TMI Blog2017 (9) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee by issuing summons u/s 131 or commission u/s 133(6) to any of the persons whose names are mentioned in the annexure and the fact that all these cash payments being only for loan and advances is not established beyond doubt and no presumption based financial liabilities can be levied upon the assessee. CIT(A) has further highlighted certain contradictions in the findings of the Add CIT. As we have held above, the initial onus is on the assessee and once the assessee discharges its initial onus, the onus thereafter shift on the Revenue. In the instant case, it is also a fact that Section 271D and Section 271E being the penal provisions which have been invoked, it is to be seen that the conditions specified in the provisions are strictly fulfilled before the levy of penalty which is equal to the value of the transactions. It has to be established that there are transactions in the nature of loans and advances and their repayment, both in cash, which have clearly violated the provisions of section 269SS and 269T of the Act without any reasonable cause. On perusal of records, we find that there is not enough material on record for us to take a view in the matter. In the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is time barred.) 2. Firstly, we will take the issue of limitation as to whether the order passed u/s 271D as well as u/s 271E of the Act are barred by limitation as prescribed under section 275 of the Act. In its cross objection, the assessee has stated that the assessment order was passed on 19.10.2014 and thereafter penalty was levied on 29.10.2015 which is beyond 6 Months hence it was barred by limitation u/s 275(1)(c) of the Act. It was accordingly contended that the initiation for levy of penalty should be reckoned from the date of passing of the assessment order. 3. The ld DR drawn our reference to circular No. 9/DV/2016 dated 26- 4-2016 issued by CBDT and submitted that the ld CIT(A) view is also in consonance with the departmental view as specified by the Board Circular. The contents of the CBDT Circular read as under: Commencement of limitation for penalty proceedings under sections 271D and 271E - It has been brought to the notice of the Central Board of Direct Taxes (hereinafter referred to as the Board) that there are conflicting interpretations of various High Courts on the issue whether the limitation for imposition of penalty under sections 271D and 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be, in the course of the assessment proceedings (or any other proceedings under the Act). The Assessing Officer, (below the rank of Joint Commissioner of Income Tax) shall not issue the notice in this regard. The Range Head will issue the penalty notice and shall dispose/complete the proceedings within the limitation prescribed under section 275(1)(c) of the Act. 5. Where any High Court decides this issue contrary to the Departmental View , the Departmental View thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However, the CCIT concerned should immediately bring the judgment to the notice of the Central Technical Committee. The CTC shall examine the said judgment on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for. 4. During the course of appellate proceedings before the ld CIT(A), the assessee has drawn support from two decisions of the Hon ble Rajasthan High Court in case of Hissaria Bros reported in 291 ITR 244 and subsequent decision in case of Jitendra Singh Rathore reported in 352 ITR 327 which has cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce so far the penalty proceedings under Section 271D were concerned. As held by this Court in Hissaria Bros. (supra), completion of appellate proceedings arising out of assessment proceedings has no relevance over sustaining such penalty proceedings. As held clearly by this Court, in such a matter, clause (c) of Section 275 (1) would be applicable. Section 275(1)(c) could be noticed as under:- 275. Bar of limitation for imposing penalties. (1) No order imposing a penalty under this Chapter shall be passed- ..... (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. 9. In the present case, the first show cause notice for initiation of proceedings was issued by the AO on 25.03.2003 and was served on the assessee on 27.03.2003. Obviously, the later period also expired on 30.09.2003 when six months expired from the end of the month in which the action for imposing the penalty was initiated. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been argued that the penalty imposed by the Addl CIT Range-1, Kota in this case was beyond the limitation provided in the Act. However, since there is no formal notice issued by the A.O. as seen from the record, it is held that the first notice was issued not by the A.O. but by the Addl CIT only on 23-04-2015 and he has passed the order on 29/10/2015 which is within 6 months period as per section 275(1)(c). On this basis itself, the penalty order cannot be on faulted on legal grounds and is held to be valid. 6. In light of above findings of the ld CIT(A) which remain undisputed before us, it is clear that during the course of assessment proceedings, the AO has stated that matter relating to penalty proceedings in respect of violation of section 269SS and 269T are being referred to the Additional/Joint CIT. In other words, the AO didn t initiate the penalty proceedings under section 271D and section 271E during the course of assessment proceedings. There is no mention of such proceedings being initiated by the AO in the assessment order. Further, there is no notice under section 271D and section 271E which has been issued by the AO to the assessee by virtue of which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds to be addressed here is that if the original documents were reliable, then why the A.O. rejected the books of accounts and estimated N.P. in the course of Assessment proceedings even after the special audit was done by an independent auditor? Therefore, when the Addl CIT is relying on the assessment proceeding from where the reference of violation of provisions of section 269SS and 269T have been invoked, he has to acknowledge the established legal position that once N.P. in such a case has been estimated, other additions based on the books of accounts cannot survive and in the present appeal, the penalty imposed u/s 271D and 271E for violation of provisions of section 269SS and 269T respectively is arising out of entries in those very rough books of accounts. As per explanation from the submissions made during the assessment as well as appellate proceedings, it has been contended that the persons to whom the payments were made were not only paid employee (site incharges), but suppliers of materials who delivered materials to sites, persons from whom machineries were hired and sub contractors. The amounts written in these rough site records were in the nature of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mewhere as these were in any case rough or Kachha books. Thus, the veracity of the books of accounts themselves being in question, the Addl. CIT should not have considered these entries to be the basis for levy of penalty u/s 271D also when he could not conclusively prove that these entries actually reflected figures of loans and repayments of these loans. 3) If these are treated as genuine loans which the Addl. CIT has concluded, he should have asked for the details of the creditors and sought reasons for taking these loans in cash in violation of section 269SS and similarly for repayment also the same condition should have been followed before treating it as violation of section 269T. The Addl. CIT during the proceeding u/s 269SS or 269T has not cross examined the above version of the assessee by issuing summons u/s 131 or commission u/s 133(6) to any of the persons whose names are mentioned in the annexure. For example, the payment to one Ashfaque who is a Sub-Contractor, with TDS deduction mentioned was verifiable from TDS records, on which the Addl CIT s order is silent though his name is included in the list of lenders as per the 271D order. Some of the entries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rification and investigation, but mere suspicion cannot be a ground to hold that loan/deposits were received in cash. The findings of the Tribunal were not perverse. Further, the revenue has not filed any document or material to show that in fact loan was taken and interest payment was made. The persons to whom allegedly interest was paid, their details and particulars were not ascertained, verified and examined. (Relevant part) ..If Revenue wanted to take the view that the noting on the loose papers is with regard to loan taken by the assessee, then the burden was upon the Revenue to establish so. However, the Assessing officer did nothing except to make serious of presumptions and then made the addition and levied the penalty on the basis of his presumptions. We find that similar situation was dealt with by the ITAT while considering the Revenue s appeal for penalty for AY 2001-02, 2002-03 2003-04 and the ITAT has held that the document does not indicate that the assessee has accepted loan or deposit from any other person. The name of the assessee is completely absent from the said document. Identical is the situation in the years under appeal before us. None of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds. Thus the Assessee s stand on the advances for site to various persons was put forth in the assessment proceeding as well but not considering though not controverted with enquiries by the Addl CIT. 6) The Addl CIT or the A.O. have not made out a case that there were unaccounted receipts. If these were loans in the books, whether these were squared up or not? If not then were there outstanding balances in the Balance Sheet which would confirm the stand taken the department? Thus it can be seen that there are inherent contradictions in the findings reached by the Addl CIT while passing the orders u/s 271D 271E in this case. It is to be noted that for a transaction to be termed as loan or-deposit within the meaning of Section 269SS of the Act, there should be two entities or persons namely lender and borrower or depositor and recipient in the instant case since the identity of the lenders were not examined by the A.O., these transactions cannot be termed as loans or deposits, hence outside the purview of Section 269SS of the Income-tax Act, 1961. If the transaction does not fall within the meaning of loan or deposit, there is no violation of Section 269SS of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the legal precedents available in this regard, it is held that the order of the Addl CIT was based on presumptions, unsustainable on facts and in law. Thus, in the absence of any cogent basis for the findings as well as absence of any material independent verification to establish that the amounts mentioned in the loose papers listed as annexure A-2/22 representing acceptance and repayment of loans/ deposits contravention of the provisions contained in section 269SS/T of the Act, 1961, I am not able to sustain the findings of the Addl CIT in imposing penalty u/s 271D/E in this case for contravention of the provisions of section 269SS/269T respectively. 9. We have heard the rival contentions and perused the material available on record. Firstly, the ld CIT(A) has held that where the books of accounts have been rejected and the Addl CIT is relying on the assessment proceeding from where the reference of violation of provisions of section 269SS and 269T have been invoked, he has to acknowledge the established legal position that once N.P. in such a case has been estimated, other additions based on the books of accounts cannot survive and in the present appeal, the penalty im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reported in 72 ITR 194 wherein it was held as under: there is nothing in law which prevents the ITO in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained and the business income estimated by him under section 13 after rejecting the books of accounts of the assessee as unreliable. Whether in a given case, the ITO may tax the cash credit entered in the books of account of the business and at the same time, estimate the profit must however depend upon the facts of each case. 10. In light of above, we donot agree with the view of the ld CIT(A) that where the veracity of the books of accounts themselves being question, the Add. CIT should not have considered these entries to be the basis for levy of penalty u/s 271D. 11. We now refer to the other findings of the ld CIT(A) which are under challenge before us. The ld CIT(A) has held that the annexure A2/22 impounded during the course of survey u/s 133A, based on which the working of the alleged loans has been done by him, were never accepted by the assessee as loan entries, rather it was claimed that these were site related expenses. Further, ld CIT(A) held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble verifable evidence. There are around 13 persons which have been identified by the Add. CIT with whom the assessee company has multiple transactions during the year wherein cash has been received and repaid. The transactions with each of the specified 13 persons need to be supported independently with credible evidence to demonstrate that the provisions of section 269SS and 269T are not attracted. In this regard, once the Add. CIT has given a show-cause to the assessee with specific details of each of the transactions with the specified persons, the initial onus is on the assessee to demonstrate that the provisions of section 269SS and 269T are not attracted and accordingly, no penalty can be levied under section 271D and 271E. The basis of such show-cause is the documents found during the course of survey and subsequent report of the special auditor who has analysed various cash transactions undertaken by the assessee and come to a conclusion that the provisions of section 269SS and 269T are violated. It is for the assessee to rebut the same with appropriate evidence. The transactions are undertaken by the assessee and it is for the assessee to demonstrate the true nature and c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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