SHRI ANIRUDHSINGH P. PADHIYAR,,ANAND vs. THE INCOME TAX OFFICER, WARD-1(3)(2),, PETLAD

These two appeals filed by the Assessee are directed against the order of the Ld. CIT(A)-V, Vadodara dated 23.01.2017 pertaining to A.Y. 2012-13 and following grounds have been taken: & 908/Ahd/2017 2 . A.Y. 2012-13

Facts of the case are that the appellant had filled his return of income on 26/09/2012declaring total income of Rs. 13,44,9807- as his income. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued and against which the required details from time to time were submitted before the assessing officer. Ultimately assessment order was passed u/s 143(3) of IT Act assessing the total income at Rs53,56,160/-by making the following addition. 1) Unexplained deposit u/s 68 of Rs.11,00,000/- 2) Bogus salary Expense of Rs.6,38,000/- 3) Disallowance out of expenses amounting to Rs. 20,39,180/- 4) Disallowance of generator rent expense u/s40(a)(ia) of the Act amounting to Rs. 2,34,000/-

Against the above said addition, assessee preferred first statutory appeal before the ld. CIT(A). Ld. CIT(A) confirmed the action of Assessing Officer.

We have heard both the parties and seen the material available on record. Out of Rs. 11,00,000/- Rs. 9,00,000/- was given to the assessee one her relative namely Kolatkuvarba Padhiyar who earned this income from the cutting of the & 908/Ahd/2017 3 . A.Y. 2012-13 tree at the bed of River Mahi and during an enquiry this fact was confirmed by the Officer of the Revenue Department who physically verified claim of the assessee. And so far remaining 2,00,000/- loan is concerned, assessee received the same from one Shri virendrasingh Manasaheb Parmar and stated that he is an agriculturist and in support of its contention, assessee submitted extract of 7/12 of Shri parmar father’s agricultural land. Thus, in our considered opinion, assessee has submitted all relevant documents before the lower authorities. Therefore, ground no. 1 with regard to addition of Rs. 11,00,000/- u/s. 68 allowed and we direct assessing officer to delete the addition of Rs. 11,00,000/- .

Next ground relating to making disallowance on account of bogus salary expense of Rs. 6,38,000/- .

This salary was paid by the assessee in cash and in assessment order, assessing officer admitted that assessee is engaged in the business of trading in sand, truck transportation and manufacturing and trading of cement paver blocks. And in the assessment year under consideration, assessee has declared income at Rs. 13,44,980/-. From the above, it is clear that assessee is in the business and has earned Rs. 13,44,980/- . Therefore, he must have paid salary to the employees in order to earn the income of Rs. 13,44,980/-. Therefore, in the interest of the justice, we allow 50% of the salary expenses of Rs. 6,38,000/-. A.O. is directed to give effect of Rs. 3,19,000/- to the appellant/assessee.

Now we come to next ground relating to making addition on account of disallowance of expenses at 15% amounting to Rs. 10,19,590/-. & 908/Ahd/2017 4 . A.Y. 2012-13 8. Ld. A.R. made disallowance of Rs. 20,39,180/-. And in appeal, ld. CIT(A) granted relief to the appellant/assessee and made addition of Rs. 10,19,590/-. In order to meet the ends of justice and appellant/assessee has furnished details with regard to expenses incurred by him for his business activities. We give relief of Rs. 4,00,000/- and remaining amount 6,19,590/- is to be confirmed.

In the result, appeal filed by the Assessee is partly allowed.

Now we come to ITA No. 908/Ahd/2017. The assessee has taken following grounds of appeal: 1.The penalty order passed u/s. 271D of IT. Act by the assessing officer and confirmed by the first appellate authority is bad in law and deserves to be quashed.

Facts of the case are that the The appellant had filed his return of income on 26/09/2012 declaring the total income at Rs. 13,44,980/-. The Assessing Officer Completed assessment u/s 143(3) on 25/03/2015 assessing the total income at Rs.53,56,160/-.The assessing officer found following acceptance of loan from following persons in cash: Sr. No. Name Total Amount (in Rs.) 1 Pradhumansing J Padhiyar 24,00,000/- HUF 2 Devendrasingh Parmar 10,00,000/- 3 Hasmukhbhai Brahmbhat 6,00,000/- 4 Manasaheb Padhiyar 6,00,000/- & 908/Ahd/2017 5 . A.Y. 2012-13 5 Parvinsingh allas 10,00,000/- Parkashsingh Dhirsingh Parmar 6 Surendrasingh B. Padhiyar 7,00,000/- Total 63,00,000/-

But lower authorities were not agree with the contention of the appellant and imposed and confirmed the penalty of Rs. 63,00,000/- u/s. 271D.

Now appellant/assessee has come before us. Assessee contention is that all lenders were agriculturist their identity and creditworthiness was proved and where assessee and creditors are residing there is no banking facilities available in connected . We have also gave substantial relief to the appellant.

In support of its contention, assessee cited a judgment of Hon’ble High Court in the matter of CIT vs. Maa Khodiyar Construction [2014] 45 taxmann.com 566 (Gujarat) where it has been held as under: "Section 269SS, read with sections 273B and 271D, of the Income-tax Act, 1961 - Deposits - Mode of accepting/taking (Reasonable cause) -Assessment year 2006- 07 - Instead of taking loan in account payee cheque or bank draft, assessee took loans in cash exceeding Rs. 20,000 from agriculturists living In remote village - Not only substantiating evidence like 7/12 extracts from land records were produced, but, also additionally, transactions were reflected in accounts of assesses and advancement of loan to assessee had been reflected in books of account of those persons from whom loan had been received - Identity of those persons had also been well established - Assessee also had given satisfactory reasons for taking such loan - Whether since genuineness of very transactions were never doubted by revenue authorities, and breach was due to reason that agriculturists were living in remote areas, default was to be treated as a mere technical or venial breach and penalty was not to be levied on assessee - Held, yes [Paras 12 & 13] [In favour of assessee]." & 908/Ahd/2017 6 . A.Y. 2012-13 15. And also cited a judgment of Madras High court in case of Director of Income Tax (Exemptions) V. Young Men Christian association [2014] 49 taxmann.com 72 wherein it was held as under: " I. Section 68, read with sections 269SS, 2697 and 271D, of the Income-tax Act, 1961 - Cash credits (Loan) - Assessment years 2008-09 and 2009-10 - During relevant year, Assessing Officer noted that assessee, to get over certain financial difficulties, borrowed a sum of Rs. one crore in cash - Assessee repaid Rs. 50 lakhs during relevant years - Assessing Officer taking a view that it was a case of unexplained cash receipt, treated amount in question as assessee's own income - He thus added said amount to assessee's Income under section 68 - Assessing Officer also passed a penalty order under section 27ID for violating provisions of section 269SS - Whether once amount was subjected to tax under section 68, question of treating it as transaction in violation of section 269SS or section 2697 did not arise as it stood mutually excluded - Held, yes - Whether, therefore, impugned penalty order was to be set aside - Held, yes [Para 7] [In favour of assessee] II. Section 269SS, read with sections 271D and 273B, of the Income-tax Act, 1961 - Loans or deposits - Mode of accepting (Penalty) -Assessment years 2008-09 and 2009-10 - Assessee took loan of Rs. 25 lakhs in cash from 'M' - Assessing Officer taking a view that there was violation of section 269SS, passed a penalty order under section 27ID - Commissioner (Appeals) and Tribunal having gone into genuineness of transaction and reasons attributed by assessee for obtaining said loan in view of compelling circumstances, invoked provisions of section 2736 and set aside penalty order - Whether on facts, impugned order passed by Tribunal did not warrant any interference - Held, yes [Paras 13 & 14] [In favour of assessee]" & 908/Ahd/2017 7 . A.Y. 2012-13 16. Since we have substantially granted relief to the assessee in connected in quantum proceedings and in similar circumstances, in above said case, relief was granted by the higher forum. Thus, in view of the facts and circumstances of the case and above said judgment, we delete the penalty of Rs. 63,00,000/-.

In the result, appeal filed by the Assessee/ appellant is allowed.