TMI Blog2023 (2) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... valid because penalty u/s 271D / 271E are not attracted in case of loan given . As against this, if we give weightage to reversed-conclusion i.e. the AIDPL has given loan to assessee, the consequences would be just opposite i.e. the re-assessment proceeding would be invalid but the penalty-proceeding shall be valid. Thus, if one proceeding is saved, other has to be quashed. Hence we have given our anxious thought in the matter. After a mindful consideration, we are of the view that the original-conclusion was not faulty at the time of initiating re-assessment / passing of order of reassessment / launching of penalty-proceedings. It is a subsequent matter that the dust was clear about the nature of transaction and original-conclusion was reversed. Hence, it would be apt to give preference to the original-conclusion which has set the proceedings in motion. Since the original-conclusion was to the effect that the assessee had given loan to AIDPL, the fate of present appeals / cross-objection, in our considered view, would be as under: (i) The order of re-assessment shall be valid for the reason that loan given was believed to be undisclosed income of assessee. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ld. AR. In view of this, the appeals are proceeded with for hearing, there being no delay. Quantum-matters upto first-appeal: 5. The original assessment of assessee was completed vide order dated 30.12.2010 u/s 143(3) of the Act. Subsequently, a search was conducted on 27.08.2014 at the premises of M/s PATH Oriental Highways Public Limited, Mhow during which an incremating document marked as LPS-1, Page No. 21 to 23 was seized which contained the details of cash-transactions done between M/s Prakash Ashphaltings Toll Highways (India) Ltd. [Hereinafter referred to as the assessee or PATL ] and M/s Agroh Infrastructure Developers Pvt. Ltd. [ AIDPL ] were found. On analysis of document, the Ld. AO framed a view that the assessee had given a loan of Rs. 1,15,00,000/- to AIDPL, which has not been recorded in the books of account. Therefore, treating the same as payment made out of undisclosed income, the Ld. AO re-opened assessment u/s 147 of the Act vide notice dated 18.03.2015 u/s 148. For the sake of immediate reference, the reason of re-opening, as reproduced by Ld. AO in Para No. 3 of the assessment-order, is as under: 3. The reason recorded u/s 148(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of Rs. 1,15,14,659/- on merit. While deciding appeal, the Ld. CIT(A) upheld the legality of re-assessment. However, he deleted the addition of Rs. 1,15,14,659/- on merit by observing and holding thus: Ground No.3: Through this ground of appeal, the appellant has challenged addition of Rs.1,15,14,659/- on account of unexplained cash credit. During the course of appellate proceeding the AO vide letter F.No. ACIT(Cen)-1/Ind/ Remand Report/2017-18 dated 29.05.2017 has stated as under: i. The search and seizure action u/s 132 of the Act were carried out on the business as well as residential premises of the Agroh group and PATH Group on 27.08.2014. ii. During the course of search, a set of incriminating documents (page no.21-23 of LPS-1) were seizure from the office premises of Agroh Infrasturcture Developers Pvt. ltd. (AIDPL) at Aqua point, AB Road, Umaria, Mhow. On perusal of these seized documents page nos. 21 to 23 of LPS-1, cash loan of Rs.1,15,00,000/- has been given by AIDPL to Prakash Asphaltings Toll Highways (I) Ltd. (PATH(I) LTD) and subsequently which was repaid along with the interest of Rs.14,659/- iii. On the basis of these seized documents ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te notices, both dated 08.07.2016, one for penalty u/s 271D and other u/s 271E, which are placed in the Paper-Book at Page No. 49 and 50, scanned copies thereof being re-produced below: 10. In response, the assessee submitted a reply dated 26.07.2016, wherein the assessee raised, among others, a legal plea that penalty u/s 271D is applicable for violation of section 269SS i.e. where the loan is taken and penalty u/s 271E is applicable for violation of section 269T i.e. where the loan is repaid. But, however, in the present case the allegation of department is that the assessee has given loan to AIDPL. Hence, neither section 271D nor section 271E is applicable qua the assessee. 11. Based on above pleading made by assessee, the Ld. Addl. CIT sought a factual-report from Ld. AO on the nature of transaction, whereupon the Ld. AO submitted factual-report dated 28.09.2016 as mentioned in Para No. 5 / Page No. 7 of the penalty-order. The contents of factual-report are also extracted by Ld. Addl. CIT in Para No. 5 of the penalty-order, according to which it was reported by Ld. AO that AIDPL has given loan to the assessee i.e. the assessee has taken loan from AIDPL. The said ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ATH. Obliviously, if the left-hand side column on upper side of page.23 is correct and if it means that AIDPL has given loan to PATH from bank account. Then, it automatically follows that in the bottom side of pageD 23 of LPS-1 is also correct and it means that the cash loan has been given by AIDPL to PATH. 12. Finally, Ld. Addl. CIT passed penalty-order dated 27.09.2016 imposing a penalty of Rs. 1,15,00,000/- u/s 271D read with section 269SS of the Act, by concluding thus: 6. Taking into consideration the facts of the case and the discussion made above, I am satisfied that the assessee has breached the provisions of section 269SS and made itself liable for levy of penalty u/s 271D r.w.s. 269SS of the Act. I, therefore, levy a penalty of Rs. 1,15,00,000/- (Rupees one crore fifteen lakh only) u/s 271D of the Income-tax Act, 1961 for the Assessment-Year 2008-09. 13. Against penalty-order, the assessee filed first-appeal to Ld. CIT(A). The Ld. CIT(A) deleted the penalty by observing and holding thus: 4. After taking into consideration the AO's findings and appellant's oral and written submission made in the course of hearing as well as the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustainable on facts nor in law. The AO has reached to conclusion that few of the entries in printouts and books of appellant are matching and therefore imposed the penalty. These documents have been scanned on page 5-7 of penalty order. On a plain and cursory look would make it amply clear that this paper is relating to some excel sheets containing notings of cash, month, interest and balance amount . It is stated in Remand report Dated 29/05/2017 that Director of Agroh (AIDPL) has admitted during proceedings u/s 263 before the Pr. CIT vide its submission dated 21/01/2017 for the A.Y. 2008-09 that Agroh has given loan in cash but the said statement has not been shared nor opportunity to cross examination was given to Appellant. The said loose papers were found from premises of AIDPL. As far as legality of the addition, it is settled position of law that no addition/ disallowance can be made to the total income of the appellant in absence of any incriminating documents/material found during the course of search from premises of appellant. In the instant case the loose papers were found and seized from the premises of AIDPL (third party). 4.1.3 It is clear that the impugned l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussion, material evidences on record and case laws cited, the AO failed to establish the nexus on receipt or repayment of impugned loans. It is settled legal pronouncement, that presumption how strong cannot take place of evidence. It is stated in remand report that AIDPL has admitted that cash loan is given by way of submission dated 21.01.2017 filed before the Pr.CIT in response to notice u/s 263, which cannot bind the assessee. Penal provisions have to be construed strictly. There is no corresponding paper or document which is seized from premises of Appellant, during the course of its search, to substantiate that transaction is real and cash is actually received by appellant. From the remand report Dated 29/05/2017 it is clear that document was interpreted in a manner that loan was given by appellant to AIDPL in re-assessment proceedings but during penalty proceeding, it was treated as cash loan is taken/accepted by appellant. Therefore, such document which laid two interpretation within department cannot be said a speaking one. Thus, from the above discussion, it is very clear that none of the transaction as mentioned in the second table, materialized. Thus, the AO was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presenting the assessee took the lead to argue all matters. He straightaway carried us to the remand-report submitted by Ld. AO to Ld. CIT(A), which we have already reproduced here-in-above in Paragraph No. 7, and requested us to peruse contents thereof which, according to him, is selfspeaking and self-explanatory. We repeat the same again while emphasizing the contents directly relevant to us: Ground No.3: Through this ground of appeal, the appellant has challenged addition of Rs.1,15,14,659/- on account of unexplained cash credit. During the course of appellate proceeding the AO vide letter F.No. ACIT(Cen)-1/Ind/ Remand Report/2017-18 dated 29.05.2017 has stated as under: i. The search and seizure action u/s 132 of the Act were carried out on the business as well as residential premises of the Agroh group and PATH Group on 27.08.2014. ii. During the course of search, a set of incriminating documents (page no.21-23 of LPS-1) were seizure from the office premises of Agroh Infrasturcture Developers Pvt. Ltd. (AIDPL) at Aqua point, AB Road, Umaria, Mhow. On perusal of these seized documents page nos. 21 to 23 of LPS-1, cash loan of Rs.1,15,00,000/- has been given by AI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the required factual report in the above mentioned assessee for levy of penalty u/s 271D 271E of the Income Tax Act, 1961 (hereinafter referred to as the Act) is as under: 1. The Search and seizure action u/s 132 of the Act was conducted on the business premises of Agroh Infrascucture Developers Pvt. ltd. (AIDPL) and Prakash Asphalting and Toll Highways (India) Ltd. (PATH). Subsequently, the assessment order was passed u/s 143(3) r.w.s. 147 of the I.T. Act 1961 on 03.03.2016 for A.Y. 2008-09 in both the cases. 2. On the basis of seized material as LPS-1 (pages 21 to 23) seized from office premises of at Aqua Pint, A.B. Road, Umaria Mhow, the case was reopened for scrutiny for A.Y.2008-09. The impugned document which formed the basis for reopening of the cases of AIDPL and PATH was page 21 to 23 of LPS-1, same is mentioned as under: XXX (not reproduced for brevity) It is evident that these three LPS are correlated to each other. As the entry in table no. 2 of pageD23 as mentioned above, the total of cash loan of Rs.1,15,00,000/. is exactly matching with the entry of cash received of dated 29 March and 31 March 2008 of table in pageD21. It is also worth mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry grievance of assessee that the re-assessment itself was invalid, is not suitably settled. Ld. AR prays us to annul the order of re-assessment therefore. 18. Regarding penalty-matter, although Ld. AR harped on the legal submission that if the reassessment-order is declared as invalid, the penalty-proceeding initiated therefrom would automatically be invalid. Alternatively, the Ld. AR submitted, even if the reassessment-order is held to be valid for any reason, then also the penalty-proceeding would be invalid for the simple reason that penalty proceeding of section 271D and 271E were initiated on the basis of original-conclusion made in re-assessment order that the assessee had given cash-loan to AIDPL, but neither section 271D nor 271E have application to the transaction of loan given . Submissions of Ld. DR: 19. Ld. DR representing the revenue claims that the proceeding of reassessment were taken on the basis of incriminating document LPS-1, Page No. 21 to 23 which is found to be a genuine-document incorporating cash-transactions done between assessee and AIDPL, yet it does not disclose exactly whether the assessee had given loan to AIDPL or AIDPL has given loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven loan to assessee, the consequences would be just opposite i.e. the re-assessment proceeding would be invalid but the penalty-proceeding shall be valid. Thus, if one proceeding is saved, other has to be quashed. Hence we have given our anxious thought in the matter. After a mindful consideration, we are of the view that the original-conclusion was not faulty at the time of initiating re-assessment / passing of order of reassessment / launching of penalty-proceedings. It is a subsequent matter that the dust was clear about the nature of transaction and original-conclusion was reversed. Hence, it would be apt to give preference to the original-conclusion which has set the proceedings in motion. Since the original-conclusion was to the effect that the assessee had given loan to AIDPL, the fate of present appeals / cross-objection, in our considered view, would be as under: (i) The order of re-assessment shall be valid for the reason that loan given was believed to be undisclosed income of assessee. Accordingly, we upheld the validity of reassessment and dismiss the ITA No. 283/Ind/2021 of assessee. (ii) The order of penalty u/s 271D and 271E shall be invalid for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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