DCIT, New Delhi V. Mrs. Mahagun India Pvt. Ltd., New Delhi

ITA 805/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3433 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 01-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR SENIOR
• Keywords: Business income; Search and seizure
• Section: 68; 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. AMIT SHUKLA, JM ITA NO.805/DEL/2014 ASSESSMENT YEARS : 2008-09 DCIT, CENTRAL CIRCLE 3, NEW DELHI. VS M/S. MAHAGUN INDIA PVT. LTD., B 66, VIVEK VIHAR, NEW DELHI. PAN NO. AAECM6572A (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. RAKESH GUPTA, ADVOCATE SHRI SOMIL AGGARWAL, ADVOCATE REVENUE BY : SHRI RAJES H KUMAR, SENIOR DR DATE OF HEARING : 19.04.2017 DATE OF PRONOUNCEMENT : 21.04.2017 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 06.11.2013 OF LD. CIT (A)-IV, NEW DELHI. 2. THE ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APP EAL RELATES TO DELETION OF PENALTY OF RS.75,40,262/- LE VIED BY THE AO UNDER SECTION 271E OF THE INCOME-TAX ACT, 1961 ITA NO.805/DEL/2014 2 (HEREINAFTER REFERRED TO AS THE ACT) FOR VIOLATIN G THE PROVISIONS OF SECTION 269T OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT A SEARCH OPE RATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT IN THE CASE OF THE ASSESSEE AND CERTAIN DOCUMENTS WERE FOUND AND S EIZED. PAGE NO.40 OF ANNEXURE A-20 FOUND DURING THE COURSE OF SEARCH CONTAINED THE TRANSACTION WITH ONE M/S. AKAS H INTERNATIONAL AMOUNTING TO RS.75,40,262/- IN CASH. THE AO WAS OF THE VIEW THAT THE SAID TRANSACTION WAS IN VI OLATION OF PROVISIONS OF SECTION 269SS AND 269T OF THE ACT. H E, THEREFORE, REFERRED THE MATTER FOR LEVYING THE PENA LTY U/S 271D AND 271E OF THE ACT TO THE ADDL.CIT, RANGE 2, NEW DELHI. THE ADDL.CIT ON THE BASIS OF REPLY FURNISHE D BY THE ASSESSEE CAME TO THE CONCLUSION THAT THERE WAS NO V IOLATION OF THE PROVISIONS OF SECTION 269SS AND, THEREFORE, HE DROPPED THE PENALTY PROCEEDINGS U/S 271D OF THE ACT . HOWEVER, HE WAS OF THE VIEW THAT THE PENALTY U/S 27 1E OF THE ACT WAS LEVIABLE AND ACCORDINGLY, HE LEVIED THE PENALTY OF RS.75,40,262/-. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO LD. CIT (A) AND SUBMITTED THAT THE AO HIMSELF HAD ACCEP TED THAT THE ASSESSEE HAS NOT TAKEN ANY LOAN IN CASH AN D NOT ITA NO.805/DEL/2014 3 VIOLATED THE PROVISIONS U/S 269SS OF THE ACT AS THE ENTIRE AMOUNT WAS TAXED IN THE HANDS OF THE ASSESSEE AS BU SINESS RECEIPTS AND THE PENALTY PROCEEDINGS U/S 271D OF TH E ACT WERE DROPPED. THEREFORE, THERE WAS NO JUSTIFICATIO N IN THE LEVY OF PENALTY U/S 271E OF THE ACT IN RESPECT OF T HE SAME AMOUNT WHICH HAD BEEN TAXED BY TREATING THE SAME AS BUSINESS INCOME. RELIANCE WAS PLACED ON THE JUDGME NT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. R.B. SINGH & CO. PVT. LTD. REPORTED IN 