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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
Aforesaid appeal by the Department is directed against the order dated 11th February 2013, passed by the learned Commissioner (Appeals)–36, Mumbai, deleting penalty imposed of ` 17,25,000 under section 271D of the Income Tax Act, 1961 (for short "the Act"), for the assessment year 2008–09.
2 Shri Sanju Kothari
Briefly stated the facts ar, assessee is an individual. For the assessment year under consideration, a search and seizure operation under section 132(1) of the Act was conducted in case of the assessee as well as the company where she was a director. Consequent upon search, a notice under section 153A of the Act was issued to the assessee in response to which she filed her return of income on 28th October 2010, declaring nil income. In the course of assessment proceedings, on the basis of material available on record, it was found by the Assessing Officer that the assessee had received the following cash loan:–
M/s. Armaan Estates Pvt. Ltd. ` 5,50,000 M/s. Infinite Realities Pvt. Ltd. ` 7,25,000 M/s. Oceanview Estates Pvt. Ltd. ` 2,50,000 M/s. Shanti Snehari Realities Pvt. Ltd. ` 2,00,000 Total:– ` 17,25,000
The Assessing Officer, therefore, called upon the assessee to show cause as to why the loan amount received in cash in violation of section 269SS should not be added back to her income. In response to the notice, the assessee, though, explained the reason for receiving the said loans in cash but the Assessing Officer was not convinced. He observed that the assessee had not filed confirmation letter from the 3 Shri Sanju Kothari concerned persons from whom she claimed to have received the cash loan. Alleging that the assessee has failed to substantiate the genuineness of the cash loans, the Assessing Officer treated then as unexplained cash credit under section 68 of the Act and added back to the income of the assessee and initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. Challenging the addition made by the Assessing Officer as aforesaid, assessee preferred an appeal before the learned Commissioner (Appeals).
When the matter stood thus on the basis of intimation received from the Assessing Officer, the Addl. CIT, Central–I, issued a notice calling upon the assessee to show cause as to why penalty under section 271D should not be imposed as the assessee has received cash loan of ` 17.25 lakh in violation of section 269SS. In response to the said show cause notice, it was submitted by the assessee that she is the director of several companies one amongst them being Corntstene Estate Developers Pvt. Ltd. It was submitted, the said company had to register deeds of assignment towards transaction in immovable property which was required to be done on 8th January 2008. It was submitted, the company had to complete the process of registration on 8th January 2008, as it had coordinated with other signatories well in advance. He submitted, though the company had purchased two pay
4 Shri Sanju Kothari orders of ` 4,24,000 and ` 12,41,000 for this purpose on 7th January 2008, towards payment of stamp duty on two project agreements but since it was found that registration of document would only be done when the pay orders are cleared by banks and as the documents were urgently required to be registered on 8th January 2008, there was no option but to avail cash loan of ` 17.25 lakh from the four companies and transfer it to M/s. Cornetstene Estate Developers Pvt. Ltd. for the purpose of payment of stamp duty on 8th January 2008, so that documents could be registered. It was submitted, the pay orders purchased for payment of stamp duties were ultimately cancelled on 9th January 2008. Thus, it was submitted as there was reasonable cause for accepting cash loan, no penalty can be imposed. The Addl. CIT, however, was not convinced with the explanation of the assessee. He opined that as the assessee has violated the provisions of section 269SS by accepting cash loans, he is liable to be visited with penalty under section 271D. Accordingly, he passed the impugned order imposing penalty of ` 17,25,000 under section 271D fo the Act.
Being aggrieved, assessee challenged the penalty imposed before the learned Commissioner (Appeals). In the meanwhile, assessee’s appeal against the addition of ` 17,25,000 as unexplained cash credit came up for consideration before the learned Commissioner (Appeals).
5 Shri Sanju Kothari The learned Commissioner (Appeals), after considering the submissions of the assessee in the context of facts and material on record, held that the amount received from the four companies cannot be treated as unexplained cash credit and, accordingly, deleted the addition. When the appeal of the assessee against the imposition of penalty under section 271D, came up for hearing before the first appellate authority, finding that addition made under section 68 of the Act, in the meanwhile, has been deleted by the learned Commissioner (Appeals) he held that under the circumstances penalty under section 271D cannot survive. Accordingly, he quashed the order imposing penalty.
Learned Departmental Representative, relying upon the reasoning of the Add. CIT, submitted there being clear violation of section 269SS, penalty has to be imposed under section 271D. He submitted, the provisions contained under section 269SS, do not restrict the application of section 271D to transactions which are not bonafide. Therefore, learned Departmental Representative submitted, the first appellate authority was not justified in deleting the penalty.
Learned A.R., on the other hand, reiterating the stand taken before the Departmental Authorities submitted, if at all there is any violation of provisions of section 269SS, it is for bona–fide reasons and 6 Shri Sanju Kothari as there is a reasonable cause for accepting the cash loan, penalty cannot be imposed under section 271D merely for a technical breach. Learned A.R. submitted, even otherwise also, imposition of penalty under section 271D is not valid as the Assessing Officer while completing the assessment has treated the cash loan as income of the assessee under section 68 of the Act. Therefore, once the amount in question is treated as income, it cannot again be treated as loan for the purpose of initiating penalty proceeding under section 271D. For such proposition, he relied upon the decision of the Hon'ble Delhi High Court in Diwan Enterprise v/s CIT, [2000] 246 ITR 571 (Del.). Learned A.R. submitted, imposition of penalty under section 271D is not automatic as it has to be r/w section 273B. He submitted, unless the transaction in cash is found to be not bonafied, penalty under section 271D cannot be imposed. He submitted, in terms of section 273B, if assessee shows reasonable cause for not imposing penalty, the Assessing Officer should not impose penalty. For such proposition, assessee relied upon the following decisions:–
i) ADIT v/s Kum. A.B. Shanti, [2000] 255 ITR 258 (SC); ii) CIT v/s Triumph International Finance Ltd, [2002] 345 ITR 270 (Bom.); iii) CIT v/s Bombay Conductors & Electricals Ltd., [2008] 361 ITR 328 (Guj.); and 7 Shri Sanju Kothari iv) Hindustan Steel Ltd. v/s State of Orissa, [1972] 83 ITR 26 (SC).
We have considered the submissions of the parties and perused the material available on record. It is evident from material on record, the Assessing Officer, while completing the assessment had treated the cash loan received of ` 17,25,000 from the four companies as not genuine and held it as income of the assessee under section 68 of the Act. Thus, once, the Assessing Officer treats the amount in question as assessee’s income, he cannot treat the same as loan for invoking the provisions of section 269SS r/w section 271D. It is further evident, when the proceeding for imposition of penalty under section 271D, was initiated and the penalty order was passed under the said provision assessee’s appeal against the addition made under section 68 of the Act was still pending before the learned Commissioner (Appeals) as he disposed off assessee’s appeal deleting the addition made under section 68 of the Act only on 11th February 2013. Thus, before the disposal of appeal, the addition made by the Assessing Officer stood and as per which the amount of ` 17,25,000 was income of the assessee. Thus, under no circumstances, proceeding for imposition of penalty under section 271D, could have been initiated when the amount in question was held as income of the assessee. For this reason alone, the imposition of penalty under section 271D cannot
8 Shri Sanju Kothari be sustained. Even otherwise also, as could be seen from the facts on record, the assessee had furnished a valid explanation explaining the reasons for which the cash loans were taken. The Assessing Officer has not brought any material on record to establish that the explanation furnished by the assessee is either fabricated or unbelievable. Assessee has proved on record that, though, two pay orders were purchased for payment of stamp duty but looking at the urgency of the situation as the deeds were required to be registered on 8th January 2008, assessee was compelled to avail the cash loans. These facts have not been found to be false by the Assessing Officer. On a reading of the provisions contained under section 269SS, it is observed that a restriction has been imposed on receipt of cash loan over and above the prescribed amount. It is further provided, if any person accepts cash loan in violation of provisions of section 269SS, he will be subjected to levy of penalty under section 271D. However, imposition of penalty under section 271D is neither automatic nor mandatory as section 273B provides that no penalty is imposable if the assessee proves that there was reasonable cause for failure in complying to the provisions of the Act. A conjoint reading of sections 269SS, 271D and 273B of the Act would demonstrate that every violation under section 269SS will not culminate in imposition of penalty under section 271D. If the assessee proves that there was 9 Shri Sanju Kothari reasonable cause for non–compliance to the relevant provision, then penalty cannot be imposed. In other words, in a given case, if assessee shows reasonable cause for the failure, Assessing Officer is empowered under the Act to refrain from imposing penalty. In the present case after considering the explanation of the assessee in the context of facts and material on record, we are of the firm view that the assessee has proved that there was reasonable cause for accepting the cash loans. Further, the authority concerned, while imposing the penalty has not established that the transaction relating to acceptance of cash loan is either non–genuine or not bonafide. On careful analysis of the decision cited by the learned Authorised Representative, it is found that ratio laid down therein squarely applies to the facts of the present case. In the aforesaid view of the matter, we do not see any reason to upset the order of the learned Commissioner (Appeals). Accordingly, upholding the same, we dismiss the ground raised by the Department.
In the result, appeal stands dismissed. Order pronounced in the open Court on 04.03.2016