LANTS AS WELL AS LOANS/DEPOSITS IN THE HANDS OF THE APPELLANTS. 14 21. THE HON'BLE DELHI HIGH COURT IN THE CASE OF STA NDARD BRANDS LTD [SUPRA] HELD AS UNDER: 6. AGAINST THE ORDER DATED 6-9-2000, THE REVENUE P REFERRED AN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. BY AN ORDER DATED 6-10-2004, THE TRIBUNAL (IN PARAGRAPH 9 OF THE SAID ORDER) UPHELD THE VIEW TAKEN BY THE COMMISSIONER (APPEALS) IN HIS ORD ER DATED 6-9-2000. THE TRIBUNAL HELD THAT THE RECEIPT WAS OUTSIDE THE SCOPE OF UNDISCLOSED INCOME DEFINED UNDER SECTION 158B(B) OF THE ACT. 7. ON THESE FACTS, WE ARE OF THE VIEW THAT THE REVE NUE COULD NOT ON THE ONE HAND, CONTEND THAT THE AMOUNT OF RS. 3 LAKH S IS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSED AND AT THE SAME TIME SEEK TO INITIATE PROCEEDINGS AGAINST THE ASSESSED FOR VIOLA TION OF THE PROVISIONS OF SECTION 269SS OF THE ACT WHICH DEALS WITH CASH DEPOSITS OR LOANS IN EXCESS OF RS. 20,000. 8. THE REVENUE, HAVING TAKEN THE STAND THAT THE INC OME WAS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSED, IT COULD NOT RESORT TO PROCEEDINGS UNDER SECTION 269SS READ WITH SECTION 271D OF THE ACT, AS HELD BY THE TRIBUNAL. 22. SIMILAR VIEW WAS TAKEN BY THE HON'BLE HIGH COUR T OF DELHI IN THE CASE OF R.P. SINGH & CO. [P] LTD 340 ITR 217 WHEREI N THE HON'BLE HIGH COURT HAD THE OCCASION TO DECIDE ON THE FACT THAT O NCE THE SHARE APPLICATION MONEY IS TREATED AS AN UNDISCLOSED INCO ME OF THE ASSESSEE 15 U/S 68 OF THE ACT, WHETHER THE INITIATION OF PROCEE DINGS U/S 269SS R.W.S 271D OF THE ACT IS VALID? 23. ON THESE FACTS, THE HON'BLE HIGH COURT OBSERV ED AS UNDER: 6. MR. KOCHAR, LEARNED COUNSEL FOR THE ASSESSEE, S UBMITTED THAT THE SAID QUESTION DOES NOT ARISE IN THE CASE AT HAN D INASMUCH AS BOTH THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TR IBUNAL HAVE RECORDED A FINDING THAT ONCE THE ASSESSING OFFICER HAS TREATED IT AS AN UNDISCLOSED INCOME, IT COULD NOT HAVE PROCEEDED ON THE FOUNDATION THAT IT IS A DEPOSIT. IN OUR CONSIDERED OPINION, TH IS SUBMISSION CANVASSED BY MR. KOCNAR HAS SUBSTANTIAL FORCE AND T HE QUESTION RAISED BY THE REVENUE REALLY DOES NOT ARISE IN THIS CASE. NEEDLESS TO SAY THAT THE SAID QUESTION MAY ARISE WHERE THE FACTS WOULD B E DIFFERENT BUT THE SAME HAS NO RELEVANCE TO THE CASE AT HAND. IN V IEW OF THE AFORESAID ANALYSIS, THE APPEAL BEING DEVOID OF MERI T STANDS DISMISSED WITHOUT ANY ORDER AS TO COSTS 24. THE CO-ORDINATE BENCH IN THE CASE OF G.S. ENTER TAINMENT ITSS 437/MUM/2004 HAD THE OCCASION TO CONSIDER SIMILAR I SSUE. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: 2. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REL IED ON THE ORDER OF THE AO. HE SUBMITTED THAT THE AMOUNT OF RS. 15 L AKHS WAS RECEIVED BY THE ASSESSEE IN CASH AS IS RECORDED IN THE CD SE IZED BY THE 16 DEPARTMENT. HE SUBMITTED THAT SHRI GAUTAM GUPTA HAS FAILED TO CONFIRM THE TRANSACTION IN THE FORM OF AFFIDAVIT BE FORE THE REVENUE AUTHORITIES. HE SUBMITTED THAT CIT(A) SHOULD HAVE T AKEN NOTE OF THE FACT THAT CASH RECEIPT OF RS. 15 LAKHS WAS TOWARDS PART PAYMENT OF THE FINANCE AGREEMENT DT. 28TH JULY, 1998. 3. THE LEARNED COUNSEL FOR THE ASSESSEE HAS OPPOSED THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. HE SUBMITT ED THAT THE AMOUNT OF RS. 15 LAKHS WAS ASSESSED BY THE AO AS UN DISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD OF THE ASSESSE E AND THEREFORE, THE PROVISION OF SECTION 269SS OF THE IT ACT, 1961 DOES NOT APPLY TO THE FACTS OF THE CASE. HE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE HON'BLE DE LHI HIGH COURT CIT V. STANDARD BRANDS LTD . (2006) 204 CTR (DEL) 48 : (2006) 285 ITR 295 (DEL). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT IT IS NOT A CASE OF REGULAR ASSESSMENT OF THE ASSESSEE. THE BLO CK ASSESSMENT OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD WAS FRAMED BY THE AO AND THE AMOUNT OF RS. 15 LAKHS WAS ADDED AS UNDISCLOSED INC OME OF THE ASSESSEE FOR THE FINANCIAL YEAR 1998-99. ONCE THE A MOUNT IN QUESTION IS ASSESSED AS THE UNDISCLOSED INCOME OF THE ASSESS EE IN THE BLOCK ASSESSMENT FOR THE BLOCK PERIOD OF THE ASSESSEE, TH E PROVISION OF SECTION 269SS R/W SECTION 271D CANNOT BE RESORTED TO. THE ISSUE IN THE PRESENT CASE IS COVERED IN FAVOUR OF THE ASS ESSEE WITH THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF STANDARD BRANDS LTD., CITED SUPRA, WHEREIN HELD THAT WHERE THE AMOU NT WAS UNDISCLOSED 17 INCOME IN THE HANDS OF THE ASSESSEE, IT COULD NOT R ESORT TO PROCEEDINGS UNDER SECTION 269SS R/W SECTION 271D OF THE ACT. ACCORDINGLY, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE ORDER OF THE CIT(A) IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENU E IS DISMISSED. 25. THE AFORESAID DECISIONS ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT APPEALS. 26. COMING BACK TO THE FACTS OF THE CASE AS MENTION ED ELSEWHERE, WHEN THE PENALTY PROCEEDINGS WERE INITIATED BY THE JCIT, EVEN THE JCIT PROCEEDED WITH THE OBSERVATIONS OF THE LD. CIT (A) WHO HAS ADVISED TO TAKE NECESSARY ACTION AS PER THE PROVISIONS OF T HE ACT. THE JCIT THEN ANALYZED THE PROVISIONS OF SECTION 269SS OF TH E ACT AND AFTER REFERRING TO ONE DECISION OF THE SUPREME COURT AND TWO DECISIONS OF THE HON'BLE HIGH COURT OF KOLKATA AND KARNATAKA HIG H COURT, WAS CONVINCED THAT THERE IS A VIOLATION OF PROVISIONS O F SECTION 269SS OF THE ACT AND, THEREFORE, PENALTY U/S 271D OF THE ACT IS LEVIABLE AND LEVIED PENALTY ACCORDINGLY. 18 27. IT IS A MATTER OF FACT THAT SPAZE TOWERS WAS IN FLATING ITS PURCHASES AND CASH SO GENERATED WAS SPENT ON THE PE RSONAL NEEDS OF THE DIRECTORS/PROMOTERS IN THE FORM OF CEREMONIAL F UNCTIONS, FARM HOUSE CONSTRUCTION ETC. NOWHERE THE ACTUAL CASH CH ANGED HANDS, BUT WERE SPENT ON PERSONAL EXPENSES OF THE PROMOTERS/DI RECTORS. MERELY BECAUSE THE PROMOTERS/DIRECTORS AGREED TO REPAY THE LIABILITY, THE SAME CANNOT BE CONSTRUED AS TAKING LOANS FROM SPAZE TOWERS. SINCE SPAZE TOWERS HAS INCURRED PERSONAL EXPENSES OF THE PROMOTERS/ DIRECTORS, THE SAME CANNOT BE CONSTRUED AS LOANS. 28. IN OUR CONSIDERED OPINION, THERE MUST BE A CLEA R FINDING BASED ON COGENT AND RELIABLE MATERIAL THAT THE APPELLANTS TO OK OR ACCEPTED ANY LOAN OR DEPOSIT IN CASH FROM SPAZE TOWERS. IN THE ABSENCE OF ANY COGENT FINDING, IT CANNOT BE ASSUMED THAT THE APPEL LANTS TOOK OR ACCEPTED LOANS/DEPOSITS OTHERWISE THAN BY AN ACCOUN T PAYEE CHEQUE TO INVOKE THE PROVISIONS OF SECTION 269SS OF THE AC T. FACTS ON RECORD CLEARLY SHOW THAT SPAZE TOWERS CATEGORICALLY DECLAR ED/ADMITTED OF HAVING INCURRED PERSONAL EXPENDITURE ON BEHALF OF T HE PROMOTERS/ DIRECTORS BEFORE THE SETTLEMENT COMMISSION WHICH HA S BEEN ACCEPTED BY THE SETTLEMENT COMMISSION IN ITS ORDER DATED 24. 05.2018. 19 29. THE ASSESSING OFFICER, AT FIRST, TREATED THE SA ID TRANSACTION AS INCOME OF THE ASSESSEE WHICH IS EVIDENT FROM THE AP PELLATE PROCEEDINGS IN RESPECT OF THE QUANTUM ADDITIONS. T HIS ALSO CLEARLY SHOWS THAT THE ASSESSING OFFICER WAS NOT SURE WHETH ER SPAZE TOWERS HAS GIVEN ANY CASH LOAN TO THE PROMOTERS/DIRECTORS. SINCE SPAZE TOWERS INCURRED EXPENDITURE TOWARDS THE PERSONAL NE EDS OF THE DIRECTORS/PROMOTERS, THE SAME WAS ACKNOWLEDGED AS L IABILITY BY THE DIRECTORS/PROMOTERS BUT THE SAME CANNOT BE CONSTRUE D AS LOAN OR DEPOSIT WITHIN THE FRAMEWORK OF SECTION 269SS OF TH E ACT. 30. CONSIDERING THE FACTS IN TOTALITY, IN OUR CONSI DERED OPINION THE TRANSACTION IS DEVOID OF ANY LENDER BORROWER RELA TIONSHIP. IN OTHER WORDS, THE AMOUNT WHICH IS THE SUBJECT MATTER OF CO NSIDERATION IN THE PRESENT CASES IS OUT OF TAX PAID FROM INCOME/DISCLO SED SOURCES OF SPAZE TOWERS. 31. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CHAMUNDI GRANITE 239 ITR 694 RELIED UPON BY THE JCIT HAS ALS O HELD THAT THE ULTIMATE AIM OF SECTION 269SS IS TO PREVENT EVASION OF TAX. WHEREAS, THE FACTS OF THE APPELLANTS CLEARLY SHOWS THAT THE TAXES HAVE BEEN PAID 20 BY SPAZE TOWERS AS PER THE ORDER OF THE SUPREME COU RT AND THERE IS NO EVASION OF TAX. 32. THE HON'BLE SUPREME COURT IN THE CASE OF KUM. A .B. SHANTHI 255 ITR 258 HAS HELD THAT THE OBJECT OF INTRODUCING THE PROVISIONS OF SECTION 269SS OF THE ACT IS TO ENSURE THAT THE TAX PAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY . 33. IN THE PRESENT CASES, THERE IS NO DISPUTE ABOUT THE SOURCES OF MONEY WHEREFROM THE EXPENDITURE HAD BEEN INCURRED W HICH HAS ALREADY SUFFERED TAXATION IN THE HANDS OF THE COMPA NY SPAZE TOWERS AND THE VERY SAME MONEY CANNOT BE CONSIDERED AS REP RESENTING UNDISCLOSED INCOME OF THE APPELLANTS FOR WHICH FALS E EXPLANATION IS BEING GIVEN AS LOAN TO ATTRACT THE PROVISIONS OF SE CTION 269SS R.W.S 271D OF THE ACT. 34. ON A PERUSAL OF THE ASSESSMENT ORDER IN THE QUA NTUM PROCEEDINGS, THE ORDER OF THE FIRST APPELLATE AUTHO RITY DECIDING THE QUANTUM ADDITIONS AND ALSO THE ORDER OF THE JCIT LE VYING PENALTY U/S 271D OF THE ACT, WE FIND THAT THE ASSESSMENT ORDER AS WELL AS THE ORDER 21 OF THE JCIT ARE DEVOID OF ANY SATISFACTION REGARDIN G INITIATION OF PENALTY PROCEEDINGS U/S 271D OF THE ACT. 35. THE HON'BLE SUPREME COURT IN THE CASE OF JAI LA XMI RICE MILLS AMBALA CITY [SUPRA] HAS HELD THAT PENALTY U/S 271D IS WITHOUT ANY SATISFACTION AND, THEREFORE, NO SUCH PENALTY CAN BE LEVIED. THE RELEVANT FINDINGS OF THE HON'BLE SUPREME COURT READ AS UNDER: IN THESE APPEALS, WE ARE CONCERNED WITH THE QUESTI ON AS TO WHETHER PENALTY PROCEEDING UNDER SECTION 271D OF THE INCOME TAX ACT (HEREINAFTER REFERRED TO AS THE ACT) IS INDEPENDE NT OF THE ASSESSMENT PROCEEDING AND THIS QUESTION A RISES FOR CONSIDERATION IN RESPECT OF ASSESSMENT YE ARS 1991-1992 AND 1992-1993 UNDER THE FOLLOWING CIRCUMSTANCES: IN RESPECT OF ASSESSMENT YEAR 1992-1993, ASSESSMENT ORDER WAS PASSED ON 26.02.1996 ON THE BASIS OF CIB INFORMATION INFORMING THE DEPARTMENT THAT THE ASSESSEE IS ENGAG ED IN LARGE SCALE PURCHASE AND SALE OF WHEAT, BUT IT IS NOT FILING IN COME TAX RETURN. EX-PARTE PROCEEDINGS WERE INITIATED, WHICH RESULTED IN THE AFORESAID ORDER, AS PER WHICH NET TAXABLE INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 18,34,584/-. WHILE FRAMING THE ASSE SSMENT, THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE H AD CONTRAVENED THE PROVISIONS OF SECTION 269SS OF THE ACT AND BECA USE OF THIS THE 22 ASSESSING OFFICER WAS SATISFIED THAT PENALTY PROCEE DINGS UNDER SECTION 271E OF THE ACT WERE TO BE INITIATED. 3. THE ASSESSEE CARRIED OUT THIS ORDER IN APPEAL. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE AP PEAL AND SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO FRAM E THE ASSESSMENT DE NOVO AFTER AFFORDING ADEQUATE OPPORTUNITY TO TH E ASSESSEE. 4. AFTER REMAND, THE ASSESSING OFFICER PA SSED FRESH ASSESSMENT ORDER. IN THIS ASSESSMENT ORDE R, HOWEVER, NO SATISFACTION REGARDING INITIATION OF PENALTY PROCEE DINGS UNDER SECTION 271E OF THE ACT WAS RECORDED. IT SO HAPPENED THAT O N THE BASIS OF THE ORIGINAL ASSESSMENT ORDER DATED 26.02.1996, SHOW CA USE NOTICE WAS GIVEN TO THE ASSESSEE AND IT RESULTED IN PASSING TH E PENALTY ORDER DATED 23.09.1996. THUS, THIS PENALTY ORDER WAS PASS ED BEFORE THE APPEAL OF THE ASSESSEE AGAINST THE ORIGINAL ASSES SMENT ORDER WAS HEARD AND ALLOWED THEREBY SETTING ASIDE T HE ASSESSMENT ORDER ITSELF. IT IS IN THIS BACKDROP, A Q UESTION HAS ARISEN AS TO WHETHER THE PENALTY ORDER, WHICH WAS PASSED ON T HE BASIS OF ORIGINAL ASSESSMENT ORDER AND WHEN THAT ASSESSMENT ORDER HAD BEEN SET ASIDE, COULD STILL SURVIVE. 