ACIT, NEW DELHI vs. SH. SATVINDER SINGH WADHAWAN, NEW DELHI

ORDER PER H.S. SIDHU, JM

These 02 appeals are filed by the Revenue against the respective Orders passed by the Ld. CIT(A)-XXVI, New Delhi relating to assessment year 2008-09. Since the issues involved in these appeals are relating to same assessment year i.e. 2008-09, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience.

2. The ground raised in (AY 2008-09 is that “Ld. CIT(A) has erred in deleting the penalty Rs. 1,59,86,750/- levied by the AO u/s. 271E of I.T. Act for violation of provisions of Section 269T of the I.T. Act, 1961.”

In the course of assessment proceedings, the AO observed that the assessee had repaid loans or deposits amounting to Rs. 1,59,86,750/- otherwise, other than by an account payee cheques or an account payee bank draft in violation to the provision o section 269T of the I.T. Act, 1961. Accordingly, penalty proceedings u/s. 271E of the Act were initiated and a show cause notice dated 9.12.2011 was issued to the assessee to show cause as to why penalty u/s. 271E of the Income Tax Act, 1961 be not imposed and in response to the same, the AR of the assessee filed the written submissions and after considering the same, the AO observed that there is no force in his written submission and has violated the provisions u/s. 269T of the Act and accordingly, imposed a penalty of Rs. 1,59,86,750/- u/s. 271E of the Act, a sum equal to repayment of loan vide order dated 30.5.2012. Aggrieved with the penalty order dated 30.5.2012, assessee appealed before the Ld. CIT(A) who vide her order dated 13.2.2013 has deleted the addition in dispute and allowed the appeal of the Assessee. Against the impugned order dated 13.2.2013 assessee is in appeal before us.

6. On the other hand, Ld. Counsel for the assessee has relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order, which does not need any interference on our part. He further submitted that on identical facts and circumstances of the case in assessee’s lenders case i.e. ACIT vs. Vardaan Fashion and ACIT vs. Sh.

Inderpal Singh Wadhawan, the ITAT, ‘C’ Bench, New Delhi vide its order dated 16.1.2015 in & 2259/Del/2013 (AY 2007-08) and ITA Nos. 2252, 2258, 3084 & 3085/Del/2013 (Ayrs. 2007-08 to 2008-09) has upheld the action of the Ld. CIT(A) in deleting the similar penalty and filed the copy of the said decision and requested to follow the similar decision of the Bench.

We find that Ld. CIT(A) has elaborately discussed the issue in dispute vide para no. 5 to 7.2 at page no. 12 to 18 of his impugned order. For the sake of clarity, we are reproducing the said relevant finding of the Ld. CIT(A) as under:-

“5. I have considered the facts of the case, written submissions of the appellant, and the findings of the Assessing Officer. I have also perused the case laws relied upon by the AR of the appellant in the course of penalty proceedings as well as in the course of proceedings before me as also the submissions made by the appellant before the Addl. CIT the course of penalty proceedings, a copy of which has been filed before me by the AR or tie appellant. On considering the facts of the case and the nature of each transaction, I find that the provisions of section 269T are not applicable in this case. I also find that in respect most of the transactions, the Assessing Officer has only given a finding stating that this camouflaging transaction is merely a colourable device to hide the original transaction without appreciating the nature of individual transaction. The provisions regulating the mode accepting or taking loans or deposits and mode of repayment of certain loans or deposits are contained in sections 269SS and 269T of the Income-tax Act, 1961 lays down the mode of repayment of loan or deposit as under:-

"Section 269T of Income Tax Act provides that any branch of a banking company or a cooperative society, firm or 5 other person shall not repay any loan or deposit otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person, who has made the loan or deposit, if [1] The amount of the loan or deposit together with interest is Rs 20000 or more, or (2) The aggregate amount of loans or deposits held by such person, either in his own name or jointly with other person on the date of such repayment together with interest, is Rs 20000 or more.

For example if X is having loan of Rs. 30000 outstanding to Y. Then X cannot repay such loan in cash to Y.

