TaxTMI 
TaxTMI 
2024 (1) TMI 603
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....levied u/s 271D was deleted. 2. The Ld. CIT(A), NFAC has erred on facts and in law in upholding the validity of penalty order passed by Ld. JCIT, Kota ignoring that the same is barred by limitation. 3. The appellant craves to alter, amend & modify any ground of appeal. 4. Necessary cost be awarded to the assessee." 3. Succinctly, the fact as culled out from the records is that the assessee is an individual. During the course of assessment proceedings u/s 147/143(3) of I.T. Act, 1961, it was found by ITO, Jhalawar, that during the F.Y 2009-10, the assessee had accepted loan of Rs. 31,78,000/- in cash from M/s Choudhary Bhuramal H. Jat otherwise than an account payee cheque or draft, the amount of loans exceeded the limit prescribed u/s 269SS of the Income Tax Act, 1961 thereby violating the provisions of section 269SS of the IT Act. During the course of assessment proceedings assessee vide letter dt. 13.07.2017 explained that the cash deposit of Rs.31,78,000/- made in his bank account between 26.11.2009 to 14.12.2009 is out of the cash amount provided by his employer M/s Choudhary Bhooramal H. Jatt and the cheque of exactly same amount on the same date ....
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....contention that he has not taken any cash loan and cash deposit in Bank account was only an accommodation transaction done was not accepted by Joint Commissioner of Income Tax, Range-1, Kota for the reason that no reasonable cause for taking cash loan has been submitted by the appellant because no there is no evidence have been furnished by the appellant showing the urgency or necessity of cash amount/loan taken or accepting in cash. The onus was on the appellant to prove the same. However, the appellant could not prove. Applicability of penalty proceedings u/s271D in the present case: "271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. (2) Any penalty imposable under subsection (1) shall be imposed by the Joint/Addl. Commissioner." 7.3 As per the class (iv) of 2nd proviso to 269SS "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes ....
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....aken an unsecured loan in cash, and this being the substantial amount, provision of section 269SS gets attracted. Hence, the appellant having received Rs. 17 lakhs in amount in cash as unsecured loan from the husband, is a fit case to levy a penalty u/s 271D of the Act. The appellant has stated that the AO did not verify the entry. But the entry is visible on the balance sheet of the appellant and no more further verification is required as a narration of the entry explains it all. 1. The source of income of appellant was salary from Ch. Bhoora Mal H. Jatt. Jaira Patan. 2. The assessee having bank account with Bank of Rajasthan, Jhaira patan A/C No. 686601070339. 3. The assessee has deposited cash in the above mentioned bank account on various dates from 26.11.2019 to 14.12.2019 total fo Rs.31.78,000/-. The said cash was made available by employer M / s Ch. Bhoora Mal H. Jatt, Jhaira Patan and appellant has issued cheques of the same amount on the same date in favour the employer Ch. Bhoora Mal H. Jatt. 7.9 The method of providing accommodation entry entails breaking up large amounts of money into smaller, less-suspicious amounts. In Ind....
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....ct. 7.13 Accepting cash from anyone and for whatsoever arrangement between employer or employee is beyond the purview of the provisions of 269SS. It is also possible that the appellant accepted cash to provide accommodation entries which byu itself is a violation of law. 7.14 What if the employee for his own reasons, is trying to give accommodation entries to his employer to help him evade taxes, The employer if at all is violating another law and defrauding bank revenue and the appellant is assisting him in this endeavour. Any transaction done for illegal ends is a violation. 7.15 At best this is seen as an arrangement of accommodation entry and since appellant has not been able to explain/give evidences as to why he accepted such cash and why he gave cheques. 269SS is limited to acceptance of cash more than 20000 and does not cover as to how it was used in the end. 7.16 Words 'accommodation entries' have not been defined anywhere in the Act. however, in catena of decisions, the courts have dealt with the issue of 'accommodation entries'. It cannot be gainsaid that the tax-evaders in order to bring back their unaccounted....
