TaxTMI 
TaxTMI 
2017 (9) TMI 374
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....dings of the Addl. CIT;" 15/JP/17 (Ground of assessee's appeal) "That the ld. CIT(A) grossly erred in not allowing the legal ground raised by the Assessee that the penalty order passed u/s 271-D is time barred, in view of the limitation applicable u/s 275(i)(c) which is affirmed by Hon. Rajasthan High Court in the case of Hissaria Bros. (The Assessment order passed on 19.10.2014 and penalty was levied on 29.10.2015 i.e. beyond 6 Months hence it is time barred.)" 184/JP/2017 (Ground of Revenue's appeal) "On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting penalty of Rs. 46,31,452/- imposed u/s 271E of the Act without appreciating and ignoring the findings of the Addl. CIT." 14/JP/17 (Ground of assessee's appeal) "That the ld. CIT(A) grossly erred in not allowing the legal ground raised by the Assessee that the penalty order passed u/s 271-E is time barred, in view of the limitation applicable u/s 275(1)(c) which is affirmed by Hon. Rajasthan High Court in the case of Hissaria Bros. (The Assessment order passed on 19.10.2014 and penalty was levied on 29.10.2015 i.e. beyond 6 Months hence it is time barred.)" 2. Firstly, we will....
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.... the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under sections 271D and 271E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply." 4. The above judgment reflects the "Departmental View". Accordingly, the Assessing Officers (below the rank of Joint Commissioner of Income Tax) may be advised to make a reference to the Range Head, regarding any violation of the provisions of section 269SS and section 269T of the Act, as the case may be, in the course of the assessment proceedi....
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....edings. If that were not so Clause (c) of Section 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if Clause (a) was to be invoked, no necessity of Clause (c) would arise." 8. In the present case, the notice for issuance of the penalty proceedings under Section 271D of the Act for the alleged contravention of provisions of Section 269SS was issued to the assessee, of course by the AO, on 25.03.2003. Even if the matter had otherwise been in appeal before the CIT(A) against the original assessment order and the appeal was decided on 13.02.2004, the same was hardly of relevance so far the penalty proceedings under Section 271D were ....
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....er:- "From the facts involved in the present case it is seen that the assessment was completed u/s 143(3) on 19.10.2014 by Asstt. Commissioner of Income Tax, Circle-1 Kota whereby he had mentioned in the assessment order as under "It may be noted that the loan entries have been considered in Annexures-1, 2 & 5 of audit report are being referred for penal proceedings under section 269 SS and 269T to the Additional/Joint CIT separately." A perusal of the assessment folder shows a letter dated 03/11/2014 written by ACIT Circle-2, transferring the case to ACIT Circle 1, Kota u/120 whereby he has mentioned that- "Penalty proceedings initiated u/s 269SS & 269T of the IT Act, 1961 in A.Y. 2011-12, information to be passed to Addl CIT, Range-1 Kota by you for taking further necessary action" The intimation recorded by the ACIT Circle 1 to the Addl. CIT Range-1 imposition of penalty was on 25-03-2015 as per the penalty imposition order of the Addl CIT and the first notice was issued by the Addl. CIT on 23-04-2015. The order was finally passed on 29/11/2015. In view of the above it has been argued that the penalty imposed by the Addl CIT Range-1, Kota in this case was beyon....
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.... expenses at various project sites. The Addl. CIT however did not agree to the assessee's contention and held that assessee has accepted loan, deposit in cash in violation of section 269SS of the Act without any reasonable cause. 8. We now refer to the relevant findings of the ld CIT(A) which are reproduced as under: "As regards ground of appeal no. 2, on the merits of the issue and the facts involved, it is seen that the entire order of the Addl CIT is based around Annexure A2/22, impounded during the survey proceeding. In the assessment related appeal, I have held that- Discrepancies shown in the books of accounts vis-a-vis loose sheets were precisely the reason why the books of accounts were not considered properly maintained and reconcilable, hence rejected and this action of the A.O. had been upheld. Once books had been rejected these could not be relied upon for making such additions/imposing penalty for credit entries. (Meaning does the A.O. accept that those transactions were all recorded so as to fall within provision of sec. 271D?) The question which needs to be addressed here is that if the original documents were reliable, then why the A.O. rejected the b....
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....e mark in maintaining the proper details of his financial activities but due to the same reason, his books were rejected & profits were estimated. 2. How the Addl. CIT or the A.O. arrived at the conclusion that these payments represented the loans & advances is nowhere brought out in the penalty order. He has mainly relied on the special auditor's theory that there were debit balances in favour of the alleged lenders in such accounts at the start of the year and these were in contradiction to the assessee's submissions that the amounts in the annexure represented site advances etc. However, there is no finding if the debit balances were carried forward from earlier year or not since mostly these pertain to earlier part of the year. Further, the Addl. CIT has failed to mention any interest payments appearing in the annexure so as to prove that these were actually loans & repayments. No loans and advances in the course of business can possibly be without interest and if these were unaccounted cash loans, the interest would also be reflected somewhere as these were in any case rough or "Kachha" books. Thus, the veracity of the books of accounts themselves being in question....
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....on said loan in cash under section 69C-Tribunal set aside said addition- It was noted that revenue had not filed any document or material to show that in fact loan was taken and interest payment was made-Moreover, persons to whom interest was paid, their details and particulars were not ascertained verified and examined- Whether in aforesaid circumstances, Tribunal was justified in deleting impugned addition- Held, yes [ para9][In favour of assessee] Section 269SS, read with section 269T, of the Income-tax Act, 1961- deposits -Mode of taking/accepting (penalty)- Assessment year 2004- 05- Whether in view of facts stated under heading 'unexplained expenditure', Assessing Officer was not justified in passing penalty order holding that assessee had taken loan in cash in violation of provisions of section 269SS-Held, yes On the facts involved, it was noted that Tribunal has recorded a finding that the allegation that loans/deposits must have been taken in cash was a mere suspicion, which could have been a cause for further verification 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 pe....
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....2000-01 to 2003- 04 would be squarely applicable to the years under appeal. We further hold that when it is not established that the assessee had taken loan or deposit, the question of further presumption that such loan or deposit was repaid during the year under consideration was without any basis or material on record. 4) if the Addl CIT thought these were loans per se, even otherwise he should have applied first the provisions of section 68 to verify these credits as to whether these were genuine or not. The Addition should then have been made u/s 68 as unexplained which was not done, thereby leading to conclusion that these entries were explained. 5) In a balance sheet which is part of the assessment record (dated 29/02/2011), there is a site incharge/cash/WIP of Rs. 40 lakhs shown by the assessee on the asset side, on which the Addl CIT has not commented upon but the special Auditor has accepted in his Audit Report comments though he has further added that it is not verifiable from the seized records. 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 en....
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....eived from VE can be characterized as loans or deposits. In our view, they can be more appropriately referred to as temporary advances. Such temporary advances are outside the purview of Section 269SS. Thus in our considered opinion and in view of the various judicial pronouncements on this matter, we hold that the transaction of this case on hand cannot be considered as "loan" so as to attract Section 269SS and Section 271D of the Act". The assessee has all along been denying these as loans and deposits and subsequent repayments worked out by the A.O. & Addl CIT. He has been pleading that these are advances for sites, to sub-contractors and for purchases etc. Thus, applying the ratio of the above decision in the appellant's case, these temporary advances and returns mobilized by the assessee for its sites cannot be termed as loan or deposit so as to attract violation committed under Section 269SAS and Section 271D of the Act. Under the facts & circumstances as discussed above and 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 th....
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....and as reported in Annexure 1, 2 &5 of the audit report and examination during the course of penalty proceedings, the Additional CIT has held that there are specific financial transactions in the nature of loans and deposits which are either not recorded at all or not fully recorded and which attract the provisions of section 269SS/269T. In our view, the said action of the Additional CIT is not vitiated merely on the ground that the books of accounts have been rejected and net profit has been estimated by the AO provided it can be proved that these are independent financial transactions not connected with the transactions in respect of which the net profit has been estimated by the AO. In support, useful reference can be drawn to the legal proposition laid down by the Hon'ble Supreme Court decision in case of Kale Khan Mohammad Hanif vs CIT reported in 50 ITR 1 and which has been followed by the Hon'ble Supreme Court in its subsequent decision in case of CIT vs Devi Prasad Vishwanath 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 sat....
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....he said contention, a solitary example was given of a transaction with Munna Bhai who was claimed to be one of site-in-charge of a construction project. The Add CIT didn't agree to the said contentions. He stated that firstly there are cash transactions with various persons which have not been recorded in the books of accounts and which have been noticed based on Annexure A-2/22 impounded during the course of survey. Secondly, based on periodicity of cash receipts and cash payments in the individual accounts of each of the identified persons, it cannot be held that these transactions are for payment of site expenses rather these transactions are in the nature of financial transactions of loan/deposits which have been received and repaid in cash. In support, the Add CIT referred to transactions with one Shashi ji during the period under consideration. 13. In the above factual matrix, what we observe is that these are merely contentions of the assessee not supported by any credible 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 rep....