Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BANGALORE BENCH A, BANGALORE
Before: SHRI. N. V. VASUDEVAN
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by Revenue, it is aggrieved that penalty u/s.271D of the Income-tax Act, 1961 (‘the Act’in short), levied on the assessee was cancelled by the CIT (A)-III, Bangalore, vide his order dt 30.08.2013, for the A.
Y. 2006-07.
ITA.1533/Bang/2013 Page - 2
Facts apropos are that during the search of a person by name, B. S.
Manjunath, it came to the knowledge of the Department that money in cash was lent by him to various persons. In the balance sheet filed by the said Shri. B. S.
Manjunath along with his return of income for A. Y. 2007-08, the names of various people to whom he had lent the money were appearing. The assessee here, M/s. Prospero Realty Ltd, was one among such people and the amount shown was Rs.25 lakhs as loaned on 19.09.2005. As per the AO, blank cheques issued by Prospero Realty Ltd were also seized during the search. AO on the strength of the above, issued a show cause notice to the assessee as to why penalty u/s.271D should not be levied for violation of Section 269SS of the Act.
Submissions were made before the AO, wherein it was stated that there were no such borrowing by the assessee company from B. S. Manjunath. As per the assessee, one of its group company called, M/s. Clean Foods Ltd, was purchasing fruits from farmers and loans for such farmers were arranged by B.
S. Manjunath. As a security for such loans, cheques were given to B. S.
Manjunath. However, AO was not impressed by the above reply. According to him, in the diary maintained by B. S. Manjunath, the name of Muralikrishna, Managing Director (‘MD’ in short) of the assessee company was mentioned and the Balance Sheet of B. S. Manjunath mentioned the loan to Muralikrishna. As
per the AO, the explanation that the cheques were given by the assessee to B. S.
Manjunath, as security for loans given by him to farmers was self-serving in nature. Further as per the AO, just because the loan did not appear in the books ITA.1533/Bang/2013 Page - 3 of the assessee, would not show that there was no borrowing by it. Believing the diary of B. S. Manjunath and blank cheque of the assessee company found in the premises of B. S. Manjunath, AO came to a conclusion that assessee had received a cash loan of Rs.25 lakhs from B. S. Manjunath. He imposed penalty of Rs.25,00,000/- for violation of Section 269SS of the Act.
In its appeal before the CIT (A), argument of the assessee was that it had never taken any loan from B. S. Manjunath. As per the assessee, blank cheque given by Murslikrishna, MD of the assessee company was not against any loan raised by the assessee company. Assessee pointed out that there was no promissory note issued by it to B. S. Manjunath. Assessee also pointed out that Muralikrishna, MD of the assessee company when examined on oath on 28.03.2007, had categorically stated that he was only a guarantor and not a principal debtor. In other words, just because a cheque was found in the premises of B. S. Manjunath would not show that it had loaned any amount from B. S Manjunath. CIT (A) was impressed by the above arguments of the assessee. According to him, assessee was never confronted with any statement recorded from B. S. Manjunath. CIT (A) also noted that nothing was brought on record to demonstrate the contention of the AO that Prospero Reality had borrowed any money from B. S Manjunath. According to him, when the factum of loan was not unequivocally established there could be no violation of Section 269SS of the Act. He deleted the levy of penalty.
ITA.1533/Bang/2013 Page - 4
Now before us, Ld. DR strongly assailing the order of CIT (A) submitted that cheque found at the premises of B. S. Manjunath was that of Prospero Reality Ltd, signed by its MD, Muralikrishna. It would clearly imply that Prospero Reality Ltd had borrowed money in cash from B. S. Manjunath. The amount was also reflected in the balance-sheet filed by B. S. Manjunath. B. S.
Manjunath had also stated at the time of search that he was giving loans in cash to various persons at the rate of 2% per month, including Muralikrishna. Thus according to him, the factum of assessee having received cash loan from B. S.
Manjunath stood proved and there was a clear violation of Section 269 SS of the Act. Therefore, according to him, penalty u/s.271D of the Act was rightly levied.
Per contra, Ld. AR supported the orders of the authorities below.
We have perused the materials on record and heard the rival submissions.
What we find is that when Muralikrishna was examined, he never stated that any cash was received by him from B. S. Manjunath on behalf of the assessee, at any point of time. The seized materials from B. S.Manjunath might have shown Muralikrishna as one of the debtors, but nothing has been brought on record to show that name of the assessee company appeared any where in the diary of B. S. Manjunath or in the statement given by him. There was no promissory note issued by the assessee company for any loan taken by it from B. S. Manunath. In our opinion, the presence of a blank cheque by itself cannot ITA.1533/Bang/2013 Page - 5 establish a cash loan having been taken. A cheque of the assessee company could have been found in the premises of B. S. Manjunath for myraid reasons.
To invoke Section 271D of the Act, it is necessary that there should be a violation of Section 269SS of the Act. For violation of Section 269SS of the Act, the primary fact to be established is that a loan was received in cash. When the factum of the loan itself was not proved, no presumption can be drawn regarding acceptance of money in cash. Muralikrishna had in his statement dt.27.3.2007, clearly specified that assessee company had not borrowed any money from B. S. Manjunath. Even if the version of Muralikrishna that cheque was given to B. S. Manjunath for loan given by him bu B. S. Manjunath to farmers is unbelievable, still it willl not go to show that assessee had borrowed any money from B. S. Manjunath. In our opinion, CIT (A) has taken a right view that the borrowing was not established and therefore violation of Section 269SS of the Act could not be fastened on the assessee. Penalty was rightly deleted.
In the result, appeal of the Revenue stands dismissed.
Order pronounced in the open court on 11th day of June, 2015.