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.... INCOME TAX: SLP dismissed against High Court ruling that where Assessing Officer had reason to believe that income chargeable to tax had escaped assessment as assessee was beneficiary of accommodation entries and basis for formation of such belief were several inquiries and investigation by Investigation Wing that there had been escapement of income of assessee from assessment because of his failure to disclose fully and truly all material facts, reopening of assessment was justified[2022] 138 taxmann.com 69 (SC)/[2022] 287 Taxman 187 (SC)[04... INCOME TAX: SLP dismissed against order of High Court that where a reopening notice was issued on ground that assessee was beneficiary of accommodation entry in form of long-term capital gain (LTCG) on sale of shares which was claimed as exempt under section 10(38), since said transactions of sale and purchase of shares were admitted by assessee and it had not brought on record anything to suggest that reassessment proceedings were being undertaken in arbitrary manner, impugned reopening notice was justified [2023] 152 taxmann.com 573 (SC)/[2023] 454 ITR 794 (SC) [04-0... INCOME TAX: Notice issued in SLP filed against....
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.... initiated, whichever period expires later. In the present case, since penalty u/s 271D has not been initiated during the course of any proceedings, first part of sec. 275(1)(c) would have no application and it is only the second part which would apply. Thus the penalty order ought to have been passed within a period of six months beginning from the end of the month in which the action for imposition of penalty was initiated. Since the show cause notice u/s 271D was issued on 07.08.2019 (PB 28), the period of six months would have to be reckoned from 01.09.2019 that would end to 29.02.2020. Therefore, penalty order passed on 05.03.2020 is barred by limitation. For this purpose reliance is placed on the decision of Hon'ble Delhi High Court in case of Subodh Kumar Bharagava Vs. CIT (2009) 309 ITR 31 which was with reference to levy of penalty u/s 271B which is independent of the assessment proceeding like section 271D which is also independent of the assessment proceedings. In this context the Hon'ble High Court in the relevant Para 11 to 14 held as under:- "11. Sec. 275(1)(c) is a residuary clause and, therefore, is supposed to cover all cases not falling under cl. (a) or (....
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....e action for imposition of penalty is initiated in the course of some other proceeding. In such a situation, it is obvious that both the periods of limitation would come into play. One would be reckoned from the date on which the other proceedings are completed up to and including the end of the financial year in which that date occurs. The other period of limitation would be that which applies irrespective of the date of completion of the "other proceedings" and which is relatable simply to the date on which action for imposition of penalty is initiated. The period of limitation in such a case would be six months from the end of the month in which the action for imposition of penalty is initiated. It is clear that where penalty proceedings are initiated in the course of some other proceedings, the Legislature has provided for two different periods of limitation. However, so that there is no confusion with regard to which of the two would apply, the Legislature has added the expression "whichever period expires later" at the end. To explain this, let us take two examples: Example 1: Assume that the action for imposition of penalty is initiated on 15th March, 2007 ....
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....ng the expression "whichever period expires later", the period of limitation for this example would be 31st March, 2008. 14. The above two examples illustrate cases where the applicable period of limitation would be relatable either to the date of initiation of the penalty proceedings or to the date of completion of the proceedings in the course of which action for the imposition of penalty has been initiated. But there is a third/residuary category of cases where the initiation of action for imposition of penalty is not in the course of some proceedings. In such cases, the first part of s. 275(1)(c) would have no application and it is only the period of limitation prescribed in the second part which would apply. Since only one period of limitation would be applicable, the expression "whichever period expires later" would have to be read as that very period of limitation. The present case undoubtedly falls under s. 275(1)(c) and, that too, under the second part thereof. Therefore, on a plain reading and on a logical analysis of the relevant provisions of the said Act, the period of limitation during which an order imposing a penalty could have been passed in the present ca....
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....nths, therefore it is barred by limitation. The LD AR relied on the decision of Delhi High Court in case of Subodh Kumar Bhargava vs CIT (2009) 309 ITR 31 (Del), the relevant observation held in paras no. 13, 14 which clearly explains the levy of penalty u/s 271B which is as independent assessment proceeding like 27ID also which is independent. From the facts and circumstances of the case, this bench has no hesitation to allow ground 2 based the ratio laid down in decision where ordering penalty u/s 27ID is barred by limitation." 2. Without prejudice to above, it is submitted that section 269SS provides that no person shall take or accept from any other person any loan or deposit exceeding the specified amount otherwise than by account payee cheque/bank draft. The explanation to section 269SS provides that loan or deposit means loan or deposit of money. Therefore section 269SS would be attracted only when a person take or accept loan or deposit of money by a mode otherwise than that specified in the section. 3. The term loan or deposit, as such, is not defined under the Act. However the general connotation in case of loan is that the amount is given by the credito....
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....has been deposited by the employer of the assessee in his saving bank account maintained with Bank of Rajasthan Ltd. and immediately the exact amount is transferred from the bank account of the assessee to the bank account of his employer maintained with ICICI bank as is evident from the bank account of the assessee (PB 21-23) and ledger account of the assessee in the books of his employer M/s Choudhary Bhooramal H. Jatt (PB 26-27). The assessee has not been the beneficiary of this amount even for a single minute. Thus the amount credited in the bank account of the assessee in cash is "amanat" amount or the amount received in "trust" which is neither a loan nor a deposit. Hence, there is no contravention of section 269SS and consequently no penalty u/s 271D is leviable. Hon'ble ITAT, Jaipur Bench in case of Late Sh. Om Prakash Choudhary ITA No.205/JP/2021 for AY 2010-11 order dt. 25.05.2022 (PB 51-54) after considering the above facts at Para 8.1 to 8.3 of the order, deleted the penalty at Para 8.4 of the order. 4. It is submitted that section 269SS falls in Chapter XXB which deals with requirement as to the mode of acceptance, payment or repayment in certain case....
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....e unaccounted cash found in course of search as representing loan taken from or deposit made by various persons. In the present case the genuineness of transaction is not in dispute, it is not a case of explaining any undisclosed income in garb of acceptance of loan or deposit and the AO himself has verified the source of such amount in the hands of M/s Choudhary Bhooramal H. Jatt. Hence it is not a case of bringing any unaccounted income in the bank account of the assessee and therefore even on the basis of the intent and purpose for which this section was brought into the statute, no adverse inference of violation of section 269SS is required to be drawn. 5. Without prejudice to above, it has been held in number of cases that where assessee has given a reasonable explanation for receiving the amount in cash, acted in bonafide manner or default is of technical nature, no penalty u/s 271D is leviable. Reliance in this connection is placed on the following cases:- CIT Vs. Maheshwari Nirman Udyog (2008) 302 ITR 201(Raj.) (HC) The Hon'ble High Court at Para 6 to 9 of this judgment held as under:- 6. We have heard learned counsel for the parties. We ....
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....SS. For the purpose he has relied upon four judgments. In the case of Muthoot M. George Bankers vs. Asstt. CIT (1993) 47 TTJ (Coch) 434: (1993) 46 ITD 10 (Coch) it was held as under: 'In the instant case, there was no evidence to show that money was loaned or kept deposited for a fixed period or repayable on demand. Further, the sister concerns and the assessee were owned by the same family group of people with a common managing partner with centralised accounts under the same roof. Transfer of funds had taken place in a whimsical manner. Therefore, it was rather difficult to say that the transactions were in the nature of deposits or loans with certain conditions attached to them, either as regards the period of such deposits or loans or with regard to their repayments. From the copies of the accounts furnished all that could be gathered was that funds had been transferred from and to the sister concerns as and when required and since the managing partner was common to all the sister concerns, the decision to transfer the funds from one concern to another concern or to repay the funds could be said to have been largely influenced by the same individual. In such circumstan....
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....ied under s. 271D deleted by CIT(A) holding that transaction was bona fide and default was of technical nature-Tribunal affirmed the order of CIT(A)-Finding to the effect that the transaction was bona fide and the default was of technical nature which did not justify levy of penalty is not shown to be, in any manner, perverse or unreasonable-No substantial question of law arises" Sonia Verma Vs. ITO (2023) 200 ITD 1 (Chd.) (Trib.) Assessee sold her flat and received sale proceeds in cash on 5 different dates. Revenue levied penalty u/s 271D for violation of provision of section 269SS. Assessee contended various reasons for proving that said transaction was bonafide and genuine and in no way was related to evasion of tax; (i) she sold her flat for arranging funds for marriage of her daughter which was being repeatedly postponed due to lack of funds (ii) buyer of property told assessee that he could not pay in lump sum on a single date and thus sales consideration was received in cash on 5 different dates (iii) assessee on account of medical infirmity of her husband travelled to Delhi to collect the sale proceeds on different dates and simultaneously made purchases ....
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....sessee has not taken any cash loan. The cash amount deposited in the bank account of the assessee by his employer is only an accommodation transaction done for the reasons stated above. Even if it is considered to a loan transaction, there is a reasonable cause for the same and the default is only technical which is saved by section 273B of the Act as held in various decision referred supra. The case laws relied by Ld. CIT(A) are not relevant in as much as the first four cases are with reference to the addition u/s 68 of the Act. The next case is on a fact where the director of the company obtained cash loan from a financier and deposited the cash in the bank account which is not the facts of the present case. The last case is where the assessee failed to discharge its burden in proving that there was a reasonable cause in accepting the cash deposit from the staff members in its bank account which is also not the facts of the present case. 7. Otherwise also penalty u/s 271D imposed after more than 10 years from the date of transaction is not valid. This is for the reason that though no time limit is prescribed for initiation of penalty proceedings u/s 271D under the Act, t....
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....etent authority under the IT Act, where no limitation is prescribed as in s. 201 of the Act within that period of four years. 22. Learned counsel for the Revenue submitted that the Department came to know that the assessee was an assessee in default only in November, 1998 when a survey was conducted and it came to be known only then that the assessee had not deducted tax at source on the global salary. We are of the opinion that the date of knowledge is not relevant for the purposes of exercising jurisdiction insofar as the provisions of the IT Act are concerned. If it were so, the limitation period, as for example prescribed under s. 147/148 of the Act would become meaningless if the concept of knowledge is imported into the scheme of the Act. Further Hon'ble ITAT, Chennai Bench in case of RMG Benefit Fund Ltd. Vs. ACIT (2018) 53 CCH 0269 has held that penalty proceeding should have been initiated within reasonable time even though no limitation was provided in Income-tax Act. Threat of initiating penalty proceeding could not be allowed to hang over head of assessee for an unreasonable period of time. There should be an end to proceeding, that also within a reaso....
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....07.2017 issued u/s 133(6) of IT Act to M/s Chaudhary Bhooramal H. Jatt 24 Both 7 Copy of reply filed by Chaudhary Bhooramal H. Jatt, Jhalra Patan in response to above notice 25 Both 8 Copy of ledger account of assessee in the books of Chaudhary Bhooramal H. Jatt J. Patan 26-27 Both 9 Copy of show cause notice dt. 07.08.2019 issued u/s 271D of IT Act 28 Both 10 Copy of show cause notice dt. 10.10.2019 issued u/s 271D of IT Act 29-30 Both 11 Copy of assessee's reply dt. 21.10.2019 in response to above show cause notice 31-32 Both 12 Copy of Hon'ble ITAT, Jaipur Bench order dt. 25.05.2022 in case of Late Sh. Om Prakash Choudhary vs. JCIT ITA No. 205/JP/2021 33-54 Both 7. The ld. AR of the assessee reiterated the contentions raised in the written submission and submitted that the penalty proceeding are independent of assessment proceeding. In the present case the transaction is alleged to be in violation of section 269SS of the Act took place in the month of November and December 2009. Thereafter AO issued notice u/s. 148 and completed the assessment on 23.08.2017. Considering the facts of the case the pen....
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.... cash amount / loan taken or accepting in cash. The assessce should have managed his affairs/requirement in such a manner that the prevalent law might have been followed. Therefore, fact/reply given by the assessee are differentiable on facts and circumstances from realty of the assessee's case." 9.1 Whereas the finding on facts in the order of the ld. CIT(A) is also relevant to understand the issue on hand and therefore, the same is reiterated here in below:- "7.2 During the course of penalty proceedings appellant's contention that he has not taken any cash loan and cash deposit in Bank account was only an accommodation transaction done was not accepted by Joint Commissioner of Income Tax, Range-1, Kota for the reason that no reasonable cause for taking cash loan has been submitted by the appellant because no there is no evidence have been furnished by the appellant showing the urgency or necessity of cash amount/loan taken or accepting in cash. The onus was on the appellant to prove the same. However, the appellant could not prove." 9.2 Thus, on the merits of the case there is no evidence that the assessee has not violated the provisions of section 269SS of....
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....limitation for imposing penalties. 275. (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the^58-59[Joint Commissioner (Appeals) or to the] Commissioner (Appeals) under section 246 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, or six months from the end of the month in which the order of the58-59[Joint Commissioner (Appeals) or the] Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later : Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the^60[Joint Commissioner (Appeals) or to the] Commissioner (Appeals) under section 246 or section 246A, and^60[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) passes the order on or after the 1st....
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....posing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the month in which the order of^61[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or the order of revision under section 263 or section 264 is passed: Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this subsection. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March, 1989. Explanation.-In computing the period of limitation for the purposes of this section,- ....
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....eriod expires later; (b)in any other case, after the expiration of two 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." It is immediately seen that it divides cases into two categories, one category covering cases where the relevant assessment or other order is the subject-matter of an appeal and all other cases coming under the second category. Clause (a) deals with the first category and clause (b) with the second category. In order to bring a case within the ambit of clause (a) there should have been an appeal to the Appellate Assistant Commissioner under section 246 or an appeal to the Appellate Tribunal under section 253(2). Section 246 covers many cases including orders of assessment, reassessment or recomputation and an order imposing a penalty under section 271 and other provisions. In its turn, section 253 provides for appeals to the Appellate Tribunal against orders passed by the Appellate Assistant Commissioner in regard to the matters mentioned therein. If there has been an appeal against the assessment or other order, the period of limitation ....
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....ficer and that officer completes the proceeding, as it has happened in this case, then it would be unreasonable to bring such a case within the scope of sub-clause (ii). No doubt, Sri Dasaratharama Reddy argued that even where the matter was remitted back to the Income-tax Officer, he was expected to complete the proceeding within six months and that is the very purpose for which that period has been fixed. Otherwise, so the learned counsel urged, it would result in giving unlimited time to the Income-tax Officer to complete a proceeding and such a situation could never be the intention of Parliament. There is no reason to suppose that the Income-tax Officers would unnecessarily and unduly delay the disposal of assessments and other cases pending before them. On the other hand, quick disposal of such cases appears to be the intention of the entire Act. Where in the appeal the appellate authority sends back the matter to the Income-tax Officer, then the case squarely walks into the ambit of sub-clause (i). In such a case all the requirements of sub-clause (i) of clause (a) are satisfied. The relevant assessment order has been the subject-matter of an appeal, action for imposition of....
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....assessment was made. In this connection, it would be material to note that the Appellate Assistant Commissioner, while allowing the appeal, completely set aside the original assessment made by the Income-tax Officer and sent back the matter. With the result, the original assessment was no more in existence and a new assessment came into being after remand on 25th of July, 1972. Section 251 confers the power of annulling an assessment while disposing of an appeal. It was this power that the Appellate Assistant Commissioner exercised while setting aside the assessment made by the Income-tax Officer. Clause (a) of section 251 further empowers the Appellate Assistant Commissioner to refer the case to the Income-tax Officer for making fresh assessment and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment. In this case when the Income-tax Officer made a fresh assessment after remand, the proceeding came to an end and there was no further appeal. We are thus satisfied that this matter is covered by sub-clause (i) and not by sub-clause (ii). Subclause (ii) wou....