TMI Blog2011 (5) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely erroneous and bad in law requiring outright annulment. 3. The brief facts of the case as emerged from the order of Ld. CIT(Appeals) are that a search operation u/s.132 was carried out at the residence of Shri Kirtibhai K Shroff (KKS for short), wherein it was found that the assessee had repaid loan of Rs.25 lakh to Shri KKS in cash. The JCIT therefore issued a notice u/s.271E r.w.s.s 269T requiring it to show cause as to why penalty u/s.271E be not levied. The assessee replied that Shri KKS was sub-broker of the assessee-company and had regular dealings with the assessee-company in this regard. As a part of business agreement, Shri KKS had agreed to pay the assessee-company a security deposit for which the assessee-company had executed promissory note in his favour. However, as against the promissory note given by the assessee-company cheques of only Rs.6 lakh was cleared on 11-07-2003 in the account of the assessee company and the balance amount was pending. This promissory note was executed for the safety point of view by the said Shri KKS against the payments to be made by him during the regular business dealings. The assessee stated that however the actual paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement u/s.132(4) that promissory note found during the course of search in respect of Rs.25 lakh given as loan to the assessee-company. This is further reinforced by the reply to Question No.2 of the statement recorded on 25-01-2005 where Shri Samirbhai K Shroff stated that loan of Rs.25 lakh given to the assessee-company was received back which was given out of unaccounted income. The assessee failed to bring any evidence on the record to show that promissory notes were issued against regular business dealings and not for obtaining loans. The legal position of statement u/s.132(4) is that a person who is in possession of the evidence has to explain the same. The presumption is that these documents/evidences were true and the genuineness is cast on the assessee to disprove the same or prove it otherwise. The Assessing Officer further stated that the decision of Hon ble Delhi High Court in the case of Standard Brands Ltd. (supra) and the decision of ITAT Mumbai Bench in the case of G.S. Entertainment (supra) were not applicable in the present case of assessee as they are regarding treating undisclosed income in the hands of the assessee and also initiating proceedings for violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.132(4A) was available only against the person from whose possession the document was found. 6. The Ld. CIT(A) in order to this submission of the assessee to Assessing Officer for giving cross-examination of Shri KKS and thereafter submitting to his remand report. In the remand report, the Assessing Officer stated that five promissory notes of Rs.5 lakh each was found during the course of search operation at the residence of Shri KKS. These promissory notes were issued by Shri Rakesh Doshi and Shri Viren Shah, who were the Directors of the assessee-company to Shri KKS on 23-01-2003 against receipt of cash. In the statement recorded u/s 132(4) in response to Question NO.22 Shri KKS clearly stated that an amount of Rs.25 lakh in cash was given on 23-0 1- 2003 to Growth Avenues Ltd. and the promissory notes were found in respect of said amount Shri Viren Shah, Director of the assessee-company was also questioned and in his statement recorded on 07-07-2005 stated in reply to Question No.11 that he had received only Rs.6 lakh by cheque and the promissory notes of Rs.25 lakh were issued in good faith. In reply to Question No.22 of his statement dated 25-01-2005 Shri SSK stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remand proceedings, the cross-examination of Shri Kirtibhai K Shroff was carried out by Shri Viren Shan on 24.12.2008 and in this crossexamination Shri Kirtibhai K Shroff repeated his earlier statement that he had given loan of Rs.25,00,000/- in cash and the same had been received back in cash through Shri Viren Shah and Shri Rakesh Doshi. Shri Kirtibhai K Shroff further stated that the promissory notes have remained with him even after repayment of loan in good faith. The relevant portion of the cross examination is as under:- Q.1 Please clarify the statement as given by you in respect of my promissory notes found from your possession during the course of search at your premises? A. 1 I have stated that I have given loan to Mr. Viren Shah and Rakesh Doshi of Rs.25 lakcs for which promissory notes were obtained. I don t remember the exact date since the same have been given around 5 to 6 years back. Q.2 Whether the promissory notes were in the name of the company Growth Avenues Ltd. or in the individual name? A.2 It was in the individual name of Viren Shah and Rakesh Doshi. Q.3 Have the loan given by you is repaid to you or not? A.3 Yes I have received back the loan. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated penalty proceedings against the assessee under section 271D. The Commissioner (Appeals) confirmed the penalty. In the quantum issue, the Commissioner (Appeals) held that the addition under section 158BC could not be sustained and that the Assessing Officer could have taken action under section 147. The Tribunal upheld the view taken by the Commissioner (Appeals) in the quantum appeal and held that the receipt was outside the scope of undisclosed income defined under section 158B(b) and dismissed the Departments appeal. On appeal: Held, dismissing the appeal, that the Revenue having taken the stand that the amount was undisclosed income in the hands of the assessee, it could not resort to proceedings under section 269SS read with section 271D. Since the block assessment could not be sustained, penal action may be permissible (if at all) only after a regular assessment was made. No substantial question of law arose in the appeal. 2.3.3 From the above decision, it is seen that the A. O in the case of Standard Brand had not only treated the amount as loan received but had also treated the amount as assessee s own undisclosed income. Both the stands are contradictory a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the provisions of that Section. Since in this case there is no such violation on the part of assessee-company the penalty cannot be levied against it. If at all there is any violation of the provisions of Section 269T, it was on the part of Shri Rakesh Doshi and Viren Shah as is cleare from the cross-examination of Shri KKS. In view of this, the penalty imposed by Assessing Officer u/s.271E/269T and sustained by Ld. CIT(A) is hereby deleted. Now coming to ITA No.1940/Ahd/2009. 10. The assessee has taken the following ground:- 1. That on facts and circumstances of the case, the Learned CIT(A) has erred in confirming penalty of Rs.25,00,000/- u/s.271D of the Act which is absolutely erroneous and bad in law requiring outright annulment. 11. The brief facts of the case as emerged from the order of Ld. CIT(A) are that a search operation was carried out at the residence of Shri KKS u/s. 132, wherein it was found that the assessee had accepted a loan of Rs.25 lakh fro Shri KKS in cash. The JCIT issued a notice u/s.271D r.w.s. 269SS requiring it to show cause as to why penalty u/s.271D be not levied. The assessee replied that Shri KKS was sub-broker of the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded on 25-01-2005, Shri Samir K Shroff stated that loan of Rs.25 lakh given to M/s. Growth Avenues Ltd had been received back which had given out the unaccounted income, which clearly indicated that assessee had accepted the loan of Rs.25 lakh and repaid the same in cash. It was also mentioned by the Assessing Officer that in view of reply at Question No.22 of Shri KKS of his statement recorded u/s 132(4) the contention of the assessee that the promissory notes were executed for safety points has no relevancy. According to him, Shri KKS has clearly made a statement u/s.132(4) that promissory note found during the course of search in respect of Rs.25 lakh given as loan to the assessee-company. This is further reinforced by the reply to Question No.2 of the statement recorded on 25-01-2005 where Shri Samirbhai K Shroff stated that loan of Rs.25 lakh given to the assessee company was received back which was given out of unaccounted income. The assessee failed to bring any evidence on the record to show that promissory notes were issued against regular business dealings and not for obtaining loans. The legal position of the statement u/s.132(4) is that a person who is in possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench in the case of Rajesh Mehta (supra). The presumption u/s.132(4) cannot be resorted to since no evidence was found in the possession of the assessee. It was further argued that promissory notes were not found in the possession of assessee and hence provisions of Section 132(4A) were not applicable to the assessee in this regard. The assessee relied on the decision of ITAT Vishakaptnam in the case of Smt. Bommana Swarna Rekha (supra), wherein it was held that presumption u/s.132(4A) was available only against the person from whose possession the document was found. 14. The Ld. CIT(A) in order to this submission of the assessee to Assessing Officer for giving cross-examination of Shri KKS and thereafter submitting to his remand report. In the remand report, the Assessing Officer stated that five promissory notes of Rs.5 lakh each was found during the course of search operation at the residence of Shri KKS. These promissory notes were issued by Shri Rakesh Doshi and Shri Viren Shah, who were the Directors of the assessee-company to Shri KKS on 23-01- 2003 against receipt of cash. In the statement recorded u/s 132(4) in response to Question NO.22 Shri KKS clearly stated that an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes found were in respect of said amount. Shri Viren Shah, Director of the appellant company was also questioned and in his statement recorded on 07.07.2005 stated in reply to question No.11 that he had received only Rs.6,00,000/p- by cheque and the promissory notes of Rs.25,00,000/- were issued in good faith. Further in reply to question No.22 of statement dated 25.01.2005, Shri Samairbhai K Shroff stated that sum of Rs.255,00,000/p had been received back. Even during the remand proceedings, the cross-examination of Shri Kirtibhai K Shroff was carried out by Shri Viren Shan on 24.12.2008 and in this crossexamination Shri Kirtibhai K Shroff repeated his earlier statement that he had given loan of Rs.25,00,000/ in cash and the same had been received back in cash through Shri Viren Shah and Shri Rakesh Doshi. Shri Kirtibhai K Shroff further stated that the promissory notes have remained with him even after repayment of loan in good faith. The relevant portion of the cross examination is as under:- Q.1 Please clarify the statement as given by you in respect of my promissory notes found from your possession during the course of search at your premises? A. 1 I have stated that I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as undisclosed income of the appellant as well as levied penalty for receiving the amount in cash as loan/deposit. In the case of Standard Brand, the facts and decision of the Hon ble High Court is as under:- The assessee received an amount of Rs 3 lakhs in cash from a company which was in violation of section 269SS of the Incometax Act, 1961. According to the assessee, it was a deposit by the Assessing Officer treated the amount as undisclosed income of the assessee and initiated penalty proceedings against the assessee under section 271D. The Commissioner (Appeals) confirmed the penalty. In the quantum issue, the Commissioner (Appeals) held that the addition under section 158BC could not be sustained and that the Assessing Officer could have taken action under section 147. The Tribunal upheld the view taken by the Commissioner (Appeals) in the quantum appeal and held that the receipt was outside the scope of undisclosed income defined under section 158B(b) and dismissed the Departments appeal. On appeal: Held, dismissing the appeal, that the Revenue having taken the stand that the amount was undisclosed income in the hands of the assessee, it could not resort to proce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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