340 ITR 217 (DEL.). THE LD. CIT (A) HAD INCORPORATED THE SUBMISSIONS OF THE ASSESSEE IN PARA 6.2 OF THE IMPUGNED ORDER, FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCED HEREIN. LD. CIT (A) ALSO FORWARDED THE SUBMISSIONS OF THE ASSESSEE TO T HE AO FOR HIS REMAND REPORT AND THE AO IN HIS REMAND REPO RT DATED 07.02.2013 STATED AS UNDER :- SHOW CAUSE NOTICE U/S 271 D WAS ISSUED BY THE ADD L. CIT, CENTRAL RANGE-2, NEW DELHI ON 18.11.2011, ACCORDING LY ASSESSEE REPLIED ON 29.02.2012 STATING THAT AO HAS TREATED S UM TOTAL OF RECEIPT IN THE IMPUGNED ANNEXURE AT RS.32,82,71,943 /- AS SUPPRESSED SALE/RECEIPT OF THE ASSESSED COMPANY WHI CH INTER ALIA INCLUDE THE CASH AMOUNT RECEIVED AS LOAN/DEPOSIT HE NCE NO PENALTY 271D IS EXIGIBLE IN THIS CASE. I HAVE CAREFULLY CON SIDERED THE SUBMISSION OF THE ASSESSEE WHICH IS NOT TENABLE BEC AUSE OF THE REASON THAT THE ASSESSEE HAS CLEARLY VIOLATED THE P ROVISION OF SECTION 239T READ WITH SECTION 271E OF THE INCOME T AX ACT, 1961. BEFORE PROCEEDING FURTHER, IT IS CONSIDERED NECESSA RY TRANSACTIONS OF REPAYMENT OF LOAN AS APPEARING IN THE PAGES REFE RRED BY THE ASSESSING OFFICER. ITA NO.805/DEL/2014 4 DATE NARRATION OF LOAN RE- PAYMENT AMOUNT REFERENCE & A Y 14.11.2007 TRANSFER TO AKASH INTERNATIONAL 4,96,130 A-20/40 IN AY 08-09 09.02.2008 TO CASH TO AKASH INTERNATIONAL 44,37,274 A-20/40 IN AY 2008-09 11.03.2008 TO CASH TO AKASH INTERNATIONAL 6,87,547 A-20/40 IN AY 2008-09 11.03.2008 TO CASH FOR INTEREST TO AKASH INTERNATIONAL 19,19,311 A-20/40 IN AY 2008-09 75,40,262 EVEN IF, IT IS PRESUMED THAT WHEN THE RECEIPT ITSEL F HAVE BEEN TREATED AS INCOME THE QUESTION OF LEVY OF PENALTY U /S 271D DOES NOT ARISE. IT IS SETTLED LAW THAT WHERE SURRENDER WAS A CCEPTED BY THE ASSESSING OFFICER AS INCOME OF THE ASSESSEE, IT CEA SED TO BE LOAN AND THEREFORE, THE VERY FOUNDATION FOR INITIATING T HE PROCEEDING FOR LEVYING PENALTY U/S 271D WAS LOST AS WAS HELD IN TH E CASE OF DIWAN ENTERPRISES V/S CIT (1999) 8 DTC 20 (DELHI-HC); (20 00) 246 ITR 571 DELHI. WHERE THE RELEVANT AMOUNT WAS CONSIDERED AS UNDISCL OSED INCOME OF THE ASSESSEE U/S 68 AND ADDITION UPHELD BY THE A PPELLANT AUTHORITY, THERE WAS NEITHER A LOAN NOR A DEPOSIT A ND AS SUCH THERE WAS NO VIOLATION OF SECTION 269SS OR 269T, THEREFOR E CANCELLATION OF PENALTY WAS JUSTIFIED AS WAS HELD IN THE CASE AC IT VS M.L. VIJAY (2000) 16 DTC 542 (JP-TRIB). IN THIS CASE THE LD. CIT(A)-II, NEW DELHI IN APPEAL NO. 72/11-12 DATED 30.04.2012 V IDE PARA NO. 23. IT WAS HELD THAT ADDITION HAS BEEN MADE BY THE AO RELYING UPON THE SEIZED MATERIAL AND THE STATEMENT OF DIREC TOR OF THE COMPANY RECORDED U/S 132(4) OF THE IT ACT AND ADDIT ION WAS SUSTAINED IN THE ASSTT. YEAR 2005-06 VIDE APPEAL NO . 75/11-12 FOR AN AMOUNT OF RS.9,31,79,939/-. IN VIEW OF THE ABOVE RECEIPT OF LOAN HAVE BEEN TREA TED INCOME FOR RE-PAYMENT OF LOAN OTHERWISE BY WAY OF CROSS CHEQUE OR DRAFT IN VIOLATION OF THE PROVISION OF SECTION 269T OF THE I T ACT, THE LOGIC ADVANCED IN RESPECT OF 269SS VIOLATION IS NOT APPLI CABLE. ACCORDINGLY, THE PENALTY U/S 271 E WAS IMPOSED. THE APPEAL OF THE ASSESSED MAY BE DECIDED IN MERITS . ' ITA NO.805/DEL/2014 5 5. THE LD. CIT (A), AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND THE REMAND REPORT OF THE AO, DELET ED THE PENALTY BY OBSERVING IN PARAS 6.4 AND 6.4.1 OF THE IMPUGNED ORDER WHICH READ AS UNDER :- 6.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER PASSED BY THE ADDL. CIT CENT RAL RANGE-2. I HAVE ALSO PERUSED THE REMAND REPORT AND THE REJOIND ER ON THE REMAND REPORT SUBMITTED BY THE APPELLANT. THE ADDL, CIT HAS INITIATED PENALTY PROCEEDINGS U/S 271D AND 271 E ON THE GROUND THAT 4 PAGES OF ANNEXURES A-20 AND A-24 AS SEIZED D URING THE SEARCH AND SEIZURE OPERATION SHOWS THAT THE ASSESSE E HAD ENTERED INTO TRANSACTION IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269T AND 271 E OF THE ACT. THE AO VIEWED THAT RECEIPT OF CASH AND REPAYMENT THEREOF ATTRACTS PENALTIES AS PER THE PRO VISIONS OF SECTION 271D AND 271 E OF THE ACT. A SHOW CAUSE NOT ICE WAS ISSUED. THE ASSESSEE SUBMITTED THAT SINCE THE AO HA D TAXED THE ENTIRE RECEIPTS WHETHER RECEIVED AS LOAN / DEPOSIT OR AS UNACCOUNTED SALE CONSIDERATION, HENCE THE PENALTIES ARE NOT LEV IABLE AT ALL. IT WAS SUBMITTED THAT SINCE THE AO HAS TREATED SUM TOTAL O F RECEIPTS IN THE IMPUGNED ANNEXURES AT RS.32,82,71,943/- AS SUPPRESS ED SALE / RECEIPTS OF THE ASSESSEE COMPANY WHICH INTER ALIA I NCLUDE THE CASH AMOUNTS RECEIVED AS LOAN / DEPOSIT HENCE NO PENALTY U/S 271D IS LEVIABLE. 6.4.1 THE ADDL.CIT HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE AND DROPPED THE PENALTY PROCEEDINGS U/S 271D ON THE GROUND THAT THE ENTRIES RECORDED IN THE DIARIES HAVE BEEN TAXED AS INCOME OF THE APPELLANT. HOWEVER, HE HELD THAT THE ASSESSEE HAS V IOLATED THE PROVISIONS OF SECTION 269T OF THE ACT BY PAYING THE LOANS / DEPOSITS OTHERWISE BY WAY OF CROSS CHEQUE / BANK DR AFT. THE ADDL.CIT HIMSELF HAS RECORDED THE FINDING THAT PENA LTY U/S 271D IS NOT LEVIABLE AS ENTRIES RECORDED IN THE DIARIES HAV E BEEN TAXED AS THE INCOME OF THE APPELLANT. A COPY OF THE SEIZED M ATERIAL A-20/40 WHICH FORMS THE BASIS FOR PENALTY WAS CALLED FOR FR OM THE AO. I FIND THAT THE SEIZED PAPER A-40 OF ANNEXURE A-20 DO ES NOT CONTAIN ITA NO.805/DEL/2014 6 ANY ENTRY AS LOAN REPAYMENT WHICH HAS BEEN INCORREC TLY MENTIONED BY THE ADDL. CIT IN THE PENALTY ORDER. 6. NOW, THE DEPARTMENT IS IN APPEAL. 7. THE LD. DR FOR THE DEPARTMENT STRONGLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATIONS MAD E IN THE PENALTY ORDER DATED 28.05.2012. IN HIS RIVAL SUBMI SSIONS, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPP ORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). IT W AS FURTHER STATED THAT THE ENTIRE AMOUNT WAS CONSIDERE D BY THE AO AS AN INCOME OF THE ASSESSEE, SO THERE WAS NO VI OLATION OF THE PROVISIONS OF SECTION 269SS AND 269T OF THE ACT SINCE NEITHER THE AMOUNT WAS RECEIVED NOR THERE WAS REPAYMENT OF LOAN. THEREFORE, THE LD. CIT (A) RIGH TLY DELETED THE PENALTY WHICH WAS ARBITRARILY LEVIED BY THE AO. THE RELIANCE WAS PLACED ON THE JUDGMENTS OF HONBLE DELHI HIGH COURT IN DIWAN ENTERPRISES VS. CIT 246 ITR 5 71 (DEL.) AND CIT VS. STANDARD BRANDS LTD. - 285 ITR 2 95 (DEL) . 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE O N RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT DURING THE COURSE OF ITA NO.805/DEL/2014 7 SEARCH PROCEEDINGS, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND WHICH REVEALED THAT THE ASSESSEE ENTERED INTO CERTAIN TRANSACTIONS IN CASH AND THE AMOUNT OF RS.75,40,262 /- PERTAINING TO THE TRANSACTION WITH ONE M/S. AKASH INTERNATIONAL WAS TREATED IN VIOLATION OF THE PROVI SIONS OF SECTION 269SS AND 269T OF THE ACT. HOWEVER, THE SA ME AMOUNT WAS OFFERED BY THE ASSESSEE FOR TAXATION AND WAS INCLUDED IN THE SUM OF RS.32,82,27,143/- WHICH WAS THE CREDIT SIDE OF THE ANNEXURES. THERE WERE CERTAIN D EBIT ENTRIES AMOUNTING TO RS.14,84,41,838/- IN THE SAID ANNEXURES AND THE BALANCE AMOUNT OF RS.17,97,85,205 /- WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. THE AO ALSO CONSIDERED THE RECEIPT OF RS.75,40,262/- AS A PART OF THE INCOME DISCLOSED BY THE ASSESSEE, THEREFORE, THE PE NALTY PROCEEDINGS U/S 271D IN VIOLATION OF THE PROVISIONS OF SECTION 269SS WERE DROPPED. HOWEVER, THE ALLEGED REPAYMENT OF THE SAME AMOUNT WAS TREATED AS A VIOLA TION OF THE PROVISIONS OF SECTION 269T OF THE ACT AND THE P ENALTY U/S 271E WAS LEVIED. IN OUR OPINION, THE VIEW TAKE N BY THE AO WAS AGAINST THE SETTLED POSITION OF THE LAW BECA USE THE AO HIMSELF TREATED THE AMOUNT OF RS.75,40,262/- AS AN INTEGRAL PART OF THE INCOME OF THE ASSESSEE. SO, T HERE WAS NO QUESTION OF RECEIPT OR REPAYMENT OF THE LOANS PA RTICULARLY WHEN THE AO HIMSELF ADMITTED THAT THE AMOUNT OF ITA NO.805/DEL/2014 8 RS.75,40,262/- WAS NOT THE RECEIPT OF THE LOAN RATH ER IT WAS THE INCOME OF THE ASSESSEE. THEREFORE, IT IS AN UN BELIEVABLE THAT A PERSON WILL MAKE THE PAYMENT OF HIS INCOME T O HIMSELF. IN THAT VIEW OF THE MATTER, WE ARE OF THE CONFIRMED VIEW THAT THE LD. CIT (A) WAS FULLY JUSTIFIED IN DE LETING THE PENALTY LEVIED BY THE AO AND ACCORDINGLY, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS GIV EN BY THE LD. CIT (A). 9. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 21/04/2017) SD/- SD/- (AMIT SHUKLA) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED: 21/04/2017 TS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR