Sh. Mohanjeet Singh, Doraha V. JCIT, Khanna

ITA 778/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8414 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 12-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Search and seizure; Bonafide belief; Reasonable cause; Tax effect
• Section: 273B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 778/CHD/2015 ASSESSMENT YEAR: 2008-09 SH. MOHANJEET SINGH, VS. THE JCIT, KHANNA RANGE, S/O SH. SAGAR SINGH, KHANNA DORAHA PAN NO. AQWPS2773C (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL RESPONDENT BY : SH. S.K.MITTAL DATE OF HEARING : 19.02.2016 DATE OF PRONOUNCEMENT : 29.02.2016 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A)-2, LUDHIANA DATED 12.8.2015 IN CONFIRMING TH E PENALTY OF RS. 3 LAKHS LEVIED U/S 271D OF THE INCOME-TAX ACT, 1961 (IN SHO RT 'THE ACT') RELATING TO ASSESSMENT YEAR 2008-09. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SSESSEE IS AN INDIVIDUAL AND THE ASSESSMENT YEAR INVOLVED IS 2008-09. THE ASSESS EE HAD CASH DEPOSIT OF RS. 1 LAKH ON 9.7.2007 AND RS. 2 LAKHS 7.9.2007 FROM HIS CLOSE RELATIVES. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE H AD ACCEPTED CASH LOANS / DEPOSIT IN CONTRAVENTION OF SECTION 269SS OF THE AC T. THE ASSESSING OFFICER 2 INITIATED THE PENALTY PROCEEDINGS U/S 271D OF THE A CT. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, THE A SSESSEE SUBMITTED THAT THE RECEIPT OF RS. 3 LAKHS BY HIM FROM SHRI GAJJA SINGH WAS NOT A LOAN BUT A BUSINESS TRANSACTION AND SHRI GAJJA SINGH HAS GIVEN THE AMOUNTS TO HIM FOR MAKING INVESTMENT IN SHARES / LIC ON BEHALF OF SHRI GAJJA SINGH, WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSING OFFICER IMPOSED A PENALTY OF RS. 3 LAKHS BEING THE SUM EQUAL TO LOAN / DEPOSIT ACCEPTED IN ALLEGED CONTRAVENTION OF SECTION 269SS OF THE ACT. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER IN IMPOSING THE PENALTY OF RS. 3 LAKHS U/S 271D OF TH E ACT AND, HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE RIVAL SUBMISSIONS. IT IS APPARE NT FROM THE RECORDS THAT THERE WERE CASH DEPOSITS OF RS. 1 LAKH ON 9.7.2009 AND RS. 2 LAKHS ON 17.9.2007 RESPECTIVELY IN THE SAVING BANK ACCOUNT OF THE ASSE SSEE MAINTAINED WITH AXIS BANK. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THESE DEPOSITS, THE ASSESSEE SUBMITTED THAT HE HAD RECEIVED CASH FROM SHRI GAJJA SINGH S/O SH. JANGIR SINGH RESIDENT OF VILLAG ARRIC HAN. THE ASSESSEE FURNISHED AN AFFIDAVIT OF SHRI GAJJA SINGH, WHEREIN HE HAS ST ATED AS UNDER:- THAT I HAD VERY GOOD RELATIONS WITH SH. SAGAR SING H (FATHER OF SH. MOHANJIT SINGH) WHO WAS OFFICER IN PUNJAB & SIND BANK AND ON THE SAME BASIS I HAVE VERY VERY GOOD FA MILY RELATION WITH SH. MOHANJIT SINGH S/O SHRI SAGAR SIN GH AND I HAVE GIVEN THIS AMOUNT TO SHRI MOHANJIT SINGH INTER EST FREE PAYABLE TO ME ON DEMAND WHENEVER I REQUIRED THAT TH E AMOUNT FOR SELF I HAVE GIVEN THIS AMOUNT INTEREST F REE OUT OF LOVE AND AFFECTION TO MOHANJIT SINGH. 