Exemptions from Section 269T. The Following persons are exempted from the purview of section 269T:

(a) Government; (b) any banking company, post office savings bank or co-operative bank, (c) any corporation established by a Central, State or Provincial Act, (d) any Government company as defined in section 617 of the Companies Act, 1956 (e) other notified institutions

mention that no penalty to be levied u/s 271D or 271E if there was a reasonable cause. As per section 273B of the IT Act, 1961 no penalty shall be levied if the failure to comply with the provisions of section 269SS or 269T is due to some reasonable cause. Now the question arises as to what can be a reasonable cause to justify the violation of the provision of section 269SS and 269T? Some of the reasonable causes based upon the judicial decision are provided as under:

6.1 Repayment or receipt of amount to partners: If a partner introduces capital in cash in the firm or withdraws the same to the tune of Rs 20000 or in excess of Rs 20000, then Provisions of section 269SS or 269T shall not be attracted as the introduction of capital or withdrawal from firm cannot be called as loans or deposits.

Amount paid by firm to partners or vice versa- is payment to self and does not pa/take the character of loan or deposits in general law. Provisions of section 269SS are not applicable to such facts (CIT v. Lokhpat Film (Cinema) (2008) 304 ITR 172 (Raj.)

6.2 Deposit assessed as income, No penalty can be imposed u/s 271D in such case: it was held by Jodhpur tribunal in Bajrang Textiles v. Additional CIT [2009] (JD.) 190 that where the A.O having treated the impugned amount of deposit as income, he is precluded from treating the same amount as deposit or loan for the purpose of section S' levy penalty u/s 271D. The penalty ought to be cancelled.

6.3 Acceptance or repayment through Journal entry do not attract section 269SS or 269T: Acceptance or repayment through Journal Entry would not come within the ambit of the words 'loans or deposits’-section 269SS applies only where money passes from one person to another by way of 'loan or deposit’[CIT v. Noida Toll Bridge Co. Ltd. 262 ITR 260 (Del.)]

A genuine transaction made in an emergency, does not attract penalty u/s 271D: held in Mrs Rupali R. Desai v. ACIT 88 ITD 76 (Mum.). In ITO v. Shree Mahaveer Industries 82 TTJ 549 (Jd.) it was held that cash paid to meet medical treatment expenditure in emergency, does not attract penalty u/s 271D.

In ITO v. Prabhulal Sahu [2006] 99 TTJ (Jd.) 177 it was held that Assessee was not aware of provisions of section 269SS or 269T. His councel did not apprise him about the provisions. No penalty u/s 271D shall be attracted.

Where Depositors residing in rural areas are not having access to banking facility and are ignorant of relevant provisions of law, it would constitute bona fide reasons for payment in cash. (AClTv. Vinman Finance & Leasing Ltd. [2008] 306 ITR (AT) 377 (Visakha.)

6 4 Loan given by relatives on Sunday for safe custody and for use in business. No contravention of section 269SS takes place- ITO v. T.R. Rangarajan [2005] 279 ITR 587 (Mad.)

6.5 Cash Transaction made on Sunday. No penalty could be imposed in such a case, IW v. Narsing Ram Ashok Kumar[1993] 47 ITD 38(Pat)

Transfer of money exceeding Rs. 20000 by way of bank voucher instead of a/c payee cheque or draft does not attract penalty u/s 271D as the transaction are through banking channels only held in Asst. CIT v. Jag Vijay Auto Finance (p) Ltd.[2000] 68 TTJ (Jp) 44

Loan in cash under compelling circumstances have been held to be reasonable cause: Industrial Enterprises v. DCIT[2000] 68 TTJ (Hyd) 373.

6.6 Where the Lenders did not have any bank account which compelled the assessee to accept the loan in cash. This has been considered as reasonable cause in Balaji Traders v. DCIT [2001] 73 TTJ (Pune) 246

Although the provisions of section 269SS and 269T have been enacted with a view to prevent the increase in black money and to stop the tax evasion.

6.7 Therefore, the provisions of section 269SS and 269T must be applied in the context of promoting the purpose for which the said provisions were introduced. The basic purpose of these sections is to prohibit and monitor the transactions of unaccounted money. Thus, when the accounted monies are brought into the books by way of journal entries, the provisions of section 269SS and 269T cannot be applied. The Hon’ble Madras High Court in the case of Kumari A.B. Shanti vs. ADI 197 ITR 330 while considering the constitutional validity of section 269SS and 269T held that the objective was to curb the circulation of black money and put an effective check upon it. Even otherwise, as decided by the Hon’ble ITAT in Herpalsingh Jaswantsingh vs. ITO 82 Taxman 81, a bona fide belief coupled with genuineness of transaction would constitute a reasonable cause for not invoking provisions of sections 271D and 271E.

6.8 Therefore, in view of the above, the facts of the case and nature of each entry against which the penalty u/s 271E was imposed are discussed one by one as under:

6.9 Entry dated 7.6.2007 of Rs.35.00.000/- in the name of Sh. G.S. Batra: On perusal of this transaction, I find that this amount was repaid by Sh. Inderpal Singh, brother of the appellant to Sh. G.S. Batra vide cheque no.495429 dated 7.6.2007 and consequently the bank account of Sh. Inderpal Singh with IOB Bank(Bank account no.32212) was debited by showing the said payment in the name of Sh. G.S. Batra. Further, the appellant had debited the account of Sh. G.S. Batra and credited the account of Sh. Inderpal Singh by Rs.35,00,000/- in his books of accounts. Therefore, the payment of Rs.35,00,000/- by Sh. Inderpal Singh, brother of the appellant was made through an account payee cheque and not by way of cash as observed by the Assessing Officer. Thus, there was no violation of the provisions of section 269T in this case and penalty u/s 271E is not attracted.

6.10 Entry dated 2.4.2007 of Rs.15.00.000/- in the name of Sh. Harvinder Singh: The nature of the transaction was that the appellant received a sum of Rs. 15,00,000/- vide cheque no.91837 dated 31.1.2007 from Sh. Avtar Singh but it was wrongly credited to the account of Sardar Avtar Singh. The appellant had filed copies of the account of Sh Hinder Singh and Sh. Avtar Singh for assessment years 200,08 a. 200,09 and copy of bank statement o, the appellant before the Assessing Officer in the course of penalty proceedings and also before me in the course of appellate proceedings in support of submission. These facts clearly reveal that the loan of Rs.

15,00,000/- was received on 31-1-2007 i e. in the financial year 2006-07 relevant to assessment year Avtar Singh but during the year under consideration only adjustment entries, which were rectificatory in nature, were passed. Thus, there was no violation of the provisions of section 269T of the Income-tax Act. 1961 to attract penalty u/s 271E.

6.11 Entry dated 2.4.2007 of Rs.30,00,000/- in the name of Sh. Harvinder Singh: The facts of this transaction are that the appellant received a sum of Rs.30,00,000/- through an account payee cheque which was credited in his bank account no. 1501000101301687 with Punjab National Bank, Punjabi Bagh, New Delhi on 12.1.2007 after discounting at Rs.29,94,886/- from Sh. G.S. Batra. However, the amount was wrongly credited to the account of Sh. Harvinder Singh instead of Sh. G.S. Batra. Lateron, when the mistake was noticed a journal entry was passed on 2.4.2007 by debiting the account of Sh. Harvinder Singh and crediting the account of Sh. G.S. Batra. The appellant had filed copies of account of Sh. Harvinder Singh and Sh. G.S. Batra for the assessment years 2007- 08 and 2008-09 along with copy of his bank statement before the Assessing Officer in the course of penalty proceedings and also before me in the course of appellate proceedings in support of his submissions. Since, this is only an adjustment entry in the year under consideration, there was no justification for invoking the provisions of section 269T read with section 271E of the Income-tax Act, 1961 by the Assessing Officer.

6.12 Entry dated 22.6.2007 of Rs.90,000/- in the name of Sh. Inderpal Singh. This transaction represented the amount repaid by the appellant to M/s. DNK Creations vide cheque no.321103 dated 22.6.2007 on behalf of Sh. Inderpal Singh who is proprietor of M/s. DNK Creations. The appellant had submitted that since there was no repayment by way of cash, the application of provisions of section 269T read with section 271E were not justified.

6.13 Entry dated 2.4.2007of Rs.67,31,750/- in the name of M/s. Sway Export.: The facts as submitted before the Assessing Officer as well as before me are that the appellant is a partner in M/s. Sway Export and he used to maintain two accounts with this partnership firm, one as current account and second as capital account upto financial year 2006-07 relevant to assessment year under consideration. However, to avoid the complexity of maintaining two accounts, the appellant started maintaining only one capital account from the financial year 2007-08 relevant to assessment year 2008-09. It was explained that during the year the appellant had a opening credit balance of Rs.67,31,750/- in the books of M/s. Sway Export. It was thus by debiting the loan of account of Rs.67,31,750/-, the appellant had credited his investment account in the books of account M/s. Sway Export which was a mere merger entry from two accounts into one account and not a repayment of loan. The appellant had filed a copy of ledger account of M/s. Sway Export i.e. investment account and capital account in the books of the appellant and appellant’s capital account in the books of M/s. Sway Export in support of the submission. It was also submitted that even the opening credit balance of Rs.67,31,750/- during the year was not a loan or advance but it related to business transaction held in earlier years.

In the light of these facts, I find that the provisions of section 269T are not applicable in this case as the entry was only adjustment/merger entry.

6.14 Entry dated 2.4.2007 of Rs.11,65,000/- in name of M/s. Vardaan Fashion: The facts of this transaction are also the same and discussed above in the case of M/s. Sway Export Here also the entry had to be passed for avoiding complexities of maintaining two accounts The appellant had made the same submissions and filed the similar evidences as in the case of M/s. Sway Export. Therefore, the same reasons the provisions of section 269T cannot be attracted in this case also.

7. The facts of the appellant’s case and the submissions made are also supported by the following judgments relied upon by the appellant:

a) ACIT vs. Ruchika Chemical & Investment Pvt. Ltd. (2004) 88 TTJ (Del) 85 b) CIT Vs. Noida Toll Bridge Co. Ltd. (2003) 262 ITR 260(Del). c) Income Tax Officer Vs. M/s Rajkot Buildwell Pvt. Ltd. order dated 31/01/2012 d) CIT vs. Bombay Conductors and Electrical Ltd. (2008) 301 ITR 328 e) ACIT vs. Gujrat Ambuja proteins Ltd. (2004) 89 TTJ (Ahd.) 324 f) ITO Vs. Amar Nath Shivraj (HUF) (2004) 1 SOT 346 (Agra) g) Sunflower Builders Pvt. Ltd. vs. DCIT (1997) 61 ITD

227 (Pune) h) CIT vs. Sunil Kumar Goyal (2009) 315 ITR 163 (P&H) i) Ramlal & Ors. Vs. Rewa Coalfields Ltd. AIR 1962 SC 361 j) S. R. Koshti vs. CIT (2005) 276 ITR 165 (Guj.) k) CIT vs. Lokhpat Film Exchange (Cinema) (2008) 304 ITR 172 (Raj.)

7.1 In the following cases, the Ahmedabad Bench of the Hon'ble ITAT have also cancelled the penalties lev,ed u/s 271D even where loans/deposits were taken in cash. a) Shreenathji Corporation vs. ACIT 58 TTJ 611 b) Ganesh Wooden Industries ITA No.1626/Ahd./1997, Bench “SMC" order dated 8.7.2002.

In the light of the above discussion made in case of each transaction and on the facts and circumstances of the case and the legal provisions and judicial pronouncements relied upon by the appellant, I hold that no penalty u/s 271E can be levied in this case. Besides the above, the Assessing Officer has not brought any adverse material on record and gave a clear finding that the above mentioned transactions constitute repayment of loans and deposits and not business transactions which are subjected to journal entries. In the absence of any such finding given by the Assessing Officer, the penalty levied by the Addl. Commissioner of Income-tax u/s 271E cannot be sustained. Accordingly, the penalty levied by the Addl. CIT, Range-33, New Delhi is hereby deleted.

8. In the result, the appeal is allowed.”

7.1 We further find that on similar issue, the ITAT, ‘C’ Bench, New Delhi 14 vide its order dated 16.1.2015 in & 2259/Del/2013 (AY 2007-08) and ITA Nos. 2252, 2258, 3084 & 3085/Del/2013 (Ayrs. 2007- 08 to 2008-09) in assessee’s lenders case i.e. ACIT vs. Vardaan Fashion and ACIT vs. Sh. Inderpal Singh Wadhawan, has upheld the action of the Ld. CIT(A) in deleting similar penalty.

7.2 After perusing the finding of the Ld. CIT(A) in the present case as well as finding of the Tribunal, as aforesaid and the case laws cited in the impugned order, we are of the considered view that no penalty u/s 271E of the Act can be levied in this case. Besides the above, the Assessing Officer has not brought any adverse material on record and gave a clear finding that the above mentioned transactions constitute repayment of loans and deposits and not business transactions which are subjected to journal entries. In the absence of any such finding given by the Assessing Officer, the penalty levied by the Addl. Commissioner of Income-tax u/s 271E cannot be sustained. Accordingly, the penalty levied by the Addl. CIT, Range-33, New Delhi was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) in deleting the penalty in dispute and reject the ground raised in the Revenue’s Appeal. In the result, the Revenue’s appeal No. 3081/Del/2013 (AY 2008-09) stands dismissed.

ITA NO. 3082/DEL/2013 (AY 2008-09)

In the course of assessment proceedings, the AO observed that the assessee had accepted loans or deposits amounting to Rs. 2,33,21,717/- either in cash or otherwise, other than through an account payee cheques or an account payee bank draft in violation to the provisions of section 269SS of the I.T. Act, 1961. Accordingly, penalty proceedings u/s. 271D of the Act were initiated and a show cause notice dated 9.12.2011 was issued to the assessee to show cause as to why penalty u/s. 271D of the Income Tax Act, 1961 be not imposed and in response to the same, the AR of the assessee filed the written submissions and after considering the same, the AO observed that there is no force in his written submission and has violated the provisions u/s. 271D of the Act and accordingly, imposed a penalty of Rs. 2,32,70,644/- u/s. 271D of the Act, a sum equal to amount of the loan or deosit so taken or accepted, vide order dated 30.5.2012. Aggrieved with the penalty order dated 30.5.2012, assessee appealed before the Ld. CIT(A) who vide her order dated 13.2.2013 has deleted the addition in dispute and allowed the appeal of the Assessee. Against the impugned order dated 13.2.2013 assessee is in appeal before us.

10. On the other hand, Ld. Counsel for the assessee has relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order, which does not need any interference on our part. He further submitted that on identical facts and circumstances of the case in 17 assessee’s lenders case i.e. ACIT vs. Vardaan Fashion and ACIT vs. Sh.

Inderpal Singh Wadhawan, the ITAT, ‘C’ Bench, New Delhi vide its order dated 16.1.2015 in & 2259/Del/2013 (AY 2007-08) and ITA Nos. 2252, 2258, 3084 & 3085/Del/2013 (Ayrs. 2007-08 to 2008-09) has upheld the action of the Ld. CIT(A) in deleting the similar penalty and filed the copy of the said decision and requested to follow the similar decision of the Bench.

We find that Ld. CIT(A) has elaborately discussed the issue in dispute vide para no. 5 to 6.3 at page no. 17 to 22 of his impugned order. For the sake of clarity, we are reproducing the said relevant finding of the Ld. CIT(A) as under:-

“5. I have considered the facts of the case, written submissions of the appellant, and the findings of the Assessing Officer. I have also perused the case laws relied upon by the AR of the appellant in the course of penalty proceedings as well as in the course of proceedings before me as also the submissions made by the appellant before the Addl. CIT in the course of penalty proceedings, a copy of which has been filed before me by the AR or tie appellant. On considering the facts of the case and the nature of each transaction, I find that the provisions of section 269SS are not applicable in this case. I also find that in respect most of the transactions, the Assessing Officer has only given a finding stating that “this camouflaging transaction is merely a colourable device to hide the original transaction” without appreciating the nature of individual transaction. Therefore, it would be appropriate to discuss the facts and nature of each entry against which the penalty u/s. 271D was imposed. Accordingly, the facts and nature of each entry is discussed one by one as under:-

5.1 Entry dated 2.4.2007 of Rs. 30,00,000/- in the name of GS Batra : The facts of this transaction are that the appellant received an amount of Rs. 30,00,000/- by way of an account payee cheque from GS Batra in the preceding assessment year 2007-08 but it was wrongly credited in the account of Harvinder Singh. However, when this mistake was noticed during the year under consideration, the same was rectified on 2.4.2007 i.e. in the financial year relevant to assessment year under consideration by crediting the amount of Rs.30,00,000/- to Sh. G.S. Batra and debiting the same to Sh. Harvinder Singh. The appellant had filed copy of account of Sh. G.S. Batra and Sh. Harvinder Singh for the assessment year 2007-08 and 2008-09 and copy of bank statement of the appellant in the course of penalty proceedings, which have again been filed before me in the course of appellate proceedings. On perusal of the same, I find that the Assessing Officer had rejected the appellant’s version without appreciating the nature of the transaction.

Therefore, on considering the facts of the case, I find that there was no violation of the provisions of section 269SS and therefore penalty u/s 271D of the Act is not attracted.

5 2 Entry dated 23.4.2007 of Rs.4,00,000/- in the name of Sh. Inderpal Singh: In this transaction also, considering the explanation of the appellant filed before me as well as before the AO in the course of assessment proceedings, I find that the provisions of section 271D are not applicable. After examining the details, if the explanation of the appellant was not acceptable to the Assessing Officer that it was a gift, even then the bona fide of the transaction between the two brothers cannot be doubted. Pertaining to this transaction, the appellant’s case is covered by the following judicial decisions by various courts. a. ACIT vs. Ruchika Chemicals & Investments Pvt. Ltd. (2004) 88 TTJ (Del.) 85. b. CIT vs. Bombay Conductors and Electrical Ltd. (2008) 301 ITR 328. c. ACIT vs. Gujrat Ambuja Proteins Ltd. (2004) 89 TTJ (Ahd.) 324. d. CIT vs. Sunil Kumar Goyal (2009) 315 ITR 163 (P & H). e. SR Koshti vs. CIT (2005) 276 ITR 165 Gujrat. f. CIT vs. Noida Toll Bridge Co. Ltd. (2003) 262 ITR 260 (Del). g. ITO vs. M/s Rajkot Buildwell Pvt. Ltd. order dated 31.1.2012.

5.3 Entry dated 8.5.2007 of Rs. 12,50,000/- in the name of Inderpal Singh On perusal of this transaction, I find that the appellant had received this amount from Sh. Abhinav Arya through vide cheque no. 444731 dated 8.5.2007 on behalf of his elder brother Sh. Inderpal Singh Wadhawan on a sale consideration of joint property held by them. The appellant had filed a copy of bank account of the appellant, copy of account of Mr. Abhinav Arya and copy of the appellant in the books of Sh. Inderpal Singh to show that the appellant had received this amount of Rs. 12,50,000/- through an account payee cheque on behalf of his brother Sh. Inderpal Singh. From the nature of transactions it is clear that there was no violation to the provisions of section 269SS and hence provisions of section 271D of the Income-tax Act, 1961 for imposing penalty on this transaction was not justified as there was no cash transaction involved as alleged by the Assessing Officer.

5.4 Entry dated 7.6.2007 of Rs.35,00,000/- in the name of Sh. Inderpal Singh : On perusal of this transaction, it is seen that Sh. Inderpal Singh, the brother of the appellant paid Rs.35,00,000/- vide cheque no.495429 dated 7.6.2007 on behalf of the appellant to Sh. G.S. Batra. Consequently, the appellant passed an entry in his books crediting Sh. Inderpal Singh and debiting Sh. G.S. Batra. During the course of penalty proceedings the appellant filed a copy of account of Sh. Inderpal Singh and Sh. G.S. Batra in the books of appellant and also a copy of account of the appellant in the books of Sh. Inderpal Singh and bank statement of Sh. Inderpal Singh and explained the above entry Without appreciating the nature of transaction, the Assessing Officer was not justified to hold this transaction as a loan from Sh. Inderpal Singh otherwise than by an account payee cheque.

Therefore, in these circumstances, there is no case of the violation of the provisions of section 269SS and therefore, the Assessing Officer was not justified in imposing per 271D in respect of this transaction.

5.5 Entry dated 12.2.2008 of Rs. 14,71,479/- in the name of Sh. Inder Pal Singh : The facts of this transaction are that Sh. Inderpal Singh had repaid the loan of Rs. 14,71,479/- through an account payee cheque no.852014 dated 12.2.2008 to HDFC Bank on behalf of the appellant. Sh. Inderpal Singh as mentioned above is the brother of the appellant Consequently, the appellant in his books of account credited the account of Sh. Inderpal Singh though said amount was not was not actually received by him. To explain these transactions the appellant had filed copies of his account and the account of Sh. Inderpal Singh and also his own bank statement and the bank statement of Sh. Inderpal Singh. On perusal of the copies of account and bank statement, I find that the AO’s observations are factually incorrect. There was no violation of the provisions of section 269SS and hence penalty u/s. 271D is not attracted.

5.6 Entry dated 1.3.2008 of Rs. 1.00.00,000/- in the name of Sh. Inderoal Singh: On perusal of the details, it is seen that the appellant along with his brother Sh. Inderpal Singh had purchased a property at 2, Udyog Nagar, New Delhi in which both have 50% share each. It was in the course of this purchase deal, the appellant advanced an amount of Rs.2,00,00,000/- towards the purchase of the property. Later on, the appellant’s brother Sh. Inderpal Singh paid Rs. 1,00,00,000/- to the appellant being his 50% share in the said property. This payment was made by transferring the amount of Rs. 1,00,00,000/- from M/s. Vardaan Fashion in which the appellant as well as his brother Sh. Inderpal Singh were partners. The appellant had also filed his own as well as Sh. Inderpal Singh’s copy of account in the books of M/s. Vardaan Fashion and the bank statement before the Assessing Officer, which were again filed before me to explain the transaction. Having considered the facts of this transaction, I do not find any violation of the provisions of section 269SS of the Income-tax Act, 1961, and hence penalty provisions laid down in section 271D are not attracted. "

5.7 Entries dated 2.8.2007. 13.10.2007. 14.12.2007 and 9.2.2008 of Rs.80.000/-. Rs. 1,81,800/-, Rs.1,94,365/- and Rs. 1,93.000/- in the name of M/s. DNK respectively: The facts of this case are that the appellant’s wife Smt. Preeti Wadhawan had taken loan from Syndicate Bank. In the same bank M/s. DNK a partnership firm in which the appellant is a partner, was also having OD account. Therefore, M/s. DNK had paid these amounts towards installment on behalf of the appellant’s wife as sufficient funds were not available in the account of the appellant’s wife. M/s. DNK had therefore, debited the above four amount in the accounts of the appellant and in turn the appellant credited the said amount in his books in the name of M/s. DNK. Similarly, Smt. Preeti Wadhawan credited the account of Sh. Satvinder Singh for such amounts in her books. These are therefore, a mere the adjustment entries and in fact the appellant had not received any loan or advance as observed by the Assessing Officer. There was thus no violation of the provisions of section 269SS in this case also.

5.8 Entry dated 2.4.2007 of Rs.15.00.000/- in the name of S. Avatar Singh: Pertaining to this transaction also the Assessing Officer without appreciating the nature of transaction invoked the provisions of section 269SS. The fact of the transaction are that the appellant received a sum of Rs. 15,00,000/- vide cheque no.918371 dated 31.1.2007 during the financial year 2006-07 relevant to assessment year 2007-08 but this amount was wrongly credited to his son’s account. However, when this mistake was realized a contra entry was passed on 2.4.2007 i.e. in the year under consideration by debiting Rs. 15,00,000/- to account of Sh. Harvinder Singh and crediting the said amounts in the account of Sardar Avatar Singh. These are therefore, merely an adjustment entry to rectify the earlier mistake. Application of provisions of section 269SS to such an adjustment entry was not justified.

5.9 Entry dated 2.4.2007 of Rs. 15,00,000/- in the name of S. Avatar Singh: The facts of this case are similar to the facts as discussed in the above entry. Here, the appellant received a sum of Rs.15 00,000/- vide cheque no.318364 dated 21.11.2006 i.e. in the financial year relevant to assessment year 2007-08 from Sh. Avatar Singh but the same was wrongly credited to M/s. Vardaan Fashion. In this case also, as in the above case, a contra entry was passed on 2.4.2007 i.e. in the year under consideration by debiting the account of M/s. Vardaan Fashion and crediting the said amount to S. Avatar Singh. This is also an adjustment entry made on account of rectification of the mistake and therefore, there was no violation of the provisions of section 269SS, and hence penalty u/s 271D is not attracted.

6. The facts of the appellant’s case and the submissions made are also supported by the following judgments:

a) ACIT vs. Ruchika Chemical & Investment Pvt. Ltd. (2004) 88 TTJ (Del) 85 b) CIT Vs. Noida Toll Bridge Co. Ltd. (2003) 262 ITR 260(Del). c) Income Tax Officer Vs. M/s Rajkot Buildwell Pvt. Ltd. order dated 31/01/2012 d) CIT vs. Bombay Conductors and Electrical Ltd. (2008) 301 ITR 328 e) ACIT vs. Gujrat Ambuja proteins Ltd. (2004) 89 TTJ (Ahd.) 324 f) ITO vs. Amar Nath Shivraj (HUF) (2004) 1 SOT 346 (Agra) g) Sunflower Builders Pvt. Ltd. vs. DCIT (1997) 61 ITD 227 (Pune) h) CIT vs. Sunil Kumar Goyal (2009) 315 ITR 163 (P&H) i) Ramlal & Ors. Vs. Rewa Coalfields Ltd. AIR 1962 SC 361 j) S. R. Koshti vs. CIT (2005) 276 ITR 165 (Guj.) k) CIT vs. Lokhpat Film Exchange (Cinema) (2008) 304 ITR 172 (Raj.)

I) Shrepak Enterprises vs. DCIT (1998) 60 TTJ (Ahd.) 199

6.1 The appellant has also placed reliance on the CBDT Circular no.387 dated 6.7.1984 wherein the objectives of section 269SS have been discussed. In this context, the appellant has submitted as under:

“1. That according to CBDT Circular No. 387 dated 6.7.2984 introduced by Finance Act, 1984 the provision of Section 269SS was introduced with the purpose to plug the loop hole in cases, where unaccounted cash found during course of search was sought to be explained by the tax payers. It means, the provision of Section 269SS is applicable, wherever the action u/s. 132 was taken. Since the action u/s. 132 was not taken in appellant case, according to circular no. 387 dated 6.7.84, the provision of section 269SS is not applicable.

6.2 In the following cases, the Ahmedabad Bench of the Hon’ble ITAT have also cancelled the penalties levied u/s. 271D even where loans / deposits were taken in cash. a) Shreenathji Corporation vs. ACIT 58 TTJ 611. b) Ganesh Wooden Industries Bench, SMC order dated 8.7.2002.

6.3 In view of the facts and circumstances of the case as discussed above and respectfully following the above decisions cited and relied upon by the AR of the appellant, I hold that no penalty u/s. 271D for violation of the provisions of section 269SS is leviable in this case. Accordingly, the penalty levied by the Addl. CIT Range-33, New Delhi is deleted.”

11.1 We further find that on similar issue, the ITAT, ‘C’ Bench, New Delhi vide its order dated 16.1.2015 in & 2259/Del/2013 (AY 2007-08) and ITA Nos. 2252, 2258, 3084 & 3085/Del/2013 (Ayrs. 2007- 08 to 2008-09) in assessee’s lenders case i.e. ACIT vs. Vardaan Fashion and ACIT vs. Sh. Inderpal Singh Wadhawan, has upheld the action of the Ld. CIT(A) in deleting similar penalty.

in the Revenue’s Appeal. In the result, the Revenue’s appeal No. 3082/Del/2013 (AY 2008-09) stands dismissed.

13. In the result, both the appeals filed by the Revenue stand dismissed. Order pronounced on 21-06-2019.