TaxTMI 
TaxTMI 
2018 (9) TMI 1409
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.... noting of Rs. 30 lakhs given to Shri Manik Rao and Rs. 10 lakhs given to ANR. It is further indicated by the payment of interest of Rs. 45, 000/- per month for 16 months from April 1997 to July 1998 and Rs. 20, 000/- per month for the period of 16 months on Rs. 10. 00 lacs from April 1997 to July1998. The Assessing Officer (AO) held that the said amount was unaccounted advances given by the assessee to Shri Manik Rao and ANR and accordingly assessed the same along with accrued interest as undisclosed income for the block period. For the sake of clarity and convenience, we extract relevant part of the order of the block assessment dated 31. 12. 2008 u/s 143(3) r. w. s. 158BC & 254 of the Income Tax Act, 1961 (hereinafter called as 'Act') in page No. 8 which reads as under: "Thus the contention made by the assessee vide his letter dated 22. 12. 2006 that the transactions mentioned therein page No. 5 & 6 of annexure A/PBR/7 seized from the residence of Sri P. Bhaskara Rao as pertaining to the loan taken by the assessee from Sri B. Manik Rao and not as the loan given by the assessee is not a fact. The contention of the assessee was only an after thought to some how mislead th....
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....ade towards interest is shown at 5, 25, 000/-. The AO mentioned that the figures contained in the paper relate to the payments made by the assessee and also mentioned that the interest figures relates to the interest received or receivable. I find that the presumption of the AO is not justified. A perusal of the paper itself clearly shows that the amount of Rs. 40 lakhs was received by the assessee and was not paid. The entries made by way of payments and the accrual of interest also indicate that the amounts are payable. There is no indication in the seized paper that the amount of loans was given by the assessee. Therefore, I hold that the observation of the AO that the appellant paid Rs. 40 lakhs to two different persons is not correct. On the other hand, it is to be held that the appellant borrowed the amount and became a debtor. Interest is payable by him. The total of the amount of interest payable by him are noted in the said paper, As can be seen the total interest payable was Rs. 21, 90, 000/-, out of which an amount of Rs. 5, 25, 000/- was paid. I also find that the assessee did not record either the receipt of Rs. 40 lakhs or the payment of Rs. 5, 25, 000/-in his books o....
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....d Mr. ANR. Hence, the findings of the ld. CIT(Appeals) has to be upheld. If it was a loan given, then the figures of interest payments and expenditure as well as stock credits, being recorded and given credit does not arise. Thus, we agree with the findings of the ld. CIT(Appeals) on this issue and dismiss this ground of the Revenue. " 4. 1. Since the Tribunal has held that the monies recorded in the loose sheets were borrowings made by the assessee but not the advances given by the assessee , the JCIT initiated penalty u/s 271D by issue of notice u/s 271D dated 18. 06. 2015. In response to the notice issued by the JCIT, the assessee filed his explanation objecting for initiation of penalty proceedings. The assessee submitted that penalty cannot be initiated unless there is an evidence to establish that the assessee has committed an offence during the course of assessment proceedings. Therefore, argued that the JCIT cannot initiate penalty proceedings mechanically without application of mind and without specifying the nature of violation. The assessee further submitted that the transactions appearing the name of Shri Manik Rao and ANR are not loans but trade advances. The Annexu....
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....he loans in cash. The assessee further submitted that it was the trade advance, but not the loan accepted in cash. Therefore, argued that the Ld. CIT(A) has rightly deleted the penalty and no interference is called for. 8. We have heard both the parties and perused the material placed on record. In the instant case, the JCIT has imposed the penalty for the block period as evidenced from the penalty order passed u/s 271D of the Act. As discussed earlier, initially, the AO held that the assessee had advanced the money from unaccounted sources and assessed the same as undisclosed income in the hands of the assessee and when the matter went to appeal, the Ld. CIT(A) has given a finding that it was not the monies advanced by the assessee , but it was the monies borrowed by the assessee, accordingly deleted the addition. The Hon'ble ITAT confirmed the finding of the Ld. CIT(A) that it was the monies borrowed by the assessee but not the monies advanced by the assessee. Subsequently the JCIT initiated penalty u/s 271D. Thus the department has taken two different stands i. e. while framing the assessment it was held as the monies advanced and assessed as undisclosed income and when the a....