3 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT (A) ASKED THE ASSESSING OFFICER TO CONDUCT NECESSARY ENQUIRY IN THE MATTER TO VERIFY THE ASSESSEES CONTENTION AND THE STATEMENT OF SHRI GAJJA SINGH MA Y ALSO BE RECORDED ON OATH. IN COMPLIANCE TO THE SAID DIRECTION OF THE CIT(A), THE ASSESSING OFFICER RECORDED THE STATEMENT OF SHRI GAJJA SINGH ON 14.5. 2015. IN REPLY TO QUESTION NO.6, SHIR GAJJA SINGH HAS STATED AS UNDER:- ANS. I HAVE GIVEN RS. 3,00,000/- (RS. THREE LACS O NLY) TO SHRI MOHANJEET SINGH ON 4.6.2007 AND THIS AMOUNT HA D BEEN PAID AFTER WITHDRAWING FROM MY SAVING ACCOUNT NO.. 65321010000 WITH BANK OF INDIA, DORAHA ON 7.6.2007. I HAVE WITHDRAWN RS. 5,00,000/- FROM MY ACCOUNT ON THIS DA TE AND OUT OF THIS, I HAD GIVEN RS. 3,00,000/- TO SHRI MOH ANJEET SINGH TO INVEST ON MY BEHALF IN CERTAIN PROFITABLE VENTURES / SHARES / LIC ETC. SHRI GAJJA SINGH , IN REPLY TO QUESTION NO.8 HAS STATED AS UNDER:- ANS. I HAVE A BANK ACCOUNT IN PUNJAB & SIND BANK, DORAHA WHERE SHRI SAGAR SINGH FATHER OF SHRI MOHANJEET SINGH WORK AS BANK OFFICER AND ALSO I LIV ED NEAR TO DORAHA. SO I HAVE FULL TRUST IN HIM AS I KN EW HIM FROM SO MANY YEARS. 5. THE CASE OF THE REVENUE IS THAT SHRI GAJJA SINGH COULD NOT OFFER ANY EXPLANATION REGARDING THE DISCREPANCIES / INCONSIST ENCIES IN HIS STAND WITH REGARD TO THE ADVANCEMENT OF RS. 3 LAKHS TO SHRI MO HANJIT SINGH AS OF NOW VIZ A VIZ THE AFFIDAVIT FILED BY HIM DURING THE COURSE OF PENALTY PROCEEDINGS U/S 271D OF THE ACT. ON THE OTHER HAND, SHRI SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS MERELY PLA CED RELIANCE ON PARA 3 OF THE AFFIDAVIT OF SHRI GAJJA SINGH BY TREATING THE SAME AS AN ONLY PARA OF THE AFFIDAVIT WHICH IS NOT A CORRECT INTERPRETATION. A CCORDING TO LD. COUNSEL FOR THE ASSESSEE, THE ENTIRE AFFIDAVIT SHOULD BE READ IN TH E SYNCHRONISATION AND A SUCCEEDING PARA OF AFFIDAVIT THAT HAS A CONNECTION WITH THE PRECEDING PARA 4 SHOULD NOT BE TREATED AS TWO SEPARATE STATEMENTS AN D THE WHOLE STATEMENT SHOULD BE TREATED AS ONE. 5. I HAVE READ THE CONTENTS OF THE AFFIDAVIT OF SHR I GAJJA SINGH AND ALSO THE STATEMENT OF SHRI GAJJA SINGH RECORDED ON 14.2.2015 . THE CRUX OF THE MATTER IS THAT THE ASSESSEE CLAIMED THAT A SUM OF RS. 3 LAKHS RECEIVED BY HIM WAS PURELY FOR THE PURPOSE OF MAKING INVESTMENT ON BEHALF OF S HRI GAJJA SINGH AND IT WAS NOT IN THE NATURE OF LOAN OR DEPOSIT AND, THEREFORE , THE PROVISIONS OF SECTION 269SS OF THE ACT ARE NOT ATTRACTED IN THIS CASE. AS AN ALTERNATIVE CONTENTION, THE CASE OF THE ASSESSEE IS THAT IF THE TRANSACTION IS TREATED AS A LOAN OR DEPOSIT, IN THAT CASE ALSO PENALTY U/S 271D OF THE ACT CANNOT B E LEVIED AS THE TRANSACTION HAS BEEN MADE THROUGH BANKING CHANNELS AND THE TRAN SFERS FINDS PLACE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS THE LEN DER ALSO CONFIRMED THE SAME AND THE ASSESSING OFFICER HAS NOWHERE RECORDED IN T HE ASSESSMENT ORDER THAT THE TRANSACTIONS