PR. COMMISSIONER OF INCOME TAX CENTRAL, JAIPUR vs. VIRENDRA MODI

Judgment Per Hon’ble Dinesh Mehta, J 30/10/2018 The appellant has preferred the present appeal under Section 260A of the Income Tax Act, 1961, (hereinafter referred to as “the Act of 1961”), laying challenge to the order dated 21.02.2018 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur, dismissing Department’s appeal against the order dated 16.06.2017 passed by the Commissioner Income Tax (Appeals-2), Udaipur. The appellants have sought setting aside of the appellate orders, consequent to favorable adjudication of the following questions of law, which according to them are substantial questions of law:- “1. “Whether the learned ITAT is justified in deleting the penalty u/s 271D without considering that the (2 of 7) [ITA-149/2018] amount of Rs.19,35,000/- received by the assessee in cash and which is self-evident from the cash book submitted by the assessee himself are squarely covered by the provisions of Section 269SS?” 2. “Whether the learned ITAT is justified in treating the receipts as reflected from the assessee’s cash book as not covered underr the definition of “loans and deposits” under the provisions of Sec. 269SS?” 3. “Whether the learned ITAT is justified in treating the cash receipts representing the peak credit as reflected in the cash book as exempt within the meaning of both the proviso u/s section 269SS?” The facts relevant for the purpose of deciding the present appeal so also to ascertain as to whether the questions of law as proposed by the appellant do arise; are set out briefly hereunder. A search and seizure was carried out in the assessee’s group, comprising of Adarsh Credit Cooperative Society Limited and Adarsh Cooperative Bank Limited, its Director and other related persons. During the course of assessment proceedings, the Assessing Officer summoned the cash book and accounts of the assessee and found that a sum of Rs.19,35,000/- has been accepted by the assessee in cash and proposed to levy penalty under Section 271D of the Act of 1961 for the alleged violation of provisions of Section 269SS of the Act of 1961. The Joint Commissioner, Income Tax issued a show cause notice during the penalty proceedings. Pursuant to the notice issued by the Joint Commissioner, Income Tax, the respondent - assessee filed a reply and took a stand that the aforesaid amount of Rs.19,35,000/- represented undisclosed income of the assessee which had been disclosed in (3 of 7) [ITA-149/2018] the return of income for the assessment year 2010-11. It was submitted by the assessee that the said income forms part of the assessee’s undisclosed income and the same was shown in the cash book under the disclosure of peak amount for which the provisions of Section 269SS of the Act of 1961 are not attracted. The Joint Commissioner, Income Tax was not satisfied with the reply of the assessee and levied a penalty of Rs.19,35,000/- under Section 271D of the Act of 1961 and for the alleged breach of Section 269SS qua the sum of Rs.19,35,000/- deposited in cash. Feeling aggrieved with the said imposition of penalty, the respondent preferred an appeal under Section 250 of the Act of 1961, which came to be allowed by the Commissioner of Income Tax (Appeals-2), Udaipur vide his order dated 16.06.2017. The learned appellate authority has recorded a finding that the amount of Rs.19,35,000/- represents the undisclosed income of the assessee, disclosed in the return of income already filed. It has also been noticed that a perusal of the books of accounts particularly cash book reveals that the entry relating to Rs.19,35,000/- was nothing but an accounting entry reflecting the receipt of undisclosed income, which has been offered to tax for the relevant assessment year. It will not be out of place to reproduce the relevant excerpt from the order of the appellate authority, which reads thus:- “3.4.1 From the perusal of the cash book and submissions of the Appellant and order of the JCIT, it is seen that transactions under consideration are related to transaction of Rs.19,35,000/- with description ‘disclosure of peak amount’ as mentioned in the cash

(4 of 7) [ITA-149/2018] book

and with respective

account

head debited/credited. From this cash book, it was concluded by the JCIT that it is the transaction of receipt of deposits in in contravention of provisions of section 269SS. However, after perusal of the records, it is seen that the said conclusions of the JCIT is without establishing the relationship of depositor- lender between the Appellant and parties involved. 3.4.2 It is clear from the bare perusal of the section 269SS of the Act that it prohibits acceptance of loans or deposits otherwise than by way of account payee cheque or draft (specified modes). Thus, following are the necessary ingredients for application of section 269T of the Act: a. There is transaction of loan or deposit b. There is acceptance of such loan or deposit c. Acceptance is made otherwise than way of specified modes d. acceptance is made from any person 3.4.3 It is well settled judicial principle that burden of proof in relation to penalty proceedings is on the revenue, however, in the instant case, the JCIT has levied the penalty only on the basis of rejection of the explanation of the Appellant and there is no concrete finding as to whether (I) there is transaction of loan or deposit, (ii), there is acceptance of such loan or deposit and (iii) there is acceptance made otherwise than by way of specified mode. In the instant case, it is being agitated by Appellant that transactions amounting to Rs.19,35,000/-, is related to undisclosed income of peak amount disclosed in return of income filed. It is seen from the bare perusal of the cash book, the transaction on which penalty is levied, is nothing but accounting entry reflecting receipt of undisclosed income, which is duly reflected

