Jagtap Builders and Developers Pvt Ltd, Pune V. Addl. CIT, Range 11, Pune

ITA 901/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72203 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANTKUMAR C LEUVA
• Keywords: Gift; Non compliance

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 901/PN/2012 (ASSESSMENT YEAR 2006-07) JAGTAP BUILDERS AND DEVELOPERS PVT. LTD., S.NO.32, TRIMURTI BUILDING PIMPLE GAURAV, PUNE 411027. PAN NO. AABAS5442E .. APPELLANT VS. ADDL. CIT, RANGE-11, PUNE .. RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI HEMANT KUMAR C. LEUVA DATE OF HEARING : 27-09-2013 DATE OF PRONOUNCEMENT : 30-09-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 01-11-2011 OF THE CIT(A)-I, PUNE RELATING TO ASSESS MENT YEAR 2006-07. 2. LEVY OF PENALTY OF RS.25,25,000/- BY THE ASSESSI NG OFFICER U/S.271D OF THE I.T. ACT WHICH HAS BEEN CONFIRMED BY THE CIT (A) IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE VARIOUS GROUNDS OF AP PEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS AS BUILDER AND DEVELOPER. DURING T HE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY PURCHASED A NEW PLOT OF LAND AND STARTED CONSTRUCTION WORK ON CONTRACT BASIS. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF SOURCE OF UNSECURED LOANS AMOUNTING TO RS.25,25,000/- TAKEN FROM THE 7 DIRECTORS/SHAREHOLDERS. ON THE BASIS OF THE LIST FURNISHED BY THE 2 ASSESSEE THE ASSESSING OFFICER ASKED THE ASSESSEE T O GIVE THE DOCUMENTARY PROOF REGARDING THE CREDIT WORTHINESS OF THE LOAN C REDITORS AND THE GENUINENESS OF THE LOAN TRANSACTIONS. THE ASSESSEE REPLIED THAT THESE LOANS WERE TAKEN IN CASH AND DIRECTORS ARE NOT ASSESSED T O TAX. SINCE THE ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE REGARDIN G THE CREDIT WORTHINESS OF THE LOAN CREDITORS AND ALSO COULD NOT PRODUCE TH E DIRECTORS FOR HIS EXAMINATION, THE ASSESSING OFFICER ADDED THE ENTIRE AMOUNT OF UNSECURED LOAN OF RS.25,25,000/- U/S.68 OF THE INCOME TAX ACT . 3.1 THEREAFTER, THE ASSESSING OFFICER INITIATED PRO CEEDINGS U/S.271D OF THE I.T. ACT BY SUBMITTING A PROPOSAL TO THE ADDL. CIT FOR VIOLATION OF PROVISIONS OF SECTION 269SS BY THE ASSESSEE. THE A DDL. CIT ISSUED NOTICE U/S.271D OF THE I.T. ACT ON 04-02-2009 CALLING FOR THE EXPLANATION OF THE ASSESSEE REQUESTING HIS PRESENCE ON 16-02-2009. ON THE SAID DATE, ONE OF THE DIRECTOR SHRI SANJAY JAGTAP ATTENDED ALONG WITH THE AUTHORISED REPRESENTATIVE AND NO REPLY FOR THE SHOW CAUSE NOTI CE WAS FILED. THERE WAS ALSO NON COMPLIANCE THEREAFTER. FINALLY, IT WAS SU BMITTED THAT THE AMOUNT OF RS.25,25,000/- IS THE ADVANCE RECEIVED FROM THE PLOT HOLDERS TOWARDS PLOT BOOKING AND THESE ARE NOT CASH LOANS FROM DIRECTORS AS ASSUMED BY THE ASSESSING OFFICER. IN ABSENCE OF ANY PROOF TO SUBS TANTIATE THE ABOVE SUBMISSION THE ADDL.CIT DID NOT ACCEPT