SMT. DEVIKABEN SHAILESH CHOKSHI L/H OF LATE SHAILESH RAMANLAL CHOKSHI,AHMEDABAD vs. THE JT. CIT, RANGE-1(3), AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.951/Ahd/2024 (Assessment Year: 2012-13) Smt. Devikaben Shailesh Chokshi Vs. Joint Commissioner of (L/h. of Late Shailesh Ramanlal Income Tax, Chokshi), Ahmedabad-Range1(3), 2220, Manek Chowk, Ahmedabad Ahmedabad-380001 [PAN No.AAWPC0092J] (Appellant) .. (Respondent) Appellant by : Shri Mehul K. Patel, A.R. Respondent by: Shri R. N. Dsouza, CIT DR 26.09.2024 Date of Hearing Date of Pronouncement 14.10.2024 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi, vide order dated 06.02.2024 passed for A.Y. 2012-13. 2. The Assessee has taken the following grounds of appeal:-

“1. That on facts, and in law, the learned NFAC has grievously erred in confirming the levy of penalty u/s. 271D of the Act of Rs. 1,30,63,574/-. 2. That on facts and in law, it ought to have been held that there is no violation of provisions of section 269SS of the Act. 3. In the Alternative, and without prejudice to the above grounds of appeal, it ought to have been held that penalty is not validly levied as the appellant was prevented by a reasonable cause in terms of section 273B of the Act. The appellant craves leave to add, alter, amend any ground of appeal.” 4. Smt. Devikaben Shailesh Chokshi (L/h. of Late Shailesh Ramanlal Chokshi) vs. JCIT Asst.Year –2012-13 - 2– 3. At the outset, we observe that the appeal is time barred by 30 days. The assessee filed an Affidavit for condonation of delay vide Affidavit dated 03.05.2024, wherein the assessee stated that the order of NFAC was served on her husband’s email address shaildevi@gmail.com and no physical order was served to the assessee. The assessee’s wife was not conversant with the income tax matters and she does not operate computer. In the last week of April, 2024 the son of the assessee operated the mail id of her late husband and he found out about this order. There was an inadvertent delay in consult with the Advocate of the assessee, as a result of which there was a delay of 30 days in filing of the present appeal. The Counsel for the assessee submitted that there was no mala fide in delaying the filing of the appeal and hence the same may be kindly condoned.

Act. While passing the order, the Assessing Officer made the following observations:

“8. The assessee's contention has been considered but not found acceptable. The assessee has failed to submit any proof as to what was the necessity of the business which warranted acceptance of loans / deposits in the form of gold in violation of section 269SS of the Act. The case laws on which the assessee relied upon is not applicable to the facts of the present case. Further, it is not the case of assessee that the loans / deposits were accepted from such persons who did not have any bank account. Even other-wise also non-maintenance of bank account cannot be considered as reasonable cause for accepting deposits in violation of section 269SS other-wise the entire purpose of bringing the provision of section 269SS on the statute will be defeated. 9. In view of the above facts and the document/details available as per records, it shows that "As per agreement dated 12/07/2011 between assessee and Shri Kaushik Kantilal Mandaliya, Il was decided that Shri Kaushik Kantlial Mandaliya will give the gold 5949.920 grams as loan to the assessee @ rate of Rs.2195.59 and us such the assessee will pay license fee rate Rs. 120/- per gram per annum an gold to Shri Kaushik Kantilal Mandaliya. As per the statement recorded of Shri Kausnik Kantilal Mandallya, the transaction was made only by passing journal entry The assessee treated the gold as loan and shown in his personal books of account by passing entry as unsecured loan. Thereafter, the loan amount of Rs.1,30.63.574/- was Introduced as capital in proprietary business le. In M/s Sparkle Gold. As per section 269SS of the Act "no person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the deposition any loan or deposit otherwise than by an account payee cheque or account payee bank draft exceeding Rs. 20,000/-". Therefore, the loan acceptable in form of Gold is violating the provision of section 269SS of the Act. Therefore, I am of the opinion that this is a fit case for levy of penalty u/s. 271D of the Act as the assessee has violated the provisions of section 269SS without any reasonable cause in accepting the loans/deposits in the form of Gold amounting to Rs.1,30,63,574/- from Shri Kaushik Kantilal Mandaliya during the year under consideration. 11. Accordingly, I hereby levy a penalty of Rs.1,30,63,574/- u/s 271D of the Act, for accepting loans/deposits otherwise than by account payee cheque/draft in violation of section 269SS of the Act. 12. Assessing Officer is directed to issue demand notice and challan accordingly and make necessary entries in the records.” Smt. Devikaben Shailesh Chokshi (L/h. of Late Shailesh Ramanlal Chokshi) vs. JCIT Asst.Year –2012-13 - 5– 6. In appeal Ld. CIT(Appeals) confirmed the penalty imposed by the Assessing Officer. Ld. CIT(Appeals) observed that two primary issues emerge for consideration in the appeal filed by the assessee. The first pertains to the assessee's claim that this was the inaugural year of his business in retail and wholesale gold jewellery, necessitating a loan of physical gold from Shri Kaushik Kantilal Mandaliya. The assessee submitted a Gold Agreement during penalty proceedings to support this claim and contended that the JCIT erred in holding that no evidence was provided to justify the acceptance of loans outside the prescribed methods outlined in Section 269SS of the Income Tax Act. The second issue raised by the assessee was around the interpretation of the term "money" in the context of Section 269SS of the Act. The assessee submitted before Ld. CIT(Appeals) that the physical gold accepted as a loan does not qualify as "money" and relied on the judgment from the Allahabad High Court, which held that bullion and metal should not be included in the legal or popular definitions of “money”. After thorough deliberation, Ld. CIT(Appeals) held that the assessee has not successfully substantiated his claims regarding the necessity of accepting loans in physical gold. Ld. CIT(Appeals) observed that the JCIT concluded that the appellant failed to provide adequate proof of business necessity justifying the acceptance of loans in a manner contrary to the methods specified in Section 269SS of the Act, which prohibits the acceptance of loans exceeding Rs. 20,000 in any form other than through an account payee cheque, bank draft, or specified electronic means. Ld. CIT(Appeals) held that the assessee's submission that gold metal in physical form does not constitute "money" conflicts with his own position that he Smt. Devikaben Shailesh Chokshi (L/h. of Late Shailesh Ramanlal Chokshi) vs. JCIT Asst.Year –2012-13 - 6– accepted this gold as a “loan”. This inconsistency highlights a significant violation of Section 269SS of the Act, which explicitly excludes precious metals as acceptable forms of loan acceptance. The penalty under Section 271D was levied due to this clear contravention. Despite the assessee's claims regarding the initial stage of his business and the need for flexibility in loan acceptance, the JCIT correctly noted that the evidence provided, including the Gold Agreement, did not sufficiently demonstrate any reasonable cause for the deviations from statutory requirements. Furthermore, Ld. CIT(Appeals) held that the existence of bank accounts for both the assessee and the lender negates the argument that there were no other options for loan acceptance. Therefore, Ld. CIT(Appeals) held that the assessee failed to demonstrate the necessity for the method of loan acceptance he chose, and the arguments presented by the assessee do not justify a deviation from the provisions of the law. Accordingly, Ld. CIT(Appeals) upheld the penalty imposed by the JCIT. While passing the order, Ld. CIT(Appeals) made the following observations:

“5.3 The appellant emphasizes that the term "money" has a legal meaning as well as a popular sense both of which bar the inclusion of bullion or metal of any kind as such in the concept of "money". On the one hand, the appellant himself contends that the gold metal in physical form had been accepted by him in the form of a "loan" and on the other hand the appellant raises a plea that "gold" in physical form does not fall within the meaning of "money". Whether the gold metal or any other valuable item is accepted as and by way of loan or deposit by any person from any other person, it certainly indicates the contravention of the provision of Section 269SS of the Act, which specifically provides for the specified mode of carrying out such transactions. In the event of contravention of such provision of Income-tax Law, it attracts the provision of Section 271D of the Act, which lays down the levy of penalty in such cases. When there is a clear provision of any bar or specified mode of carrying out any transaction enumerated in any of the statutes, whether it be relating to revenue or tax-related law or any other law, the appellant cannot be permitted to take advantage by giving a different meaning or interpretation or connotation or law and raising a plea that the appellant had taken gold in physical form as it was his Smt. Devikaben Shailesh Chokshi (L/h. of Late Shailesh Ramanlal Chokshi) vs. JCIT Asst.Year –2012-13 - 7–

first year of business of gold jewellery - retail and wholesale As stated above the provision of Section 269SS does not include the mode of carrying out such transactions on the form of any precious metal in physical form. Thus, I concur with the view of the JCIT in holding that there was no reasonable cause for accepting the loans from a third party in the mode and manner not specified in Section 269SS of the Act. I also concur with the view of the JCIT that the appellant had tailed to submit any evidence regarding the necessity of the business which warranted acceptance of loans in the form of gold metal in physical form, i.e. otherwise than by way of a mode prescribed specifically in Section 269SS of the Act. I also concur with the view of the JCIT in not accepting the Explanation (i) to Section 269SS of the Act, which is raised as a plea by the appellant that the gold metal accepted as a loan by the appellant does not fall within the meaning of 'money" and hence it does not attract the provision of Section 269SS of the Act. Whether gold metal or any other precious metal or any other valuable item falls within the definition of money or not, is not the question to be considered here, but the question that arises here is the mode adopted by the appellant for accepting loans for his business purpose is not in accordance with the provision of Section 269SS of the Act. 5.4 It is an undisputed fact that the appellant had admittedly raised loans in the form of gold metal. It is also an undisputed fact that gold metal or any other precious metal is not prescribed as one of the modes of acceptance of loans in Section 269SS of the Act. Hence, it is a clear violation of the provision of Section 269SS of the Act, which entails the levy of penalty u/s 271D of the Act. 5.5 In view of the above discussion, the facts that are involved in the instant case reveal that the appellant bad miserably failed to prove the necessity of using any other mode of raising loans otherwise than by way of the modes enumerated specifically in the provision of Section 269SS of the Act, thereby attracting the levy of penalty under the provision of Section 271D of the Act. Merely because the appellant had placed on record a copy of the Gold Agreement in the course of penalty proceedings before the JCIT, does not prove that there was a reasonable cause in not following the provision of Section 269SS of the Act. Be that as it may, the Statement of Facts and written submission of the appellant are examined in light of the evidences relied upon by him in the course of appellate proceedings. It is undisputed that the impugned amount of Rs. 1,30,63,574/- was accepted as a loan by the appellant from a third party in the form of gold metal in physical form during the financial year 2011-12 relevant to A.Y 2012-13. It is not a case where the appellant or the said third party did not have bank accounts at the relevant time or there was any reasonable cause for not following the provision of Section 269SS of the Act. At the appellate stage, the appellant is trying to twist the facts by raising a plea that it was the first year of the business of retail and wholesale trade in gold jewellery, and hence the appellant adopted such a mode of acceptance of loans. None of the case- laws that are relied upon by the appellant support the appellant's case. 5.6 Thus, taking into account the facts and circumstances of the case and the provisions of law, I do not find any reason to interfere in the action of the JCIT of levying the penalty of Rs. 1,30,63,574/- u/s.271D of the Act for violating the Smt. Devikaben Shailesh Chokshi (L/h. of Late Shailesh Ramanlal Chokshi) vs. JCIT Asst.Year –2012-13 - 8– provision of Section 269SS of the Act by way of accepting the loans by way of gold metal in physical form. Thus, the grounds of appeal raised in the Memo of Appeal stand dismissed. 6. Thus, to conclude, the appeal stands dismissed.” 7. The assessee is in appeal before us against the aforesaid order passed by the CIT(A) dismissing the appeal of the assessee.

(iii) to Section 269SS of the Act stated that “loan or deposit” means loan or deposit of “money”. Therefore, looking into the definition of loan and deposit, it is evident that the loan or deposit has to be only a loan taken in the form of “money” and the “Gold” loan taken by the assessee falls outside the purview of Section 269SS of the Act, in the first instance. Therefore, since the assessee has taken loan of Gold metal and not money, and since the provisions of Section 269SS of the Act deals with loans or deposits of “money”, as per Explanation (iii) of the said section, there is no violation of provision of Section 269SS of the Act. Secondly, the Counsel for the assessee drew our attention to Clause 32.2 of the Finance Act, 1984, which brought into force the provisions of Section 269SS of the Act, which was “with a view to countering this device, which enables taxpayers to explain away unaccounted cash or unaccounted deposits…”. Accordingly, the Counsel for the assessee submitted that the objective of enacting Section 269SS of the Act was to stop taxpayers from bringing unaccounted cash or Smt. Devikaben Shailesh Chokshi (L/h. of Late Shailesh Ramanlal Chokshi) vs. JCIT Asst.Year –2012-13 - 9– deposits in their books, however, in assessee’s case, no cash or deposits were involved and both the assessee as well as Mr. Kaushik Mandaliya (the lender) was both have reported all the required details in their respective books of accounts and there is nothing which is unaccounted and therefore, there is neither any evasion of tax nor any intention to evade taxes. The third argument of the Counsel for the assessee was that entry for Gold taken is booked as “unsecured loan” in the journal entry in his books of accounts. Gold was taken with a condition to return the same after a stipulated time and therefore, there was no other way to book an entry in his books of accounts other than journal entry in order to record a transaction in it’s actual form. The Counsel for the assessee relied on judicial precedents in support of the contention that provisions of Section 269SS of the Act were not attracted merely on the basis of journal entries. The Counsel for the assessee further submitted that there was a reasonable cause for taking the Gold from the lender which was that this was the assessee’s first year in jewellery retail and wholesale business and it was with this intention that the assessee took loan of Gold stock to start his business. The concerned Gold bars of 5949.920 grms were part of Mr. Kaushik Mandaliya stock-in- trade held by him in his books of accounts. The assessee also furnished copy of agreement between Mr. Kaushik Mandaliya and himself. Further, Mr. Kaushik Mandaliya (lender) also appeared before the Income Tax Department and has given his statement in response to summons issued to him by the Income Tax Department. Further, the Counsel for the assessee also submitted that in terms of the agreement, assesse returned the Gold metal to Mr. Kaushik Mandaliya on 07.10.2013. The Counsel for the Smt. Devikaben Shailesh Chokshi (L/h. of Late Shailesh Ramanlal Chokshi) vs. JCIT Asst.Year –2012-13 - 10– assessee submitted that as per the provisions of Section 271D penalty could not be imposed in case of reasonable cause having been adduced by the assessee. In the instant case, the assessee has been able to give adequate documentary evidences as well as reasonable cause, so as to fall outside the purview of provisions of Section 271D of the Act.

आदेश की "ितिलिप अ"ेिषत/Copy of the Order forwarded to : अपीलाथ" / The Appellant 1. 2. ""थ" / The Respondent. 3. संबंिधत आयकर आयु" / Concerned CIT 4. आयकर आयु"(अपील) / The CIT(A)- 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.