(5 of 7) [ITA-149/2018] in return of income of the Appellant, therefore, penalty u/s 271D is not attracted on such transaction. 3.4.4 It is well settled judicial principle that burden of proof in relation to penalty proceedings is on the revenue, however, in the instant case, the JCIT has failed to establish with a finding as to whether (i) there is transaction of loan or deposit, (ii), there is acceptance of such loan or deposit and (iii) acceptance is made otherwise than by way of specified mode. In the instant case, it has not been established whether deposit was taken, when was deposit taken and what was the amount of deposit taken. This burden has not been discharged, therefore, bare allegation upon the Appellant without establishing aforesaid requirements, do not justify levy of penalty u/s 271D of the Act.” Feeling aggrieved with the said order of the appellate authority, the Department preferred an appeal before the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur, which came to be rejected by the Tribunal vide its order dated 21.2.2018. Learned Members of the Tribunal while rejecting the appeal filed by the Department and upholding the order of the appellate authority has held that the fact that it was not a case of acceptance of cash towards loan or deposit, attracting the provisions of Section 269SS of the Act. The Tribunal also held that the burden of proof in relation to the penalty proceedings was on the Revenue and that the Assessing Officer has failed to establish that the amount of Rs.19,35,000/- is the amount of peak cash deposited, reflected in return of income, which by no stretch of imagination be termed as acceptance of deposit. Mr. Bissa, learned counsel for the appellant contended that the learned Members of the Tribunal have erred in holding that the (6 of 7) [ITA-149/2018] burden of proof in cases of penalty proceedings is on the Revenue. He submitted that the onus lay upon the assessee to establish that the cash brought in the books was not in violation of the provisions of Section 269SS of the Act of 1961. He also submitted that the provisions of Section 269SS of the Act of 1961 are applicable upon taking or accepting any loan or deposit in cash irrespective of the genuineness or otherwise of such transaction. He however failed to point out from the record that from whom the assessee had received sum of Rs.19,35,000/- in cash.

We have considered the arguments advanced by Mr. Bissa and perused the material available on record including the provisions of Section 269SS of the Act of 1961. A perusal of record leaves no room for doubt that the respondent assessee had surrendered a sum of Rs.19,35,000/- as his undisclosed income for the assessment year 2010-11 and has infused the said amount in his channel of accounts. As a matter of fact, it was not acceptance of any amount in cash as loan or deposit. A perusal of Section 269 SS of the Act of 1961 reveals that it prohibits receipt of loan or deposit made by any person, otherwise than by way of an account payee cheque or account payee draft. A bare look at the aforesaid provision leaves no room for ambiguity that the rigours of the said provision is attracted only in the event when the assessee accepts loan or advance in cash. In other words, loan or advance is a sine qua non or foundational fact for the applicability of the provisions of Section 269SS of the Act of 1961. In the extant facts, the assessee has stated that the amount of Rs.19,35,000/- represented assessee’s undisclosed income and the same was debited in cash book as peak cash

(7 of 7) [ITA-149/2018] deposit. It was upon the Assessing Officer to have recorded the finding that the assessee had received a loan or deposit or advance from a third party. In absence of such fact, which is a precursor for establishing of breach of Section 269SS of the Act of 1961, the penalty cannot be levied. That being the fact situation, we are of the considered opinion that the learned Commissioner (Appeals-2), Udaipur was perfectly justified in holding that there is no violation of the provisions of Section 269SS of the Act of 1961 and thus, levy of penalty under Section 271D of the Act of 1961 was void. In view of the aforesaid, while concurring with the views of the appellate authority and the Income Tax Appellate Tribunal, we do not find any substantial question of law involved in the present appeal. The same is hereby dismissed. (DINESH MEHTA),J Arun/PS (37) (SANGEET LODHA),J