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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
Consolidated Appeals (2)
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH (Conducted Through Virtual Court) Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member
Sl. Appeal ITA A.Y. Appellant Respondent No. 1 1029/Ahd/2013 2003-04 Shri Pavan M. Sharma, A’bad The ITO, Ward-9(2), PAN: ATFPS6366M A’bad 2 1030/Ahd/2013 2003-04 Shri Pavan M. Sharma, A’bad The ITO, Ward-9(2), PAN: ATFPS6366M A’bad 3 1031/Ahd/2013 2004-05 Shri Pavan M. Sharma, A’bad The ITO, Ward-9(2), PAN: ATFPS6366M A’bad 4 1032/Ahd/2013 2004-05 Shri Pavan M. Sharma, A’bad The ITO, Ward-9(2), PAN: ATFPS6366M A’bad 5. 2771/Ahd/2013 2003-04 Shri Pavan M. Sharma, A’bad ADIT(Exemption) PAN: ATFPS6366M Ahmedabad 6. 2772/Ahd/2013 2003-04 Shri Pavan M. Sharma, A’bad ADIT(Exemption) PAN: ATFPS6366M Ahmedabad
Assessee by: Shri Tushar Hemani, Sr. A.R. & Shri Parimalsinh, B. Parmar, A.R. Revenue by: Shri Purushottam Kumar, Sr. D.R.
Date of hearing : 21-03-2022 Date of pronouncement : 30-03-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
These six appeals have been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-XV Ahmedabad in Appeal Nos. CIT(A)-XV/ITO 9(2)/114/10-11, CIT(A)-XV/ITO 9(2)/111/10-11, CIT(A)- XV/ITO 9(2)/113/10-11 & CIT(A)-XV/ITO 9(2)/112/10-11 and against order passed by Ld. CIT(A) u/s 271D and 271E of the Act dated 24/09/2013 respectively.
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ITA No. 1030 & 1032/Ahd/2013 A.Ys. 2003-04 & 2004-05:
Since the facts and the issues under consideration in both the appeals are identical we shall first deal with appeal for assessment year 2003-04, which shall serve as the lead case and the observations and conclusions for A.Y. 2003-04 shall also apply to the A.Y. 2004-05 as well.
ITA No. 1030/Ahd/2013 A.Y 2003-04 3. The assessee has raised following grounds of appeal:- “1. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in framing and passing the assessment order u/s 144 of the Act as valid and appropriate action. 2. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in disallowing entire business expenditure of Rs.5,82,162/- after holding that no business was carried out by the Appellant during the year under consideration. 3. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in treating interest income of Rs.6,98,780/- as income from other sources and adding the same to total income of the Appellant. 4. Alternatively and without prejudice to above, both the lower authorities ought to have allowed deduction of expenditure amounting to Rs.5,82,162/- u/s 57 of the Act, against the interest income of Rs.6,98,780/- treated as income from other sources, which has been laid out or expended wholly and exclusively in making / earning such income.
The ld. CIT(A) has erred in law and on the facts of the case in sustaining the addition made by the Id. AO to the extent of Rs.5,00,000/- u/s 68 of the Act.
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The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in making addition of Rs.1,09,200/- u/s 22 of the Act. 7. The ld. CIT(A) has grossly erred in law and on the facts of the in assuming jurisdiction in recording satisfaction to levy penalty u/s 27ID and 27IE of the Act while passing the appellate order without taking into cognizance of the provisions of sub-section (1) to S.271D and 27 IE of the Act which, categorically provides that the penalty under these provisions can be imposed by the Joint Commissioner. 8. The ld. IT(A) accordingly has erroneously assumed jurisdiction to record satisfaction to levy penalty u/s 27ID and 27IE of the Act, which is beyond his power and accordingly bad and illegal in the eyes of law. 9. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
The ld. CIT(A) has erred in law and on facts in confirming the action of Id. AO in charging interest u/s 234B/C/D of the Act. 11. The ld. CIT(A) has erred in law and on facts in confirming the action of Id. AO in initiating penalty proceedings u/s 271(l)(c) of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
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The brief facts of the case are that the assessee filed return of income declaring total income of Rs. 1,15,150/- and agricultural income of Rs. 49,850/-. The case of the assessee was picked up for scrutiny but despite being provided several opportunities, neither the assessee appeared nor furnished any details/documents required as per the notices issued. Since the assessee did not cause appearance, the ld. Assessing Officer was forced to pass best judgment assessment order u/s. 144 of the Act on the basis of material available on record. The ld. CIT(A) observed that the assessee has earned interest income of Rs. 6,98,780/- which has been shown as ‘business income’, whereas it should have been considered as ‘income from other sources’. Against the above interest income, the assessee had debited various expenses on account of depreciation, donation, insurance expenses and loan interest amounting to Rs. 5,82,162/-. The ld. Assessing Officer held that in absence of any explanation, the assessee did not conduct any business and the assessee has earned only ‘interest income’ which is considered as ‘income from other sources’. Since the expenses claimed are not allowable against any income other than ‘income from business or profession’, therefore, the above expenses were disallowed and added to the total income. On verification of balance sheet, the ld. Assessing Officer observed that a total of Rs. 94,41,503/- have been shown under the head “loans”. The assessee was asked to furnish names, addresses, PAN, copies of accounts with confirmations of these depositors. But since the assessee failed to produce any details regarding the cash deposits amounting to Rs. 94,41,503/- the same were treated as unexplained cash credit u/s. 68 of the Act. The ld. Assessing Officer further observed that the assessee held ownership in several properties in respect of which no income was declared
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in the return of income. The AO held that out of the above properties, only one can be considered as self occupied property. With respect to the balance two properties, the ld. Assessing Officer computed annual rent of Rs. 1,20,000/- and Rs. 36,000/- respectively and after giving the permissible deduction u/s. 24 of the Act on the notional rent, an amount of Rs. 1,09,200/- was added under the head income from house property.
The assessee filed appeal before the ld. CIT(A) against the above order. With respect to claim of the assessee that the interest income amounting to Rs. 6,98,780/- qualifies as business income, the assessee submitted that assessee was in the business of providing need based finance and acting as agent which has given rise to interest income of Rs. 6,98,780/- and brokerage income of Rs. 81,000/- which qualifies as business income. Alternatively the assessee submitted that in the case of “lull of business” even if there is no business income but the overhead expenses incurred to continue the business have to be allowed. It was further alternatively claimed that the assessee borrowed loan from Shri Puranbhai Lajjaram Sharma & Shri Ramlakhan Lajjaram Sharma to provide loan to other parties in order to earn interest income and therefore if the interest income of Rs. 6,98,780/- is taxed under the head “income from other sources” then deduction of Rs. 2,20,394/- being interest paid to such parties for earning interest income has to be allowed. The assessee filed copies of returns of income along with balance sheet and profit and loss account for A.Y. 2002- 03, A.Y. 2003-04, A.Y. 2004-05 & A.Y. 2005-06 to evidence that appellant in all these years filed such interest and brokerage income as income from “business and profession” and claimed such expenditure against “business
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income”. On perusal of the returns of income, the ld. CIT(A) observed that for the same income for A.Y. 2002-03 the assessee has himself categorized it as “business income” in the return of income but for A.Y. 2006-07, no such business income is shown by assessee despite having similar indirect income. There is no consistency of treatment of income by the assessee. The ld. CIT(A) further noted that no evidences were filed by assessee that he is engaged in the business of providing need based finance. Even the earning of brokerage is a non-recurring activity. Therefore, the ld. CIT(A) held that the assessee did not earn business income. On the alternate argument that payment of interest be given to the assessee if the income is assessed under the head “income from other sources”, in absence of evidence that such borrowing is directly linked with such loan advances, such deduction cannot be allowed u/s. 57 of the Act. The ld. CIT(A) observed that the assessee did not produce books of accounts or any details to establish the nexus between borrowed fund to such loans and advances. Accordingly, the ld. CIT(A) dismissed this ground of the assessee.