4. THE TRIBUNAL AS WELL AS THE HIGH COURT HAS HELD THAT IT COULD NOT BE SO FOR THE SIMPLE REASON THAT WHEN THE ORIGINAL ASSESSMENT ORDER ITSELF WAS SET ASIDE, THE SATISFACTION RE CORDED THEREIN FOR THE PURPOSE OF INITIATION OF THE PENALTY PROCEEDING UND ER SECTION 271E 23 WOULD ALSO NOT SURVIVE. THIS ACCORDING TO US IS THE CORRECT PROPOSITION OF LAW STATED BY THE HIGH COURT IN THE IMPUGNED ORD ER. 5. AS POINTED OUT ABOVE, INSOFAR AS, FRESH ASSESSME NT ORDER IS CONCERNED, THERE WAS NO SATISFACTION RECO RDED REGARDING PENALTY PROCEEDING UNDER SECTION 271E OF THE ACT, T HOUGH IN THAT ORDER THE ASSESSING OFFICER WANTED PENALTY PROCEEDI NG TO BE INITIATED UNDER SECTION 271(1)(C) OF THE ACT. THUS, INSOFAR A S PENALTY UNDER SECTION 271E IS CONCERNED, IT WAS WITHOUT ANY SATIS FACTION AND, THEREFORE, NO SUCH PENALTY COULD BE LEVIED. THESE APPEALS ARE, ACCORDINGLY, DISMISSED. 36. THE LD. DR HAD RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ADINATH BUILDERS PVT LTD [SUPR A]. WE ARE OF THE CONSIDERED OPINION THAT THE HON'BLE SUPREME COURT H AS DISMISSED THE SLPS FILED BY THE REVENUE AND THE LD. DR HAS RELIE D UPON THE HEAD NOTES, WHICH CANNOT BE CONSIDERED AS JUDGMENT OF TH E HON'BLE SUPREME COURT AS THE HON'BLE SUPREME COURT HAS SIMP LY DISMISSED THE SLPS WITHOUT ASSIGNING ANY REASON. 37. CONSIDERING THE FACTS OF THE CASES IN HAND FROM ALL POSSIBLE ANGLES, WE DO NOT FIND THEM TO BE FIT CASES FOR LEV Y OF PENALTY U/S 271D OF THE ACT. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE 24 PENALTY LEVIED IN RESPECT OF THE CAPTIONED APPELLAN TS FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. BY THIS CONS OLIDATED ORDER, ALL THE APPEALS ARE ALLOWED AND DISPOSED OFF ACCORDINGL Y. 38. IN THE RESULT, ALL THE ABOVE CAPTIONED APPEALS ARE ALLOWED. 39. ALL THE STAY APPLICATIONS ACCORDINGLY BECOME IN FRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/ 2019. SD / - SD / - [A.D. JAIN] [N.K. BILLAIYA] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 28 AUGUST, 2019 VL/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR DELHI BENCHES, ITAT DELHI 25 DATE 1. DRAFT DICTATED ON 19/08/2019 2. DRAFT PLACED BEFORE AUTHOR /08/2019 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE COMES BACK TO PS/SR. PS 8. UPLOADED ON 9. FILE SENT TO THE BENCH CLERK 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER.