MR NEERAJ TYAGI vs. JOINT COMMISSIONER OF INCOME TAX & ANR.

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W.P.(C)/627/2023HC DelhiDLHC01001187202301 February 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MS. JUSTICE TARA VITASTA GANJU7 pages
AI SummaryWithdrawn

What did the High Court hold?

The Court noted that the primary issue was whether Section 269SS was applicable to the petitioner. Based on a plain reading of Section 269SS, the Court had previously opined that it could not be made applicable to the petitioner as he was not the recipient of the 'specified sum' as defined in Explanation (iv) to the section. Subsequently, the revenue informed the Court that the penalty order dated September 29, 2022, had been withdrawn by the Assessing Officer under Section 154 of the Act. The Court acknowledged that this withdrawal effectively redressed the petitioner's grievance. The apprehension raised by the petitioner regarding potential future actions by the revenue under Section 263 was noted as a possibility for which the petitioner could seek appropriate remedy at the appropriate time. Consequently, the demand notice stood quashed, and the writ petition was disposed of. The interim order was vacated. The Court also directed the Registry to upload the withdrawal order passed by the AO under Section 154.

What were the facts?

The petitioner, Mr. Neeraj Tyagi, challenged a notice dated March 12, 2022, issued under Section 271D read with Section 274 of the Income Tax Act, 1961, and a subsequent penalty order dated September 29, 2022, for Assessment Year (AY) 2017-18. The penalty proceedings were initiated for an alleged violation of Section 269SS of the Act concerning a sale deed executed on January 20, 2016, where the petitioner paid Rs. 32,60,000/- in cash out of a total consideration of Rs. 39,60,000/-. The petitioner argued that Section 269SS was not applicable as he was not the recipient of the sum and that the wrong AY was invoked. The revenue contended that the error could be rectified under Section 292B and that the petitioner had an alternative remedy by way of appeal. Subsequently, the revenue informed the Court that the penalty order dated September 29, 2022, had been withdrawn by the Assessing Officer under Section 154 of the Act.

What were the issues?

1. Whether penalty can be imposed under Section 271D read with Section 269SS of the Income Tax Act, 1961, when the petitioner was not the recipient of the 'specified sum' in terms of Section 269SS(iv)? - Assessee's contention: Section 269SS is not applicable to the petitioner as he was not the recipient of the amount. Furthermore, the penalty proceedings were initiated for the incorrect Assessment Year (AY 2017-18) as the transaction occurred in Financial Year (FY) 2015-16 (AY 2016-17), based on the sale deed execution date of January 20, 2016. - Revenue's contention: The error in invoking Section 269SS instead of Section 269T (which deals with repayment of loans/deposits) could be rectified under Section 292B of the Act. The revenue also argued that the petitioner had an alternative remedy by way of appeal against the assessment and penalty orders, and therefore, the writ petition should not be entertained. 2. Whether the Assessing Officer could withdraw the penalty order under Section 154 of the Act?

Which sections of the Income-tax Act were involved?

Section 271D,Section 274,Section 269SS,Section 269T,Section 292B,Section 154,Section 263,Section 156

AI-generated summary — verify with the full judgment below

$~3 * IN THE HIGH COURT OF DELHI AT NEW DELHI

+ W.P.(C) 627/2023 & CM No.2454/2023

MR NEERAJ TYAGI

..... Petitioner

Through: Mr Krishnan S., Advocate.

versus

JOINT COMMISSIONER OF INCOME TAX & ANR.

.. Respondents Through: Mr Ruchir Bhatia, Sr. Standing Counsel, with Mr Shlok Chandra, Jr. Standing Counsel & Mr Keshav Garg, Advocate.

