THE PRINCIPAL COMMISSIONER OF INCOME TAX-3 vs. DEVCHAND B PATEL

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TAXAP/739/2019HC GujaratGJHC24068268201927 January 2020Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE BHARGAV D. KARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in deleting the penalty levied under Section 271E of the Act. The Court agreed with the Tribunal's finding that the Revenue failed to establish that the assessee accepted any loan or deposit from Shri Jivraj V. Desai. The Court noted that in the absence of any material on record demonstrating the acceptance of such loans or deposits by the assessee, the Tribunal's decision to delete the penalty was correct. The ratio decidendi is that a penalty under Section 271E cannot be sustained if the Revenue fails to provide material evidence to prove the contravention of Section 269T, specifically the acceptance of loans or deposits in cash. The appeal filed by the Revenue was dismissed.

What were the facts?

This is a Tax Appeal filed by the Revenue against an order of the Income Tax Appellate Tribunal (ITAT), Ahmedabad-Bench 'A', dated 31.05.2019. The appeal pertains to Assessment Year 2001-02, falling within the block period 01.04.1990 to 20.10.2000. The dispute concerns the deletion of a penalty of Rs.1,79,69,600/- levied under Section 271E of the Income Tax Act, 1961. The Assessing Officer had levied this penalty on the respondent-assessee, Devchand B Patel, for allegedly accepting a loan or deposit in cash from Shri Jivraj V. Desai. The ITAT had deleted this penalty.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Appellate Tribunal was right in deleting the penalty levied under Section 271E of the Act amounting to Rs.1,79,69,600/-, without considering the diary seized during the search, which contained transactions of the assessee with Shri Jivraj V. Desai & Group? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the Tribunal's reasoning indicates that the assessee argued, and the Tribunal found, that the department was unable to establish any transaction of the assessee with Shri Jivraj V. Desai, and that the seized material and statement of the diary's author were misinterpreted by the Revenue. The Tribunal had previously deleted an addition of Rs. 13,79,300/- in the quantum appeal based on similar evidence assessment. Revenue's Contention: The Revenue argued that the penalty under Section 271E should not have been deleted as the seized diary contained relevant transactions, and the Tribunal failed to consider this material.

Which sections of the Income-tax Act were involved?

Section 260A,Section 271E,Section 269T,Section 271D

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/739/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 739 of 2019 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-3 Versus DEVCHAND B PATEL ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 MR MANISH J SHAH(1320) for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 27/01/2020

ORAL ORDER

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1.

This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, 'the act, 1961') is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad-Bench 'A' dated 31.05.2019 in the IT(SS)A.No. 278/Ahd/2010 for the A.Y. 2001- 02 (Falling within the block period 01.04.1990 to 20.10.2000. 2. The Revenue has proposed following question of law as substantial question of law for the consideration of this Court : C/TAXAP/739/2019 ORDER “Whether in the facts and on the circumstances of the case, the Appellate Tribunal was right in deleting the penalty levied u/s. 271E of Rs.1,79,69,600/- without considering the diary seized and inventorized as per Annexure A-1 during the course of search, which contains the sharafit transactions of the assessee with Shri Jivraj V.Desai & Group?”

3.

The proposed question of law pertains to the deletion of penalty levied under Section 271E of the Act. Section 269T of the Act prohibits every persons to accept any loan or deposit exceeding the specified sums other than by way of cheque or account payee cheque or use of electronic clearing system through Bank accounts. When any person pay or accept any loan or deposit in contravention of provisions of Section 269T of the Act, then he would be liable to pay by way of penalty under section 271E of the Act, a sum equal to the amount of loan and/or deposit so taken or accepted.

4.

According to the Assessing Officer, the respondent assessee accepted loan or deposit in cash from Shri Jivraj V. Desai, and therefore, penalty under section 271E was levied amounting to Rs.1,79,69,600/-.

5.

The Tribunal while allowing the appeal of the respondent- assessee observed as under : C/TAXAP/739/2019 ORDER “26. As observed while deciding the appeals against levy of penalty under section 271E of the Act, we find that department is unable to establish that the assessee has any transaction of Shri Jivraj V. Desai. There is no material possessed by the Revenue showing acceptance of any loan or deposits by the assessee from Shri Jivraj V. Desai. Revenue has mis-constructed or misinterpreted the seized material as well as statement of Shri Arvindbhai A. Shah, alleged author of the diary. We have discussed this evidence while deleting the addition of Rs. 13,79,300/- in the quantum appeal i.e. IT(SS)A. no.271/Ahd/2010. Taking into consideration all these material facts, we are of the view that no penalty is imposable upon the assessee under section 271D of the Act. We allow both the appeals and delete the impugned penalty.”

6.

In view of the aforesaid finding of fact given by the Tribunal that the Appellant-Revenue is not able to establish that assessee accepted any loan or deposit from Shri Jivraj V. Desai. In absence of any material showing acceptance of any loan or deposits by the respondent-assessee, we are of the opinion that the Tribunal has rightly deleted the penalty levied under Section 271E of the Act. C/TAXAP/739/2019 ORDER

7.

In the result, this appeal fails and is hereby dismissed as no substantial question of law arises out of the impugned order of the Tribunal. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) KUMAR ALOK

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