TaxTMI 
TaxTMI 
2019 (7) TMI 1915
X X X X Extracts X X X X
X X X X Extracts X X X X
....gal along with the 15 un-named and undated cheques of Rs. 1 crore each signed by the assessee were found. An enquiry was also conducted from the assessee during the assessment proceedings in case of Shri D.P. Sehgal wherein the assessee denied having received any alleged cash loan of Rs. 15 crores from Shri D.P. Sehgal and explained that the said letter was an advance acknowledgement along with the security in the shape of cheques for seeking loan. However, subsequently the loan was not taken from Shri D.P. Sehgal but the assessee received the loan from some financial institution. Thereafter, a search and seizure action under section 132 of the IT Act was also carried out on 07.09.2017 in case of the assessee. During the search and seizure proceedings, statement of the assessee was recorded under section 132(4) on 07.09.2017 wherein the assessee admitted the transaction of cash loan of Rs. 15 crores from Shri D.P. Sehgal. In the meantime, the AO issued a show cause notice dated 1st September, 2017 for imposing the penalty for violating the provisions of section 269SS on account of receiving cash loan of Rs. 15 crores in the month of May-June, 2014. The AO imposed the penalty of Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns can be taken as a reasonable time limit for the purpose of levy of penalty under section 271D of the IT Act. He has further contended that the department is bound to exercise the powers within the reasonable time as held by the Hon'ble Kerala High Court in case of K. Iswara Bhat vs. Commissioner of Agricultural Income Tax, 200 ITR 238 (Ker.). Therefore, even in the absence of a time limit prescribed by the Statute, the repository of the power should initiate the proceedings within a reasonable time within which the proceedings are to be completed. The ld. A/R has also referred the decision of Hon'ble Supreme Court in case of State of Gujarat vs. Patel Raghav Natha, AIR 1969 SC 1297 wherein the Hon'ble Supreme Court has held that the suo moto power of revision can be exercised within a reasonable time even in the absence of time limit prescribed by the statute. In the case in hand, the AO has initiated the proceedings by issuing show cause notice dated 1st September, 2017. However, since the proceedings are not inconsequence of any assessment order in the case of the assessee, then the reckoning of the limitation should be from the search proceedings in case of Shri DP Sehgal. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in violation of section 269SS. It is settled law that what is apparent is real unless controverted. The onus lay upon the person, who alleges that what is apparent is not real. The ld. A/R referred the decision of Hon'ble Supreme Court in the case of CIT (Central) vs. Daulat Ram Rawatmull, 87 ITR 349 (SC), followed in case of CIT vs. Bedi & Co. Pvt. Ltd., 230 ITR 580 (SC). In the present case, what was apparent was that both the parties have denied to accept /paid loan. Shri DP Sehgal denied that he could not arrange fund for the assessee Shri Ram Kishan Verma. Similarly, Shri Ram Kishan Verma denied that he never received cash loan from Shri D.P. Sehgal. If, such an apparent state of affair, was alleged to be unreal, it was for the person making such allegation to prove that what is apparent is not real. Unfortunately, the lower authorities have totally failed to prove contrary. He has also referred to section 103 of Evidence Act and submitted that the burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. The ld. A/R further sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reason, if had he/they granted the loan to the assessee. Therefore, firstly, it was not an executed contract or it was a mere proposal which is yet to be acted upon. Thus, based on the seized documents, which are seriously lacking in material legal aspect, the undated promissory notes and cross account payee cheques etc., there did not exist any legally enforceable agreement and in any case, Mr. DP Sehgal the alleged lender could not have compelled the alleged borrower assessee to pay back the loan, if any given. Interpreting the provision of Section 269SS from the angle of the assessee borrower alone is fallacious, unless there is a completed loan transaction between the two parties which is legally enforceable, section 269SS cannot be applied. He has relied upon the decision of Coordinate Bench of this Tribunal in case of DCIT vs. Rajat Agarwal, 144 TTJ 753 as well as decision of Mumbai Bench of the Tribunal in case of A. Phiroj & Co. vs. CIT, 59 ITR 645, decision of Hon'ble Delhi High Court in case of CIT vs. S.M. Agarwal, 293 ITR 43 (Del.). The ld. A/R has referred to the statement recorded under section 132(4) of Shri DP Sehgal and submitted that in answer to question no. 12,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to show the allegation of the said loan by the assessee, then the penalty levied on the basis of presumption is not sustainable. The ld. A/R has further submitted that the ld. CIT (A) has considered new material which is in violation of Rule 46A of IT Rules read with section 251(4) of the IT Act. He has pointed out that the ld. CIT (A) has considered the statement of the assessee recorded under section 132(4), however, the said statement was retracted by the assessee immediately without any delay and was not the basis of initiation as well as levy of penalty by the AO under section 271D of the IT Act. The ld. A/R has submitted that the penalty levied by the AO under section 271D and confirmed by the ld. CIT (A) is not sustainable and the same be deleted. 4. On the other hand, the ld. D/R has submitted that in the search and seizure under section 132 of the IT Act in case of Shri DP Sehgal, un-named and undated 15 blank cheques of Rs. 1 crore each signed by the assessee were found, inventorized and seized from the possession of Shri DP Sehgal. Along with the cheques, a letter signed by the assessee duly acknowledged receipt of loan of Rs. 15 crores along with another set of 15 bl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P Sehgal. This fact was further corroborated by the assessee in his statement recorded under section 132(4) of the IT Act on 07.09.2017 and again on 23.10.2017. The subsequent retraction by the assessee is a make belief document which is nothing but after-thought to escape taxation. 4.1. As regards the limitation of penalty proceedings under section 271D of the Act, the order passed by the AO is within 6 months from the reference made to Additional CIT-1, Kota by the AO. Therefore, it is not barred by limitation. The ld. D/R has referred to the reference made by the ACIT Circle-1, Kota dated 09.08.2017 to Additional CIT-I Kota for levy of penalty under section 271D of the IT Act. The impugned order was passed on 11.10.2017, therefore, the same is within the period of limitation as per provisions of section 275(1)(c) of the IT Act. The ld. D/R has further contended that when the assessee filed a retraction petition after the search operation, then the contents/facts narrated in the sworn in statement made on oath under section 132(4) or under section 131 of the Act cannot be brushed aside or ignored. If he is so aggrieved, then he has to come with fresh evidence so that his claim....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Thus the initiation of penalty proceedings by issuing the show cause notice dated 01.09.2017 is based on the information received by the AO of the assessee from the DDIT Investigation Jaipur vide letter dated 23rd October, 2015. Section 275 provides the limitation for imposition of penalty under Chapter-XXI of the IT Act. Since in the case in hand, the penalty under section 271D is not imposed pursuant to any assessment order, therefore, clause (c) of section 275(1) is relevant for the purpose of limitation for passing the order under section 271D of the IT Act. For ready reference, we reproduce the provisions of section 275(1) as under :- "275. ^39[(1)] No order imposing a penalty under this Chapter shall be passed- ^40[(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the ^41[***] Commissioner (Appeals) under section 246 ^42[or section 246A] or an appeal to the Appellate Tribunal under section 253, 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^43, or six months from the end of the month in which the orde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imb of this clause is relevant which gives 6 months from the end of the month in which action of imposition of penalty is initiated. In the case in hand, the action for imposition of the penalty was initiated vide letter dated 23rd October, 2015 whereby the DDIT Investigation-3, Jaipur sent information along with the document to the AO for his perusal and necessary action. These are the proceedings from which the AO has satisfied himself about the default on the part of the assessee of violation of the provisions of section 269SS of the Act by taking the alleged loan of Rs. 15 crores in cash. Though there was subsequent search and seizure action in the case of the assessee on 07.09.2017, however, those proceedings were subsequent to the satisfaction of the AO as well as initiation of the penalty proceedings by issuing show cause notice dated 01.09.2017. Therefore, for the purpose of limitation under section 275(1) what is relevant is the communication from the DDIT Investigation-3, Jaipur to the ACIT Circle-1, Kota vide letter dated 23rd October, 2015. Therefore, the limitation would reckon from the end of the month of October, 2015 and shall expire on the expiry of 6 months from t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herefore, even if the said correspondence is considered as part of the proceedings of investigation carried out by the Jaipur Investigation Wing in case of Shri DP Sehgal, the limitation will reckon when the said investigation proceedings were completed and thereafter the information was sent by the Investigation Wing to the AO of the assessee. The Hon'ble Jurisdictional High Court in case of CIT vs. M.A. Presstressed Works, 220 ITR 226 (Raj.) has considered the aspect of initiation of penalty proceedings as under :- " We have considered the submissions made by learned counsel for the Revenue. Section 274 of the Income-tax Act provides the procedure for imposing the penalty while section 275 sets out the time-limit within which the penalty proceedings must be completed. Section 275 requires to complete the penalty proceedings within two years from the end of the financial year in which the proceedings in the course of which the action for imposition of penalty has been initiated, are completed. But where the assessment order or any other order is the subject-matter of appeal before the Deputy Commissioner (Appeals) or the Commissioner of Income-tax (Appeals) or to the I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. The words "in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed" used in section 275 indicate the proceedings in which the income-tax authority is satisfied about the default which attracts the penalty and not with respect to any other proceeding in which the order like the cancellation of the registration, etc., has been passed. It is the assessment order or any other order passed in the proceeding in the course of which it is found that the assessee has brought himself within the mischief of the penalty proceedings. In the present case, the order, in which the proceedings for imposition of penalty were initiated, was passed on July 30, 1983, which was subjected to appeal and the appeal was dismissed on February 24, 1984." The Hon'ble High Court has observed that the words " in which the proceedings in course of which the action for imposition of penalty has been initiated, are completed" used in section 275 indicate the proceedings in which the Income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es signed by the assessee. Though there is a subsequent search in the case of the assessee on 7th September, 2017 wherein statement of the assessee under section 132(4) of the Act was recorded to get the confirmation of the transaction of loan of Rs. 15 crores, however, the said admission/confession on the part of the assessee was retracted by the assessee vide letter dated 30th September, 2017. We will deal with the facts of retraction made by the assessee at later stage. First, we will analyze whether the documents found and seized during the course of search and seizure in the case of Shri DP Sehgal on 17th December, 2014 would establish the transaction of loan of Rs. 15 crores in cash. It is pertinent to note that during the course of search and seizure action in case of Shri DP Sehgal two letters signed by the assessee were found along with the 15 undated blank cheques and 15 promissory notes. For ready reference, both the undated letters are reproduced as under :- The peculiar feature of both the letters is that the contents of these letters are identical except some amendment/additions were suggested in the first letter regarding rate of interest, period for repayment of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cash. It appears that the department though tried to examine the assessee during the post search enquiry in case of Shri DP Sehgal by issuing summon under section 131 to the assessee on 01.04.2015 and thereafter the notice under section 133(6) was also issued to the assessee on 13th October, 2016. The assessee replied the summons of the department vide letter dated 07.09.2016. Thus it is clear that when the department could not succeed in the case of Shri DP Sehgal, they conducted a search and seizure action in case of the assessee on 7th September, 2017 to strengthen their case against Shri DP Sehgal. The contemporaneous events of making the request of loan in the month of May-June 2014 to Shri DP Sehgal and thereafter the approval of loan was granted by AU Finance Ltd. on 30th July, 2014 and subsequent dropping of the proposal of loan from Shri DP Sehgal as he has stated in the statement that in the month of August he regretted the request of the assessee for not arranging the funds clearly established the chain of events which cannot be doubted when there is no other evidence of actual transaction of loan except the papers given by the assessee as a security and pre-requisition....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the outset I hereby unconditionally deny having ever received any loan or deposit from Shri DP Sehgal in contravention of section 269SS of the Income Tax Act, 1961. I may also bring to your kind notice that an enquiry in the matter was also done by Deputy Commissioner of Income Tax (Central Circle)-III, Jaipur in the matter of the assessment proceedings of Shri DP Sehgal for AY 2015-16. In the said enquiry I was asked to explain the matter. I hereby enclose a copy of the said reply for ready reference. I hereby reaffirm the contents of the said reply fully and without any reservations. Any other version of facts or evidence contrary to my aforesaid reply dated 07.09.2016, irrespective of source or point of time of such version is denied, same being untrue. If you propose to rely on any such version/evidence, I hereby request your goodself to provide me a copy thereof and an opportunity to explain/rebut the same." In this reply, Shri R.K. verma has reaffirmed the contents of his reply in the matter submitted by him before DCIT (Central Circle)-III, Jaipur which is reproduce below :- " Please refer to above. At the outset, I would like to humbly submit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f evidence but it cannot be said that it is conclusive. Therefore, if the assessee has made out a case and shows that the statement made under section 132(4) is not based on correct facts, then the subsequent retraction is not prohibited. The Hon'ble Jurisdictional High Court in case of CIT vs. Ravi Mathur (supra) as relied upon by the ld. D/R has also considered this issue and only after noticing the fact that there is an inordinate delay in retracting the statement earlier made on oath, the said retraction has no evidentiary value. Further, in the said case the assessee could not demonstrate that the statement initially recorded were factually incorrect. Similar position was expressed in the other decisions relied upon by the ld. D/R. Therefore, the retraction is not out-rightly prohibited but if the assessee subsequently points out with supporting material to show that the statement of admission is not factually correct, then such retraction cannot be ignored or brushed aside. The Hon'ble Gujarat High Court in case of Kailashben Manharlal Chokshi vs. CIT (supra) has discussed this aspect in para 22 to 26 as under :- "22. We have heard learned counsels appearing for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... partner. As per say of Mr. Shah even departmental valuation officer has also accepted that the cost of construction of first floor worked out to Rs. 2,06,060. There was, therefore, no reason for making addition of Rs. 4 lakhs on the basis of alleged disclosure made by the assessee in his statement recorded under section 132(4) of the Act. In support of this statement the Revenue has not brought any evidence whatsoever which would establish that the assessee had in fact incurred an amount of Rs. 4 lakhs on the construction of the first floor and that amount was invested out of the undisclosed income. Hence there is no justification for making account of Rs. 4 lakhs merely on the basis of statement recorded under section 132 (4). None of the authorities have considered this explanation and the CIT(A) as well as Tribunal both have proceeded on the footing that the Assessing Officer has considered the explanation. 24. So far as the addition on account of gold ornament to the tune of Rs. 1 lakh is concerned, the assessee has given the explanation that was reproduced by the Assessing Officer in his assessment order which says that during the course of search and seizure proceed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ive evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has committed an error in ignoring the retraction made by the assessee." In the case in hand, when the documents seized during the course of search in case of Shri DP Sehgal do not establish conclusively the fact of alleged loan of Rs. 15 crores, then the said material can be a relevant evidence but in the absence of any other corroborative material to show the actual transaction and movement of money, it is not established that the transaction of loan of Rs. 15 crores in cash has actually taken place between the assessee and Shri DP Sehgal. We have already discussed the contents ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in Rule 46A of the Income-tax Rules, 1962 in as much as he used and relied on material, which was never confronted to the appellant and no opportunity whatsoever was ever afforded to rebut the same. 5.2 The ld. CIT(A), Kota erred in law as well as on the facts of the case in introducing and relying on new material ex-parte while confirming the impugned penalty, which was not relied upon even by the authority imposing the penalty, i.e. the ld. Add. CIT, Range-1, Kota, hence the impugned penalty deserves to be deleted in full or alternatively, the order of the ld. CIT(A) has to be considered ignoring the additional evidences illegally considered by him. 6. The impugned orders passed u/s 271D and confirmation thereof by the ld. CIT(A) imposing a huge amount of penalty of Rs. 15 crores is highly perverse being in the utter disregard of the detailed submissions and the precedents cited before them, in absence of direct and cogent evidences in their support, against the normal human conduct & the prevailing trade practices, particularly in respect of the matters of penalty and hence, deserves to be fully quashed. 7. The appellant prays your h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....रकार / Government of India कारà¥à¤¯à¤¾à¤²à¤¯ सहायक आयकर आयà¥à¤•à¥à¤¤ वृत - 1, कोटा Office of the Assistant Commissioner of Income Tax, Circle-1, Kota. कमरा संखà¥à¤¯à¤¾ 106, पà¥à¤°à¤¥à¤® तल, दैनिक नवजà¥à¤¯à¥‹à¤¤à¤¿ बिलà¥à¤¡à¤¿à¤‚ग, रावतà¤à¤¾à¤Ÿà¤¾ रोड, कोटा - 324009 Room No. 106, 1st floor, Danik Navjyoti Building, Rawatbhata Road, Kota-324009. कà¥à¤°à¤®à¤¾à¤‚क सहा.आ.आ./ वृत-1 / कोटा / 2015-16/633 दिनांक 09.08.2017. To The Addl. Commissioner of Income Tax, Range-1, Kota. Sir, Sub: Information in the case of Shri R.K. Verma, Kota (PAN:ADDPK 1093 R) -Reference for levy of penalty u/s 271D-Reg.- Kindly refer to your good office ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....44-2406263 Date: Ganpati Plaza M.I.Road 24% I hereby thankfully acknowledge receipt of loan of Rs. 15 Crore (Rupees Fifteen Crore only) from you your friends (through you and your efforts on your personal guarantee carrying annual interest rate of (compounded quarterly, in case of non-payment of interest of any quarterly installment of interest). I have issued following Fifteen undated cheques of Central Bank of India DAV School Talwandi Kota for a total principal amount Rs. 15 Crore (Rupees Fifteen Crore only).. towards repayment of the above mentioned principal loan amount FIFTEEN Cheques No. 003441 to 003455 (both inclusive) of Rs. 1 Crore (each) I hereby authorise you to fill up the dates and the name of the payee in the above cheques and present them to the bank for encasing them whenever you feel need to receive back your loan. I again acknowledge that these cheques are issued for adequate value / consideration received. I will however, much appreciate if you will let me know before presenting the cheques for encasing. This is only a request and not a condition. Login Stinues of hem val I would make efforts to replace t....
X X X X Extracts X X X X
X X X X Extracts X X X X
...._type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 7 "q 12 आपके कारà¥à¤¯à¤¾à¤²à¤¯ के à¤à¥Œà¤¤à¤¿à¤• सतà¥à¤¯à¤¾à¤ªà¤¨ के दौरान पाये गये कà¥à¤› अनà¥à¤¯ दसà¥à¤¤à¤¾à¤µà¥‡à¤œ जिनà¥à¤¹à¥‡à¤‚ Annexure-A के Exibit-15 में संकलित किया गया है उनà¥à¤¹à¥‡à¤‚ मै आपको दिखा रहा हूà¤à¥¤ कृपया इनका धà¥à¤¯à¤¾à¤¨à¤ªà¥‚रà¥à¤µà¤• अवलोकन कर इन दसà¥à¤¤à¤¾à¤µà¥‡à¤œà¥‹ में जो विवरण है उस पर à....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 15 undated पà¥à¤°à¥‹à¤®à¥‡à¤¸à¤°à¥€ नोटस à¤à¥€ à¤à¥‡à¤œà¥‡ थे। इस बात से संबधित मेरा उनसे communication à¤à¥€ हà¥à¤† था जिसके अंतरà¥à¤—त मैने उनसे à¤à¤• पतà¥à¤° वाहक दà¥à¤µà¤¾à¤°à¤¾ लाये गये undated पतà¥à¤° में कà¥à¤› सà¥à¤§à¤¾à¤° करके दà¥à¤¬à¤¾à¤°à¤¾ à¤à¥‡à¤œà¤¨à¥‡ के लिये à¤à¥€ वापस दिया था। यह दोनो पतà¥à¤° उसके मूल सà¥à¤µà¤°à¥‚प में Annexure - A के Exibit-15 के ....