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Facts
The assessee challenged a penalty order under Section 271D of the Income Tax Act, which was dismissed by the CIT(A). The penalty was levied for violating Section 269SS by accepting cash deposits/loans. This was the second round of litigation, with the previous appeal being remanded for examination of cash transactions.
Held
The Tribunal held that the Assessing Officer committed a gross violation of the principles of natural justice by failing to call the assessee or deponents for remand proceedings and not verifying additional evidence. Therefore, the impugned order deserved to be set aside.
Key Issues
Whether the Assessing Officer violated principles of natural justice by not allowing the assessee to participate in remand proceedings and verify additional evidence before passing the penalty order.
Sections Cited
271D, 269SS, 269T, 271E
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A-Bench” JAIPUR
Before: SHRI GAGAN GOYAL, AM& SHRI NARINDER KUMAR, JM
vkns'k@ORDER PER: GAGAN GOYAL, ACCOUNTANT MEMBER.
Present appeal is one of the 8 appeals filed by the assessee, while challenging order dated 30.11.2024. Vide impugned order passed by Learned CIT(A), an appeal filed by the assessee challenging penalty order 23.03.2018, u/s 271D of the Income Tax Act (hereinafter referred to as “the Act”), has been dismissed. The Assessing Officer levied upon the assessee penalty to the tune of Rs. 35,15,600/-, for violating provisions of Section 269 SS of the Act, as financial year 2008-09.
We have heard both the sides and perused the record.
On behalf of the appellant, it has been pointed out that this is second round of litigation as in the first round, the matter was remanded to Learned CIT(A) to examine as to the nature of transactions of loans and advances and their repayment, both in cash, leading to violation of provisions of section 269SS and 269T of the Act, without any reasonable cause.
Thereupon, the assessee produced before the CIT(A) certain additional evidence, and he called for remand report in respect thereof, but the Assessing Authority did not follow principles of natural justice, having failed to associate the assessee or the concerned deponents, whose affidavits were furnished by way of additional evidence.
So, the contention is that the appeal deserves to be allowed.
Learned DR has contended that the material claimed to be additional evidence was actually already on record and as such could not be termed to be additional evidence. She has further contended that that there being no evidence worth reliance in support of the claim of the assessee- appellant, CIT (A) was fully justified in dismissing the appeal. requesting Ld. Additional CIT, Range-2, Kota to submit remand report , he observed that the latter might carryout enquiry, if need be , in respect of the issues involved.
As regards the additional evidence, the Assessing Officer observed in the remand report that same having already been placed on record and considered upto the level of Appellate Tribunal, could not be taken into consideration.
Assessee furnished rejoinder/comments to the remand report on 22.08.2024 and 11.11.2024. Relevant portion extracted from the said rejoinder as is available in the impugned order reads as under:-
“The Ld. A.O. has not applied his statutory duties, have not verified the facts &evidences submitted by us and out rightly he has brushed aside all the evidences.
That the Ld. A.O. retreated the earlier observation, whereas when the assessee submitted additional evidence then the Ld. A.O. has to verify the same with the books but instead there of when the additional documents say account statements, affidavits are there then the Ld. A.O. has to verify properly by calling the books of Accounts or issue of summon to the persons submitted papers. When the action of penalty have been taken against the assessee, but no summon was issued to the persons submitted A/c statement, Affidavits etc.
When the assessee submitted account statements based on Books & when the Ld. A.O. rejected the books then when the account statements submitted it is the duty of the Ld. A.O. to verify with the books.
Subhash Pareta, Kota. That when the plea of the Assessee allowed by your honour then it is the duty of the A.O. to consider the additional evidences & then submit the report. The A.O. has out rightly rejected the papers submitted by assessee through your honour.
That the Id. A.O. is required to give factual report after verifying with the books or after calling of person submitted affidavits if the A.O. will not verify the facts& evidences then at which forum the assessee will submit his submission. We now request your honour to verify the account statement from books also call to persons by issue of summons to get to the facts of the case or write the another Ld. A.O. to verify properly by calling with summon to all those peoples.
We thus request your honour to get tallied the statement with the books since the A.O. accepted the certain GP/NP then why other issue be taken up.
Sir, the additional evidence is provided in rule 46A for verification by Ld. A.O. but if the A.O. do not verify then what is the use of said provision in the rules.
