BALBIR SINGH GORAYA,BATALA vs. THE JOINT COMMISSIONER OF INCOME TAX,, AMRITSAR.

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. RAVISH SOOD, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER

I.T.A. No. 237 & 238/(Asr)/2016 Assessment Year: 2009-10

Sh. Balbir Singh Goraya Vs. J.C.I.T. House No. 1043, Range-II VillageChah Bohrawalla Amritsar Batala [PAN: AMUPG1406C] (Appellant) (Respondent)

Appellant by : Sh. Tarun Bansal, Advocate Respondent by: S/sh. Rahul Dhawan, CIT-DR & Rohit Mehra, D.R

Date of Hearing: 21.12.2021 Date of Pronouncement: 21.02.2022

ORDER PER RAVISH SOOD, JM :

The present appeals filed by the assessee are directed against

the respective orders passed by the Commissioner of Income-Tax

(Appeals)-1, Amritsar, dated 19.02.2016, which in turn arises from the

respective orders passed by the Joint CIT, Range-II, Amritsar U/ss. 271D

and 271E of the Income-Tax Act, 1961 (“Act”, for short), dated

ITA Nos. 237 & 238/Asr/2016 2

14.11.2013. As the issues involved in the captioned appeals are inextricably

interlinked, or in fact interwoven, therefore, the same are being taken up

and disposed off by way of a common order. We shall first take up the

appeal filed by the assessee against the order of the CIT(A) wherein the

penalty imposed by the JCIT, Range-II, Amritsar u/s 271D of the Act has

been upheld by him. The assessee has assailed the impugned order on the

following grounds of appeal before us:

“1. That Id CIT(A) has erred in law while confirming the penalty u/s 27ID, by ignoring merits of Remand Report filed by A.O U/R 46A dated 28.09.15, hence penalty is liable to be deleted.

ITA Nos. 237 & 238/Asr/2016 3

2009-10 on 29.06.2009, declaring an income of Rs.1,53,000/- a/w

agriculture income of Rs.3.80 lacs. Subsequently, the case of the assessee

was selected for scrutiny assessment u/s 143(2) of the Act. Assessment

was thereafter framed by the AO vide his order passed u/s 144 of the Act,

dated 19.09.2011, determining the income of the assessee at

Rs.2,21,28,960/-.

CIT(Appeals), Amritsar. During the course of the appellate proceedings the

CIT(A), vide his letter No. CIT(A)/Asr/2012-13/1607, dated 04.03.2013

called for a ‘remand report’ from the AO. As per the facts that transpired in

the course of the remand proceedings, it was observed by the AO that the

assessee had during the year under consideration received cash loan of

Rs.1,36,50,000/- in two tranches from one Sh. Navtej Singh, viz. (i). Rs. 29

lac (on 19.09.2008); and Rs. 1,07,50,000/- (on 26.10.2008). Observing,

that the assessee had raised the aforesaid loans in contravention of the

ITA Nos. 237 & 238/Asr/2016 4

modes contemplated in section 269SS of the Act., the AO vide his letter

dated, 13.08.2013 shared the said information with the Joint CIT, Range-

II, Amritsar, as under:

“1. Rs.29,00,000/- received in cash from Navtej Singh and deposited in Indian Overseas Bank, Batala A/c No.191201000000234; and 2. Rs.1,07,50,000/- received in cash from Navtej Singh and deposited in Indian Overseas Bank, Batala A/c No.191201000000234.”

taking cognizance of the fact that the assessee had raised the aforesaid

loan of Rs.1,36,50,000/- in cash, i.e., in contravention of the provisions of

section 269SS of the Act, thus, vide his notice u/s 271D, dated 17.10.2013

called upon him to explain as to why penalty under the said statutory

provision may not be imposed on him. As the assessee failed to comply

with the aforesaid notice, therefore, another opportunity was afforded to

him. In reply, the assessee’s counsel this time filed a letter seeking

adjournment, which read as under:

“With reference to your penalty notice dated 1.11.13, I may submit as under: 1. The brief facts are that the Ld. A.O. made huge addition in the case of Balbir Singh Goraya for A.Y. 2009-10 and the appeal of the same is pending with CIT(A), Amritsar.

ITA Nos. 237 & 238/Asr/2016 5

However, the JCIT was not persuaded to accept the aforesaid request of

the assessee. Observing, that the penalty proceedings u/s 271D were

independent of the appellate proceedings qua the quantum assessment,

and also that the application filed by the assessee u/s 154 before the A.O

(in quantum assessment) would have no bearing on the penalty

proceedings u/s 271D of the Act, the JCIT declined the aforesaid request

for an adjournment that was raised by the assessee’s counsel. Further,

Observing that the assessee had not denied the fact of having accepted

cash loan aggregating to an amount of Rs.1,36,50,000/- (Rs.29,00,000/- +

Rs.1,07,50,000/-), it was noticed by the JCIT that the assessee had chosen

to remain silent on having received the aforesaid amount in contravention

of the mandate of law. It was further observed by the JCIT that the AO in

ITA Nos. 237 & 238/Asr/2016 6

his ‘remand report’ [filed in the course of the quantum appeal proceedings

before the CIT(A)], had observed, that Sh. Navtej Singh, i.e., the lender,

who was running a dairy business at Village: Manawala a/w the business of

purchase/sale of properties was an Income-Tax assessee holding PAN No.

CINPSS919R. Also, it was noticed by the JCIT that Sh. Navtej Singh (supra)

had admitted of having given a cash loan of Rs.29,00,000/- and

Rs.1,07,50,000/- to the assessee. Observing, that both the assessee and

the lender, viz. Sh. Navtej Singh were Income-Tax assessee’s, the JCIT

was of the view that the provisions of section 269SS of the Act were clearly

applicable. Also, it was observed by the JCIT, that the AO, i.e., ITO, Ward-

2(3), Batala in his ‘remand report’ had stated that the assessee in the

course of his examination had accepted of having received cash loan of

Rs.1,36,50,000/- from Sh. Navtej Singh (supra). Backed by the aforesaid

facts, the JCIT holding a conviction that the fact that the assessee had

contravened the provisions of section 269SS stood clearly established,

thus, imposed a penalty of Rs.1,36,50,000/-, i.e., 100% of the amount of

the cash loan that was received by the assessee u/s 271D of the Act.

ITA Nos. 237 & 238/Asr/2016 7

CIT(A). Before the CIT(A) it was inter alia, submitted by the assessee’s

counsel that the JCIT, Range-II, Amritsar, had imposed the penalty without

affording sufficient opportunity of being heard to the assessee. Rebutting

the aforesaid claim, it was observed by the CIT(A) that as the penalty

proceedings in question were to be completed within a time period of six

months as per section 275 of the Act, therefore, no infirmity could be

related to the passing of the aforesaid order u/s 271D of the Act by the

JCIT. Observing that the assessee had failed to establish any ‘business

exigency’ which had prompted him to raise the loan in cash, i.e, in

contravention of the express provisions of Sec. 269SS of the Act, the

CIT(A) after drawing support from certain judicial pronouncements of the

Hon’ble High Court of jurisdiction declined the assessee’s claim of there

being a reasonable cause for having received the loans in cash. Backed by

his aforesaid observations, the CIT(A) relying upon the order of the ITAT,

Amritsar in the case of M/s Charan Dass Ashok Kumar v. Addl. CIT, Moga,

ITA No. 369/Asr/2011 upheld the penalty imposed by the AO u/s 271D of

the Act and dismissed the appeal.

ITA Nos. 237 & 238/Asr/2016 8

the matter in appeal before us. The Ld. Authorized Representative (“AR”,

for short) for the assessee at the very outset of the hearing of the appeal,

submitted, that both the lower authorities had failed to appreciate the facts

involved in the case in the right perspective and had most arbitrarily

imposed the penalty u/s 271D of the Act. Elaborating on his aforesaid

contention, it was submitted by the Ld. AR that the JCIT, Range-II,

Amritsar, had failed to record his satisfaction while saddling the assessee

with penalty u/s 271D of the Act. It was averred by the Ld. AR that a bare

perusal of the penalty order revealed a clear absence of application of mind

by the JCIT, who had mechanically imposed the penalty u/s 271D of the

Act. Ld. A.R drawing support from Article 14 of the Constitution of India,

submitted, that the same therein contemplates that the state shall not deny

to any person equality before law. It was submitted by Ld. AR that where

an Act is arbitrary, it is implicit in it that it is unequal both according to

political logic and constitutional law and is therefore violative of Article 14

which requires that State action must be based on valid relevant principles

applicable alike to all similarly situate and, it must not be guided by any

extraneous or irrelevant considerations, because, that would amount to

ITA Nos. 237 & 238/Asr/2016 9

denial of equality. Backed by his aforesaid contention, it was submitted by

the Ld. AR that when a discretionary power is conferred on an authority,

then, it is incumbent on the part of the said authority to exercise that power

after applying its mind to the facts and circumstances of the case in hand.

It was submitted by the ld. AR that in case the authority vested with a

discretionary power fails to apply its mind and acts mechanically, i.e,

without due care and caution or without a sense of responsibility in exercise

of its discretion, then, order passed by him would be bad in law. It was

further submitted by the Ld. AR, that it is the duty of the courts to see that

all authorities exercise their power properly, lawfully and in good faith. In

the backdrop of his aforesaid contention, it was the claim of the Ld. AR,

that as the JCIT, Range-II, Amritsar, while saddling the assessee with an

exorbitant penalty u/s 271D of the Act had failed to apply his mind to the

facts as were there before him, therefore, his order could not be sustained

and was liable to be quashed. In order to buttress his claim that the JCIT,

Range-II, Amritsar had had passed the impugned order mechanically, i.e.,

without application of any mind, the ld. A.R had drawn our attention to the

fact that the JCIT in his order passed u/s 271D, dated 14.11.2013 had not

even referred to the dates on which the impugned cash loans were stated

ITA Nos. 237 & 238/Asr/2016 10

to have been received by the assessee. It was the claim of the Ld. AR that

the JCIT had merely acted on the basis of the information that was shared

with him by the AO, i.e., the Income Tax Officer, Ward 2(3), Batala, and

without applying his mind to the facts of the case before him had

mechanically subjected the assessee to penalty u/s 271D of the Act. It was

submitted by the Ld. AR that Sec. 273B of the Act, inter alia, carves out an

exception to the triggering of the penal provisions contemplated in Sec.

271D of the Act, i.e, in a case where the assessee is able to establish that

there was a reasonable cause for having received the loan in cash, i.e., not

as per the modes contemplated in Sec. 269SS of the Act, then, he was not

to be subjected to penalty u/s 271D of the Act. Backed by the aforesaid

fact, it was the claim of the Ld. AR that as the JCIT in the present case had

merely acted on the information provided by the AO and not independently

applied his mind to the facts involved in the case before him, therefore, he

had remained oblivion of the reasonableness of the cause due to which the

assessee had raised the loan in cash. Adverting to the reasons for raising

the cash loans in question, it was submitted by the Ld. AR that Sh. Navtej

Singh (supra), the assessee’s cousin had on both the occasions, i.e, on

19.09.2008 and 27.10.2008 withdrawn money from his bank account with

ITA Nos. 237 & 238/Asr/2016 11

Oriental Bank of Commerce and deposited the same in the assessee’s bank

account with Indian Overseas Bank, Batala. It was submitted by the Ld. AR

that on both the occassions the assessee was absolutely unaware about the

cash deposited by Sh. Navtej Singh (supra) in his bank account, and had

learnt about the same only when the latter had informed him about the

same on phone. Ld. A.R in order to support his aforesaid claim had drawn

our attention to the respective affidavits, dated 16.01.2014 of the assessee

and Shri. Navtej Singh (supra), Page 56-61 of APB. Elaborating on the

reasons leading to the aforesaid transactions, i.e., deposit of cash by Navtej

Singh (supra) in the bank account of the assessee, it was the claim of the

Ld. AR that as the assessee had intended to shift to Canada, therefore, for

reflecting a good bank balance in his bank account which would have

helped him in getting a visa from the Canadian embassy, the

aforementioned person, viz. Sh. Navtej Singh had by taking recourse to the

aforesaid bonafide transaction financially assisted him. It was claimed by

the Ld. AR as the aforesaid transaction between the assessee and Sh.

Navtej Singh (supra), his real cousin, was a bonafide transaction, and the

source of the funds in question were admittedly explained, therefore, no

penalty u/s 271D was called for in the hands of the assessee. In order to

ITA Nos. 237 & 238/Asr/2016 12

buttress his claim that the source of the money was duly explained, it was

submitted by the Ld. AR that the cash loan transactions in question were

duly accounted for in the books of accounts of both the parties, i.e., the

assessee and Sh. Navtej Singh (supra), and the CIT(A) while disposing off

the assessee’s quantum appeal had not drawn any adverse inference as

regards the same. It was further submitted by the Ld. AR that as the

penalty u/s 271D had been imposed by the JCIT, Range-II, Amritsar for

technical and venial breach of the provisions of the Act, and not on account

of any malafide intention on the part of the assessee, therefore, in all

fairness the penalty imposed on the assessee u/s 271D could not be

sustained and was liable to be vacated. It was further submitted by him

that as the loan transaction between the assessee and Shri. Navtej Singh,

i.e, assessee’s cousin brother, were bonafide transaction within the family,

therefore, no penalty u/s 271D was liable to be imposed on the assessee. In

support of his aforesaid contention reliance was placed by the ld. A.R on

the judgment of the Hon’ble High Court Punjab & Haryana in the case of

CIT v. Sunil Kumar Goel [2019] 315 ITR 363 (P&H). In the backdrop of his

aforesaid contentions the Ld. AR had tried to impress upon us that the

penalty imposed on the assessee u/s 271D could not be sustained and was

ITA Nos. 237 & 238/Asr/2016 13

liable to be vacated, for the reason, viz. (i) that the JCIT, Range-II, Amritsar

had imposed the penalty u/s 271D, vide his order dated 14.11.2013 in a

mechanical manner, i.e., without any application of mind to the facts

involved in the case before him; (ii) that no penalty u/s 271D could have

been imposed as regards the bonafide loan transactions within the family;

(iii) that as there was a reasonable cause for the assessee to have received

cash loans, therefore, on that count too penalty u/s 271D could not have

been validly imposed on him; (iv) that as the source of the loan funds in

question received by the assessee from Sh. Navtej Sigh (supra) were

admittedly duly explained, therefore, on the said ground also no penalty u/s

271D was liable to be imposed; and (v) that as the loan transaction in

question was executed in the family, i.e., between the assessee and his real

cousin, therefore, no penalty qua a technical and venial breach of the

provisions of the Act could have been imposed as regards such bonafide

transactions. At this stage, we may herein observe, that in order to verify

the authenticity of the claim of the assessee of having received the

aforesaid cash loan from his cousin, viz. Sh. Navtej Singh (supra), for the

reason that the latter wanted to assist him in reflecting a good bank

balance which would have facilitated obtaining a visa from the Canadian

ITA Nos. 237 & 238/Asr/2016 14

Embassy, we called upon the Ld. AR to produce the documents which

would evidence that the assessee at the relevant point of time had either

applied for, or was in process of applying for a visa to Canada. However,

neither the Ld. AR placed on our record any document in support of his

aforesaid claim nor sought any further time to do the needful. In fact, on

being called upon by the bench that he may take some further time for

furnishing the supporting documents, the ld. A.R expressed his inability to

do so. Backed by his aforesaid contentions, it was submitted by the ld. AR

that the penalty imposed by the JCIT, Range-II, Amritsar u/s 271D could

not be sustained and in the totality of the facts therein involved did merit to

be vacated.

orders of the lower authorities. It was submitted by the Ld. DR, that it was

never the claim of the assessee in the course of the proceedings before the

lower authorities that the cash loans in question were raised by him from

Shri. Navtej Singh (supra) to facilitate his immigration to Canada. It was

submitted by the ld. DR that the aforesaid claim of the assessee was devoid

and bereft of any merit and did not merit any acceptance. In so far the claim

of the Ld. AR that the assessee during the penalty proceedings was not

ITA Nos. 237 & 238/Asr/2016 15

afforded sufficient opportunity of being heard by the JCIT, it was submitted

by the Ld. DR that as the assessee had in the course of the said proceedings

sought for an adjournment on a frivolous ground, i.e., not for the reason

that he wanted some further time to furnish any reply, but for reasons which

had no relevance or bearing on the proceedings under consideration, viz. (i)

that as the quantum appeal was pending before the CIT(A), therefore, the

penalty proceedings be kept in abeyance; and (ii) that the assessee’s

application u/s 154 as regards his quantum assessment was pending before

the ITO, Ward-2(3), Batala. It was submitted by the Ld. DR that as neither

of the aforesaid reasons on the basis of which the assessee’s counsel had

sought an adjournment had any bearing or relevance in context of the

penalty proceedings that were pending before the JCIT, which as per Sec.

275 of the Act were to get time-barred within a period of six months from

the end of the month in which action for imposition of the same was

initiated, therefore, the JCIT had after considering the entire facts of the

case rightly proceeded with the matter and passed the order u/s 271D,

dated 14.11.2013. Adverting to the claim of the Ld. AR that no penalty u/s

271D r.w.s 273B could be validly imposed for a technical infraction of the

provisions of the law, it was submitted by the Ld. AR that as both the

ITA Nos. 237 & 238/Asr/2016 16

parties, i.e., the assessee, i.e, the borrower, and Shri. Navtej Singh (supra),

the lender, were regular income-tax assessee’s had consciously entered into

the transactions in question, therefore, the assessee could not now be

permitted to plead that there was a mere technical or venial infraction of the

provisions of law. In support of his aforesaid contentions, it was submitted

by the Ld. DR that as held by the ITAT, Amritsar in the case of M/s Charan

Dass Ashok Kumar v. Addl. CIT Moga, ITA No. 369/2011, an ignorance of

law cannot be taken as a justifiable reason for infraction of law. Backed by

his aforesaid contentions, it was submitted by the Ld. DR that as there was

no reasonable cause on the part of the assessee to have received a

substantial amount of Rs. 1.36 crore as such loans, therefore, the provisions

of Sec. 273B would not come to his rescue. Rebutting the claim of the Ld.

AR that there was nothing discernible from the record that the parties in

question had entered into a loan transaction, it was submitted by the ld. DR

that Sh. Navtej Singh (supra) in the course of the remand proceedings had

clearly stated that he had given a cash loan to the assessee. Further, taking

us through the ‘remand report’, dated 08.05.2013, it was submitted by the

ld. D.R that Shri. Balbir Singh, i.e, the assessee had also in the course of the

remand proceedings admitted of having received cash loan of Rs.

ITA Nos. 237 & 238/Asr/2016 17

1,36,50,000/- from Shri. Navtej Singh (supra), i.e, in two trenches, viz. (i).

Rs. 29 lac; and (ii). Rs. 1,07,50,000/- a/w a loan of Rs. 5 lac through cheque

out of which an amount of Rs. 6 lac was repaid in cash. On the basis of his

aforesaid contentions, it was the claim of the Ld. DR that the JCIT had not

acted in a mechanical manner, but in fact had after giving justifiable reasons

for rejecting the assessee’s reply, had imposed penalty u/s 271D of the Act.

Further rebutting the claim of the assessee that the cash loans in question

were raised by Sh. Navtej Singh (supra) for the purpose of reflecting a

healthy bank balance which would have facilitated the assessee to obtain a

visa from the Canadian Embassy, the Ld. DR, took us through the relevant

extracts of the cash book of the assessee, i.e., Page 118 and Page 156 of

APB wherein the cash loan transactions of Rs.29,00,000/- (supra) and

Rs.1,07,50,000/- (supra) stood reflected. Our attention was drawn by the

Ld. DR to the fact that out of the aforementioned respective cash loans of

Rs. 29 lac (on 19.09.2008) and Rs. 1,07,50,000/- (on 27.10.2008) that were

received by the assessee from Sh. Navtej Singh (supra), substantial amounts

were withdrawn by the assessee either on the same day or within a short

span of few days, i.e Rs.27 lacs (on 22.09.2008) and Rs. 1 crore (on

27.10,2008). In the backdrop by the aforesaid fact, it was submitted by the

ITA Nos. 237 & 238/Asr/2016 18

Ld. DR that the very claim of the assessee of having raised the aforesaid

substantial amount of cash loans from Sh. Navtej Singh (supra) for the

purpose of building up a good bank balance to be shown to the Canadian

embassy for obtaining a visa was disproved to the hilt, and in fact proved

beyond doubt to be nothing but a concocted story. Also, our attention was

drawn by the Ld. DR to the substantial cash withdrawals made by the

assessee over the year which raised serious doubts about the purpose of

having raised the cash loans in question. Backed by the aforesaid fact, it was

the claim of the Ld. DR that as the assessee had not only violated the

provisions of Sec. 269SS of the Act by raising substantial amount of cash

loans aggregating to Rs.1,36,50,000/- (supra), but had also failed to come

forth with any reasonable cause which would have justified the raising of the

same on both the occasions i.e. otherwise then vide account payee

cheques/drafts, therefore, no infirmity did emerge from the order of the

JCIT, Range-II, Amritsar, who had rightly subjected him to penalty u/s 271D

of the Act.

parties, perused the orders of the lower authorities and the material

available on record, as well as considered the judicial pronouncements that

ITA Nos. 237 & 238/Asr/2016 19

have been pressed into service by them to drive home their respective

contentions. Admittedly, as is discernible from the records, an amount

aggregating to Rs.1,36,50,000/- was deposited in cash in the bank account

of the assessee, i.e., SB A/c No. 1912065230 with Indian Overseas Bank,

Batala during the year under consideration, as under:

Date Particulars Amount 19.09.2008 Cash deposit Rs. 29,00,000/- 26.10.2008 Cash deposit Rs.1,07,50,000/- Total Rs. 1,36,50,000/-

As observed by us hereinabove, the assessee in the remand proceedings (in

the course of his quantum appeal), had stated, that the aforesaid amounts

were loans that were received by him in cash from Sh. Navtej Singh (supra),

who as stated by him was his first cousin. Backed by the aforesaid information

that the assessee had raised cash loans, i.e, in contravention of the provisions

of Sec. 269SS of the Act, the AO, vide his letter dated 13.08.2013 shared the

same with the JCIT, Range-II, Amritsar. On a perusal of the records, we find

that the assessee in the course of the remand proceedings had clearly

admitted before the AO of having received interest free cash loans from Sh.

Navtej Singh (supra) amounting to Rs.1,36,50,000/- [29,00,000/- +

Rs.1,07,50,000/-] along with a further amount of Rs.5,00,000/- through

ITA Nos. 237 & 238/Asr/2016 20

cheque, out of which he had stated to have repaid a sum of Rs. 6 lacs in cash.

Also, it was observed by the AO that Sh. Navtej Singh (supra) had in the

course of the remand proceedings accepted of having advanced loans to the

assessee, i.e., both by way of cash and cheque. Relevant extract of the

‘remand report’ (Page 1-2 of ‘remand report’) reads as under :

“Sh. Navtej Singh explained that he is an income tax assessee. He is cousin of Sh. Balbir Singh Goraya. His PAN number is CINPS5919R. He is doing business of dairy at Manawala, Sale purchase of property and Agricultural income. He himself alongwith his mother are having Agri. Land approx 11 Kilas 2 Kanals after family’s division. They sold Agri Land measuring 24 Kanals and 5 Marlas to Sai College of Engineering and Technology (Society) on 26.03.2008 through two sale deeds of Rs. 85,20,938/- and 17041875/- respectively and had given loan to Sh. Balbir Singh out of Joint account as he wants to go abroad. Sh. Navtej Singh accepted that he had given loan in the following manner :-

Date Particulars Amount 19.09.2008 Cash deposited in the 29,00,000/- bank 27.10.2008 do 1,07,50,000/- 17.07.2008 Amount through cheque 5,00,000/- 20.11.2008 Repaid to Navtej Singh 6,00,000/- Total 1,41,50,000/-“

As is discernible from the aforesaid, it was stated by Sh. Navtej Singh

(spura) that except for an amount of Rs.6,00,000/- that was repaid by him

in cash on 20.11.2008, the balance amount of loan was outstanding. Also,

as observed by us hereinabove, Sh. Navtej Singh (supra) had duly

explained the source out of which the aforesaid amounts were advanced

by him to the assessee.

ITA Nos. 237 & 238/Asr/2016 21

Amritsar, vide his ‘Show cause’ notice (SCN), dated 17.10.2013 had called

upon the assessee to explain that as to why penalty u/s 271D of the Act

may not be imposed on him for having received the loans aggregating to

Rs.1,36,50,000/- (supra) in cash from Sh. Navtej Singh (supra). Although,

the aforesaid ‘SCN’, dated 17.10.2013 was duly got served upon the

assessee vide registered post a/w a personal service on him, however, he

failed to comply with the same and did neither appear before the JCIT nor

filed any reply. Accordingly, the JCIT in all fairness issued another ‘SCN’,

dated 01.11.2013, in compliance whereto the assessee’s counsel, viz. Sh.

S. K. Bansal, Advocate filed an adjournment letter, which read as under:

“With reference to your penalty notice dated 1.11.13, I may submit as under: 1. The brief facts are that the Ld. A.O. made huge addition in the case of Balbir Singh Goraya for A.Y. 2009-10 and the appeal of the same is pending with CIT(A), Amritsar.

ITA Nos. 237 & 238/Asr/2016 22

However, the JCIT, being of the view that as the penalty proceedings u/s

271D were neither dependent on the fate of the quantum appeal of the

assessee which was pending disposal before the CIT(A), Amritsar; nor on

the outcome of his application that was pending with the ITO, Ward 2(3),

Batala u/s 154 of the Act, therefore, had proceeded with the penalty

proceedings. Observing, that the assessee had not denied the fact of

having received cash of loans of Rs.1,36,50,000/- from Sh. Navtej Singh

(supra), a property dealer by profession, who too had accepted of having

advanced the cash loans of Rs.29,00,000/- and Rs.1,07,50,000/- to the

assessee, we find, that the JCIT holding a conviction that the assessee had

raised the aforesaid loans in contravention of the provisions of section

269SS of the Act, subjected him to penalty u/s 271D of Rs.1,36,50,000/-,

i.e., 100% of the amount of cash loans that were received by him.

us, we find that the assesseee undisputedly having received the cash loans

aggregating to an amount of Rs.1,36,50,000/-, i.e, in contravention of the

ITA Nos. 237 & 238/Asr/2016 23

modes contemplated in section 269SS of the Act, had clearly acted in

defiance of law. In so far the claim of the Ld. AR that the JCIT, Range-II,

Amritsar had imposed the penalty u/s 271D in a mechanical manner, i.e.,

without applying his mind to the facts of the case, we are unable to find

any substantce in the same. As observed by us hereinabove, the claim of

the Ld. AR that the JCIT had merely acted upon the information which was

shared with him by the AO, i.e., ITO, Range-II, Amritsar as regards the

receipt of cash loan by the assessee from Sh. Navtej Singh (supra), and had

without applying any mind to the facts of the case before him and also

affording any opportunity to the assessee to put forth his case as to why he

may not be subjected to penalty u/s 271D of the Act, had saddled him with

an exorbitant penalty under the said statutory provision, we are afraid is

based on incorrect facts and cannot be accepted. As observed by us

hereinabove, the JCIT had vide ‘SCN’, dated 17.10.2013 and 01.11.2013

called upon the assessee to explain as to why he may be not be subjected

to penalty u/s 271D of the Act. As is discernible from the records, we find,

that in the course of the penalty proceedings before the JCIT, Range II,

Amritsar, the assessee instead of coming forth with an explanation as to

why he was not exigible to penalty u/s 271D of the Act, had adopted an

ITA Nos. 237 & 238/Asr/2016 24

evasive approach, and for frivolous reasons which had no bearing on the

penalty proceedings, i.e, pendency of his quantum appeal and application

for rectification, had sought for keeping the said proceedings in abeyance.

Apart from that, as observed by the CIT(A), and rightly so, as the penalty

proceedings as per Sec. 275(1)(c) were to get time barred within a period

of six months from the end of the month in which the same had been

initiated, therefore, the same could not have been kept in abeyance. As

regards the claim of the Ld. AR that the fact that the JCIT had in his order

u/s 271D of the Act, dated 14.11.2013 had though referred to the amounts

which were stated to have been received by the assessee as cash loan from

Sh. Navtej Singh (supra), i.e., Rs. 29,00,000/- (supra) and Rs.1,07,50,000/-

(supra), but had not referred to the dates on which the impugned loan

transactions were entered between the aforesaid parties, therein, reveals

that he had merely acted upon the information that was shared with him by

the AO, i.e., ITO, Ward 2(3), Batala, and had in a mechanical manner, i.e.,

without any application of mind imposed the penalty u/s 271D on the

assessee, we are afraid does not merit acceptance. Although, the JCIT,

Range-II, Amritsar in the body of his penalty order u/s 271D, dated

14.11.2013 had not referred to the dates of the loan transactions, however,

ITA Nos. 237 & 238/Asr/2016 25

we cannot remain oblivious of the fact that the assessee in the remand

proceedings (in the course of the quantum appeal) had categorically

admitted of having received cash loans aggregating to Rs.1,36,50,000/-

[29,00,000/- + Rs.1,07,50,000/-]. Apart from that, we find that Shri. Navtej

Singh (supra) had in the course of the remand proceedings specifically

given the respective dates on which the cash loans were advanced by him

to the assessee. Also, we cannot remain oblivious of the fact that the AO

vide his letter dated 13.08.2013 had shared the details as regards the cash

loans that were received by the assesse from Shri. Navtej Singh (supra), as

under :

“1. Rs.29,00,000/- received in cash from Navtej Singh and deposited in Indian Overseas Bank, Batala A/c No.191201000000234; and 2. Rs.1,07,50,000/- received in cash from Navtej Singh and deposited in Indian Overseas Bank, Batala A/c No.191201000000234.”

Further, we find that the JCIT, Range-II, Amritsar, vide his SCN dated

17.11.2013 and 01.11.2013 had clearly put the assessee to notice as

regards the impugned cash loan transactions, as regards which penalty

was sought to be imposed on him u/s 271D of the Act. Be that as it may,

we are of the strong conviction that a mere absence of mentioning of the

respective dates by the JCIT against the cash loan transactions in question

ITA Nos. 237 & 238/Asr/2016 26

in his order u/s 271D, dated 14.11.2013, would by no means be fatal to

the validity of the order so passed by him. We, thus, are unable to

persuade ourselves to subscribe to the claim of the Ld. AR that the JCIT,

Range-II, Amritsar, had without any application of mind imposed the

penalty vide his order passed u/s 271D, dated 14.11.2013, and accordingly

reject the same.

raising of the loans by in question by the assessee in cash, i.e., in

contravention of the modes contemplated in section 269SS of the Act.

Before us, it is the claim of the Ld. AR, that as the assessee had planned to

settle abroad, i.e., in Canada, therefore, Sh. Navtej Singh (supra), i.e, the

assessee’s cousin had in order to facilitate reflecting of good bank balance in

the assessee’s bank account, which would have facilitated him in obtaining a

visa, had thus, by way of a financial assistance deposited the amount of

cash loans on both of the aforesaid two occasions, i.e., on 19.09.2008 and

27.10.2008 in his bank account. It is further stated by the Ld. AR that the

assessee had gathered about the aforesaid respective cash deposits in his

bank account only after he was informed by Sh. Navtej Singh (supra). At the

very outset, we may herein observe that the aforesaid explanation of the

ITA Nos. 237 & 238/Asr/2016 27

assessee has been raised for the very first time before us, and nothing is

discernible from the orders of the lower authorities which would reveal that

the said plea was raised before them. Be that as it may, we find certain

serious lapses in the aforesaid explanation of the assessee. Although, it is

the claim of the Ld. AR that the aforesaid cash deposits were made in the

assessee’s bank account in order to facilitate reflecting of a good bank

balance which would have assisted him in obtaining a visa from the

Canadian embassy, we find, that a perusal of the ‘cash book’ filed by the

assessee before us reveals an absolutely different story. On a perusal of the

‘cash book’ filed by the assessee before us, we find that out of an amount of

Rs.29 lac (supra) that was received by the assessee as a cash loan from Sh.

Navtej Singh (supra) on 19.09.2008 an amount of Rs.27 lac was withdrawn

by him on 22.09.2008. In so far the cash loan of Rs.1,07,50,000/- that was

received by the assessee from Sh. Navtej Singh on 27.10.2008, the same

stood on no better footing, and an amount of Rs. 1 crore was withdrawn out

of the same by the assessee on the very same date. Backed by the aforesaid

facts, we are unable to persuade ourselves to subscribe to the claim of the

Ld. AR that the cash loans in question were received by the assessee from

Navtej Singh (supra) for reflecting a heavy bank balance, which in turn

ITA Nos. 237 & 238/Asr/2016 28

would have facilitated obtaining of a visa by him from the Canadian

embassy. Apart from that, as observed by us hereinabove, the ld. AR on

specifically being directed by the bench to produce supporting documents

which would substantiate his claim that the assessee had at the relevant

point of time, either applied for, or, was in the process of applying a visa for

Canada, had expressed his inability to do so. As a matter of fact, on being

advised by the bench that the ld. AR may seek some further time for

furnishing the aforesaid supporting documents, the latter had expressed his

inability to do so. In the backdrop of the aforesaid facts, we are of the

considered view, that the unsubstantiated explanation of the assessee as

regards the reason for having raised the loans in question, in cash, i.e. in

contravention of the mandate of law is nothing but a concocted story put

forth by him to justify the aforesaid cash loan transactions entered into by

him. Accordingly, finding no substance in the aforesaid explanation of the ld.

A.R as regards the reasons for raising of the cash loans in question by him,

we herein reject the same.

as well as the lender, viz. Sh. Navtej Singh (supra) are regular Income Tax

assessee’s, therefore, it is beyond comprehension that they were ignorant

ITA Nos. 237 & 238/Asr/2016 29

about the mandate of law, as per which no loan in excess of an amount of

Rs.20,000/- could have been raised otherwise then by way of an account

payee cheque or bank account payee bank draft or use of electronic clearing

system through a bank account. Even otherwise, as observed by the CIT(A),

and rightly so, ignorance of law is no excuse. On a perusal of the records,

we find, that the fact that the assessee was conversant about raising of the

loans vide account payee cheques/demand drafts can safely be gathered

from the fact that he had raised a loan of Rs.5 lac by cheque from Sh.

Navtej Singh (supra), and also a loan of Rs.34,04,000/- through cheques

from one Sh. Amrik Singh, out which an amount of Rs.13,30,000/- was

returned by him to the said latter person through cheques. Backed by our

aforesaid observations, we are of a strong conviction that not only the

assessee had contravened the provisions of section 269SS of the Act by

receiving the loans aggregating to Rs.1,36,50,000/- in cash from Sh. Navtej

Singh (supra), but had also failed to come forth with any reasonable cause

for having raised such loans in cash, which would have otherwise justified

triggering the provisions of section 273B of the Act. In the backdrop of our

aforesaid deliberations, finding no substance in the appeal filed by the

assessee, wherein he has assailed the order of the CIT(A) who had upheld

ITA Nos. 237 & 238/Asr/2016 30

the penalty of Rs. 1,36,50,000/- imposed by the JCIT, Range-II, Amritsar u/s

271D of the Act, we uphold the same.

ITA No. 238/Asr/2016 Assessment Year 2009-10

order passed by the JCIT, Range-II, Amritsar u/s 271E of the Act, dated

14.11.2013. The assessee has assailed the impugned order on the

following grounds of appeal before us:

“1. That Id. CIT(A) has erred in law while confirming the penalty u/s 27IE by ignoring the facts on record, indicating that no loan is paid to Navtej Singh in cash of Rs.6 lacs on 20.11.2008, hence penalty is liable to be deleted.

ITA Nos. 237 & 238/Asr/2016 31

Range-II, Amritsar from the ITO, Ward 2(3), Batala, that the assessee

during the year under consideration, i.e, on 22.11.2008 had returned a loan

of Rs.6,00,000/- in cash to Sh. Navtej Singh (supra), i.e., in contravention of

the provisions of section 269T of the Act, the JCIT issued a SCN dated

17.10.2013, therein following upon the assessee to explain that as to why he

may not be subjected to penalty u/s 271E of the Act. As the assessee failed

to comply with the aforesaid notice, therefore, another SCN, dated

01.11.2013 was issued to him both through registered post and process

server. In compliance, the assessee’s counsel, viz. S.K. Bansal, Advocate

filed an application seeking adjournment of the case, for the reason that the

quantum appeal of the assessee was pending disposal before the CIT(A),

and also that the assessee’s application u/s 154 was pending before the AO.

However, the JCIT being of the view that neither the outcome of the

appellate proceedings in the quantum appeal of the assessee nor his

application filed u/s 154 before the AO would have any bearing on the

adjudication of the issue in hand, therefore, refused to adjourn the matter

and proceeded with the same. Observing, that the assessee had not denied

the fact of having returned the loans of Rs.6,00,000/- in cash to Sh. Navtej

ITA Nos. 237 & 238/Asr/2016 32

Singh (supra), wherein the latter too had admitted of having received back

the loan to the said extent in cash, the JCIT holding a conviction that the

assessee had repaid the loan in question in contravention of the provisions

of section 269T of the Act, thus, vide his order u/s 271E, dated 14.11.2013

saddled him with a penalty of Rs.6,00,000/-, i.e., 100% of the cash loan that

was repaid by him.

advanced by the assessee therein upheld the penalty imposed by the JCIT,

Range-II, Amritsar, u/s 271E of the Act and dismissed the appeal.

upholding the penalty imposed by the JCIT, Range-II, Amritsar u/s 271E in

appeal before us. In addition to the contentions that were advanced by the

assessee as regards the bona-fide for having entered into cash loan

transaction with his cousin brother, viz. Sh. Navtej Singh (supra), the Ld.

AR further assailed the validity of the order passed by the JCIT u/s 271E of

the Act, dated 14.11.2013, for the reason, that the same was passed by

him on the basis of incorrect facts. Elaborating on his aforesaid contention,

it was submitted by the Ld. AR that the JCIT in his order had wrongly

stated that the assessee had returned the loan of Rs.6,00,000/- in cash to

ITA Nos. 237 & 238/Asr/2016 33

Sh. Navtej Singh (supra) on 20.11.2008. It was stated by the Ld. AR that

the aforesaid claim of the JCIT was factually incorrect as the assessee had

not repaid any part of the outstanding loan in cash to Sh. Navtej Singh

(supra) on 20.11.2008. In order to fortify his aforesaid contention the Ld.

AR had drawn our attention to the assessee’s cash book wherein no

transaction of repayment of any loan in cash on the aforesaid date, i.e.,

20.11.2008 to Sh. Navtej Singh (supra) was reflected. On a specific query

by the bench as to whether the assessee had repaid loan of Rs. Lac to Shri.

Navtej Singh, and if so, then on which date, the ld. A.R affirmed the

transaction of repayment by the assessee of a loan of Rs. 6 lac in cash to

Shri. Navtej Singh (supra), but stated that the same was not done on the

said date. Elaborating on his aforesaid contention, it was submitted by the

ld. AR that the aforesaid loan of Rs. 6 lac was repaid by the assessee in

cash to Shri. Navtej Singh (supra) on 29.12.2008. In order to fortify his

aforesaid claim the ld. AR had drawn our attention to the assessee’s ‘cash

book’ wherein the aforesaid transaction was recorded on the

aforementioned date, i.e, 29.12.2008. Backed by the aforesaid facts, it was

the claim of the Ld. AR as the very basis of imposition of the impugned

penalty by the JCIT, Range-II, Amritsar was factually incorrect, therefore,

ITA Nos. 237 & 238/Asr/2016 34

the order passed by him u/s 271E of the Act, dated 14.11.2013 could not

be sustained and was liable to be vacated.

was submitted by the Ld. DR that both the assessee and Sh. Navtej Singh

(supra) in the course of their respective statements recorded in the remand

proceedings (in the course of the quantum appeal), had admitted, that a

part of the outstanding loan, i.e, an amount of Rs.6 lac was repaid by the

assessee in cash. Our attention was drawn by the Ld. DR to the ‘remand

report’, dated 08.05.2013, wherein the aforesaid fact of repayment of loan

of Rs. 6 lac in cash was clearly discernible. In fact, it was stated by the Ld.

DR that as per the details given in the remand report the loan of

Rs.6,00,000/- was repaid by the assessee to Sh. Navtej Singh (supra) in

cash on 20.11.2008. In the backdrop of his aforesaid contention, it was

submitted by the Ld. DR that as the claim of the assessee’s counsel was

factually incorrect, therefore, the same did not merit acceptance and was

liable to be rejected.

parties, and perused the orders of the lower authorities a/w the material

ITA Nos. 237 & 238/Asr/2016 35

available on record. As is discernible from the record, it is a matter of fact

that both the assessee and Sh. Navtej Singh (supra) had admitted that part

of the outstanding loan, i.e, an amount of Rs. 6 lac (out of the total loan

of Rs.1,40,50,000/-) was repaid by the assessee in cash to the aforesaid

lender. On a perusal of the ‘remand report’, dated 08.05.2013, we find that

it is therein observed by the AO that Sh. Navtej Singh (supra) had given

the details of his loan transactions with the assessee, as under :

Date Particulars Amount 19.09.2008 Cash deposited in the 29,00,000/- bank 27.10.2008 do 1,07,50,000/- 17.07.2008 Amount through cheque 5,00,000/- 20.11.2008 Repaid to Navtej Singh 6,00,000/- Total 1,41,50,000/- (emphasis supplied by us)

inescapably be gathered that a part of the outstanding loan, i.e, an amount

of Rs.6 lac(supra) was repaid by the assessee to Sh. Navtej Singh (supra)

on 20.11.2008. Also, we find that as observed by the A.O in his aforesaid

‘remand report’ (supra), Sh. Navtej Singh (supra) had admitted of having

received back part of the outstanding loan of Rs.6 lac in cash from the

assessee. At this stage, we may herein observe, that the assessee too in

ITA Nos. 237 & 238/Asr/2016 36

the course of the remand proceedings (in his quantum appeal) had

admitted of having repaid part of the outstanding loan, i.e, an amount of

Rs. 6 lac (supra) in cash to Shri. Navtej Singh (supra). Backed by the

aforesaid facts, we are of the considered view that undeniably the assessee

had during the year under consideration repaid a part of the outstanding

loan, i.e, an amount of Rs.6 lac (supra) in cash to Sh. Navtej Singh (supra).

Although, we find that the cash book of the assessee does not reflect any

transaction of any cash repayment of loan of Rs. 6 lac on 20.11.2008 to Sh.

Navtej Singh (supra), however, the cash book of Sh. Navtej Singh (supra)

on the said date, i.e., 20.11.2008 duly reflects the receipt of part of the

outstanding loan of Rs.6 lac on the aforesaid date from the assessee. Be

that as it may, we are of the considered view, that as Sh. Navtej Singh

(supra) had not only admitted the fact of having received an amount of Rs.

6 lac(supra) towards part payment of the outstanding loan by the assessee,

but had also accounted for the same in his ‘cash book’ on 20.11.2008, the

same, thus substantially proves that the assessee had made the aforesaid

repayment of the loan on the aforesaid date, i.e. on 20.11.2008. Our

aforesaid conviction is all the more supported by the fact, that not only the

assessee in the course of the remand proceedings (in the course of his

ITA Nos. 237 & 238/Asr/2016 37

quantum appeal) had admitted of having repaid part of the outstanding

loan, i.e, an amount of Rs. 6 lac in cash to Sh. Navtej Singh (supra), but

even the copy of the ‘cash book’ of Sh. Navtej Singh (supra) supporting the

aforesaid fact had been placed on our record by the assessee. As regards

the accounting of the transaction of the repayment of cash loan of Rs. 6 lac

by the assessee to Shri. Navtej Singh (supra) on 29.12.2008, i.e, as per the

‘cash book’ of the assessee as against the claim of Shri. Navtej Singh

(supra) of having received back the same on 20.11.2008, we may herein

observe, that as the ‘cash book’ of the assessee was not maintained by him

in regular course, but as stated by the ld. A.R was compiled only in the

course of the proceedings for explaining the transactions in question,

therefore, the contents thereof do not inspire much of confidence as

regards the authenticity of the facts discernible there from. Backed by our

aforesaid observations, we are unable to persuade ourselves to subscribe to

the claim of the Ld. AR that the JCIT, Range-II, Amritsar, had erred in

imposing the penalty of Rs. 6 lac u/s 271E, vide his order dated 14.11.2013.

Accordingly, not finding any infirmity in the view taken by the CIT(A) who

had rightly upheld the penalty of Rs. 6 lac imposed by the JCIT, Range-II,

ITA Nos. 237 & 238/Asr/2016 38

Amritsar u/s 271E of the Act, we herein dismiss the appeal filed by the

assessee.

237/Asr/2016 and ITA No. 238/Asr/2016 are dismissed in terms of our

aforesaid observations.

Order pronounced U/R 34(4) of ITAT Rules on 21.02.2022.

Sd/- Sd/_ (Dr. M.L. Meena) (Ravish Sood) Accountant Member Judicial Member Date: 21.02.2022 *GP/Sr./PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True copy By Order