ATUL N. SHAH,AHMEDABAD vs. THE JT.CIT, RANGE-4(2), AHMEDABAD

O R D E R आदेश आदेश These two appeals have been filed by the assessee against separate order passed by the learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [in short referred to as “ld. CIT(A)”] under section 250 of the Income Tax Act, 1961 [in short referred to as “the Act”], both dated 27.09.2023, confirming the levy of penalty of Rs.8,25,000/- each under Section 271D and 271E of the Act for Assessment Year (AY) 2013-14.

3. The ld. Counsel for the assessee pointed out that the impugned penalties levied u/s 271D & 271E of the Act were on account of the assessee having been found to be violated the provisions of Section 269SS and 269T of & 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 2 the Act which debarred acceptance and repayment of loan respectively in cash beyond a certain limit. In the present case, the charge of the Revenue was that the assessee had taken loans of Rs.8,25,000/- in cash and repaid the same otherwise than by account payee cheque as required by Statute, i.e. the repayment was found to have been made by bearer cheques in violation of the provision of law, and therefore, the penalty levied on the assessee of the equivalent amount of cash loan taken and repaid amounting to Rs.8,25,000/- each u/s 271D and 271E of the Act.

1. In law and in the facts and circumstances of the case, the CIT(A) has grievously erred in upholding the penalty levied by Ld. Jt. CIT, Range-4(2), Ahmedabad of Rs. 8,25,000/- u/s 271E of the Act for alleged violation of provisions of Section 269T of the Act, in the penalty order dated 29.03.2018 made by him for A.Y. 2013-14. 2.In law and in the facts and circumstances of the case, the CIT(A) has also failed to appreciate the fact that no transactions in cash referred to in the penalty order were effected and thus no penalty is leviable

1. In law and in the facts and circumstances of the case, the CIT(A) has grievously erred in upholding the penalty levied by Ld. Jt. CIT, Range-4(2), Ahmedabad of Rs. 8,25,000/- u/s 271D of the Act for alleged violation of provisions of Section 269SS of the Act, in the penalty order dated 29.03.2018 made by him for A.Y. 2013-14. 2.In law and in the facts and circumstances of the case, the CIT(A) has also failed to appreciate the fact that no transactions in cash referred to in the penalty order were effected and thus no penalty is leviable & 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 3

Sr. Name of person Name Name of Bank Account No. Amount of Date of cheque No signing cheque Cheque

& 953/Ahd/2023 pertaining to AY 2013-14 before SMC Facts: Police in it's search operations found cash of Rs. 17.17 lacs & cheques/demand draft of Rs. 36.75 lacs at Sudama Resorts. This information was received by ITO(Inv) Unit-Il Ahmedabad. The cash & cheques were requisitioned u/s 132A on 27/01/2015.

& 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 6 Statement of Mr Kaushik J Shah, Director of Sudama Resorts Pvt Ltd, was recorded u/s 131(1A) where he confessed to arranging finance for the members of Sudama Resorts Pvt Ltd. He admitted to cheques being obtained from the Financiers. He however was unable to give the names of the Financiers. He (Mr. Kaushik Shah) owned up the same as HIS income for FY 2012-13 relevant to AY 2013-14. The Assessee's (Mr Atul N Shah) reply dated 13-12-2017 (on Pg 3-4 of Penalty order) was not accepted and ultimately JCIT levied penalty u/s 271D for having accepted loan in Cash being violation of section 269SS. Penalty of Rs. 8.75 Lacs was levied.

Penalty u/s 271D levied The penalty is based solely on presumption that cash loan was received against the security of cheques & this is based on the statement of Mr Kaushik J Shah & the fact that signed cheques were found during search. Assessee's Contentions: There is no specific reference to question and the response of the Mr Kaushik Shah based on which the JCIT has come to above conclusion - more particularly when TWO cheques of Rs. 75K each dated 15-5-2012 & 15-6-2012 were not deposited even when the search was conducted on 30-06-2012. Assessee's demand a cross examination NOT granted. (Pg 4 of penalty order) The reasoning that the Assessee, Mr Atul Shah, wanted to buy a car against which the cheques were given & SUCH transaction (of buying a car against which loan was intended to be taken) didn't materialise was not accepted by the JCIT even in light of the fact that two cheques dated 15-5-2012 & 15 06 2012 were not deposited as aforesaid. Further, the Mr Kaushik who owned up the transaction and offered the income has not been considered and penalty is levied merely on surmises & presumptions. (Refer Pg 4 of penalty order where the response is re-produced - common submission for 271D & 2716) CIT(A) finding - reliance placed on various decisions are on different facts where the factum of accepting loan in cash was established. Assessee's Plea In the instant case - its only a presumption based on undeposited cheques found & statement of Mr Kaushik Shah where Mr Atul Shah (Assessee) has NOT been mentioned anywhere. Nothing is brought on record to establish that Cash loan was received / Loan repaid in cash. Thus penalty is based on conjectures, surmises & suspicion.

