SAI SAKTI DEVELOPERS & BUILDERS PVT. LTD.,MUMBAI vs. ADDL.CIT 8(3), MUMBAI

This appeal has been filed by the assessee against the order dated 23.05.2014 passed by the Commissioner of Income Tax (Appeals)-18, Mumbai, for the assessment year 2005-06, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against penalty order passed u/s 271D of the Income Tax Act, 1961 (for short ‘the Act’).

Brief facts of the case are that during survey action at the business premises of Sh. Narayan Gowda, director of the assessee company, a note on the letter pad of the assessee company was found, the contents of which are as under: “I NarayanGowda (Director) of Sai Shakti Developers & Builders(P) Ltd. received cash of Rs. 10 lakhs (Ten lakh) on 25 .09.2004 from Mr. Subhash R Agarwal on the above said date.

On the basis of the said document penalty u/s 271D of the Act was levied on Narayan Gowda by Joint Commissioner of Income Tax range 21(3), Mumbai, for violating the provisions of section 269-SS of the Act by accepting cash loan of Rs.10,00,000/- from Mr. Subhash R Aggarwal. However, the ITAT Mumbai deleted the said penalty vide order dated 18.06.2010 passed in holding that Shri Narayan Gowda received the cash in question in the capacity of director of M/s Sai Shakti Developers & Builders. Accordingly, the AO issued notice under section 274 r/w section 271D to the assessee company to explain as to why penalty should not be levied for accepting the amount in question in violation of section 269-SS of the Act. The assessee contended that the company did not receive any cash from Mr Subash Agarwal and there is no entry in the books of account of the assessee company therefore penalty cannot be levied for any violation. However, the AO rejecting the contention of the assessee levied penalty of Rs. 10,00,000/-under section 271D of the Act.

The assessee challenged the penalty order before the Commissioner of Income Tax (appeals). The Ld. CIT(A) after hearing the authorised representative of the assessee dismissed the appeal and confirmed the penalty levied by AO. Being aggrieved, the assessee is in appeal before the Tribunal.

The assessee has challenged the impugned order passed by the Ld. CIT(A) on the following effective ground:-

Before us, the Ld. counsel for the assessee submitted that the Ld. CIT(A) has wrongly confirmed the penalty levied by the AO. The learned counsel for the assessee further submitted that since the assessee company has not received any cash from Shri Subash Agarwal and there is no entry in the books of account of the assessee, the Ld CIT(A) ought to have deleted the penalty levied by the AO. Therefore, the impugned order is liable to be set aside.

On the other hand, the Ld. departmental representative (DR) relying on the order passed by the Ld. CIT(A) submitted that since the ITAT has deleted the penalty levied against Shri Narayan Gowda holding that he has received the amount in the capacity of director of the assessee company, the company is liable for violation of the provisions under section 269-SS of the Act.