5.1 Regarding the addition of Rs. 94,41,503/- u/s. 68 of the Act, the ld. CIT(A) gave part relief to the assessee and confirmed addition in respect of Rs. 5 lakhs from M/s. Radhe Shyam Investment Corporation on the ground that no PAN or present address of the party was furnished and hence the appellant had not discharged its onus u/s. 68 of the Act.
5.2 Regarding the addition of Rs. 1,09,200/- u/s. 22 of the Act, the ld. CIT(A) upheld the order of ld. Assessing Officer on the ground that the
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assessee has factually made incorrect statement and has not brought any evidence to controvert the findings of the ld. CIT(A).
Before us, the ld. counsel for the assessee submitted that the ld. Assessing Officer erred in holding that the assessee was not carrying out business since this fact has been accepted by the Department in later years as well. The ld. counsel for the assessee drew our attention to pages 36 onwards of the paper book and also to order passed by the ld. CIT(A) for A.Y. 2004-05 to contend the fact that assessee is engaged in business activities has been accepted by the Department in later years. The ld. counsel for the assessee drew our attention to page 4, para 7 of the assessment order for A.Y. 2004-05 in support of his contention. The ld. counsel for the assessee submitted that on the principle of consistency, the ld. CIT(A) erred in coming to the conclusion that assessee is not engaged in carrying on business activities. Alternatively, he contended that even if entire income is treated as ‘income from other sources’ then expenditure against such brokerage income is deductable. Regarding the confirmation of addition of Rs. 5 lakhs u/s. 68 of the Act, the ld. counsel for the assessee drew our attention to page 33 of the paper book “copy of ledger of Radhe Investment Corporation” in support of his contention that the addition is not sustainable and that the assessee had discharged the onus cast upon it. In respect of addition upheld by the ld. CIT(A) on rental income u/s. 22 of the Act on presumptive basis, the ld. counsel for the assessee conceded that the department has already given 30% deduction u/s. 24 of the Act and he has nothing further to submit in the matter. With respect to ground related to initiation of penalty proceedings u/s. 271(1)(c) of the Act, the ld. counsel for
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the assessee submitted that no separate adjudication is required. The ld. Departmental Representative in response placed reliance on observations of ld. CIT(A) at para 5.3(b) at page 19 and at pages 21 to 22 of the order in support of his contention that the ld. CIT(A) has categorically concluded that the assessee did not carry out any business activity and also in absence of any evidence from the appellant’s side that such borrowing is directly linked with granting of such loan and advances and not for other personal expenditure of purchase of flat, car or other assets, deduction of such amount cannot be allowed u/s. 57 of the Act.
We have heard arguments of both the parties and perused the material on record. Ground No. 1 of the assessee’s appeal regarding the action of the ld. Assessing Officer in framing assessment order u/s. 144 of the Act. The ld. counsel for the assessee did not specifically press for the same and even otherwise from perusal of material on record despite several opportunities being granted, since the assessee did not cause appearance, we are of the view that ld. CIT(A) has not erred in law and on facts of the case in confirming the action of the ld. Assessing Officer in framing and passing assessment order u/s. 144 of the Act. Ground Nos. 2 to 4 which is in relation to treating the interest income of Rs. 6,98,780/- as ‘income from other sources’ and consequentially disallowing business expenditure of Rs. 5,82,162/- after holding that no business was carried out by the appellant during the year under consideration. The ld. counsel for the assessee submitted that the Department has in the later years as well have accepted the position that the assessee is carrying on business activities and hence the ld. CIT(A) has erred in confirming the action of ld. Assessing Officer in
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treating interest income of Rs. 6,98,780/- as income from other sources. However, we note that this assertion of the Ld. Counsel for the assessee that the Department has accepted the position that the assessee is engaged in carrying on business activities has not been accepted by the Department. We would like to reproduce the relevant extracts of order of ld. CIT(A) for A.Y. 2004-05 from which it becomes evident that the Department has never accepted this contention of the assessee:
“It is evident from above observation that appellant for the previous year relevant to A.Y. 02-03 though does not have any direct income but shown entire indirect income except Agri. Income, Director’s remuneration and deposit interest as business income. But on the same fact during Prv. Year relevant to A.Y. 06-07 no such business income is shown despite having similar indirect income. It is therefore, there is no consistency of treatment of income by the appellant. The appellant is basically engaged as agent and in the absence of any License cannot be held as involved in the business of finance in the capacity of 'shroff or 'Non banking financing Agent' No evidences in this regard were filed by appellant that his business to provide need based finance. The appellant was director of a company and involved in real estate dealing on commission basis. In the absence of any evidences on record to show that appellant devoted regular time and his interest to earn interest income as basic requirement, it cannot he held that appellant has taken any risk in such continuous activity of providing finance and therefore the same is business activity. Even the earning of brokerage is also a non recurring activity. It is therefore, I am not inclined with the contention of the appellant that expenditure so disallowed by A.O. being there no business activity, the same be allowed since there was 'Lull in business' or 'out of business'. Now coming to alternative ground that deduction of payment of interest out of the interest income be given to appellant if the income is assessed under the head 'Income from other sources', I am inclined with the contention of the appellant that if there is no business activity these
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earning of interest can be linked with payment of interest on borrowed fund and deduction of such interest is allowable but in the absence of evidences from the appellant that such borrowing is directly linked with such loan advances and not for other personal expenditure of purchase of flats, car or other asset, such deduction can be allowed u/s. 57 of the Act. The appellant submitted profit & loss account and balance sheet only reflecting various asset, sundry creditor & debtor but not produced books of account pr my details to establish the nexus between borrowed fund to such loan & advances. It is therefore such alternative ground cannot be accepted. In totality this ground is dismissed.”
From the above observations of ld. CIT(A) for A.Y. 2004-05 and from the material on record, it can be concluded that no evidence has been filed by the assessee in support of its claim that it was engaged in the business of providing need based finance. The assessee either during the course of assessment or at appeal stage did not produce any books of accounts, bills, vouchers, etc. in support of the genuineness of the claim. Regarding the alternate claim of the assessee that in the event the interest income is treated as “income from other sources” then the interest expenses should be allowed as a deduction against such interest income u/s. 57 of the Act, we are of the view that in absence of evidence from the assessee that such borrowing is directly linked with such loans/advances, such deduction cannot be allowed u/s. 57 of the Act. The ld. CIT(A) in his order has observed that the assessee submitted profit and loss account and balance sheet only reflecting various assets/sundry creditors and debtors but failed to produce books of accounts or any details to establish the nexus between borrowed fund to such loans and advances. In view of the above, we hold that the ld. CIT(A) has not erred in treating interest income of Rs. 6,98,780/- as income from other
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sources. We are of the view that since the assessee has not established that it is engaged in carryout out any business activity, the ld. CIT(A) has not erred in law and on facts in confirming the action of the ld. CIT(A) in disallowing the entire business expenditure of Rs. 5,82,162/- after holding that no business was carried out by the assessee. Further, since the assessee has failed to establish any nexus between payment of interest on borrowed fund and giving of loans and advances for earning interest income, in our view, the ld. CIT(A) has not erred in not granting deduction of expenditure amounting to Rs. 5,82,162/- u/s. 57 of the Act, against interest income of Rs. 6,98,780/-.
In the result, the ground nos. 2 to 4 of the assessee are dismissed.
Regarding ground no. 5 in respect of addition to the extent of Rs. 5 lakhs u/s. 68 of the Act, we note that the assessee has not discharged the onus cast upon it u/s. 68 of the Act. Despite several opportunities the assessee has not produced either the PAN No. of the concerned person nor has produced any details of the address of the person. It is a well established law that the initial onus is on the assessee to prove the genuineness and creditworthiness of the party which has not been discharged in the instant set of facts. Mere production of ledger account and the contention that the amount has been received through banking channel would in our view not suffice when the identity of the creditor itself has not been established. The Supreme Court of India in the case of C.V Ravi v. ITO [2021] 129 taxmann.com 44 (SC) dismissed the SLP against High Court ruling that where assessee took loan from an entity, however, failed to produce any
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confirmation from such entity or produce its owner in person for cross- examination and also failed to produce any document to establish identity of such creditor or genuineness of alleged loan transaction, impugned addition made under section 68 in respect of such loan amount was justified. In the result, we are of the view that ld. CIT(A) has not erred in law and on facts of the case in sustaining addition made by the ld. CIT(A) to the extent of Rs. 5 lakhs u/s. 68 of the Act.
In the result, the ground no. 5 of the assessee is dismissed.
Regarding Ground No. 6 in respect of addition of Rs. 1,09,200/- u/s. 22 of the act as noted in the preceding paragraphs, the ld. counsel for the assessee has already submitted before us that the Department has already granted 30% standard deduction u/s. 24 of the Act and he has nothing further to submit in the matter. Therefore ground no. 6 of the assessee hereby is dismissed.
In the result, ground no. 6 of the assessee is dismissed.
13 Regarding ground nos. 7 and 8 in respect of initiation and imposition of penalty u/s 271D and s. 271E of the Act by the CIT(Appeals), the matter is being taken up in separate appeal filed by the assessee before us and no separate adjudication is required for these grounds in this appeal.
14 Ground nos. 8 to 11 are general for which no separate adjudication is required.
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In the result, the appeal of the assessee is dismissed.
ITA No. 1032/Ahd/2013 A.Y. 2004-05
The assessee has raised following grounds of appeal:- “1. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in framing and passing the assessment order u/s 144 of the Act as valid and appropriate action.
The ld. CIT(A) has erred in law and on the facts of the case in sustaining the addition made by the Id. AO to the extent of Rs.2,80,000/- u/s 68 of the Act.
The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in disallowing entire business expenditure of Rs.5,98,616/- after holding that no business was carried out by the Appellant during the year under consideration.
The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in making addition of Rs. 1,09,200/- u/s 22 of the Act.
Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
The ld. CIT(A) has erred in law and on facts in confirming the action of Id. AO in charging interest u/s 234B/C/D of the Act.
The ld. CIT(A) has erred in law and on facts in confirming the action of Id. AO in initiating penalty proceedings u/s 271(l)(c) of the Act.
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The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
The brief facts of the case for this year are that the assessee is an individual earning interest income in the profit and loss account enclosed with the return of income. The assessee has shown interest receipts of Rs. 6,58,498/- and other income of Rs. 90,346/-. The assessee, in the statement of income, treated the above income as ‘income from business’ and after claiming expenses against the same, the net profit worked out at Rs. 1,50,227/-. During the course of assessment, the ld. Assessing Officer asked the assessee to provide details of one party namely, Shriram Lakhan Sharma from whom the assessee had accepted Rs. 2,80,000/- in cash but the assessee neither provided the PAN No. of such party and nor the address details. In absence thereof, the ld. Assessing Officer added an amount of Rs. 2,80,000/- as unexplained cash credit u/s. 68 of the Act. During the course of assessment, the ld. Assessing Officer noted that the assessee had debited expenses amounting to Rs. 5,98,616/- against interest receipt of Rs. 6,58,498/- and other receipts of Rs. 90,346/- by treating the above said as its business income but from the records available the assessee had not carried out any business activity. The ld. Assessing Officer accordingly requisitioned the assessee to produce the books of accounts for verification. However, the assessee did not file any reply and accordingly the ld. Assessing Officer disallowed the entire expenses of Rs. 5,98,616/- on the ground that the same was not incurred for earning business income. During the course of assessment proceedings, the ld. Assessing Officer further noted
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that the assessee was having immoveable properties in respect of which he had not been offered any rental income in the return of income. The ld. Assessing Officer accordingly treated one of the immoveable properties as self occupied, and in respect of other two properties arrived at annual notional rent of Rs. 1,56,000/- and after allowing deduction of Rs. 46,800/- u/s. 24 of the Act, added an amount of Rs. 1,09,200/- under the head income from house property. The ld. Assessing Officer also initiated penalty proceedings u/s. 271(1)(c) of the Act.
In appeal before ld. CIT(A), he dismissed the appeal of the assessee in respect of all grounds raised before him. In respect of loan of Rs. 2,80,000/-from M/s. Ram Lakhan Sharma, ld. CIT(A) noted that except the copy of ledger account of Mr. Ram Lakhan Sharma, the assessee has neither furnished any address of the party and also did not furnish PAN No. of such party and therefore ld. CIT(A) sustained the addition. Regarding disallowance an addition of Rs. 5,82,162/-, the appellant submitted that he was in the business of providing need based finance and account as a commission agent which has given rise to interest income of Rs. 6,58,498/- which is nothing to business income and therefore assessee has rightly claimed business expenditure of Rs. 5,98,616/-. The ld. CIT(A) summarily rejected the arguments of the assessee and observed as below:-
“It is evident from above observation that appellant for the previous year relevant to A.Y. 03-04 though does not have any direct business income but shown entire income except Agri. Income, deposit interest etc. (other income) as business income. But, on the same fact during Prv. Year relevant to A.Y. 05-06 no such business income is shown despite having similar indirect income. It is therefore, there is
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no consistency of treatment of income by the appellant. The appellant is basically engaged as agent and in the absence of any License cannot be held as involved in the business of finance in the capacity of 'shroff or 'Non banking financing Agent' No evidences in this regard were filed by appellant that his business was to provide need based finance.' The, appellant was director of a company and involved in real estate dealing on commission basis. In the absence of any evidences on record to show that appellant devoted regular time and his interest to earn interest income as basic requirement, it cannot' he held that appellant has taken any risk in such continuous activity of providing finance and therefore the same is business activity. Even the earning of brokerage is also a non recurring activity. It is therefore, 1 am not inclined with the contention of the appellant that expenditure so disallowed by A.O. being there no business activity, the same be allowed since there is 'Lull in business' or 'out of business'. The all important aspect of disallowance is non production of books of accounts, bills, vouchers etc. for such claim being genuine. Even in appeal proceeding no such bills, vouchers, were produced. It is in this regard, the A.O. in the final para of computing income has not treated interest of Rs. 658498 as income from other sources but disallowed the expenses so claimed. Now coming to alternative ground that deduction of payment of interest out of the interest income be given to appellant if the income is assessed under the head 'Income from other sources'. I am inclined with the contention of the appellant that if there is no business activity these earning of interest can be linked with payment of interest on borrowed fund and deduction of such interest is allowable but in the absence of evidences from the appellant that such borrowing is directly linked with such loan advances and not for other personal expenditure of purchase of flats, car or other asset, such deduction can be allowed u/s. 57, of the Act. The appellant submitted profit & loss account and balance sheet only reflecting various asset, sundry creditor & debtor but not produced books of account or details to establish the nexus between borrowed fund to such loan & advances. Further, The A.O. has not treated the interest income as income from other sources. It is therefore such alternative ground cannot be accepted. In totality this ground is dismissed.”
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19 Regarding addition of Rs. 1,09,200/- u/s. 22 of the Act, the ld. CIT(A) observed that the assessee had nothing substantive to argue in the matter and accordingly upheld the action of the ld. Assessing Officer in correctly working out the income from house property. Accordingly, the ld. CIT(A) dismissed the ground of appeal of the assessee.
Before us, ld. counsel for the assessee appeared and argued that for both the assessment years 2003-04 and 2004-05, the facts and issues for consideration are similar. Since the facts in both the years are identical the observations and ratio for A.Y. 2003-04 would apply to the A.Y. 2004-05 as well.
In the result, the ground no. 1 relating to framing and passing of assessment order u/s. 144 of the Act is dismissed.
Regarding ground no. 2 in respect of addition of Rs. 2,80,000/- u/s. 68 of the Act, we are of the view that the ld. CIT(A) has not erred in facts and law of the case in sustaining the addition since the assessee has not discharged the onus cast upon it u/s. 68 of the Act. In our view, the ld. CIT(A) has correctly observed that neither the PAN No. of the party was furnished nor any other details like address etc. were furnished to prove the genuineness and creditworthiness of the party. The Supreme Court of India in the case of C.V Ravi v. ITO [2021] 129 taxmann.com 44 (SC) dismissed the SLP against High Court ruling that where assessee took loan from an entity, however, failed to produce any confirmation from such entity or produce its owner in person for cross-examination and also failed to
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produce any document to establish identity of such creditor or genuineness of alleged loan transaction, impugned addition made under section 68 in respect of such loan amount was justified. In absence of the details of parties like PAN or address etc. being furnished by the assessee, we are of the view that the burden u/s 68 of the Act has not been discharged by the assessee and we therefore uphold the addition sustained by the ld. CIT(A).
In the result, the ground no. 2 of the assessee is dismissed.
Regarding ground no. 3 in respect of disallowance of entire business expenditure of Rs. 5,98,616/- after holding that no business was carried out by the assessee during the year under consideration, since the facts are similar to the facts immediately preceding assessment year 2003-04, the observations made by us for A.Y. 2003-04 would equally apply to this year as well. We find no infirmity in the order of Ld. CIT(A), where he has held that the assessee has taken inconsistent position in various years. Further, the Ld. CIT(A) has also specifically observed that that there has been non production of books of accounts, bills, vouchers etc. for various expenses claim being genuine both during assessment as well as in appeal proceeding where no such bills, vouchers, were produced. Accordingly, we are of the view that ld. CIT(A) has not erred in confirming the action of the ld. Assessing Officer in disallowing the business expenditure of Rs. 5,98,616/-. Accordingly, ground no. 3 of the assessee’s appeal is hereby dismissed.
In the result, ground no. 3 of the assessee’s appeal is dismissed.
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Regarding ground No. 4 in respect of addition of Rs. 1,09,200/- u/s. 22 of the Act as noted in the order for A.Y. 2003-04, the ld. counsel for the assessee has submitted that the Department has already granted 30% deduction against the presumptive addition u/s. 22 of the Act and he has nothing further to submit in the matter.
Accordingly ground no. 4 of the assessee is hereby dismissed.
Regarding ground nos. 5 to 7, no separate adjudication is required.
In the result, the appeal of the assessee is dismissed.
ITA No. 1029/Ahd/2013 A.Y. 2003-04:
This is an appeal filed by the assessee against the order of CIT(A)-XV dated 28th January 2013 in Appeal Number CIT(A)-XV/ITO 9(2)/114/10-11.
The assessee has raised following grounds of appeal:- “1. The Id. CIT(A) has erred in law and on the facts of the case in directing the Id. AO to confirm the levy of penalty u/s 271(l)(c) of the Act on the additions sustained in the quantum appellate order, which is wholly unsustainable in law and on facts and as such the appellant could not be charged with any guilt of furnishing inaccurate particulars of income or concealing particulars of income within mischief of Section 271(l)(c) of the Act. The levy of penalty being without jurisdiction and totally uncalled for deserves to be quashed.
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In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal.
In any case, quantification of the penalty is erroneous and excessive.
The learned CIT(A) has erred in law and on facts in confirming the action of AO in initiating and levying penalty under section 271(l)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order.
Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
The brief facts of the case have been mentioned in ITA No. 1030/Ahd/2013 A.Y. 2003-04 and hence the same are not reiterated again for the sake of brevity. At the time of assessment order, the ld. Assessing Officer initiated penalty proceedings u/s. 271(1)(c) of the Act and notice was issued to the assessee on 27-03-2006 but assessee failed to comply and hence another show cause notice dated 23-08-2016 was issued. The assessee again did not comply with the aforesaid notice and accordingly the ld. Assessing Officer passed minimum penalty u/s. 271(1)(c) of the Act at 100% of concealed income which worked out to Rs. 33,55,999/-. The
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assessee filed appeal against the order of penalty passed by ld. Assessing Officer
In appeal, the ld. CIT(A) observed that on perusal of records of appellant from A.Y. 2003-04 to A.Y. 2006-07, the appellant has inconsistently taken up the income assessable under the head ‘income from other sources’ as ‘business income’ to claim deduction of various expenditure which are otherwise not allowable. Against such income declared under the head ‘income from business or profession’, ld. CIT(A) held that despite being good receipts, the appellant through his dubious and deliberated method has not paid any tax from A.Y. 2003-04 to A.Y. 2005-06 and in 2006-07 paid an amount of Rs. 1300 as self assessment tax. The appellant did not co-operate in assessment proceedings to avoid scrutiny of his case and he did not even file appeal against such order. The books of accounts, bills, vouchers etc. were never produced before Department at any level, even in appellate proceedings for both quantum as well as penalty order, no such bills, vouchers of expenditure, confirmation from creditors were produced. The ld. CIT(A), therefore, held that appellant cannot be given dual benefit of evading and avoiding scrutiny proceedings at assessment stage and immunity of penalty at appeal stage taking advantage of such non-compliance and non-production. The ld. CIT(A) placed reliance on the case of CIT vs. Indian Metal and Ferro Alloys Ltd. (1994) 117 CTR (Orissa) 378 and held that the phases “furnishing of inaccurate particulars and concealment of income” are squarely applicable in view of non-compliance of notices and non-production of books of accounts, bills, vouchers to justify how such return of income is arrived at. Further, the ld.
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CIT(A) held that with regard to the various case laws relied upon by the appellant viz. Reliance Petro-products Ltd. (SC), the ratio of such case laws is not applicable since the appellant has not made any explanation which was treated as satisfactory or non- satisfactory before making such addition.
Before us, the ld. counsel for the assessee submitted that Assessing Officer has erroneously concluded that no business activity has been carried out by the assessee and consequentially treated such interest income as income from other sources. The ld. counsel for the assessee submitted that Assessing Officer simply changed head of income under which income shall be taxed i.e. “income from other sources” as against “business income”. Therefore, the assessee has neither consequentially concealed any income nor furnished inaccurate particulars of income. The assessee placed reliance on the case of Reliance Petro-products Ltd. 322 ITR 158 (SC). Regarding penalty of business expenditure of Rs. 5,82,162/-, the ld. counsel submitted that Assessing Officer has not found any fault with the genuineness of such expenses and therefore under such circumstances no penalty can be levied u/s. 271(1)(c) of the Act. Regarding penalty on account of addition of Rs. 5 lakhs u/s. 68 of the Act, the ld. counsel for the assessee submitted that initially onus was already discharged by assessee on production of ledger account of party and therefore there is no cause for confirmation of penalty on account of this addition. Regarding the penalty in respect of addition of Rs. 1,09,200/- in respect of annual value of property, the ld. counsel for the assessee submitted that such addition has been made with respect to notional income estimated by Assessing Officer. No such income has been actually earned by the assessee and therefore when there is no real income, then,
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even if addition is confirmed in quantum proceedings, then no case is made out for penalty u/s. 271(1)(c). The ld. counsel for the assessee cited various case laws in support of his contention that mere fact addition has been confirmed in quantum proceedings does not straightway result penalty u/s. 271(1)(c) of the Act. He further submitted that it is a settled law that once any assessee offers plausible explanation, substantiated the same with documentary evidence and such explanation is not found to be false by Department then even if such explanation is not acceptable to the Department then also the penalty u/s. 271(1)(c) cannot be levied. The ld. Departmental Representative relied upon the observations made by the ld. CIT(A) in his order.
We have heard the rival contentions and perused the material on record. From the facts on record, we are in agreement with the order of ld. CIT(A) that the assessee has been inconsistent in his approach wherein in one year, he has shown interest as “income from other sources” whereas in another year he has offered the same as “business income”. The assessee has not been able to establish that he is carrying on any business and ld. CIT(A) has correctly noted that interest income has been categorized as ‘business income’ and not as ‘income from other sources’ in order to claim deduction of various expenses against such income so as to avoid payment of taxes. When the case was opened for scrutiny, the assessee deliberately did not cause appearance and did not produce books of accounts, vouchers, evidence etc. in supports of any of its claim. Even in proceedings before the ld. CIT(A), both in quantum and penalty no evidence was produced by the assessee in respect of any of its claim. The assessee despite having
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ownership of several properties did not offer tax on any rental income in respect of those properties which were not self occupied. In respect of addition made u/s. 68 of the Act, the assessee was unable to prove the genuineness and creditworthiness of the creditors and failed to discharge the initial onus cast upon him. From the above facts of the case, we are of the view that the ld. CIT(A) has not erred in law and on facts in confirming the penalty levied u/s. 271(1)(c) by the Assessing Officer.
We shall now take up individual grounds raised by the assessee.
Ground No. 1 of the assessee’s appeal, which is to the effect that Ld. CIT(A) has erred in upholding levy of penalty u/s 271(1)(c) of the Act is being dismissed for reasons cited above.
In the result Ground No. 1 of the assessee’s appeal is dismissed.
Ground No. 2 of the assessee’s appeal, which is to the effect that penalty order passed by Ld. CIT(A) is barred by limitation is being dismissed since assessee has himself has filed appeal against penalty order passed by Ld. AO after a substantial delay of 1492 days (which was subsequently condoned by Ld. CIT(A) in his order). The assessee himself has not availed legal remedy available to it within stipulated time frame and hence now cannot take a plea that Ld. CIT(A) has not passed order within reasonable time, when such delay in passing of order was occasioned by the assessee.
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In the result Ground No. 2 of the assessee’s appeal is dismissed.
Ground Nos 3 and 5 of the assessee’s appeal are general in nature and do not require any specific adjudication.
In the result Ground No. 3 and 5 of the assessee’s appeal is dismissed.
Ground No. 4 of the assessee’s appeal that Ld. AO did not record mandatory satisfaction for initiating penalty proceedings u/s 271(1)(c) of the Act, is factually incorrect and hence being dismissed. Such satisfactions forms part of the assessment order.
In the result Ground No. 4 of the assessee’s appeal is dismissed.
In the result, the appeal of the assessee is dismissed.
ITA No. 1031/Ahd/2013 A.Y. 2004-05:
The assessee has raised following grounds of appeal:- “1. The Id. CIT(A) has erred in law and on the facts of the case in directing the Id. AO to confirm the levy of penalty u/s 271(l)(c) of the Act on the additions sustained in the quantum appellate order, which is wholly unsustainable in law and on facts and as such the appellant could not be charged with any guilt of furnishing inaccurate particulars of income or concealing particulars of income within mischief of Section 271(l)(c) of the Act. The levy of penalty being without jurisdiction and totally uncalled for, deserves to be quashed.
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In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal. 3. In any case, quantification of the penalty is erroneous and excessive. 4. The learned CIT(A) has erred in law and on facts in confirming the action of AO in initiating and levying penalty under section 271(l)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order.
Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. The appellant .craves leave ,to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
The brief facts of the case have been mentioned in ITA No. 1032/Ahd/2013 A.Y. 2004-05 and hence the same are not reiterated again for the sake of brevity. At the time of assessment order, the ld. Assessing Officer initiated penalty proceedings u/s. 271(1)(c) of the Act and notice was issued to the assessee on 12/12/2006 but assessee failed to comply and hence another show cause notice dated 31/05/2007 was issued. The assessee again did not comply with the aforesaid notice and accordingly the ld. Assessing Officer passed minimum penalty u/s. 271(1)(c) of the Act at 100% of concealed income which worked out to Rs. 3,29,529/-. The
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assessee filed appeal against the order of penalty passed by ld. Assessing Officer.
