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Income Tax Appellate Tribunal, DELHI BENCH “E” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI L.P. SAHU
The aforesaid appeal has been filed by the Revenue against the impugned order dated 28.03.2013 passed by ld. CIT(A)-XXXI, New Delhi in relation to the penalty proceedings u/s.271E for the Assessment Year 2009-10. The Revenue is aggrieved by deletion of penalty of Rs.75,75,000/- imposed u/s.271E.
The brief facts qua the levy of impugned penalty are that after completion of assessment passed u/s.143(3), referred the case of the assessee company for initiating the penalty proceedings for violation of Section 269T of the Act after noting as under:-
“As per details available from the return of income, it has been perused that the amount of loss has been transferred to the share application money account to the tune of Rs.75.75 lac as per following details. M/s. Narsi Oil Refinery Pvt. Ltd. 1245000/- M/s. Gunvardhan Vyapaar Pvt. Ltd. 5035000/- M/s. Fiscal Services Pvt. Ltd. 1295000/- Total 7575000/- These transactions are in contravention to the provision of section 269T as the funds have been transferred from loan accounts without any account payee cheque or bank draft.”
Accordingly, notice u/s.271E was issued on 3rd October, 2011. In response to the show cause notice, the assessee filed a detailed explanation which has been incorporated in the penalty order wherein it was mainly contended that assessee has taken unsecured loan from the group companies and later on at their request the amount has been transferred to share application money during the current Assessment Year 2009-10. Whatever amount was not converted the same was repaid back by the assessee through account payee cheque. Hence, there is no repayment of loan in cash or contravention of Section 269T. The assessee has mainly changed the deposit from loan to share application money and no payment has been made in the contravention of the provision of Section 269T. However, the learned Assessing Officer held that since these transactions have been made otherwise than by account payee cheque or account payee draft, therefore, there is violation of Section 269T and accordingly, he imposed the penalty of Rs.75,75,000/- u/s.271E of the Act.
4. Ld. CIT(A) has deleted the said penalty after observing and holding as under:-
3.4 I have considered the submissions of the AR and the penalty order. The provisions of section 269T are unambiguous in their wordings. There is a requirement that the amount should have been repaid to the person for invoking the provisions of section 269T. In the instant case there has been no actual payment of the money by the appellant company. The amount received has only undergone change of nomenclature. From unsecured loan account the amounts have been transferred to share application money account. The money has been actually returned in the subsequent years in the case of two parties through account payee cheque as mentioned in the assessment order. The amount in respect of the third- party was still pending for repayment by the company. The facts being so, I do not consider there is any merit in holding that the amount has been repaid in contravention of section 269T. Therefore I’m not inclined to sustain the action of the Addl. CIT in this regard. The decision of ITAT Pune bench in the case of Sunflower Builders Pvt. Ltd. vs. DCIT 61 ITD 227 is directly on the point. The Hon’ble bench of ITAT has referred to the decisions of Hon’ble Supreme Court of India in the case of Bombay Steam Navigation Co Ltd (56 ITR 52) and decision of Hon’ble Gujarat High Court in the case of CIT 3 vs. Ritu Rayon Pvt. Ltd. (TAXAP/2524/2009 4/4) and concluded that in case of transfer of loan through book entries, backed by letter of the lender to do so and acceptance letter by the person in whose name same is transferred, section 269SS or 269T could not be applicable. Considering all these factors, the penalty imposed is hereby deleted.”
Before us, ld. counsel for the assessee, at the outset, submitted that the penalty proceedings u/s.271E were not initiated during the course of assessment proceedings nor there is any allegation in the assessment order passed u/.s143(3) and therefore, in view of the judgment of Hon'ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills Ambala City, reported in (2015) 379 ITR 521 (SC) such penalty cannot survive, because Assessing Officer has to record a satisfaction regarding the penalty proceedings u/s.271E in the assessment order. Thus, on this ground alone penalty is not sustainable.
On the other hand, learned DR submitted that these penalty proceedings are initiated separately and matter was referred to the Joint Commissioner/Additional Commissioner for initiating and levying the penalty which has been done by the Assessing Officer. He thus strongly relied upon the order of the Assessing Officer.
After considering the aforesaid submissions, we find from the perusal of the assessment order that Assessing Officer has not recorded any kind of satisfaction nor has he pointed out as to whether there was any violation of Section 269T. It is only during the course of assessment proceedings while analyzing the transaction, AO has to record his satisfaction that there is a violation of Section 269T for which he has to give his satisfaction and initiate the proceedings, and thereafter, he can refer the matter to the Joint/Additional Commissioner for the penalty proceedings. The Hon'ble Supreme Court in the case of the CIT vs. Jai Laxmi Rice Mills Ambala City (supra) has categorically held that, once there is no satisfaction recorded in the assessment order regarding the penalty proceedings u/s.271E, then no such penalty could be levied. Thus, here in this case, on this ground alone the penalty levied by the AO does not stand.
Apart from that, we find that there is no actual payment of the money by the assessee-company and only the nomenclature has changed. The share application money received by the assessee has been converted into loan and hence it cannot be said that there any kind of repayment of money and thus we uphold the order of the ld. CIT (A) that there is no violation of the Section 269T. Accordingly, on both the counts, the penalty levied by the Assessing Officer is directed to be deleted.