THE SUBMISSI ONS AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAD VIOLATED THE PROVI SIONS OF SECTION 269SS. HE ACCORDINGLY LEVIED PENALTY OF RS.25,25,000/- U/S .271D OF THE I.T. ACT. 4. BEFORE THE CIT(A) IT WAS ARGUED THAT LOANS WERE DECLARED AS INCOME TO BUY PEACE AND TO AVOID LITIGATION. HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSE E. HE OBSERVED THAT THE ASSESSEE IS CHANGING HIS STAND FROM TIME TO TIME WI THOUT HAVING THE RELEVANT 3 EVIDENCES IN SUPPORT OF THE SAME. THIS, ACCORDING TO HIM, CLEARLY SHOWS THAT CASH INTRODUCED WAS UNDISCLOSED INCOME OF THE ASSESSEE. HOWEVER, ACCORDING TO HIM, THE ABOVE MATERIAL IS ONLY A CIRC UMSTANTIAL VALUE. SO FAR AS ISSUE OF LEVY OF PENALTY U/S.271D IS CONCERNED H E OBSERVED THAT PENALTY U/S.271D IS LEVIABLE FOR VIOLATION OF SECTION 269SS WHICH PLACED RESTRICTION IN RESPECT OF CERTAIN CATEGORIES OF ASSESSEES TO RE CEIVE LOANS/DEPOSITS IN CASH IN EXCESS OF RS.20,000/-. SINCE THE ASSESSEE IN TH E INSTANT CASE HAS ACCEPTED LOAN OF RS.25,25,000/- IN CASH FROM DIRECTORS/SHARE HOLDERS OF THE COMPANY, THEREFORE, THERE WAS CONTRAVENTION OF PROVISIONS OF SECTION 269SS. RELYING ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CHAMUNDI GRANITES PVT. LTD. VS. DCIT AND ANOTHER REPORTED IN 239 ITR 694 HE UPHELD THE PENALTY LEVIED BY THE ADDL.CIT U/S.271D OF THE I.T. ACT. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE ADDITION OF RS.25,25,000/- MADE BY THE ASSESSING OF FICER IN THE ASSESSMENT PROCEEDINGS HAS NOT BEEN CHALLENGED BY THE ASSESSEE IN THE APPEAL PROCEEDINGS AND THE ASSESSEE HAS ACCEPTED THE SAME. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIWAN ENTERPRISES VS. CIT & OTHERS VS. CIT REPORTED IN 246 ITR 571 HE SUB MITTED THAT ONCE THE ASSESSEE SURRENDERS THE AMOUNT OF ALLEGED LOAN AS I TS INCOME AND ASSESSING OFFICER ACCEPTS THE SURRENDER OF LOAN AS INCOME OF THE ASSESSEE HE CANNOT ANYMORE TREAT IT AS A LOAN FOR THE PURPOSE OF SECTI ON 269SS R.W.S.271D AND LEVY PENALTY. HE SUBMITTED THAT THE HONBLE COURT IN THE SAID DECISION HAS HELD THAT ONCE THE AMOUNT HAS BEEN CEASED TO BE A L OAN, THE VERY FOUNDATION FOR INITIATING THE PROCEEDINGS FOR LEVYING THE PENA LTY U/S.271D WAS LOST. 4 5.1 REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STANDARD BRANDS LTD. REPORTED IN 285 ITR 29 5 HE SUBMITTED THAT THE HONBLE COURT IN THE SAID DECISION HAS HELD THA T REVENUE HAVING TAKEN A STAND THAT ALLEGED DEPOSIT WAS UNDISCLOSED INCOME O F THE ASSESSEE IT COULD NOT RESORT TO PENALTY PROCEEDINGS U/S.271D OF THE I .T. ACT. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL (TM) IN THE CASE OF ITO VS. SUNIL M. KASLIWAL REPORTED IN 94 ITD 281 HE SUBMITT ED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT ONCE THE AMOUNTS OF THE ALLEGED GIFTS HAVE BEEN TREATED AS INCOME OF THE ASSESSEE FROM UNDISCL OSED SOURCES, THEREFORE, THE AMOUNTS HAVE LOST THE CHARACTER OF LOANS/DEPOSI TS AND ACCORDINGLY PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE TO T HESE LOANS AND THERE IS NO JUSTIFICATION FOR PENALTY. HE ACCORDINGLY SUBMITTE D THAT ONCE THE LOAN HAS BEEN TREATED AS INCOME OF THE ASSESSEE THE VERY FOU NDATION FOR LEVY OF PENALTY IS LOST AND THEREFORE IN VIEW OF THE DECISI ONS CITED ABOVE, NO PENALTY U/S.271D IS LEVIABLE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT THE ASSESSEE HAD SHOWN TO HAVE RECEIVED CASH LOAN OF RS.25,25,000/- FROM VARIOUS SHAREHOLDERS/DIRECTORS. THERE WAS CONTRAVENTIONS O F THE PROVISIONS OF SECTION 269SS. SUBSEQUENTLY, THE ASSESSEE CHANGED ITS STAND AND SUBMITTED THAT THESE ARE ADVANCES FOR SALE OF PLOT. THE ASSE SSEE IS CHANGING HIS STAND FROM TIME TO TIME. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE CIT(A) UPHOLDING THE PENALTY WAS FULLY JUSTIFIED AND THE SAME SHOULD BE UPHELD. 5 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BY BOTH THE SIDES. THERE IS NO DI SPUTE TO THE FACT THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS MADE ADDITION OF RS.25,25,000/- WHICH REPRESENTS THE AMOUNT OF RS.25 ,25,000/- RECEIVED BY THE ASSESSEE FROM 7 PERSONS WHO WERE DIRECTORS/SHAR EHOLDERS AND ANOTHER RS.1 LAKH FROM THE SAME PERSONS TOWARDS SHARE CAPIT AL. WE FIND THE ASSESSEE DID NOT CHALLENGE THE ADDITION OF RS.25,25 ,000/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE INCOME TAX ACT BEIN G THE UNSECURED LOAN RECEIVED BY THE ASSESSEE ALTHOUGH IT HAS CHALLENGED THE ADDITION OF RS. 1 LAKH. IN OTHER WORDS, HE HAS ACCEPTED THE SAME AS HIS INCOME. NOW THE QUESTION THAT ARISES IS AS TO WHETHER PENALTY U/S.2 71D CAN BE LEVIED FOR VIOLATION OF SECTION 269SS ONCE THE ASSESSEE ACCEPT S THE ALLEGED LOAN AS ITS OWN INCOME. 7.1 WE FIND THE HONBLE DELHI HIGH COURT IN THE CAS E OF DIWAN ENTERPRISES (SUPRA) HAS OBSERVED AS UNDER : 14. SECTION 269SS PROVIDES, INTER ALIA, THAT NO PE RSON SHALL, AFTER JUNE 30, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON, ANY LOA N OR DEPOSIT OTHERWISE BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT , IF THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE THEREOF IS RS. 20, 000 OR MORE. SECTION 271D PROVIDES THAT IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOSIT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS, HE SHALL BE LIA BLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT SO T AKEN OR ACCEPTED. 15. THE RECORD OF THE PROCEEDINGS SHOWS THAT THE AS SESSING OFFICER HAD DIS CARDED THE THEORY OF THE ASSESSEE HAVING TAKEN ANY LOAN. HE ACCEPTED THE SURRENDER OF THE AMOUNT AS INCOME OF THE ASSESSEE. IT WAS OPEN TO THE ASSESSING OFFICER NOT TO ACCEPT THE SURRENDER, TREA T THE AMOUNT AS LOAN AND THEN TO HOLD THE PETITIONER LIABLE TO PENALTY UNDER SECTION 271D FOR NON- COMPLIANCE WITH SECTION 269SS. THE ASSESSING OFFICE R CANNOT BE PERMITTED TO TREAT THE AMOUNT OF LOAN AS INCOME FOR THE PURPOSE OF ASSESSING TAX THEREON WHILE FRAMING THE ASSESSMENT AND AT THE SAME TIME T O TREAT IT AS A LOAN FOR THE PURPOSE OF SECTION 269SS READ WITH SECTION 271D AND SUBJECT THE TRANSACTION TO PENALTY. SUCH PROCEEDINGS WOULD BE SELF-CONTRADICTO RY. FOR NON-COMPLIANCE WITH THE PROVISIONS OF SECTION 269SS, THE GENUINENE SS OF THE TRANSACTION AS LOAN WAS DOUBTED BY THE ASSESSING OFFICER AND SO TH E AMOUNT WAS SURRENDERED 6 BY THE ASSESSEE. THE SURRENDER WAS ACCEPTED BY THE ASSESSING OFFICER AS INCOME OF THE ASSESSEE. IT CEASED TO BE A LOAN AND, THEREFORE, THE VERY FOUNDATION FOR INITIATING THE PROCEEDINGS FOR AND L EVYING PENALTY UNDER SECTION 271D WAS LOST. 16. SUB-SECTION (1) OF SECTION 271D BEGINS WITH THE WORDS 'IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOSIT'. THE ASSESSING OFFI CER HAD RECORDED A FINDING THAT THE AMOUNT OF RS. 30,000 WAS THE INCOME OF THE ASSESSEE. IMPLIEDLY HE HAD RECORDED A FINDING THAT IT WAS NEITHER ANY LOAN NOR A DEPOSIT. THE QUESTION OF THE PROVISIONS OF SECTION 269SS HAVING BEEN CONTRAV ENED WAS THEN LOST IN OBLIVION AND COULD NOT HAVE RE-ARISEN AT ANY SUBSEQ UENT STAGE OR IN SUBSEQUENT PROCEEDINGS. THE PENALTY IMPOSED UNDER SECTION 271 D READ WITH SECTION 269SS CANNOT, THEREFORE, BE SUSTAINED. C.W.P. NO. 3868 O F 1997, THEREFORE, DESERVES TO BE ALLOWED AND THE PENALTY DESERVES TO BE QUASH ED. 7.2 WE FIND THE HONBLE DELHI HIGH COURT IN THE CAS E OF STANDARD BRANDS LTD. (SUPRA) HAS OBSERVED AS UNDER : 6. ON THESE FACTS, WE ARE OF THE VIEW THAT THE REV ENUE COULD NOT, ON THE ONE HAND, CONTEND THAT THE AMOUNT OF RS.3 LAKHS IS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE AND AT THE SAME TIME SEEK TO INITIATE PROCEEDINGS AGAINST THE ASSESSEE FOR VIOLATION OF THE PROVISIONS OF S.2 69SS OF THE ACT WHICH DEALS WITH CASH DEPOSITS OR LOANS IN EXCESS OF RS.20,000/ -. THE REVENUE HAVING TAKEN THE STAND THAT THE INCOME WAS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE, IT COULD NOT RESORT TO P ROCEEDINGS UNDER S.269SS R.W.S.271D OF THE ACT, AS HELD BY THE TRIBUNAL. 7.3 SINCE IN THE INSTANT CASE THE UNSECURED LOAN WA S ACCEPTED BY THE ASSESSEE AS HIS OWN INCOME BY NOT CHALLENGING THE A DDITION BEFORE THE CIT(A), THEREFORE, IN VIEW OF THE DECISIONS CITED ( SUPRA) THE ASSESSEE IN OUR OPINION IS NOT LIABLE TO PENALTY U/S.271D OF THE I. T. ACT FOR NON COMPLIANCE OF PROVISIONS OF SECTION 269SS. THE ORDER OF THE C IT(A) ON THIS ISSUE IS ACCORDINGLY SET-ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE DATED: 30 TH SEPTEMBER 2013 SATISH 7 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, PUNE 4 CIT-I, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE