TaxTMI 
TaxTMI 
2011 (5) TMI 684
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....lings 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 payment received was only Rs.6 lakh that too through account payee cheque. It was submitted by assessee-company that even during the course of recording of preliminary statement of one of the Directors of the company, Mr. Viren Shah before the Revenue, he had categorically stated that he had received only Rs.6 lakh by account payee cheque against the promissory note and the balance amount was pending. In view of this reason, the assessee contended that there was no violation of provisions of Section 269T. Without prejudice to this argument, the assessee also submitted ....
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....atement 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 of Section 269SS/271D. In the present case, the amount of Rs.25 lakh has not been taxed as undisclosed income in the hands of Growth Avenues Ltd. and therefore decisions are not applicable on the facts of the assessee's case. The AO therefore stated that Section 269T envisages that no person shall repay any loan or deposit to any other person otherwise by any account payee cheque of account payee bank draft and if the amount of such loan or deposit is Rs.20,000/- or more than the penalty u/s.271E would be levied equal to the loan or deposit amount. The assessee ha....
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....hri 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 a sum of Rs.25 lakh had been received back. During the remand proceedings, the crossexamination of Shri KKS was carried out by Shri Viren Shah on 24-12-2008 and din this cross-examination Shri KKS repeated his earlier statement that he had given loan of Rs.25 lakh in cash and the same had been received back in cash to Shri Viren Shah and Shri Rakesh Doshi. Shri KKS further sated that promissory notes had remained with him even after repayment of loan in good faith. This copy of this remand report was given to assessee for his comments. The assessee in his counter co....
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.... 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. Q.4 When was the loan repaid to you and how? A. 4 I do not remember the exact dated and the said loan was repaid cash. Q.5 By whom was the loan repaid to you? A. 5 The loan was repaid by Shri Viren Shah and Rakesh Doshi. Q. 6 Do you have any receipt or any other evidence in respect of loan given or received back? A. 6 No apart from promissory note I have no other evidence. Q. 9 Whether you or your family members or any of your concern have any business relation or business transaction with me personally or my company Growth Avenue Ltd. in connection with which t....
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....: 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 and, therefore, the penalty was deleted. In fact, the Hon'ble High Court observed that the penal action may be permissible once the regular assessment was made. The provisions of Section 269SS and 269T r. w.s. 271D & 271E were brought on this statute to prevent laundering of unaccounted money. In the present case, it is established that the assessee had taken cash loan of Rs.25,00,000/p and repaid the same thereby violating the provisions of Section 269SS and 269T inviting upon itself the penal provisions of Section 271D & 271E. The....
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...."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 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 company had executed promissory note in his favour. However, as against the promissory note given by the assessee-company cheques of only Rs.6 lakhs 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 broker against the payments to be made ....
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....s 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 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 AO 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 ....
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....on 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 amount of Rs.25 lakh in cash was given on 23-01-2003 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 a sum of Rs.25 lakh had been received back. During the remand proceedi....
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....as 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. Q.4 When was the loan repaid to you and how? A. 4 I do not remember the exac....
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....er 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 and, therefore, the penalty was dele....