& 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 7 Decisions relied upon: 1) Navin Kumar v. JCIT, Bhatinda in ITAT Amritsar in 98 ITD 242 Relevant headnotes reproduced for reference: The factual finding recorded by the Commissioner (Appeals) was fully supported by the material on record. Except photocopies of alleged statement of loan account of the assessee which was contradicted by admission of 'H' and was shown to be incomplete, there was no material to infer that loan/deposit in contravention of the provisions of section 26955 was returned by the assessee. Therefore, it was not possible to accept that 'f' did not make admissions in his statement attributed to him by the Commissioner (Appeals) The said fact was not challenged even by the revenue, it was further not clear as to how fact of entering Rs. 10,000 when actually Rs. 8,500 were given H, would be reflected in the copy of account produced by the revenue it was difficult to subscribe to the view proposed by the Judicial Member, it is a settled law that penalty proceedings are quasi-criminal proceedings. The revenue authorities are obliged to record a clear finding based on authentic evidence which would leave no scope for doubt that the assessee committed offence and was liable to be visited with penalty. The penalty cannot be imposed on vague and imaginary evidence. No such definite evidence was available in the instant case to show that the assessee contravened provisions of section 26955 to justify levy of penalty under section 271D. The Commissioner (Appeals), on the basis of statement of the assessee, assumed that he must have received loan or deposit of Rs. 30,000 and, therefore, imposed penalty of a equal amount which inference was not supported by any cogent material. The Accountant Member had properly analyzed statement of the assessee. There were large number of credit and debit entries in unreliable photocopies of accounts relied upon by the revenue authorities. Entry or entries taken singly or jointly did not establish that the assessee received loan/deposit of Rs. 30,000 in contravention of statutory provision. The penalty had been imposed on estimate and guess work and Rs. 30,000 had been taken in an ad hoc manner. There was no justification to hold that statutory provisions had been violated in terms of section 271D. Legal effect of the order proposed by the Judicial Member was that relief allowed by the Commissioner (Appeals) was withdrawn although no request to do so was made by the revenue. The impugned order had been accepted by them. There was also force in the alternative finding of the Accountant Member that assessees were petty traders carrying on small business, that their income was below taxable limit and for purposes of business, they were taking small loans without any intention to violate any statutory provision. They had no intention to & 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 8 contravene the provision of section 26955 and, therefore, it would not be a fit case to levy penalty on them. [Para 28] 2) Sneh Builders in ITAT 520/PN/2008 & 456/PN/2008 Relevant extract reproduced for reference: “7. After going through rival submissions and material on record we find that certain cheques were claimed to have been issued as security for the entire Sneh group to the statement of Shri Mahendra Yeole recorded u/s 131 on 11-1-2003 it was confirmed by him that the cheques found and seized from the premises of ShriH.H. Shah were issued from different firms and money was borrowed for business purposes and that such cheques were taken back on renewal of the loan transactions. Some of those cheques were used for making payments while others were cancelled it was general statement with regards to transactions with Sneh group but it is not in particular with regards to assessee i.e. Sneh Builders. There is nothing on record to suggest that the copy of the statement by Shri B.H. Shah was given to assessee at any point of time. There is also nothing on record that assessee was offered any opportunity to crass examine said B.H. shah with regard to amount in question. The action of the Assessing Officer in imposing the penalty u/s 271D on the presumption that against the security of these cheques of Rs.95,50,000/- the assessee must have taken equivalent amount of cash is not borne from the records. There is no concrete evidence to fact that such amount was in fact received in cash by the assessee except the statement of Shri B.H. Shah. General statement of third person cannot be valid basis for taking action against the assessee. As the penalty has been imposed only on the basis that against the security of cheques equivalent amount of cash might have been taken cash loans is not justified. Under the facts and circumstances penalty of Rs. 95.50,000/- was rightly deleted by the CIT(A). We uphold the same” 3) SC in Umacharan Shaw & Bros (371 ITR 271) held that conclusion as a result of suspicion could not take the place of proof. This principle would apply even in case of penalty proceedings though the decision was rendered in connection with grant of registration to the firm. With Regards to levy of penalty u/s 271E for violation of section 269T on similar facts It has not been conclusively proved that the Assessee has taken Loan in cash- how can there be an allegation of loan being repaid in cash based on "Bearer Cheques found during Search" No evidence as to loan has been repaid in cash.”

& 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 9 Reliance was placed on various judicial decisions in support, cited in the submissions of the assessee reproduced above.

& 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 10 There is , I agree with the Ld.Counsel for the assessee , no concrete finding of the Revenue ,based on authentic evidence, of the assessee having accepted and repaid loan in violation of the provisions of section 269SS/T of the Act. The finding of the Revenue to this effect is merely based on surmises and conjectures.

In the light of the above, with no clear finding based on authentic evidence of the assessee having violated the provisions of Section 269SS and 269T of the Act, we agree with the ld. Counsel for the assessee that there was no case for levy of penalty u/s 269D and 269E of the Act respectively.

& 953/Ahd/2023 Atul N Shah Vs. JCIT AY : 2013-14 11 In view of the above, we direct the Assessing Officer to delete both the penalties levied u/s 271D and 271E of the Act.

Order pronounced in the open Court on 23 /08/2024 at Ahmedabad.