The A.O. has not accepted the rules, though he is bound to accept the rules & circulars etc. issued by the Board.
The Ld. A.O. ought to call the assessee and all the people by issue of summon to verify the evidences submitted by the assessee.
More ever the then Ld. CIT (A) deleted the addition in the elaborate orders made on penalty u/s 271D & 271E which is on facts & legal precedence’s. Case since the Ld. CIT(A) had already allowed the appeal of the assessee.
We also request your honour to direct the Ld. A.O. to verify the evidences submitted by the Assessee and then submit report for proper justice in the matter.
Vide dt. 11/11/2024 In our earlier submission we have submitted that on calling of remand report the Ld. A.O. have not done anything, thus the following issues are not taken up.
Thus the issue is that- There is nothing on record to have verified the 13 persons by A.O. neither the Ld. A.O. cross examined to all 13 persons. Thus to meet with the requirements of Hence based on his remand report no new facts are coming us then the order of Hon. CIT (A), Kota dtd. 19.12.2016 holds good.
That even after your letter for remand report the Ld. A.O. directs your honour not accept the additional evidences whereas it was as per the direction of your honour and Hon. ITAT.
In view of above we request your honour either the Ld. A.O. has to prepare a detailed remand report after proper verification or to hold good the order of Hon. CIT (A) Kota dtd. 19.12.2016.”
While dealing with the aspect of the additional evidence, Learned CIT (A) observed in para 4.6 of the impugned order as under:-
“4.6 Admission of additional evidence:-
I have considered the additional evidences, the submissions made in this regard and also the remand report of the AO, as reproduced supra. The additional evidences submitted by the A/R of the appellant are copy of some ledger accounts with affidavits. Since the matter was set-aside by the Hon'ble ITAT with a decision that onus is on the appellant and that the sufficient documents were not on record, and thus the appellant was required to place on record the additional evidences /documents as per the decision of the Hon'ble ITAT. Therefore without going into any technicalities and in the interest of natural justice, the additional evidences are admitted considering the facts and circumstances of the case.
At the same time it is found that these affidavits were already on record of the assessing authority and these affidavits have been filed as additional evidences only after the notarization. For illustration, in para (v) on page 4 of the penalty order u/s 271E for the AY 2010-11 the Id. Jt.CIT has referred and mentioned that these affidavits are mere self-serving documents. As these are already on record these can be considered in appeal.” additional evidence, proceeded to consider the same, the observations made by the A.O. for rejecting the same are of no significance
CIT (A), while dealing with the affidavits and copies of the ledger accounts and rejecting the same observed in the manner as under:-
“Analysis of the Affidavits:- Onus is on the appellant to have shown and proved that the transactions mentioned in the impounded documents pertaining to site expenses. On perusal of the affidavits submitted by the appellant following defects were noticed:-
(i) No documentary evidence as regards identity of the staff/employee was enclosed.
(ii) The PAN No. of the assessee was also not mentioned in the affidavit. Even the AADHAR number or Voter ID card number etc. is not mentioned.
(iii) Substantiating evidence such as salary slip, Form 16 etc. issued by the appellant to his staff was not enclosed.
(iv) No documentary evidence such as employment agreement other agreement is submitted by the appellant in support of his claim that these person are their staff/contractor.
(v) There is a mismatch in the name of the person in the affidavit in comparison to the name mentioned in the ledger account as the name mentioned in the ledger account has been stated to be the nickname / alias name only. Example - name mentioned in ledger is "shahsi ji" whereas in the affidavit the name mentioned is "sukhvir suman alias shashi ji". No evidence has been filed regarding the nickname/alias name.
(vi) complete address like the house number etc. is not mentioned.
The appellant has not filed the evidences regarding the following:-
• Evidence regarding employment during the relevant period. Employment agreement, Form 16, bank transactions of salary payment etc.
• Evidence regarding working on that site during the relevant period • Evidence regarding role of handling of cash in terms of earlier and later Transaction from the books of accounts • Identification details and documents of these persons • Evidence regarding giving of the funds as imprest cash for the business expenses • Evidence regarding usage of the given funds for the business Appellant has also not placed on record material to show that similar kind of site expenses transactions were carried out by the appellant with such persons in earlier period. This also shows that these transactions are not regular transactions and are not in the nature of business expenses.
The appellant has also not been able to prove:-
• For what expense the fund were given.
• For what expense and to whom the payments were made • Linkage between the recorded expenses in books with such cash payments.
Thus the identity and the genuineness of the affidavits is not proved and the affidavits have been prepared as an engineer document to mislead the proceedings.
Therefore, mere submission of affidavit by these persons that they are the staff of the appellant and that the amount received by them was related to site expenses and they have never taken or repaid any loan without establishing the identity and nature of employment cannot be considered.
In view of the above discussion is affidavits are found to be colourable devices and are hereby rejected.
Subhash Pareta, Kota. These affidavits were already on record of the assessing authority and these affidavits have been filed as additional evidences only after the notarization. For illustration, in para (v) on page 4 of the penalty order u/s 271E for the AY 2010- 11 the Id. Jt.CIT has referred and mentioned that these affidavits are mere self- serving documents. Thus these affidavits already stand not accepted and thus rejected by the honourable ITAT when the matter was set aside to the CIT Appeal for fresh adjudication.
Ledger Accounts:-
(i) Appellant failed to discharge onus casted on him to substantiate that ledger account found during survey are imprest A/c mostly transaction for making payment at sites through authorized person of the firm.
(ii) Further on perusal of ledger accounts it is noticed that there is debit and credit entries in round figure which is unlikely in case of site expense.
(iii) In general course, the staff will submit bills and vouchers against expenses and if any amount is left after that expense, it is likely that staff will return said remaining amount and it is unlikely that the remaining amount may be same.
For example, on perusal of ledger account of Sh. Mohanji, it is observed that there was payment of Rs.500000/- on 20.04.2010 and same amount was received back on 12.05.2010.
Further, on perusal of ledger account of Mishraji Baran, it is observed that there was receipt of Rs.80000 on 18.06.2010 and payment of Rs.80000 on 29.06.2010.
Similar instances are noticed in the ledger account of the other person also.
(iv) On perusal of copy of ledger account furnished by appellant as per paper book (Page No.65), in ledger account of Bharat Construction, there is credit opening balance of Rs. 6, 00,000 as on 01.04.2009. Therefore, it is pertinent to mention that if these amount were for site expense why there are opening credit balance in round figure.
(v) In the impounded books, there are specific entries like Lalaji/Bobby/Dagalji kejama".
Subhash Pareta, Kota. The transactions which are found during the course of survey were not recorded in the books of accounts of the appellant as on date of the survey. Further the entries in the ledger accounts support the case of the Addl. Commissioner regarding the levy of the penalty. These ledger accounts have been prepared by the appellant after the survey and apparently even after the assessment order has been passed and after the penalty order had been levied and others mere afterthought and the appellant has also not filed any supporting journal entries and the supporting documents were the same.
Even in the ledger accounts for example of Galav Ji A/c the entries are only for giving and receipt of cash of the same amounts. No expense has been incurred. This shows that the payment was not done by the appellant for the purpose of site expenses.
The ledger account claimed for Munna Bhai as submitted by the appellant does not appear to be the ledger account and appears to be appellant out of some tabulated data without having any linkage with the books of accounts.
As such these ledger accounts are mere self-serving documents and colourable devices and are rejected.
In view of the above detailed discussion these ledger accounts are also rejected.”
In the given facts and circumstances of the case and the issues involved, the Assessing Officer was required to call upon the assessee to participate in the remand proceedings.
As noticed above, the Assessing Officer nowhere observed in the remand report that he did not deem it to be a fit case to conduct enquiry as regards the additional evidence.
Record reveals that the assessee was never called by the Assessing Officer to participate in the remand proceedings, as regards additional process to the assessee or deponents whose affidavits were submitted by way of additional evidence.
Had they called to participate in the remand proceedings, clarifications could be sought from them about the contents of their affidavits, and entries in the ledger accounts could be verified.
By not calling upon the assessee or summoning any of the deponents of the affidavits, we have no option but to observe that the Assessing Officer indulged in gross violation of the principles of natural justice.
Therefore, on this very ground the impugned order passed by Learned CIT (A) deserves to be set aside.
Consequently, the appeal is allowed and the impugned order passed by Learned CIT (A) is hereby set aside.
Order pronounced in the open court on 15/05/2025.