TaxTMI 
TaxTMI 
2024 (7) TMI 1605
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....2022 Addl. CIT, Central Range-05, New Delhi, date: 29.06.2018 271D r.w.s. 269SS 612/Del/2022 - Do- - Do - - Do - - Do - 613/Del/2022 - Do - - Do - - Do - - Do - 614/Del/2022 - Do - Do - - Do - - Do - 615/Del/2022 - Do - 553/19-20, 554/19-20, 559/19-20 & 561/19-20, dated 02.03.2022 - Do - 271E r.w.s. 269T 616/Del/2022 - Do - - Do - - Do - - Do - 617/Del/2022 - Do - - Do - - Do - - Do - 618/Del/2022 - Do - - Do - - Do - - Do- 2. On hearing both the sides, it comes up that assessment in the relevant assessment years was completed by the AO u/s 153A r.w.s. 143(3) of the Act and, during the course of assessment proceedings, the AO allegedly noticed that the assessee had received loan from Shri Asharamji Bapu in cash or repaid the but the same was exceeding Rs. 20,000/-, and was through a mode other than by account payee cheque or account payee draft which is in violation of provisions of section 269SS of the Act and by the said infringement, the assessee was found to be liable to penalty u/s 271D and u/s 271E of the Act for which notice was issued to the assessee. The A....
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....d in 2017-TIOL- 30-HC-DEL-IT wherein Hon'ble High Court has held that "addition made on basis of director's statement recorded during the course of search proceedings is sustainable, where the statements recorded are duly corroborated by evidences on record". 8.5 The assessee has taken a plea that reliance have been placed in this regard on the documents seized from the premises of Shri Asharam Bapu by Surat Police and requisitioned by the Department u/s 132A of the I.T. Act, 1961. It has been contended that no action can be taken in the case of the assessee in the proceedings u/s 153A or present penalty proceedings. This contention of the assessee is also devoid of any merit. In this regard, a reference is made to the decision of Hon'ble Delhi High Court in the case of CIT Vs Sonal Constructions reported in 359 ITR 532 (Delhi)[2013] wherein Hon'ble High Court has held that "Where during search certain documents were seized from possession of a partner of assessee-firm, merely because partners were not examined by Assessing Officer at time of assessment, it could not be stated that no reliance could be placed on seized materials for purposes of making additions". ....
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....e provisions of the Act. 2. The Ld. CIT (A) has erred on facts and in law in upholding the inference that the entries in the alleged ledger accounts were true and the statement of Devidas Chhatani was reliable even though the said Devidas Chhatani filed an affidavit disowning the statement and the person to whom the ledger accounts allegedly belonged to categorically confirmed that the same were not true. 3. The Ld. CIT (A) has erred on facts and in law in treating the material seized by the Police long before search in the case of the appellant to be the material seized in the case of the appellant and has further erred in applying presumption u/s 292C of the Income Tax Act, 1961 on the same. 4. The Ld. CIT (A) has erred on facts and in law in confirming the erroneous inference drawn by the AO on the material seized by the Police which is not coming out from the seized material even if the material is presumed to be correct. 5. The Ld. CIT (A) has erred on facts and in law in confirming the additions made in gross violation of principles of natural justice without providing an opportunity to cross examine the persons on whose statements the reli....
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....he appellant neither brought the same in the books of accounts nor sought to explain any asset/expenditure which is in gross violation of the purpose for which section 269T was brought on statute as explained by the CBDT Circular in this regard. 13. The Ld. CIT (A) has erred on facts and in law in confirming the penalty levied by the AO by picking up alleged loan taken or repaid on the basis of certain Master Ledger even though there is no correlation of the same with the detailed ledgers referred and relied by the AO. 14. The Ld. CIT (A) has erred on facts and in law in in confirming the penalty levied by the Assessing Officer assuming the alleged transactions recorded in the ledger 'Vishwa-Cash Vs Cheque' and 'Vishwa-Cheque Vs Cheque when the ledger title itself does not indicate that it is likely to represent any repayment of loan. 15. The Ld. CIT (A) has erred in facts and law in confirming the penalty levied by the Assessing Officer on account of alleged ledgers titled 'Vishwa Cash Vs Cheque' and 'Vishwa-Cheque Vs Cheque' even though there were no such cheque transactions in the appellant's account. 16. The Ld....
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....fore the Bench that there were huge and fatal variations and contradictions between the observation made by the AO and the show cause notice issued by the JCIT and the penalty order levying the penalty. Among other the following was highlighted for the same; ● The AO observed in the assessment order that the alleged breach was with regard to a transaction with Sant Shri Asharamji Ashram whereas the JCIT levied the penalties for the alleged transaction with Sh. Asharam Bapu. ● The JCIT issued show cause notice stating the assessee to be assessee company whereas it is undisputed that the assessee is an individual. ● The JCIT issued cryptic show cause notice without any satisfaction and without even detailing the transactions on which alleged infringement of section 269SS/269T had taken place. ● The amount on which the show cause notice was issued was at variance in some of the assessment years from the amount with regard to which observation alleged infringement was made by the AO. For instance, in the assessment year 2013-14 the AO alleged infringement of Rs. 4,75,05,329/- and Rs. 8,20,00,000/- u/s 269SS and Rs.&n....
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....Bench was drawn to the circular no. 09/DV/2016 issued by the CBDT on 26.04.2016. Copy of the said circular was also submitted. It was submitted that the circular was necessitated as there was a gap in the statute with regard to the timeline by which reference to competent authority for levy penalty was required to be made. Nothing in the circular is contrary to the plain provisions of the statute or to the interest of revenue. The circular was apparently issued in the interest of the revenue as the revenue was losing cases for the reason of delay in levy of penalties. In particular kind attention was drawn to para 4 which runs as follows; "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 proceedings (or any other proceedings under the Act). 5.4 Ld. Counsel, emphasized that the reference for levy of penalty u/s 271D/271E is required to be made during the course of assessment proceedings. It was further pointed out from the penalty order that....
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....when undisputedly there is no change whatsoever in the facts and circumstances of the matter or the evidence relied and referred by the revenue. Reliance was placed on the following case laws; ● [1992] 60 Taxman 248 (SC) Radhasoami Satsang v. Commissioner of Income-tax ● [2004] 135 Taxman 34 (Delhi): Lovely Bal Shiksha Parishad ● [2016] 71 taxmann.com 30 (Delhi): JCB India Ltd ● [2019] 112 taxmann.com 66 (Delhi - Trib.): NIIT Ltd. 5.7 It was submitted during the course of hearing that the fact of the breach of provisions of section 269SS and 269T has to be undisputed and admitted by the assessee. The aforesaid penalties would get triggered only when the transactions are either parts of the books of account or otherwise accepted by the assessee for the purposes of explaining any of his assets or transaction. In the case of the appellant the alleged transactions were neither part of the books of account nor the assessee tried to explain any of the transaction or asset under the basis of cash loans taken or given. In the case of the appellant no unaccounted cash was found or seized. The sole basis for levy of penalty was c....
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....the date on which such loan or deposit is proposed to be taken, is Rs. 10,000 or more." 5.10 On the basis of the aforesaid, it was submitted that it is indisputably clear that the law was enacted only with a view to countering the device, which enables taxpayers to explain away unaccounted cash or unaccounted deposits. From the aforesaid the legislative intention behind the introduction of the aforesaid circular is clear. This section was introduced to curb the practice of making entry in the books of accounts in respect of cash found during the course of search as a tool to explain the unexplained cash. In this context attention was drawn to following facts in the case of assessee; ● no cash was found or seized during the course of search which is being sought to be explained by the appellant or the alleged counter party by any entries. ● The assessee made no entry in the books of account incorporating the cash loans given or taken to explain any transaction. ● During the course of search no asset/expenditure was sought to be explained by the assessee invoking cash loan take or given. 5.11 It was submitted that the assessee c....
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.... 5.16 It was pointed out during the course of hearing that the revenue has relied very heavily on the retracted statement of a third party namely Devidas Chattani who had no connection whatsoever with the appellant. It was also pointed out that during the course of assessment of alleged counter party namely Sant Shri Asharamji Ashram by the AO of the said entity issued notice u/s 131(1A) of the Act to the aforesaid person. In response to the same, the said Devidas Chattani responded that his statement recorded on 25.09.2015 was under extreme mental pressure and he did not actually know what was being recorded and attributed to him. It was submitted that in these circumstances levy of penalties on the basis of the aforesaid statement was not in accordance with the settled law in this regard. A compilation of the relevant cases was made available in the case law synopsis for the aforesaid proposition. 5.18. During the course of hearing, it was also submitted that the limitation for levy of penalties u/s 271D/271E should be reckoned from the date from which reference was made by the DDIT (Inv.) to the AO. The date on which reference was made by the DDIT(Inv.) to the AO was 18.03....
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.... in the names of various persons/sadhaks etc. A copy of the assessment completed in the case of Sant Shri Asharamji Ashram (PAN: AAAAS2722E) completed u/s 153C of the Act for AY 2010-11, is placed on record. It was submitted that on going through the facts mentioned in the order, it is seen that the requisitioned documents run into more than 58,000 pages along with soft data (mentioned on page 302 of the said order). The correlation between requisitioned documents and the soft data, between requisitioned documents and the books of accounts of the Ashram, between requisitioned documents and the documents seized during searches conducted on beneficiaries of cash loan transactions (including the appellant), have also been discussed in detail in the order. The fact that the requisitioned documents pertain to the Ashram is proved beyond doubt by the above said correlations, the statements of various persons discussed in the order, and the nature of documents themselves. In his statement to the Police Authorities, Shri Prahlad Bhai Sevani from whose flat these documents were requisitioned has submitted that the flat was in possession of the Ashram (pages 145-147 of the order). The docume....
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....ed as cash loans by the appellant to different parties in Jaipur. Similarly, during a course of search at the premises of Sh. Babubhai Patel, one of the directors at M/s Gurukrupa Krafts Pvt. Ltd. where the appellant also holds a directorship, a hand written document containing detailing interest on loans provided by the appellant was found. Thus, this underscores the appellant was engaged in transactions of cash loan with the Ashram and other parties. 6.1.6 The requisitioned documents also contained a Board resolution passed by the Directors of M/s Arjun Nav Nirman Pvt Ltd, a group company of the Ashram. The resolution is for purchase of a flat at Palam Colony, New Delhi from M/s J.T Builders Pvt Ltd, and a group concern of appellant. Additionally, a letter written by Dev Kumar to Sh. Asharam Bapu explained the necessity of purchasing the flat on the pretext of being safe for keeping the papers of Ashram. The letter also mentions that the cheque consideration for the flat is Rs 13.50 lakhs, the remaining consideration was to be decided. During the course of search in case of the appellant from the premises of M/s Kalawati Builders Pvt Ltd at Palam, New Delhi, along with other d....
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....Tikamdas Chattani are unfounded. 6.1.8 Sh. Devidas Tikamdas Chattani has given a detailed statement explaining the various seized documents and modus oprendi of the Ashram. With an association spanning approximately 15-20 years, his role within the Ashram is clearly delineated in the requisitioned documents. In his statement, he has identified all the key persons of the Ashram including the beneficiaries of cash loan transactions. Thus, his retraction after 21 months is not contemporaneous with the events in question, nor supported by documentary evidence. 6.9 On the basis of above Ld. DR has submitted that the requisitioned documents are pertaining to cash loan transactions. They are corroborated by other seized documents including the documents seized in the case of appellant. They have been explained by Sh. Devidas Tikamdas Chattani, who has also identified the appellant as a beneficiary of cash loan transactions. Further, the Ld. CIT (A) while sustaining the penalties has comprehensively discussed the nexus and linkage between the Appellant & the Ashram and the reliability of the seized documents on the basis of which penalties have been imposed. Based on the comprehensiv....
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.... in the case of the Assessee in proceedings u/s 153A of the Act. It was submitted that there is independent nature of penalty proceedings under Sections 27ID and 27IE of the Income Tax Act. While Section 153A pertains to assessments or reassessments triggered by search or requisition operations, Sections 27ID and 27IE are specifically tailored to address penalties associated with contraventions of Sections 269SS and 269T, governing high-value cash transactions. It's crucial to recognize the distinct purposes served by these provisions. Section 153A primarily focuses on facilitating assessments or reassessments in cases where income has escaped assessment due to undisclosed assets or documents found during search operations. Conversely, Sections 27ID and 27IE are tailored to address violations related to the acceptance and repayment of high- value loans or deposits in cash, thereby promoting transparency and discouraging cash transactions above a certain threshold. Moreover, the imposition of penalties under Sections 27ID and 27IE is contingent upon the contravention of specific statutory provisions governing cash transactions. These penalties are not contingent upon the outcome....
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....der the Act. The appellant contends that, in this case, since a reference was made by the AO to the Range Head on 15.02.2018 i.e. after the completion of the assessment proceedings, thus the reference is void and, consequently, the penalty proceedings are also void. It was submitted that this contention of the appellant is factually incorrect since the assessing officer has drawn satisfaction for violation of provisions of section 269SS & 269T in the assessment order itself. The assessment order u/s 153A of the IT Act is approved by Range Head u/s 153D of the Act and a reference u/s 271D & 271E of the Act is made as part of the order. 7. Further, it is submitted that vide the said Para 4 of the Circular, the Department has articulated its position regarding the initiation of penalty proceedings. The Department's view aligns with the judgment of the Hon'ble Kerala High Court, which states that penalty proceedings under Section 271D of the Act commence with the issuance of a show cause notice by the JCIT. However, the subsequent Para No. 5 of the Circular explicitly indicates that when any High Court renders a decision contrary to the Department's view, such Departmen....
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....the issuance of the SCN. While it is true that the ACIT had the discretion whether or not to issue the SCN, if he did decide to issue a SCN, the limitation would begin to run from the date of letter of the AO recommending 'initiation' of the penalty proceedings. " 9. It was submitted that Hon'ble High Court did not accept the Department's View that penalty proceedings commence upon issuance of a Show Cause Notice (SCN) by the JCIT. The view adopted by the Hon'ble Delhi High Court contradicts the stance articulated in the aforementioned Circular of the Department. Thus, strictly in accordance with Para No. 5 of the Circular, the Department's interpretation does not apply to the present case. Therefore, the advisory provided to the assessing officer, which advised referencing the JCIT during assessment proceedings, was predicated on the Department's understanding as stated therein. Following the jurisdictional High Court's ruling, the act of making a reference to the JCIT itself constitutes the initiation point for penalty proceedings in this matter. 10. Furthermore, reliance waw placed on the judgement of Hon'ble High Court of Rajasthan in ....
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....ts and the ruling of the Hon'ble Rajasthan High Court as affirmed by the Supreme Court. Accordingly, the advisory contained therein is also not applicable as the same was given in context of department view contained therein. 12. It was then submitted that even if the Bench were to hold the Circular or a part of the Circular to be applicable to the facts of the case, the same can be done only within the four corners of law as determined by the Hon'ble High Courts and Supreme Court. The Hon'ble Supreme Court in the case of Bengal Iron Corp. vs CTO AIR 1993 SC 2414 held that "Law is what is declared by this Court and the High Court. An executive authority can, at best, only opine its own understanding of the statute; such opinion is not binding on the quasi judicial authority functioning of the authorities under the Act. ". 13. Reference was made to the Hon'ble Supreme Court judgement in the case of Sanjeev Coke Manufacturing Company v. M/s Bharat Coking Coal Limited and Anr., (1983) 1 SCC 147 where it was held that - "25. Shri Ashoke Sen drew pointed attention to the earlier affidavits filed on behalf of Bharat Coking Coal Limited and commented severely on the all....
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....High Court and High Court of Rajasthan. She submitted that when the jurisdictional High Court and other High Courts have interpreted the statute in a manner which is different from the interpretation given in the Circular, then that Circular or part of it cannot be made the basis of holding the entire penalty proceedings void. As held by the Hon'ble Supreme Court in the case of Sanjeev Coke Manufacturing Co (supra), on the interpretation of a statute in case of any conflict between the department and the High Court, the view taken by the High Court shall prevail. Accordingly, the view taken by the jurisdictional high court shall prevail. The contention of the appellant deserves to be dismissed. 15. Distinguishing the decision of ITAT, Chennai in the case of DCIT Chennai Vs. Sh. Subramaniam Thanu in ITA No. 785, 786, 787 & 788/ Chny/2023, for A.Y 2015-16 & 2016-17 relied on by Ld. AR, it was submitted that the operating part of the decision is reproduced below - "Para 11.6 We have considered the judicial pronouncements and principles laid down by the Hon'ble Supreme Court and also the judgement of various Hon'ble High Courts and as per the above judicial pronounceme....
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....ITAT in the case of Anglican India Consultancy Pvt. Ltd. v. Addl. CIT (supra), the ground raised by the Department is liable to be dismissed. " 16. Ld. DR distinguished same by pointing out following; (i) The assessment order was passed on 30.12.2017 and reference for initiating penalty u/s 27 ID & E was made on 14.03.2021 i.e. after a time gap of more than 3 years. (ii) In the assessment order AO has drawn satisfaction with regard to penalty proceedings u/s 271(l)(c) and no reference was made for violation of S. 269SS & S. 269T and subsequently for imposition of penalty u/s 271D & 271E of the act. (iii) The Hon'ble Tribunal decided the issue based on the fact that the AO should have recorded his satisfaction u/s 271D &271E before making a reference to the Range Head. Also, as the AO did not record the satisfaction, accordingly the reference was treated as void. Coupled with the fact the reference was also made after a gap of more than 3 years. 17. She thus contended that the above noted decision is not binding as the facts of the present case are clearly distinguishable from the S. Thanu Case (cited Supra). She submitted that in the present case as....
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....tion to the AO because the AO has not passed any assessment order and no satisfaction was drawn by AO. In the present case, the facts are totally different as the AO has passed a separate assessment order and drawn his own satisfaction about imposition of penalty u/s 271D & 271E and based on his own satisfaction, made a reference to the JCIT/Addl. CIT. Thus, as independent satisfaction was recorded in the present case by the AO, the initiation date for counting of limitation date for penalty u/s 271D & 271E has to be the date of reference by the AO i.e. 15.02.2018 and within a period of 6 months i.e. on 29.06.2018 . 20. Then she contended that in addition to above, the appellant had taken several other contentions including that the SCN issued by the JCIT is nonspeaking and incorrectly refers to the Ashram as Company. In this regard, it was submitted before the Hon'ble Bench that the seized documents have been confronted to the appellant during assessment proceedings. On the basis of material available, the AO has drawn his satisfaction regarding violation of provisions of section 269SS & 269T attracting penalty u/s 271D & 271E. In light of the same, the appellant has clearly un....
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....ision, 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 E 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 proceedings (or any other proceedings under the Act). The Assessing ....
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....f CIT V/s. Service Iron and Steel Rolling Mills reported in 178 ITR 589 P&H, CIT V/s. Sohanlal Savindersingh Jagadhri reported in 178 ITR 628 P&H, Hotel And Allied Trades P. Ltd V/s. CIT reported in 221 ITR 619 Kerala. Thus the onus is heavy on the Department to not only establish the facts with categorical finding, independently of the assessment order but to also successfully canvass that due process of law was strictly followed. 24. However, the penalty orders as passed in the case in hand show that the AO has drawn conclusion on the basis of 'elaborate discussion' in the assessment order without making a specific examination of the issues, independently. It is for this reason the discrepancies with regard to the name of the borrower or lender being Shri Asharam ji Ashram or Shri Asharam Bapu or stating violator to be assessee company while the assessee is individual have crept in. 25. In this background, if we consider the purport of the CBDT Circular dated 26.04.2016 which is heavily relied by the ld. counsel of the assessee that reference for the purpose of penalty u/s 271D and 271E of Act should be made during the course of assessment proceedings itself. We find that d....