In appeal, the ld. CIT(A) observed that on perusal of records of appellant from A.Y. 2003-04 to A.Y. 2006-07, the appellant has inconsistently taken up the income assessable income from other sources as business income to claim deduction of various expenditure which are otherwise not allowable. Against such head he held that despite being good receipts, the appellant through his dubious and deliberated method has not paid any tax from A.Y. 2003-04 to A.Y. 2005-06 and in 2006-07 paid an amount of Rs. 1300 as self assessment tax. The appellant did not co-operate in assessment proceedings to avoid scrutiny of his case and it did not even file appeal against such order. The books of accounts, bills, vouchers etc. were never produced before Department at any level even in appellate proceedings for both quantum as well as penalty order, no such bills, vouchers of expenditure, confirmation from creditors were produced. The ld. CIT(A), therefore, held that appellant cannot be given dual benefit of evading and avoiding scrutiny proceedings at assessment stage and immunity of penalty at appeal stage taking advantage of such non- compliance and non-production. The ld. CIT(A) placed reliance on the case of CIT vs. Indian Metal and Ferro Alloys Ltd. (1994) 117 CTR (Orissa) 378 and held that the phases “furnishing of inaccurate particulars and concealment of income” are squarely applicable in view of non-compliance of notices and non-production of books of accounts, bills, vouchers to justify how such return of income is arrived at. Further, the ld. CIT(A) held that with regard to the various case laws relied upon by the appellant viz.
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Reliance Petro-products Ltd. (SC), the ratio of such case laws is not applicable since the appellant has not made any explanation which was treated as compulsory or non-compulsory before making such addition.
Before us, the ld. counsel for the assessee submitted that Assessing Officer has erroneously concluded that no business activity has been carried out by the assessee and consequentially treated such interest income as income from other sources. The ld. counsel for the assessee submitted that Assessing Officer simply changed head of income under which income shall be taxed i.e. “income from other sources” as against “business income”. Therefore, the assessee has neither consequentially concealed any income nor furnished inaccurate particulars of income. The assessee placed reliance on the case of Reliance Petro-products Ltd. 322 ITR 158 (SC). Regarding penalty on account of disallowance of business expenditure of Rs. 5,98,616/- the ld. counsel submitted that Assessing Officer has not found any fault with the genuineness of such expenses and therefore under such circumstances no penalty can be levied u/s. 271(1)(c) of the Act. Regarding penalty on account of addition of Rs. 2.80 lakhs u/s. 68 of the Act, the ld. counsel for the assessee submitted that initially onus was already discharged by assessee and therefore there is no cause for confirmation of penalty on account of this addition. Regarding the penalty in respect of penalty of addition of Rs. 1,09,200/- in respect of annual value of property, the ld. counsel for the assessee submitted that such addition has been made with respect to notional income estimated by Assessing Officer. No such income has been actually earned by the assessee and therefore when there is no real income, then, even if addition is confirmed in quantum proceedings then no case is made
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out for penalty u/s. 271(1)(c). The ld. counsel for the assessee cited various case laws in support of his contention that mere fact addition has been confirmed in quantum proceedings does not straightway result penalty u/s. 271(1)(c) of the Act. He further submitted that it is a settled law that once any assessee offers plausible explanation, substantiated the same with documentary evidence and such explanation is not found to be false by Department then even if such explanation is not acceptable to the Department then also the penalty u/s. 271(1)(c) cannot be levied. The ld. Departmental Representative relied upon the observations made by the ld. CIT(A) in his order.
We have heard the rival contentions and perused the material on record. From the facts on record, we are in agreement with the order of ld. CIT(A) that the assessee has been inconsistent in his approach wherein in one year, he has shown interest as “income from other sources” whereas in another year he has offered the same as “business income”. The assessee has not been able to establish that he is carrying on any business and ld. CIT(A) has correctly noted that interest income has been categorized as business income and not as income from other sources in order to claim deduction of various expenses against such income so as to avoid payment of taxes. When the case was opened for scrutiny, the assessee deliberately did not cause appearance and did not produce books of accounts, vouchers, evidence etc. in supports of any of its claim. Even in proceedings before us, the ld. CIT(A) both in quantum and penalty no evidence was produced by the assessee in respect of any of its claim. The assessee despite having several properties did not offer any rent in respect of those properties which were
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not self occupied. In respect of addition made u/s. 68 of the Act, the assessee was unable to prove the genuineness and creditworthiness of the creditors and failed to discharge the initial onus cast upon him. From the above facts of the case, we are of the view that the ld. CIT(A) has not erred in law and on facts in confirming the penalty levied u/s. 271(1)(c) by the Assessing Officer.
Ground No. 1 of the assessee’s appeal, which is to the effect that Ld. CIT(A) has erred in upholding levy of penalty u/s 271(1)(c) of the Act is being dismissed for reasons cited above.
In the result Ground No. 1 of the assessee’s appeal is dismissed.
Ground No. 2 of the assessee’s appeal, which is to the effect that penalty order passed by Ld. CIT(A) is barred by limitation is being dismissed since assessee has himself has filed appeal against penalty order passed by Ld. AO after a substantial delay of 1156 days (which was subsequently condoned by Ld. CIT(A) in his order). The assessee himself has not availed legal remedy available to it within stipulated time frame and hence now cannot take a plea that Ld. CIT(A) has not passed order within reasonable time, when such delay in passing of order was occasioned by the assessee.
In the result Ground No. 2 of the assessee’s appeal is dismissed.
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Ground Nos 3 and 5 of the assessee’s appeal are general in nature and do not require any specific adjudication.
In the result Ground No. 3 and 5 of the assessee’s appeal is dismissed.
Ground No. 4 of the assessee’s appeal that Ld. AO did not record mandatory satisfaction for initiating penalty proceedings u/s 271(1)(c) of the Act, is factually incorrect and hence being dismissed. Such satisfactions forms part of the assessment order.
In the result Ground No. 4 of the assessee’s appeal is dismissed.
In the result, the appeal of the assessee is dismissed.
ITA 2771/Ahd/ 2013 and ITA 2772/Ahd/ 2013
Both these appeals have been filed against the common order of ld. CIT(A)-XV Ahmedabad dated 24-09-2013 u/s. 271D and section 271E of the Act. Since both the appeals are emanating out of the same order, both are being taken up together.
ITA 2771/Ahd/ 2013:
The assessee has taken up the following grounds of appeal:-
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“1. The ld. CIT(A) has erred both in law and on the facts of the case in imposing penalty of Rs.95,000/- u/s 27ID of the Act for alleged violation of provisions of S.269SS of the Act. 2. The order passed by the ld. CIT(A) is barred by limitation and beyond his jurisdiction. 3. The ld. CIT(A) has erred in both in law and on the facts of the case that in not appreciating the scheme of the Act whereby penalty u/s 27ID of the Act can be imposed only by the Joint Commissioner of Income Tax and not by the Commissioner of Income Tax (Appeals). 4. The ld. CIT(A) ought to have appreciated that powers as envisaged u/s 251 of the Act would ceases to be operational once the appellate order has already been passed. 5. Ld. CIT(A) has accordingly erred in law in passing the order on 24/09/2013 by invoking provisions of S.251 of the Act to impose penalty u/s 27ID of the Act after the appellate order has already been passed by him on 28/01/2013 and no appeal was pending before him while imposing penalty. 6. The ld. CIT(A) has further erred in law in imposing penalty for the year under consideration after a gap of almost 10 years, which is beyond the reasonable period of time to pass any order. 7. Alternatively and without prejudice to above raised grounds, the ld. CIT(A) has erred in law in not appreciating that there was a reasonable cause for alleged breach of provisions of S.269SS of the Act, and therefore, in view of provisions of S.273B of the Act no penalty could have been levied by him.
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The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
ITA 2772/Ahd/ 2013 61. The assessee has taken up the following grounds of appeal:- “1. The ld. CIT(A) has erred both in law and on the facts of the case in imposing penalty of Rs.4,15,887/- u/s 271E of the Act for alleged violation of provisions of S.269T of the Act. 2. The order passed by the ld. CIT(A) is barred by limitation and beyond his jurisdiction. 3. The ld. CIT(A) has erred in both in law and on the facts of the case that in not appreciating the scheme of the Act whereby penalty u/s 27IE of the Act can be imposed only by the Joint Commissioner of Income Tax and not by the Commissioner of Income Tax (Appeals). 4. The ld. CIT(A) ought to have appreciated that powers as envisaged u/s 251 of the Act would ceases to be operational once the appellate order has already been passed. 5. Ld. CIT(A) has accordingly erred in law in passing the order on 24/09/2013 by invoking provisions of S.251 of the Act to impose penalty u/s 27IE of the Act after the appellate order has already been passed by him on 28/01/2013 and no appeal was pending before him while imposing penalty.
The ld. CIT(A) has further erred in law in imposing penalty for the year under consideration after a gap of almost 10 years, which is beyond the reasonable period of time to pass any order. 7. Alternatively and without prejudice to above raised grounds, the ld. CIT(A) has erred in law in not appreciating that there was a reasonable cause for alleged breach of provisions of S.269T of the
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Act, and therefore, in view of provisions of S.273B of the Act no penalty could have been levied by him. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
The brief facts of the case are that during the course of appellate proceedings in Appeal No. CIT(A)-XV/ITO 9(2)/111/10-11 A.Y. 2003-04 , the ld. CIT(A) observed that assessee had made infringement of section 269SS of the Act as well as section 269T of the Act which calls for levy of penalty u/s. 271D and 271E of the Act. The ld. CIT(A) while disposing of quantum appeal for A.Y. 2003-04 vide order dated 28-01-2013, on the basis of facts available on record, drew satisfaction in the said appeal order and initiated penalty proceedings u/s. 271D and 271D of the Act. As per provisions of section 269SS, acceptance of deposit in cash exceeding Rs. 20,000/- is prohibited for which penalty u/s. 271D of the Act may be levied. As per the provisions of section 269T of the Act repayment of deposit exceeding Rs. 20,000/- in cash is prohibited for which penalty u/s. 271E of the Act is provided. The ld. CIT(A) issued show cause notice dated 11-03- 2013 asking the assessee to provide an explanation in respect of the transactions tabulated below:- Transaction Amount in Section under Amount of Rs. which penalty penalty in Rs. required to be imposed Repayment in cash to 20887 271E 20887 GMAC TCFL Finance Ltd.
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Cash loan accepted from Shri 95000 271D 95000 Ramavtar Lajjaram Sharma
Cash loan repaid to Shri 95000 271E 95000 Ramavtar Lajjaram Sharma Cash loan repaid to Shri 300000 271E 300000 Ramlakhan Lajjaram Sharma
In response to the notice, the assessee vide submission dated 29-05-2013 filed an objection that the notice issued proposing to impose penalty u/s. 271D and section 271E of the Act is beyond jurisdiction, since any penalty imposing u/s. 271D and section 271E can only be imposed by Joint Commissioner of Income Tax and therefore the notice is bad and illegal in the eyes of law. The assessee submitted that whenever Legislature has intended to give powers to the Commissioner and Commissioner (Appeals) to record satisfaction and levy penalty, the same has been specifically included in the respective provisions of the Act viz. section 271A(1), 271B, 271AA, 271G etc. The assessee also submitted that initiation and levy of penalty u/s. 271D/E of the Act for A.Y. 2003-04 is beyond reasonable period of time and therefore barred by limitation. Alternatively, the assessee submitted that even on merits the assessee has reasonable cause as envisaged u/s. 273B of the Act for not levying penalty u/s. 271D and 271E of the Act. The assessee submitted that since the assessee has already deceased, his legal heir is not in a position to explain the business expediency of such transactions.
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The ld. CIT(A) disposed of the observations by observing that there is an admitted infringement related to section 269SS and section 269T of the Act. So far as the question of time tag of 10 years is concerned, the ld. CIT(A) held that this is occasioned by the fact that the legal heir of the assessee himself filed the appeal after delay of 1600 days with a condonation of delay application. In the assessment order u/s. 143(3) of the Act dated 27-03-2016 for the captioned year, various opportunities were provided to the assessee, who was alive at that time did not attend the proceedings nor responded to notices thereby leading to ex-parte assessment order being passed u/s. 144 of the Act. The assessee expired on 06-02-2008 and legal heir Shri Pawan Sharma filed an appeal with condonation of delay of 1600 days. Importantly, PAN, confirmation, address of all such parties from whom cash was accepted and repaid were filed by the legal heir and therefore he was well aware of the business affairs of the deceased assessee. Considering the background of criminal proceedings against assessee, such acceptance and repayment of loan in cash are within the objective of promulgation of section 269SS and 269T of the Act. Therefore, the ld. CIT(A) held that the assessee cannot be held as prevented by reasonable cause for acceptance of such cash and repayment of such loan in cash. So far as objection that the notice is bad in law since penalty u/s. 271D and 271E can be imposed only by the Joint Commissioner, the ld. CIT(A) rejected this objection by observing that Explanation to section 251 of the Act give wide ranging power to Commissioner(Appeals) to enter into the shoes of the Assessing Officer and act accordingly. In this regard, the intention and objective of legislature has to be looked into. In the hierarchy, the ld. CIT(A) is higher than Joint Commissioner and if any power to
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specifically provided to Joint CIT, who is both Assessing Officer as well as Income Tax Authority, then as per definition of section 2 (7A) of the Act and Section 116 of the Act, then the same power available to JCIT is also available to higher authorities. The ld. CIT(A) held that appellant’s contention such provision excludes all other authorities higher to Joint Commissioner of Income Tax is misconstrued and misleading. All these provisions have to be interpreted in consonance with intention and object of legislature taking into account that section and power therein. Therefore, the contention of the assessee in respect of jurisdiction was rejected. Accordingly, the ld. CIT(A) held that in absence of any satisfactory reply in reference to transaction infringing section 269SS and 269T of the Act, he held that assessee is liable to penalty as contemplated u/s. 271D and 271E of the Act. The penalty was calculated @ 100% of amount so involved for each such infringement. Accordingly, the ld. CIT(A) imposed a penalty of Rs. 95,000 u/s. 271D of the Act and Rs. 4,15,887/- u/s. 271E of the Act.
64 Before us, the ld. counsel for the assessee reiterated the submission of jurisdiction, which were also raised before ld. CIT(A). The assessee submitted that as per section 271D(2) and Section 271E(2) penalty can be levied by “Joint Commissioner”. Hence, the CIT(A) could not have exercised jurisdiction for levy of penalty u/s. 271D/E. Wherever legislature intended to extend powers of levying penalty to CIT(A), it has been specifically provided in the respective sections viz. 270A, 271(1), 271A, 271AA, 271G and 271J. Further, as per plain language of the statute, only Joint Commissioner can levy penalty u/s. 271BB, 271CA, 271D, 271E and 271DB. Thus, when the legislature has consciously not empowered CIT(A)
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to levy penalty u/s. 271D/271E, ld. CIT(A) cannot levy such penalty. As regards, CIT(A)’s observations that the ld. CIT(A) being a statutory officer and exercises power of JCIT (i.e. a subordinate officer), the assessee submitted that it is a settled legal position that there is no statutory provision under which a power to be exercised by officer can be exercised by a superior officer. The assessee placed reliance on several cases in support of the aforesaid legal proposition. The ld. counsel for the assessee further submitted that while disposing of an appeal against order of assessment, ld. CIT(A) would not have initiated penalty proceedings u/s. 271D and section 271E. Section 251 of the Act provides for power of CIT(A) in disposing of an appeal. Once the appeal before CIT(A) has been disposed off, no further action can be taken by him. The ld. Departmental Representative on the other hand relied upon the order of the ld. CIT(A) imposing penalty u/s. 271D and 271E.
We have heard the rival contentions and have perused the material on record. We are in agreement with the argument of the counsel for the assessee that the language as per section 271D and 271C of the Act is very categorical and is not open to interpretation. The operative part of the section is being reproduced for ready reference:
Penalty for failure to comply with the provisions of section 269SS.
271D. (1)……
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(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.
Penalty for failure to comply with the provisions of section 269T.
271E. (1) …….
(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.
In the said sections, the Legislature has clearly provided that only the joint Commissioner is empowered to levy penalty. The Learned counsel for the assessee placed reliance on the case of CIT v Aquatic Remedies 406 ITR 545 (Bom), wherein Bombay High Court held that when in terms of section 151(2), sanction to issue notice under section 148 has to be issued by Additional Commissioner, reopening of assessment with approval of Commissioner was unsustainable. The Supreme Court of India dismissed the SLP filed against the High Court Ruling. Further, in case of Yum restaurants v DDIT 397 ITR 639 (Del), the Bombay High Court held that where original assessment was processed under section 143(1), approval for reopening of assessment should be by an officer of rank of Joint Commissioner; approval granted by an officer superior to Joint Commissioner would not satisfy requirement of section 151(2). In the case of CIT v. SPL'S Siddhartha Ltd [2012] 17 taxmann.com 138 (Delhi), the Delhi High Court held that where Assessing Officer instead of taking approval from Joint Commissioner as per provisions of section 151, obtained
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approval from Commissioner and issued notice under section 148 said notice was invalid.
65.1 It is a well settled principle of law, that if the language of the statute is plain and unambiguous, then the same may not be open to interpretation and the plain language of the statute has to be respected. The Supreme Court in CBDT v. Aditya V. Birla [1988] 170 ITR 137, held that when the literal meaning is clear, one need not bother any more for the intention or the purpose. The five Judges Constitutional Bench of the Supreme Court in the case of Padmasundara Rao v. State of Tami Nadu [2002] 255 ITR 147 while discussing the period of limitation for declaration, the court reaffirmed the literal rule and held that the language of section 6 of the Land Acquisition Act, 1984, is plain and unambiguous; there is no scope for reading something into it. It may be useful to refer to the Ahmedabad special bench Tribunal decision in the case of AMP Spg. & Wvg. Mills (P.) Ltd. v ITO [2006] 100 ITD 142 (Ahmedabad - ITAT) (SB), where is the Tribunal observed as under:
Therefore, one of the pillars of statutory interpretation, viz., the literal rule, demands that if the meaning of the statutory interpretation is plain, the Courts must apply the same regardless of the result. The very concept of interpretation connotes the introduction of elements as are necessarily extrinsic to the words in the statute. Though the words ‘interpretation’ and ‘construction’ are used interchangeably, the idea is somewhat different. The rule of construction that if the statutory provision is susceptible or admits of
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two reasonably possible views, then the one which would promote its constitutionality should be preferred on the ground that the Legislature is presumed not to have intended to exceed its own jurisdiction, is subject to the further rule that it applies only where two views are reasonably possible on the statutory language.
65.2 We are therefore in agreement with argument of the Counsel for the assessee that when as per the Rule of Literal interpretation, when the words of the Statute are plain and unambiguous, the same should be understood to represent the legislative intent. In the instant case, the language of sections 271D and 271E is plain and unambiguous and states specifically that penalty shall be imposed by the Joint Commissioner of Income Tax. We therefore are of the view that the CIT(Appeals) erred in law and in facts in initiating and levying penalty u/s 271D and 271E of the Act.
Now we shall take up individual grounds of appeal.
ITA 2771/Ahd/ 2013:
Ground Nos. 1,3, 4, 5 and 7 of the assessee’s appeal are being allowed for reasons cited above.
Grounds Nos 2 and 6 do not require any specific adjudication, since the appeal has been allowed on the issue of jurisdiction.
ITA 2772/Ahd/ 2013:
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Ground Nos. 1,3, 4, 5 and 7 of the assessee’s appeal are being allowed for reasons cited above. Grounds Nos 2 and 6 do not require any specific adjudication, since the appeal has been allowed on on the issue of jurisdiction.
In the result, the appeal of the assessee is allowed.
In the combined result, in ITA No. 1030/Ahd/2013 for A.Y 2003-04, appeal of the assessee is dismissed, in ITA No. 1032/Ahd/2013 for A.Y. 2004-05, appeal of the assessee is dismissed, in ITA No. 1029/Ahd/2013 for A.Y. 2003-04, appeal of the assessee is dismissed, in ITA No. 1031/Ahd/2013 for A.Y. 2004-05, the appeal of the assessee is dismissed and in ITA Numbers 2771/Ahd/ 2013 and 2772/ Ahd /2013 for AY 2003-04, appeals of the assessee are allowed.
Order pronounced in the open court on 30-03-2022
Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 30/03/2022 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.
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By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद