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Mr. Hemant Rajnikant Shroff Versus The Addl. CIT, Range-2, Surat

2016 (4) TMI 128 - ITAT AHMEDABAD

Penalty levied u/s 271D - whether the order is time barred - Held that:- The last date before which the penalty order u/s 271D could have been passed by the Revenue was 31.03.2014 and the date of passing the order u/s 271D of the Act is 28.03.2014, which is well within the time limit prescribed under the provisions of Section 275(1)(a) of the Act. We are, therefore, of the view that the order u/s 271D is not time-barred and is valid. We, therefore, dismiss first ground of the appeal of the asses .....

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cause the assessee and his brother, both are having their bank accounts in Surat City and both of them are not agriculturists. They are regularly filing their return of income. Therefore, there cannot be any reasonable cause for such failure. In these circumstances, there do not seem to be any way out for the assessee to get away from the penalty u/s 271D and therefore, we do not find any reason to interfere with the order of the learned CIT(A) - Decided against assessee

Penalty u/s 2 .....

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period when cash payment of ₹ 5,13,440/- was made, the account of M/s. Karmayog Commercial Corporation never came under the unsecured loan category. We are, therefore, of the view that in such situation the assessee should not be visited with penalty u/s 271E of the Act, because the assessee has not made any contravention to the provision of Section 269T of the Act. - Decided in favour of assessee - ITA Nos. 2480 & 2481/Ahd/2015 - Dated:- 1-4-2016 - Shri Rajpal Yadav, Judicial Member And S .....

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0/Ahd/2015. The assessee has raised following grounds of appeal:- 1. That on facts, and in law, the initiation of proceedings u/s 271D are timebarred, invalid and void ab initio. 2. That on facts and in law, the learned CIT(A) has grievously erred in confirming the penalty levied u/s 271D of the Act of ₹ 7,50,000/-. 3. The appellant craves leave to add, alter, amend any ground of appeal. 3. Briefly stated facts are that, during the course of scrutiny assessment for Assessment Year 2008-09, .....

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k account of the assessee is from cash loan taken by the assessee from the sole proprietary concern of assessee s brother for the purpose of repayment of monthly EMIs/installments of various personal loans taken by the assessee from various banks. The learned CIT(A) in his appellate order has mentioned that addition u/s 68 of the Act should not have been made in the case of the assessee as the source of cash of ₹ 7,50,000/- has been duly disclosed by the assessee; however, learned CIT(A) o .....

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now in appeal before the Tribunal. 5. First we take up Ground No.1 raised against the initiation of proceedings u/s 271D of the Act being time-barred. The learned Authorized Representative submitted that the penalty u/s 271D passed by the learned Assessing Officer is time-barred as per the provisions of Section 275(1)(c) of the Act, which says that no order imposing a penalty Chapter shall be passed after the expiry of the financial year in which the proceedings, in the course of which action f .....

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void and null. 5.1 On the other hand, learned Departmental Representative supported the order of the learned CIT(A). 6. We have heard the rival contentions and perused the material on record. We find from the available record that during the course of assessment proceedings u/s 143(3) of the Act for Assessment Year 2008-09 in the case of assessee an addition of ₹ 7,50,000/- was made on account of unexplained cash, which means that during the assessment proceedings, the assessee was unable .....

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eceived by the assessee as loan and this fact of receiving cash loan by assessee from his brother s sole proprietary concern has not been controverted by the assessee. Due to this reason, learned CIT(A) held that the assessee has been able to explain the source of cash of ₹ 7,50,000/- and no addition should be called for u/s 68 of the Income-tax Act. However, as the assessee has made contravention of the provisions of Section 269SS of the Act for accepting the loan exceeding ₹ 20,000 .....

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spect as to whether the penalty order u/s 271D was time-barred or not. We will first go through the provisions of Section 275 of the Act, which read as under:- 275. (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subjectmatter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the .....

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the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the [Pri .....

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tiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. (1A) In a case where the relevant assessment or other order is the subjectmatter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or .....

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celling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263or section 264: Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- (a) unless the assessee has been he .....

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hall apply in respect of the order imposing or enhancing or reducing penalty under this sub-section. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March, 1989. Explanation.-In computing the period of limitation for the purposes of this section,- (i) the time taken in giving an opportunity .....

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sessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A , and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which t .....

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n initiated and second date can be calculated on the basis of completion of one year from the end of the financial year in which the order of CIT(A) is received, which in this case the order of the CIT(A) in which the proceedings u/s 271D have been initiated is dated 01.03.2013 and one year from the end of financial year in which this order is passed will complete on 31.03.2014. So, applying this proviso, we find that the last date before which the penalty order u/s 271D could have been passed b .....

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#8377; 7,50,000/- in contravention of the provisions of Section 269SS of the Act. 7.1 On going through the records placed before us, we find that the assessee himself has submitted the date-wise details on which cash loans have been received aggregating to ₹ 7,50,000/- from M/s. Karmayog Commercial Corporation, which is a sole proprietary concern owned by the assessee s brother. The assessee has also accepted during the assessment proceedings as well as during the appellate proceedings bef .....

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ssessee has taken cash loan from his own brother. 7.2 The assessee could not get any relief before the learned CIT(A) who has confirmed the penalty u/s 271D. 8. We have heard the rival contentions and perused the material on record. We find that the learned CIT(A) has observed as under while sustaining the penalty u/s 271D of the Act:- 6.2.1 The Grounds of appeal- Ground Ho. 2 pertains to levying penalty of ₹ 7,50,000/- under the provision of section 271D of the Income Tax Act 1961 for con .....

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D of the Act. The appellant submitted that the M/s Karamyog Commercial Corporation is a proprietary concern of appellant's brother and the funds in cash of ₹ 7,50,000/- were taken on different dates for the repayment of EMI/installment of the various personal loans taken by the appellant from various banks. The cash amount was taken to make the repayments from his brother and therefore his action of taking cash loans falls under the category of the reasonable cause u/s 273B of the Act. .....

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tioned the cash transaction as 'Udhar' which means loans. The appellant has not mentioned any business connection with M/s KaramYog Commercial Corporation in respect of these transactions. The provisions of sec. 271D are clearly attracted. It is no doubt true that the heading of Chapter XX-B provides that the sections in this chapter are to counteract the evasion of tax. At the same time, it is equally true that nowhere in the body of section 269SS or other sections falling in this chapt .....

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onstruction. 6.2.2 In the light of this legal position, it is noted that there is no ambiguity in the language of section 269SS and, therefore, the provisions of section 269SS are not only to counteract the evasion of tax but also to regulate certain transactions of money in a specified form. If the contention of the appellant that no penalty is exigible because genuineness of transaction was not doubted is accepted, it would lead to anomalous results. It is important to bear in mind that sectio .....

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the issue would close at the applicability of section 68 itself. On the contrary, section 269SS does not deal with the genuineness or otherwise of the loans and deposits accepted by the appellant but it only requires the regulation of loans and deposits in a specific manner exceeding a specified limit. Therefore, the appellant has to show the reasonable cause for receiving the amount by way of cash and what is the reason for not receiving the deposit by way of account payee cheque or bank draft .....

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on the appellant to prove that there was reasonable cause for receiving the deposits by way of cash from the various persons. 6.2.3 There is a difference between the expressions "genuine and bonafide transaction" and the "reasonable cause" for not complying with the provisions of Section 269SS to avoid penalty proceeding under Section 271 D. The transaction may be genuine and bonafide but may still violate the provisions of Section 269SS. The legislature has provided for rela .....

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ding the constitutional validity of sections 269SS and 271D, held as under: . "The new section 271D provides only for fine equal to the amount of loan or deposit taken or accepted. It is important to note that another provision, namely section 273B was also incorporated which provides that notwithstanding anything contained in the provisions of section 271 D, no penalty shall be imposable on the person or the appellant, as the case maybe, for any failure referred to in the said provision if .....

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ft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power. In that view of the matter, we do not think that section 269SS or 271D or the earlier section 276DD is unconstitutional on the ground that it was draconian or expropriatory in nature." 6.2.4 The above extract gives us a key to the understanding of section 273B of the said Act. The Supreme Court observed that (1) if there was a genuine and bona fide transaction and (2) if for any .....

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present case, there is nothing on record to show that there were bona fide reasons for not accepting the said amounts through account payee cheques or account. The appellant has relied on various decisions to show that penalty not be levied in the appellant's case but those decisions are delivered on their own facts and those decisions have no application to the case of the appellant. The following decisions have upheld the issue of imposition of penalty in absence of any reasonable cause : .....

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/s 271D without giving immunity u/s 273B and without properly considering the "reasonable causes for requisites of such cash funds from brother" duly submitted by appellant as stipulated under provisions of section 273B. The appellant has not been able to demonstrate any reasonable cause before the AO during the penalty proceedings as envisaged in the provisions of sec. 273B of the Act. The appellant has not been able to demonstrate that what circumstances prevented him from taking the .....

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the Act and therefore the ground of appeal is dismissed. 8.1 We further find that provisions of Section 269SS of the Act are squarely applicable on the cash loan transactions made by the assessee by way of taking cash loans from his brother s proprietary concern M/.s Karamyog Commercial Corporation. Further, the learned Authorized Representative s contention that the assessee should be given immunity from the harsh provisions of Section 271D by covering him u/s 273B of the Act as the assessee ha .....

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order of the learned CIT(A) and accordingly, we dismiss this ground of the assessee. 9. Ground No.3 is general in nature. 10. In the result, the appeal of the assessee is dismissed. 11. Now, we take up ITA No.2481/Ahd/2015. The Ground No.1 raised by the assessee in this appeal reads as under:- That on facts, and in law, the initiation of proceedings u/s 271E are timebarred, invalid and void ab initio. 12. We have already dealt with this issue in ITA No.2480/Ahd/2015, wherein we have dealt with .....

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and accordingly, we find that order u/s 271E framed by the assessing authority is not time barred and accordingly, we dismiss this ground of the assessee. 13. Now, we take up Ground No.2, which reads as under:- That on facts and in law, the learned CIT(A) has grievously erred in confirming the penalty levied u/s 271E of the Act of ₹ 5,13,440/-. 14. Penalty u/s 271E of the Act was framed by the assessing authority for repayment of loan in cash on various dates aggregating to ₹ 5,13,4 .....

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rusal of record, we find that the assessee has submitted ledger account of M/s. Karmayog Commercial Corporation for the Financial Year 2007-08 which is appearing at page Nos. 27 & 28 of the paper-book. From going through the ledger account, we find that as on 01.04.2007 there is a credit balance of ₹ 18,32,305.50 in the name of M/s. Karmayog Commercial Corporation in the books of assessee as on 01.04.2007, which means that M/s. Karmayog Commercial Corporation was standing in the books .....

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0,000/- and was left with a credit balance of ₹ 22,78,305.50 in the name of M/s. Karmayog Commercial Corporation and thereafter, there were series of debit entries which turned the credit balance of M/s. Karmayog Commercial Corporation into debit balance and as on 23.10.2007, the debit balance of M/s. Karmayog Commercial Corporation was standing at ₹ 42,57,194.50; which means that the category of M/s. Karmayog Commercial Corporation has changed from unsecured loans taken to the categ .....

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hich read as under:- 269T. No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it [or any specified advance received by it] otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit [or paid the specified advance,] [or by use of electronic clearing system through a bank account] if- (a) the amount of the .....

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amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such specified advances,] is twenty thousand rupees or more: Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch .....

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