SHRI JAYDEEPSINH VAJESINH DODIYA,,AHMEDABAD vs. THE JT. C.I.T., RANGE-7(1),, AHMEDABAD

आदेश/ORDER

PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-

This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-7, Ahmedabad in Appeal no. CIT(A)-7/166/15-16 vide order dated 04/07/2016 passed for the assessment year 2012-13.

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“1. The Hon'ble CIT(A) - 7, Ahmedabad has erred in law and on facts in confirming the levy of penalty of Rs. 37.50 Lakhs (Rs. 12.50 Lakhs + Rs. 10 Lakhs + Rs. 15.00 Lakhs u/s. 271-D of the I.T. Act which has been levied by the Ld. Joint Commissioner of Income Tax, Range - 7(1), Ahmedabad, though the same is barred by time in view of the Provisions of Sec. 275(1)(c) are covered and not it pertains to Sec. 275(1)(a). 2. Without prejudice to the above, the Hon'ble CIT(A) has also erred in law and on facts in confirming the penalty amount of Rs. 37.50 Lakhs as the Ld. Assessing Officer has not been satisfied in the body of the assessment order in respect of amount of Rs. 15 Lakhs for levy of penalty nor the Ld. J.C.I.T has been satisfied and he has mentioned in the show cause notice about levy of penalty in respect of only two amounts i.e. Rs. 12.50 Lakhs and Rs. 10 Lakhs and not for Rs. 15 Lakhs. Thus, both the authorities not satisfied to levy of penalty on Rs. 15 Lakhs which is not initiated at all. 3. The Hon'ble CIT(A) has also erred in law and on facts in not considering the case property on merits. 4. The Hon'ble GIT(A) has also erred in law and on facts in not considering the spirit of the law which is explained by the Hon'ble Finance Minister at the time of introducing the provisions of Sec. 269SS during the course of Budget Speech on Finance Act, 1984. The Hon'ble C.B.D.T has also in its Circular No. 387 dated 06/07/1984 elaborately explained. The Speech and intention of inserting the provisions of Sec. 269SS at Para – 32.1 and 32.2 which is not followed by the Ld. J.C.I.T and the Hon'ble CIT(A) has erred in confirming the action of the Ld. J.C.I.T. 5. The Hon'ble CIT(A) has also erred in distinguishing the various decisions cited by the appellant before the Hon'ble J.C.I.T and before the Hon'ble CIT(A). 6. The appellant craves leave to amend, alter or delete any of the above grounds of appeal on or before the date of appeal hearing.” 3. The brief facts of the case are that the assessee was employed as branch manager with the Ahmedabad District Cooperative Bank and derived income from salary, income from other sources and agricultural income. During the course of assessment proceedings, the assessing officer noted that the assessee made an investment of � 76,20,758/- in immovable property and for which it took cash loan of �12,50,000 from his wife, Smt. Arunaben

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and � 10,00,000/- from his father Shri Vijsinh. Accordingly, the assessing officer in the assessment order held that there is a contravention to the provisions of section 269SS of the Act in view of accepting cash loan of � 22,50,000/- (� � 1,250,000 from wife and 10 lakhs from father) and is therefore liable to penal provisions of section 271D of the Act. The assessing officer accordingly in the assessment order held that “the case is hereby referred to Ld. JCIT, Range 7(1), Ahmedabd in view of contravention of provisions of section 269 SS of the Income Tax Act, 1961”.

3.1 The Ld. JCIT initiated proceedings under section 271D of the Act and issued notice dated 15-07-2015. During the course of proceedings under section 271D of the Act, the assessee submitted that he had to invest an amount of �76,20,758/- to purchase agricultural land. The assessee was an agriculturalist and he took loan from his wife and father, who were both agriculturalists. The assessee submitted that he was under a bona-fide belief that if both the loaner and the loanee are agriculturalists, then cash could be taken cash above the prescribed limit of � 20,000. He further submitted that he received some part in cash since he was under immediate requirement of funds to purchase agricultural land. He further submitted that the assessing officer has accepted the fact that both his wife and father are agriculturalists and have sufficient agricultural income and also have separate bank accounts and therefore the question of creditworthiness of the parties and genuineness of the transaction does not arise. However, the Joint Commissioner in the 271D proceedings rejected the contention of the assessee and held that since the assessee is a manager of a cooperative bank and has himself submitted that part of the loan from both his father and wife were received by way of

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cheques , which implies that both the lenders had bank accounts and hence it is not the case that money had to be accepted in cash on account of lack of banking facilities. During the course of 271D proceedings, Ld. Joint Commissioner further observed that the assessee had further taken a loan of � 15,00,000/- from one Mr. Mahispatsinh in cash in contravention of provisions of section 269SS of the Act about which he never informed during the course of assessment proceedings. In response to assessee’s challenge to 271D proceedings on the grounds of limitation, the Ld. JCIT dismissed the same on the ground that the order was passed within 6 months from the issuance of notice and hence the same was not barred by limitation. Accordingly, the JCIT imposed a penalty of � 37.5 lakhs, equivalent to the amount of sum received in cash.

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from 3 persons. Further, the assessee had deliberately concealed the fact of having taken a loan of � 15 lakhs in cash from Mr. Mahitpatsinh before the AO during the course of assessment proceedings in spite of the fact that applicability of section 269SS was being discussed. The Ld. CIT(A) further held that the assessee has not been able to establish the immediate contingency for taking loans in cash. Further, the argument of the assessee that he has taken cash loans out of ignorance since he was under the belief that there is no restriction in accepting loan in cash if both the loaner and loanee are agriculturalists is not acceptable since the assessee himself as a branch head of a cooperative bank and cannot take the plea of ignorance. Accordingly, the Ld. CIT(A) dismissed the appeal of the assessee and held that Joint Commissioner had rightly levied penalty of � 37,50,000/- u/s 271D of the Act.

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reliance has been placed by the assessee, the assessing officer had initiated proceedings under section 271D of the Act during the course of assessment proceedings itself. However, after a few years the Joint Commissioner of Income Tax had given the approval for initiating 271D proceedings. The issue for consideration was whether the period of limitation started from the date when the assessing officer (during the course of assessment proceedings itself) had initiated penalty proceedings u/s 271D of the Act or whether the period of limitation could be extended till 6 months from the date when the Joint Commissioner subsequently granted approval after a few years. In the light of the above facts, the court held that issuance of notice of initiation of penalty under section 271D of the Act may appropriately and validly be made by the assessing officer without necessitating further issuance of notice by the Joint Commissioner, the other authority, to levy penalty. Again, in the case of JKD Capital and Finlease limited 81 taxmann.com 80 (Delhi), on which reliance has been placed by the assessee, the assessing officer during the course of assessment proceedings itself had issued a direction to initiate proceedings against the assessee u/s 271E of the Act. However, we note that in the instant facts, the AO did not suo moto initiate 271D proceedings, but instead referred the case to the Joint Commissioner for as per the following noting in the assessment order “the case is hereby referred to Ld. JCIT, Range 7(1), Ahmedabd in view of contravention of provisions of section 269 SS of the Income Tax Act, 1961”. Accordingly, we note that the case laws on which reliance is being placed by the counsel for the assessee, are distinguishable on facts, where the Ld. Assessing Officer had during the course of assessment proceedings initiated 271D proceedings. Further, on facts, it is observed that during the course of 271D proceedings,

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the Joint Commissioner found out that the assessee had not disclosed that he had also received another sum of � 15 lakhs from another party, and added the same while computing penalty u/s 271D of the Act. Therefore, even from the above, in our view, complete facts came into picture only during the course of 271D proceedings, and hence it would be difficult to accept the plea, in the instant facts that 271D proceedings were initiated by Ld. Assessing Officer during course of assessment proceedings. It may be noted, that in the case of Govindkripa Buildmart (P.) Ltd. 2018] 99 taxmann.com 441 (Rajasthan), the High Court held that for failure to comply with section 269SS, Assessing Officer below rank of Joint Commissioner is not competent authority to initiate penalty proceedings under section 271D and he should make reference to Range Head regarding any violation of provisions of section 269SS. The hon'ble Kerala High Court in the case of Grihalakshmi Vision v. Addl CIT vide its order dated August 7, 2015 in I.T.A. Nos. 83 and 86 of 2014 reported in [2015] 379 ITR 100 (Ker), observed that, 'Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From the statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under sections 271D and 271E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an

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authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply”. Therefore, in our considered view, the 271D order is not barred by limitation and as validly pointed out by the Ld. CIT(A) in his order, the Joint Commissioner, who is the prescribed authority to initiate 271D proceedings, has passed order within the period of limitation prescribed i.e. within 6 months from the end of the month from the date of initiation of 271D proceedings on 15.07.2015. In view of the above discussion, we are of the considered view that Ld. CIT(A) has not erred in law and on facts in holding that the order u/s 271D of the Act is not barred by limitation.

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that the revenue has not pointed out any fault in the explanation offered by the assessee, genuineness of transactions has not been disputed by the revenue, it is a matter of fact that assessee had acquired agricultural land out of the funds received from relatives. In view of the above facts, there was a reasonable cause for accepting the funds in cash. The assessee placed reliance on several case laws in support of his contention that genuine transactions would not be hit by provisions of section 271D of the Act. The Ld. Departmental Representative relied upon the observations made by the Ld. CIT(A) and Joint Commissioner in their respective orders.

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labourers and lenders, there being no violation of provisions of section 269SS, impugned penalty order passed under section 271D was to be set aside. In the case of ITO v. Tarlochan Singh [2003] 128 taxman 20 (Asr.) (Mag.) penalty under section 271D was levied on ground that assessee had received loan of Rs. 70,000 in cash from his wife for investment in acquisition of immovable properties. Wife had given money to husband for prosperity of family only and there was no evidence that amount in question was taken for commercial use. Though revenue considered it loan, but there was no material on record to show that assessee had returned amount received from wife or paid interest thereupon. Assessee was also under bona fide belief that amount in question did not require to be received otherwise than by an account payee cheque or account payee bank draft. Whether considering above and also keeping in view that intention of Legislature was never to punish a party involved in genuine transactions, it had to be held that there was reasonable cause and no penalty was leviable. In the case of Smt. Meera Devi Kumawat v. JCIT [2021] 132 taxmann.com 21 (Jaipur - Trib.) where assessee received substantial amount of cash from her husband for purchase of plot and construction of residential house on it, since repayment of said amount was not mandatory and there was no element of interest, and pooling of family funds was done by assessee due to family requirement and as she did not have any known sources of funds, no penalty could be levied under section 271D for violation of section 269SS. In view of the decision of the jurisdictional Gujarat High Court in the case of Dr. Rajaram L. Akhani supra and other case laws cited above, as applicable to the facts of the case, in our view so far as receipt of � 22,50,000/- by the assessee from his wife and father is

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concerned, in our view the provisions of section 269SS do not stand attracted. There is nothing on record to show that the amount was taken as a loan or deposit by the assessee from his father/wife and also there is nothing on record to establish that the assessee was under an obligation to repay that the same (with our without interest) and therefore in view of the judicial precedents cited above, in our view provisions of section 269SS cannot be invoked so far as the amount of � 22,50,000/- is concerned.

Now, so far as the issue concerning receipt of � 15,00,000/- from Mr. 8.1 Mahispatsinh is concerned, the assessee submitted that since no show cause notice was issued in respect of the same, levy of penalty on such sum is in gross violation of the principles of natural justice. In our view, when the issue of cash receipt in connection with the purchase of property during the course of assessment proceedings was being discussed, the assessee was absolutely silent in respect of the receipt of � 15 lakhs from Mr. Mahispatsinh. When the assessee was asked to produce the breakup of resources to fund the property of � 76,20,758/-, the assessee did not disclose the fact of receipt of � 15 lakhs from Mr. Mahispatsinh during the course of assessment proceedings. The same is evident from observations made by the assessing officer at page 11, paragraph 10.1 and 10.2 wherein the assessee did not disclose any details in respect of the loan of � 15 lakhs mentioned above. In para 10.2 of the assessment order, the assessing officer has noted that the assessee has filed an affidavit to the effect that he has taken cash loans of � � 12,50,000 from his wife and 10 lakh from this father. In the affidavit, there was no mention of receipt of � 15 lakhs from Mr. Mahispatsinh. Thus, from the facts it becomes clear that the assessee has

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deliberately chosen not to disclose any details in connection with the receipt of Rs. 15 lakhs from Mr. Mahispatsinh during the course of assessment proceedings and specially when the assessee was required to furnish details of cash taken in contravention of provisions of section 269 SS of the Act. Therefore, there was no occasion for the assessing officer to issue a show cause notice in respect of this above receipt of � 15 lakhs since the assessee had deliberately not disclosed this sum during the course of assessment proceedings. It was only during the course of 271D proceedings, that on going through the relevant assessment records, it came to light that apart from the aforesaid sum of � 22,50,000/- taken by the assessee from his wife and father, the assessee had also taken cash loan from Mr. Mahispatsinh for a sum of � 15 lakhs. The assessee during the course of proceedings before Ld. CIT(A) contended that the issuance of show cause notice is missing in respect of the above addition, and therefore penalty in respect of � 15 lakh cannot be sustained. We note that while submission dated 06.06.2015 before Ld. CIT(A) , the assessee at para 6 has specifically admitted that he had taken cash loan from Mr. Mahispatsinh who was a relative of the assessee. The assessee has not given any explanation as to why this amount was not disclosed during the course of assessment proceedings and the circumstances which would take this cash receipt out of the purview of section 269 SS of the Act. The only argument put forth by the assessee is that this amount cannot be added in absence of show cause notice being issued by the assessing officer/ Joint Commissioner. However, as noted above since the assessee himself deliberately concealed the fact of receipt of � 15 lakhs, in our view, there was no occasion to issue show cause notice in respect of the above receipts. Further, both during 271D proceedings and in assessee’s

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appeal before Ld. CIT(A), the assessee never challenged the fact of having received the above sum of � 15 lakhs, for which the assessee did not give any plausible explanation. In the case of Vasan Healthcare (P.) Ltd. [2021] 125 taxmann.com 266 (SC), the Supreme Court of India dismissed SLP against High Court ruling that where director of assessee-company obtained cash in excess of Rs. 20,000 as loan from a financier and deposited same in cash in bank account of company, merely because director took cash loans from financier and deposited it in current account of assessee-company on very same day and assessee utilized it to pay salaries, rent and EMI commitments, same could not be a ground to be taken as a mitigating factor to escape from rigour of levy of penalty under section 271D. Again, the Supreme Court of India in the case of Al Ameen Educational Trust [2021] 131 taxmann.com 127 (SC) dismissed SLP as withdrawn against High Court's ruling that where assessee failed to discharge its burden in proving that there was a reasonable cause in accepting cash deposits from staff members in its bank account penalty order passed under section 271D was to be confirmed. In our view, in the above facts, assessee has failed to discharge its burden proving that there was a reasonable cause for accepting the sum of � 15 lakhs in cash from Mr. Mahispatsinh. The Ld. CIT(A) in in his order has specifically noted that “further, it is also seen that during the assessment proceedings the assessee, well knowing that he had also taken cash loans of � 15 lakhs did not deem it necessary to make submissions regarding the same before the AO in spite of the fact that the issue of applicability of section 269SS was being discussed in his case”. In light of the above discussion, we are of the considered view that the Ld. CIT(A) has not erred in facts or in law in confirming penalty in respect of the sum of �

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15 lakh received in cash from Mr. Mahispatsinh in violation of the provisions of section 269SS of the Act.

Order pronounced in the open court on 31-05-2022

Sd/- Sd/- (PRAMOD KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 31/05/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद