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Facts
The assessee accepted a cash loan of Rs. 31,50,000/- in violation of Section 269SS of the Income Tax Act. The JCIT levied a penalty under Section 271D, which was confirmed by the CIT(A). The assessee appealed against this order.
Held
The Tribunal held that the revenue failed to prove that the transaction of loan taken by the assessee violated Section 269SS. The Tribunal further noted that allegations of misappropriation related to this transaction were also nullified in a previous appeal.
Key Issues
Whether the penalty levied under Section 271D for alleged violation of Section 269SS is justified when the revenue has not proven the violation and prior proceedings related to the transaction have been nullified.
Sections Cited
271D, 269SS, 253(5), 12A, 153A
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC’’ JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 23/JP/2024
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC’’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’ble SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 23/JP/2024 fu/kZkj.k o"kZ@Assessment Year : 2014-15 Shri Tajender Pal Singh Sahni cuke The JCIT Vs. 1, Rajender Villa, Rubber Factory Road Central Range Kota 324 006 Udaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFFPS 1351 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Rajeev Sogani, CA & Ms. Ruchika Sogani, Adv. jktLo dh vksj ls@Revenue by: Mrs. Monisha Choudhary, Addl. CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 23/04/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 10 /07/2024 vkns'k@ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A), Udaipur-2 dated 18-09-2023 for the assessment year 2014-15 raising therein solitary ground of appeal as under:- ‘’In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of JCIT, Central Range, Udaipur in levying penalty of Rs.31.50
2 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR lacs u/s 271D for violation provisions of Section 269SS of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire penalty levied by the JCIT, Central Range, Udaipur and confirmed by the ld. CIT(A).’’
2.1 At the outset of the hearing, the Bench noted that there is delay of 53 days in filing the appeal by the assessee the assessee has filed an application dated 05-01- 2024 for condonation of delay with following prayer. ‘’A penalty order was passed on 27.06.2019 for AY 2014-15 by ld. JCIT, Central Range, Udaipur levying the penalty u/s 271D of the Act. An appeal against such order was preferred before Id. CIT(A)-2, Udaipur on 02.07.2019. The order confirming the levy of penalty was passed by ld. CIT(A)-2, Udaipur dated 18.09.2023 u/s 250 of the Income Tax Act, 1961. The order, as per current practice, was not served on the assessee through post. The said order was also uploaded on e-filing portal of the assessee. Accordingly, assessee was required to file an appeal before the Hon'ble ITAT on or before 17.11.2023, being 60 days from the date of receipt of order. However, the present appeal is being filed with a delay of 53 days. It is submitted that three appeals of the assessee (including the present appeal) were pending before CIT(A)-2, Udaipur. The assessee mailed to CIT(A)-2, Udaipur on 01.11.2023 for release of orders of all the three appeals but received no response from the office of CIT(A)-2, Udaipur.
3 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR In the other two appeals (quantum appeals), remand report was pending from DCIT, Central Circle, Kota. The counsel of the assessee was regularly following with the office of DCIT, Central Circle, Kota for the same. Only when he visited office of DCIT, Central Circle, Kota for checking the status of remand report on 27.12.2023, he was informed that an order confirming the penalty u/s 271D was already passed on 18.09.2023 The assessee took immediate steps to file the appeal before Hon'ble ITAT. The present appeal is with delay; however, the assessee came to know about the order being passed only on 27.12.2023 and, thereafter, the appeal is filed within 60 days of order coming in knowledge of the assessee. As per the provisions of sections 253(5), if there is sufficient cause for delay in filing of appeal, Hon'ble ITAT may condone such delay. In the above legal and factual background, as the assessee was not aware of the order being passed, the appeal could not be filed within stipulated time as per the provisions of law. However, it is submitted that the delay was not deliberate. In view of above, it is humbly prayed that delay in filing of appeal may please be condoned. Reliance is placed on the following judicial pronouncement of the Hon'ble Supreme Court: -Collector, Land Acquisition vs. Mst. Katiji [1987] 167 ITR 471 "The legislature has conferred the power to condone delay by enacting S.5 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on "merits". The expression "sufficient cause" employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the end of justice-that being the life-purpose of the existence of the institution of courts."
4 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR In view of above, a very humble prayer is made for condoning the delay.’’
2.2 On the other hand, the ld. DR objected to such delay made by the assessee in filing the appeal. 2.3 The Bench has heard the ld. DR parties and perused the condonation of the assessee and feel that there is a merit in the submission of the assessee and thus in view of the condonation application of the assessee, the delay in filing the appeal by the assessee is condoned. 3.1 Apropos solitary ground of the assessee, the facts as emerges from the order of the ld. CIT(A) who has dismissed the appeal of the assessee by observing as under:- ‘’4.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In this case, during the course of assessment proceedings in the case of M/s Whole Sale Cloth Merchant Association, Bajaj Khana, Kota Rajasthan, the Assessing Officer Central Circle-Kota noticed that during the F.Y.2013-14, the appellant, Sh Tejender Pal Singh Sahni in violation of the provisions of section 269SS of the Income Tax Act, accepted cash loan amounting to Rs 31,50,000/ from M/s Whole Sale Cloth Merchant Association. Accordingly, a reference was made by the DCIT Central Circle-Kota to the Joint Commissioner of Income- tax Central Range, Udaipur for considering Initiating penalty proceedings u/s 271D of the Income Tax Act against the appellant.
5 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR
The JCIT noted that in the audit report of M/s Wholesale Cloth Merchant Association for FY 2013-14, the auditor noted that an amount of Rs. 31.50 lakhs was outstanding against the appellant, Sh. Tejender Pal Singh sahni. The auditors have further mentioned that it is not available whether the payment has been made through bearer cheque or account payee cheque. The JCIT noted that the debits in the name of the appellant in the ledger, are further withdrawn in cash from the SBI account number 601664 of M/s Wholesale Cloth Merchant Association.
The appellant was president of M/s. Wholesale Cloth Merchant Association from 2013-14-to-2016-17. Hence, the entry in the name of the appellant in the accounts of M/s Wholesale Cloth Merchant Association is not disputable. The appellant stated that as per his books of accounts he has not accepted any loan from M/s Wholesale Cloth Merchant Association: This argument of the appellant is not found to be acceptable in view of the fact that the entry in audit report is not proved to be incorrect by the appellant The entry in the audit report is to be believed to be true unless some verifiable evidence is furnished to prove that the entry is incorrect. The appellant has not furnished any evidence to prove that the entry in the audit report is incorrect. The appellant claimed that the funds withdrawn by bearer cheque were used for the cause of the association. However, the appellant has not furnished any Evidence in support of the argument. In the absence of any supporting evidence, the JCIT is found to be justified in treating the loan entry in the books of M/s Wholesale Cloth Merchant Association as genuine. The appellant has accepted that the amount was withdrawn from the accounts of M/s Wholesale Cloth Merchant Association through bearer cheque. Therefore, the loan was accepted by the appellant through mode which is in violation of section 269SS. The fact that the appellant was president of M/s Wholesale Cloth Merchant Association at the time when this transaction took place further strengthens the order of the JCIT as there remains no doubt about the transaction taken place. Accordingly, the penalty levied by the JCIT of Rs. 31,50,000/- is found to be justified and upheld.
6 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR Accordingly these grounds of appeal are treated as dismissed.’’
3.2 During the course of hearing, the ld.AR of the assessee has filed detailed written submission praying therein that the ld. CIT(A) has erred in confirming the action of the JCIT in levying penalty of Rs.31.50 lacs u/s 271D for violation of provisions of Section 269SS of the Act which deserves to be allowed. 3.3 On the other hand, the ld DR supported the order of the ld CIT(A). 3.4 The Bench has heard both the parties and perused the materials available on record. The only basis for imposing penalty in this case is that the name of the assessee was appearing on the asset side of the balance sheet under the head of Loans and Advances in the audited balance sheet of the Association whereas it was specifically denied by the assessee that the assessee at all stages there is no loan taken or accepted by the assessee for attracting penalty u/s 271D of the Act. For the sake of brevity, Section 269SS is reproduced herein below. ‘’269SS.Mode of taking or accepting certain loans, deposits and specified sum - No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,- (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or
7 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:" On careful analysis of the Audit Report, the Bench noticed that in the audit report of the Wholesale Cloth Merchant Association the Auditor himself has highlighted discrepancies found at the time of the Audit. Two discrepancies observed by the Auditor at S. No. 2 & 3 below stand to substantiate that entries for loan / advances to Shri Tajender Pal Singh, as is appearing in the balance sheet of the Association, are contravention of proper accounting norms. The screenshot is placed at page 11 of the Paper book. Moreover, the Auditor himself under the head loans and advances in the audit report mentioned ‘’confirmation required’’ for the loan amount appearing against the name of the assessee. The relevant screen short is placed at page 12 of the paper book and thus from the above it is clear that even the auditor in his audit report has asserted that there remain discrepancies regarding the loan given to the assessee and proper proof in this regard is lacking. Even as already submitted by the assessee that he served as President of Wholesale Cloth Merchant Association from 2013-14 to 2016-17 and thereafter new team of office bearers took charge of Association after April 2017. Thus the entries relied upon by the AO are solely based on books prepared by the new team of office
8 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR bearers. Thus in such a situation, the onus of proving that entries are wrong in the books of account of another person is not on the assessee. And if it is to be established that loan has been taken then in that eventuality the lender has to prove that he has given loans as loan being bilateral transaction between the lender and the borrower. In this regard, the AO has not carried out any verification to validate the entries of loan from the person who made entries in the books of the Association. The Auditor in this case has only prepared the Audit Report in which he himself has highlighted / doubted the entry of loan given to the assessee. Therefore, the entries in the books of account of third parties are not relevant for imposing penalty. On this preposition, the Bench rely upon the decision in the case of CBI v. V.C. Shukla, CRL. A. NO. 000247-000256/1998; 1998 taxmann.com 2155 (SC) dated 2nd March, 1998. The headnote is reproduced hereunder:
“Whether even if entries made in diaries were correct, such entries were not sufficient to charge respondents with accusation levelled against them as there was no iota of independent evidence in support thereof - Held, yes –“
The object of enacted Section 269SS has already been explained by the Hon’ble Supreme Court in the case of Assistant Director of Inspection v. Kum. A.B. Shanthi [2002] 255 ITR 258, while rendering the judgment, has explained the object of introduction of provisions of section 269SS, as under:
9 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR “8. The object of introducing section 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer usually gives the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so- called lender also to manipulate his records later to suit the plea of the taxpayer. The main object of section 269SS is to curb this menace.”
In the instant case, it is not the case of the ld. Lower Authorities that Assessee has ever used the said alleged cash loan to explain his unaccounted money. Thus, the levy of penalty would be contrary to the objects for which the law was enacted. Lastly, it has already been pointed out that the issue of alleged misappropriation against the assessee was also the subject matter of controversy for cancellation of registration of Wholesale Cloth Merchant Association us/ 12A of the Act. The Association filed appeal before ITAT Jaipur Bench and the said appeal was decided vide order dated 06-01-2021 in ITA No. 688/JP/2019 by the Coordinate Bench and the relevant portion of the order of the Coordinate Bench is at para 23 and page 43 of the order wherein the very allegation of misappropriation and the resultant allegation of cash loan taken by the assessee stands nullified. The extract of the order is reproduced below:-
10 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR ‘’23. Another submission of the assessee in order to counter the allegation of the department that the application of funds ‘deemed to have been made for the benefit of specified person’ has been countered by submitting that Due to internal differences between the office bearers a FIR came to be filed for misappropriation of funds by the new management against the previous management. Subsequently, the Police after thorough investigation not finding any case for misappropriation of funds has proposed FR (Final Report) in the instant FIR vide its report dated 31.01.2019. In the instant case, the ld. Assessing Officer & ld. Pr. Commissioner of Income-tax without any independent verification have alleged misappropriation of funds. The assessment of the assessee appellant trust and its ex-president Shri Tejendra Pal Singh was done by the same Assessing Officer and in the assessment orders passed u/s. 153A of the Act dated 20-21.12.2018 for the A.Y. 2014- 2015 to 2016-2017 in the case of Shri Tejendra Pal Singh, no addition has been proposed for so called misappropriated income. Thus, without carrying out any independent verification and on account of mere suspicion, without any proof the said allegation has been levelled against the assessee appellant Trust.”
Thus from the totality of the facts and circumstances of the case as discussed above, the Bench is of the view that the transaction of loan taken by the assessee or committing any violation of provisions of Section 269SS of the Act is not proved by the Revenue. Therefore, the Bench is of the view that the ld. CIT(A) erred in confirming the action of the JCIT in levying penalty u/s 271D of the Act in violation of Section 269SS of the Act. Thus the Bench allows the solitary ground of appeal and delete the penalty confirmed by the ld CIT(A). The Bench orders accordingly.
11 ITA NO. 23/JP/2024 TAJENDER PAL SINGH VS JCIT, CENTRAL RANGE, UDAIPUR 4.0 In the result, the appeal of the assessee stands allowed with no orders as to costs. Order pronounced in the open court on 10 /07/2024.
Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 10 /07/2024 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Tajender Pal Singh Sahni, Kota 2. izR;FkhZ@ The Respondent- The JCIT, Central Range, Udaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 23/JP/2024) vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेजज. त्महपेजतंत