CORAM:

HON'BLE MR JUSTICE RAJIV SHAKDHER

HON'BLE MS JUSTICE TARA VITASTA GANJU

O R D E R %

01.02.2023 [Physical Hearing/Hybrid Hearing (as per request)] 1. We had heard the matter at some length on 19.01.2023, when, after hearing the counsels for the parties, we had recorded the following: 2. Issue notice. 2.1 Mr Shlok Chandra accepts notice on behalf of the respondents/revenue. 3. Mr Chandra says that he will argue, for the moment, on the basis of the record, in particular, the facts emerging from the impugned notice dated 12.03.2022 issued under Section 271D, read with Section 274 of the Income Tax Act, 1961 [in short, „the Act‟] concerning Assessment Year (AY) 2017-18 and the impugned order dated 29.09.2022 passed under Section 271D of the Act. 4. As noticed hereinabove, in the writ petition a challenge is laid to the notice dated 12.03.2022 issued under Section 271D read with Section 274 of the Act, concerning AY 2017-18 and the order dated 29.09.2022 passed under Section 271D of the Act, whereby penalty W.P.(C) 627/2023

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has been imposed. 5. The principal issue which arises for consideration in the instant writ action is whether penalty can be imposed under Section 271D, read with Section 269SS of the Act. 6. The relevant provisions of Section 271D of the Act empowers the respondents/revenue to impose penalty if there is failure to comply with the provisions of Section 269SS of the Act. Therefore, as indicated above, what is required to be construed is whether provisions of Section 269SS would apply to the petitioner. For the sake of convenience, the said provision is extracted hereafter: “Mode of taking or accepting certain loans, deposits and specified sum. 269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if, - (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by, - (a) the Government; (b) any banking company, post office savings bank or co-operative bank;

W.P.(C) 627/2023

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(c) any corporation established by a Central, State or Provincial Act; (d) any Government company99 as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify1 in this behalf in the Official Gazette: Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act. Explanation. - For the purposes of this section, - (i) 2" banking company means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (ii) "co-operative bank" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (iii) "loan or deposit" means loan or deposit of money; (iv) "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.” [Emphasis is ours] 6. Upon a plain reading of Section 269SS of the Act, it emerges that it is applicable qua a person who accepts either a loan deposit or any “specified sum” otherwise than by an account payee cheque or account payee bank draft or via electronic clearing system through a bank account. There are certain exceptions provided in the first proviso appended to the section, which, for the moment, are not relevant, insofar as the instant case is concerned.

W.P.(C) 627/2023

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6.1. We may note that Explanation (iv) appended to the Section defines the expression “specified sum”. 7. The facts which have emerged in the instant case are that the petitioner/assessee executed a sale deed on 20.01.2016 for purchase of an immovable property. The total consideration as disclosed in the said sale deed, which the petitioner/assessee was required to pay, was pegged at Rs.39,60,000/-. 7.1. The said sale deed also discloses that the petitioner/assessee paid in cash an amount equivalent to Rs.32,60,000/-. 8. Having regard to these facts, what is required to be examined is whether the provisions of Section 269SS of the Act get attracted in the instant case, for imposing penalty on the petitioner/assessee. 9. As indicated above, prima facie, on plain reading of the provisions of Section 269SS of the Act, it cannot be made applicable to the petitioner, as the petitioner is not the recipient of the amount referred to in the sale deed i.e., specified sum. 10. Mr S. Krishnan, who appears on behalf of the petitioner/assessee, submits that not only is Section 269SS not applicable qua the petitioner, the respondents/revenue have also erred in initiating penalty proceedings in AY 2017-18. 10.1 Mr Krishnan states that since the sale deed was executed on 20.01.2016 and the cash amount, as indicated above, was paid on the said date, the authority, if any, of the respondents/revenue to trigger proceedings under the Act would stand confined to Financial Year (FY) 2015-16, relevant to AY 2016-17. 11. Mr Krishnan says that the error in invoking the incorrect AY by the respondents/revenue is as the respondents/revenue have taken into account the date on which the sale deed was dispatched, which is 30.11.2016 and/or the date when copies of the same were received by persons who were parties to the aforementioned sale deed i.e., 01.12.2016. Mr Krishnan says that both dates are irrelevant for ascertaining the correct period of assessment. 12. Mr Chandra, who appears on advance notice, however, contends that even the recipient cannot accept consideration in cash. For this purpose, Mr Chandra has relied upon Section 269T of the Act. 12.1. It is also Mr Chandra‟s contention that the error with regard to the provisions mentioned in the impugned order (which concerns Section 269SS of the Act) can be corrected by taking recourse to the provisions of Section 292B of the Act. According to Mr Chandra, it is a mistake and/or defect, which will not render the impugned order dated 29.09.2022 inefficacious/invalid.

W.P.(C) 627/2023

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13.

Furthermore, Mr Chandra says that the petitioner/assessee has preferred an appeal against the assessment order dated 12.03.2022, as well as the impugned order dated 29.09.2022, which is pending consideration before the concerned appellate authority. Mr Chandra informs us that this appeal was lodged in October, 2022. 13.1. In sum, it is Mr Chandra‟s argument that since the petitioner/assessee has taken recourse to an alternate remedy, and the instant writ petition and the penalty proceedings which are, a result of those very orders, that are assailed in appeal by the petitioner/assessee, the instant writ petition ought not to be entertained. 14. Prima facie, in our opinion, if the proceedings are founded on facts and on a provision which does not permit the concerned officer to assume jurisdiction, then this Court would be entitled to intervene in the matter. 15. Before us, the challenge laid by the petitioner/assessee is with regard to the penalty proceedings. We are also informed that a demand notice dated 29.09.2022 under Section 156 of the Act, has been issued [See Page 79, Annexure P9 of the case file]. 16. Mr Chandra says that he will return with instructions. In case instructions are received to resist the writ petition, counter-affidavit will be filed before the next date of hearing. 17. We may note that although there is a typographical error in the prayer made in the interlocutory application, the main writ petition adverts to the correct date. 18. Given what is noted hereinabove, we are of the view that in the meanwhile, the operation of the impugned notice and order be stayed. It is ordered accordingly.” 2. It is in this backdrop that the matter has been listed today. 3. Mr Ruchir Bhatia, the counsel for the respondents/revenue, has returned with instructions and says that the order imposing penalty dated 29.09.2022 passed under Section 271D of the Income Tax Act, 1961 [in short, “Act”], has been withdrawn by the Assessing Officer (AO) in exercise of powers under Section 154 of the Act.

W.P.(C) 627/2023

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4.

Mr Krishnan says that, while the outcome is a happy one, it is doubtful whether such a power could have been exercised under Section 154 of the Act. 5. In sum, the apprehension of Mr Krishnan is that down the road i.e., after a passage of time, the respondents/revenue may, perhaps, take recourse to powers conferred under Section 263 of the Act, having regard to the provisions based on which the Assessing Officer(AO) has withdrawn the aforementioned penalty order. 6. To be noted, we had, as observed hereinabove, indicated on 19.01.2023, as to why Section 269SS of the Act was not applicable in the petitioner‟s case. This is adverted to in paragraph nine (9) of the very same order. 6.1. In brief, the petitioner not being recipient of the amount i.e., the amount referred to in the subject sale deed, the said provision could not have been made applicable to him. 7. Given this position, insofar as the petitioner is concerned, de facto, his grievance stands redressed. 8. The apprehension raised by Mr Krishnan is in the realm of possibility, qua which, if necessary, at the appropriate time, the petitioner can, as he may be advised, take recourse to an appropriate remedy. 9. Logically, the consequences of the action taken by the AO would be that the demand notice shall stand quashed. 10. The writ petition is disposed of in the aforesaid terms. Pending application shall also stand closed. 10.1. Interim order dated 19.01.2023 shall stand vacated. W.P.(C) 627/2023

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11.

The Registry will scan and upload the hard copy of the order dated 24.01.2023, passed by the AO under Section 154 of the Act, so that it remains embedded in the case file.

RAJIV SHAKDHER, J

TARA VITASTA GANJU, J

FEBRUARY 1, 2023/SA

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W.P.(C) 627/2023

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