WERE NON GENUINE. SHRI SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT ASSESSEE WAS UNDER BONAFIDE BELIEF THAT SUCH TRANSACTIONS WITH THE AGRICULTURIST WAS COVERED IN THE EXCEPTION CLAU SE OF SECTION 269SS OF THE ACT AND, THEREFORE, THE TRANSACTION IS OUTSIDE THE PUR VIEW OF SECTION 269SS OF THE ACT. THUS, THE ALTERNATIVE CONTENTION OF THE ASSES SEE IS THAT THERE WAS A REASONABLE CAUSE FOR FAILURE TO COMPLY WITH THE PR OVISIONS OF SECTION 269SS OF THE ACT. ACCORDING TO SHRI SUDHIR SEHGAL, THE ASSES SEE WAS UNDER BONAFIDE BELIEF THAT THE TRANSACTION IN QUESTION WITH SHRI G AJJA SINGH WHO IS AGRICULTURIST WAS COVERED IN EXCEPTION CLAUSE OF SECTION 269SS OF THE ACT. THUS, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS T HAT THE FAILURE, IF ANY, TO COMPLY WITH THE PROVISIONS OF SECTION 269SS WAS ON ACCOUNT OF BONAFIDE BELIEF OF THE ASSESSEE AND, THEREFORE, IN VIEW OF THE PROV ISIONS OF SECTION 273B OF THE ACT, NO PENALTY U/S 271D CAN BE VALIDLY LEVIED. NO W THE QUESTIONS IS WHETHER THERE IS A REASONABLE CAUSE FOR THE ALLEGED VIOLATI ON OF SECTION 269 SS OF THE ACT. 5 SECTION 269SS OF THE ACT (APPLICABLE AT THE RELEVAN T PERIOD) PROVIDES THAT NO PERSON SHALL, AFTER 30.6.1984, TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE O R ACCOUNT PAYEE DRAFT, IF (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMOUNT OF SUCH LOAN OR DEPOSIT; OR (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 HAS FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID; OR C) THE AMOUN T OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (B) IS RS. 20,000/- OR MORE W.E.F. 1.4 .1989. FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269SS, THE PENALTY I S LEVIABLE U/S 271D OF THE ACT WHICH EMPOWERS THE JT. CIT TO IMPOSE PENALTY TO ANY PERSON WHO TAKES OR ACCEPT ANY LOAN OR DEPOSIT IN CONTRAVENTION OF THE PROVISI ONS OF SECTION 269 SS OF THE ACT. THE PENALTY UNDER THIS SECTION IS LEVIABLE IN A SUM EQUAL TO THE AMOUNT OR LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. THE HON'BLE S UPREME COURT IN THE CASE OF ASST. DIRECTOR OF INSPECTION (INVESTIGATION) VS. K UM. A.B. SHANTHI (2002) 255 ITR 258 (SC) HAS OBSERVED THE OBJECT OF INTRODUCING OF SECTION 269 SS OF THE ACT, WHICH READS AS UNDER:- THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENSU RE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION F OR HIS UNACCOUNTED MONEY, OR IF HE MAKES SOME FALSE ENTRIE S, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR TH E SAME. DURING SEARCH AND SEIZURES, UNACCOUNTED MONEY IS UN EARTHED AND THE TAXPAYER WOULD USUALLY GIVE THE EXPLANATION THAT HE HAD BORROWED OR RECEIVED DEPOSITS FROM HIS RELATIVE S OR FRIENDS AND IT IS EASY FOR THE SO-CALLED LENDER ALS O TO MANIPULATE HIS RECORDS TO SUIT THE PLEA OF THE TAXP AYER. THE MAIN OBJECT OF SECTION 269SS WAS TO CURB THIS MENAC E OF MAKING FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIVING AN EXPLANATION FOR THE SAME. 6 THE HON'BLE SUPREME COURT FURTHER OBSERVED THAT SE CTION 273B OF THE ACT FURTHER PROVIDES THAT IF THERE IS A GENUINE AND BON AFIDE TRANSACTIONS AND THE TAX PAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PA YEE CHEQUE OR DEMAND DRAFT FOR SOME BONAFIDE REASON, THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETIONARY POWER NOT TO LEVY PENALTY. SE CTION 273B OF THE ACT PROVIDES THAT IF ASSESSEE PROVES THAT THERE WAS A R EASONABLE CAUSE, THE ASSESSEE IS NOT SUBJECT TO LEVY OF PENALTY. FOR THE ARGUMENT SAKE, IN THIS CASE IF IT IS ACCEPTED THAT ASSESSEE DID NOT RECEIVE THE SHARE AP PLICATION MONEY BUT IT WAS A DEPOSIT WITHIN THE MEANING OF SECTION 269SS OF THE ACT, THEREFORE, THE QUESTION ARISES AS TO WHETHER THERE WAS A REASONABLE CAUSE I N ACCEPTING THE DEPOSITS IN CONTRAVENTION OF PROVISIONS OF SECTION 269SS OF THE ACT. 6. IN THE INSTANT CASE, THE CASH WAS DEPOSITED BY S HRI GAJENDER SINGH WHO IS AN AGRICULTURIST. THERE IS NO DOUBT THAT THE SOURCE OF SUCH MONEY WAS COMPLETELY FROM EXPLAINED SOURCES, THE EVIDENCE OF WHICH WAS SUBMITTED BEFORE THE ASSESSING OFFICER. THE AMOUNT IN QUESTION HAS NOT B EEN TREATED AS CASH CREDITS U/S 68 OF THE ACT. IT IS NOT THE CASE OF THE REVEN UE THAT THE TRANSACTIONS WERE NOT GENUINE OR THAT IT WAS A SHAM TRANSACTION TO CO VER UP UNACCOUNTED MONEY. IN THE CASE OF CIT VS. SUNIL KUMAR GOEL (2009) 315 ITR 163 (P&H), IT HAS BEEN HELD THAT CASH TRANSACTIONS WITH SISTER CONCERN WHI CH HAD NO TAX EFFECT, ESTABLISHED REASONABLE CAUSE U/S273B OF THE ACT, THEREFORE, NO PENALTY U/S 271D IS LEVIABLE. SHRI GAJENDER SINGH IS A CLOSE F RIEND OF THE ASSESSEE WHICH FACT IS CLEAR FROM REPLY TO Q.NO. 8 OF THE STATEMEN T OF SHRI GAJJA SINGH RECORDED ON OATH BY THE ASSESSING OFFICER ON 14.5.2015 AND T HE SAME HAS ALREADY BEEN REPRODUCED HEREIN ABOVE. IN MY OPINION, THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENSURE THAT A TAX PAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY, OR IF HE MAKES ANY FALSE ENT RY, HE SHALL HAVE NO ESCAPE BY GIVING FALSE EXPLANATION TO THE SAME. IN THE I NSTANT CASE, IT IS CLEAR THAT THE 7 CASH TRANSACTIONS OF THE ASSESSEE WERE WITH HIS CLO SE FRIEND SHRI GAJENDER SINGH WHO IS AN AGRICULTURIST. THE HON'BLE SUPREME COURT IN THE CASE OF ASST. DIRECTOR OF INSPECTION (INVESTIGATION) VS. KUM. A. B. SHANTHI (2002) 255 ITR 258 (SC) HAS CLEARLY LAID DOWN THAT IF THERE IS A G ENUINE AND BONAFIDE TRANSACTIONS AND THE TAX PAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONAFIDE REASON, TH E AUTHORITY VESTED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETIONARY POWER. IN VIEW OF THE ABOVE OBSERVATIONS, I AM OF THE OPINION THAT NO PENALTY U /S 271D OF THE ACT CAN BE VALIDLY LEVIED IN THIS CASE. ACCORDINGLY, I CANCEL THE IMPUGNED PENALTY. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.02.2016 SD/- (H.L.KARWA) VICE PRESIDENT DATED : 29 TH FEBRUARY, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR