Loading judgment…
Facts
The assessee, an individual, filed a return declaring income. Information was received by the ITO alleging the assessee took a cash loan of Rs.4,00,000/-, violating Section 269SS. Penalty proceedings were initiated under Section 271D.
Held
The Tribunal found that the CIT(A)/NFAC erred in not properly deciding the legal ground raised by the assessee and that penalty proceedings could be initiated simultaneously with reassessment proceedings. However, the Tribunal noted procedural lapses in the penalty order.
Key Issues
Whether the penalty under Section 271D for accepting a cash loan in violation of Section 269SS was validly levied, considering the initiation of reassessment proceedings and alleged procedural defects in the penalty order.
Sections Cited
269SS, 271D, 148, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2017-18 Rameshwar Ramvilas Sarda, Vs. ITO, Ward-14(3), Pune. Loni Kalbhor Taluka Haveli, District Pune- 412201. PAN : ACEPS8953Q Appellant Respondent Assessee by : Shri C. V. Deshpande Revenue by : Shri Arvind Desai Date of hearing : 06.01.2025 Date of pronouncement : 04.04.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 13.05.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2017-18.
Facts of the case, in brief, are that the assessee is an individual & has furnished his return of income on 31.10.2017 declaring income of Rs.12,07,870/-. Subsequently on 01-03-2021, an information was shared by ACIT, Central Circle- 1(1), Pune with ITO, Ward- 14(3), Pune that the assessee has taken cash loan of Rs.4,00,000/- through Sachin Nahar. Since according to the Assessing Officer, the assessee has violated the provisions of section 269SS of the Act by accepting the loan of Rs.4,00,000/- in cash otherwise than by an account payee cheque etc, therefore, penalty proceedings u/s 271D of the Act were initiated on 17-08-2022, requiring the assessee to show cause, why an order imposing penalty should not be made u/s 271D of the Act. Further, notices were issued on 19-10-2022, 14-11-2022 & also on 29-11-2022. The assessee complied & furnished his reply. The Assessing Officer imposed penalty of Rs.4,00,000/- u/s 271D of the Act for violation of section 269SS of the Act by accepting the cash loan of Rs.4,00,000/-.
In first appeal, after considering the reply of the assessee Ld. CIT(A)/NFAC dismissed the appeal by observing as under :- “I have carefully considered Form 35, statement of facts, order u/s 271D, submission/details uploaded in the system, computation of total income and the Grounds of Appeal raised. The present appeal is filed against the order u/s 271D dated 03/01/2023. The grounds raised are adjudicated as under: The ground Nos. 1 and 3 are interconnected to each other as such, they are adjudicated together as under: Ground No.1: On the basis of fact and circumstances of the case and in law the ld. AO erred in levying penalty under section 271D for alleged violation of Section 269SS without taking into consideration the notice under section 148 r.w.s. 147 having been issued suggesting that the Income of Rs. 4,00,000 having been escaped assessment and therefore same amount cannot be subjected to penalty for acceptance of loan of same amount by mode other than account payee cheque or demand draft as mandated under section 269SS of the Income Tax Act, 1961. Ground No.3: On the basis of facts and circumstances of the case and in law, levying penalty before conclusion of the assessment or reassessment proceedings and further conclusion is arrived at about a impugned transactions is income or loan, even though the assessment proceedings and penalty proceedings are independent of each other, is bad in law. The grounds raised have been carefully examined with reference to the penalty order passed and the submissions uploaded. During the course of assessment proceedings, it was observed by the AO that the appellant-assessee has accepted cash from one Sachin Nahar amounting to Rs. 4,00,000/- in contravention of provisions of Sec. 269SS r.w.s. 271D. Accordingly, after affording four opportunities, the AO has levied the penalty u/s 271D of the Income Tax Act, 1961. In response to the opportunities given, the appellant has contended that the AO was not justified in levying the penalty based on the materials found during the course of search and the statement recorded from the third-party. Further, it was also contended that since the proceedings u/s 148 has been initiated against the same transaction, the levy of penalty was not justified. Accordingly, requested to delete the penalty levied. The penalty order and the submissions uploaded have been carefully examined and it must be stated here that there is no bar for the AO to initiate proceedings u/s 148 for assessing the income of the appellant, simultaneously along with the initiation of penalty proceedings for contravention of provisions of Sec. 269SS. As could be seen from para-03, page-02 of the penalty order, it is very clear that the appellant has accepted the loan otherwise by-way of account payee cheque or account payee draft or use of electronic clearing system through bank account. The appellant has reiterated the stand taken before the AO which has been discussed by the AO at para-01 of page- 03 of the penalty order. Under the circumstances, for the contravention of the provisions of Sec. 269SS penalty u/s 271D is clearly attracted which the AO has rightly levied. In the light of the above discussion, in the given factual matrix, I am of the considered opinion that there is no merit in the grounds raised by the appellant. Therefore, the grounds raised are dismissed. Ground No.2: On the basis of facts and circumstances of the case and in law the ld. AO erred in levying penalty under section 271D without obtaining prior approval of the appropriate higher authority, as there is no whisper in the penalty order, regarding approval having been obtained before levy of penalty. The ground raised
is general in nature that does not require adjudication. Ground No.4: All about grounds of appeal are without prejudice to each other. The ground raised is general in nature that does not require adjudication. Ground No.5: The Appellant craves leave to add, alter, amend, modify or delete the grounds of appeal, if need arises. The ground raised is general in nature that does not require adjudication.
6. In the result, the appeal of the appellant is treated as dismissed.”
4. It is this order against which the assessee is in appeal before this tribunal.
5. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR argued on all the grounds mentioned in memo of appeal Form 36 & also raised additional oral ground before us that in memo of first appeal i.e. Form 35 the assessee has raised total 5 grounds wherein ground no.2 was legal in nature but Ld. CIT(A)/NFAC dismissed the same by saying that the ground raised is general in nature that does not require adjudication. Accordingly, Ld. AR submitted before us that the order passed by Ld. CIT(A)/NFAC is not correct since he has not decided the legal ground properly. Before us Ld. AR also argued on other grounds related to merits of the issue that in the penalty order name of the person from whom loan has been accepted in cash & on which date the cash transaction took place also not brought on record & merely on the basis of the statement of one person penalty has been imposed, apart from this in the seized document also, his name is not appearing but some other name is appearing. Under all these circumstances, assessee requested to delete the penalty of Rs.4,00,000/- imposed u/s 271D of the Act for so called violation of section 269SS of the Act.
6. Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record. In this regard, we find that proceedings u/s 271D of the Act were initiated on the basis of an information which was sent 01-03-2021 to the ITO, Ward- 14(3), Pune. And on 17-08-2022 notice to impose penalty u/s 271D was issued then the case was transferred to NFAC for completion of proceedings. In this regard, we find that the original assessment order was passed way back & no penalty was initiated u/s 271D of Act since no satisfaction was recorded in the original assessment regarding so called violation of section 269SS of the Act. Subsequently, on 01-03-2021 an information was shared by Central Circle- 1(1), Pune with ITO, Ward- 14(3), Pune for necessary action that cash loan of Rs.4,00,000/- was obtained by the assessee through Sachin Nahar. Accordingly, notice u/s 148 was issued & reassessment proceedings were initiated. In between on the basis of same information penalty u/s 271D of Rs.4,00,000/- was imposed by Assessment Unit by an order dated 03-01-2023. Thereafter, on 16-05-2023, section 148 proceedings were dropped since penalty was already imposed u/s 271D with relation to the amount of Rs.4,00,000/- cash loan & since the same amount cannot be treated as income of the assessee. We also find from the assessment record which was produced by Ld. DR before us that no satisfaction was recorded prior to imposition of penalty u/s 271D regarding violation of section 269SS of the Act. We also find that in this case nowhere in the penalty order it was mentioned that proper approval was obtained or satisfaction was recorded regarding so called violation of section 269SS of the Act. We also finds that the assessee apart from factual grounds has raised legal ground in this regard before Ld. CIT(A) which was dismissed by treating the same as general ground. This approach of Ld. CIT(A) is not correct. However, we also find that proceedings u/s 147/148 were also initiated on the basis of so called cash transaction of Rs.4,00,000/- made through Sachin Nahar, wherein the assessee took shelter of the fact that once the amount has been treated as loan & penalty u/s 271D has been imposed the same transaction of Rs.4,00,000/- cannot be treated as income of the assessee. Considering this fact the department has already dropped 147/148 proceedings. But still we are of the considered opinion that Ld. CIT(A)/NFAC has erred in not deciding the legal ground raised before him in proper manner. We therefore deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC & remand the matter back to him with a direction to decide all the grounds including the legal ground i.e. ground no.2 of Form No.35 afresh after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by Ld. CIT(A)/NFAC in this regard and produce relevant documents/evidences in support of grounds of appeal without taking any adjournment under any pretext, otherwise Ld. CIT(A)/NFAC shall be at liberty to pass appropriate order as