Income Tax Appellate Tribunal - Pune
Niki Agro Products Pvt. Ltd.,, Jalgaon vs Assessee on 9 December, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 1572/PN/2011
(Assessment Year 2008-09)
Niki Agro Products Pvt. Ltd.,
Plot No.V/191/1,
MIDC, Jalgaon- 425 003 .. Appellant
PAN No.AABCN6531B
Vs.
ACIT, Circle-2,
B.J.Market, Jalgaon-425 001 .. Respondent
ITA No. 1461/PN/2012
(Assessment Year 2008-09)
Niki Agro Products Pvt. Ltd.,
Plot No.V/191/1,
MIDC, Jalgaon- 425 003 .. Appellant
PAN No.AABCN6531B
Vs.
JCIT, Range-2, Jalgaon .. Respondent
Assessee by : Shri Sunil Ganoo
Revenue by : Shri P.L. Pathade
Date of Hearing : 09-12-2013
Date of Pronouncement : 31-12-2013
ORDER
Per R.K. Panda, AM :
The above two appeals filed by the assessee are directed against the separate orders dated 10-10-2011 and 14-05-2012 of the CIT(A)- II, Nashik relating to Assessment Year 2008-09. For the sake of convenience, both the appeals were heard together and are being disposed of by this common order.
2ITA No.1572/PN/2011 (A.Y. 2008-09) :
2. Facts of the case, in brief, are that the assessee is a Pvt. Limited Company engaged in the business of processing, export and import and trading of all kinds of pulses, cattle feed, food grains, oil seeds etc. The assessee is also acting as a commission agent. For the impugned assessment year, the assessee company filed its return of income on 30-09-2008 declaring total income at Rs.15,23,170/-. During the course of assessment proceedings the Assessing Officer noted that during the course of search at the premises of Shri Satishchand G. Mittal an amount of Rs.50 lakhs was received by the assessee company. The Director of the assessee company Shri Kantilal Motilal Jain has acknowledged the receipt of such loan on the letter head of the company which contain Revenue stamp and seal of the company duly singed by Shri Kantilal Jain as received for and on behalf of the assessee company. The amount was received on 01-04- 2007 which was returned on 07-11-2007 and the rate of interest was 12% per annum. Shri Satishchand G. Mittal has offered an amount of Rs.50 lakhs as his undisclosed income and has also offered an amount of Rs.3,61,500/- as interest accrued on such loan. The Assessing Officer, therefore, asked the assessee to explain as to why an amount of Rs.3,61,500/- should not be added to his total income being unaccounted expenditure.
2.1 It was explained by the assessee that although an amount of Rs.50 lakhs has shown to have been received on the letter head of the company but the money has no relation with the business and hence not recorded in the books of account of the assessee. The Director 3 who has signed the same on letter head might have entered into the loan transaction with Shri Satishchand G. Mittal on his personal account. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that the acknowledgement was given on the letter head of the company duly authenticated and signed on Revenue stamp by one of the Director with the seal of the company. Shri Satishchand G. Mittal has stated u/s.132(4) of the Act before the search party to have given the loan of Rs.50 lakhs to the assessee company and has paid tax on that as his undisclosed income along with the interest accrued thereon amounting to Rs.3,61,500/-. Shri Satishchand G. Mittal again in his answer to Question No.3 on 20-12-2010 has confirmed the transaction of loan to the assessee company for which the Director Shri Kantilal Jain has signed/acknowledged. The company has not filed any evidence, i.e. books of account or any other document maintained by the Director to show that the amount of Rs.50 lakhs has been received by him in his personal capacity. The denial/explanation of the assessee company vide letter dated 08-12-2010 is not supported by any corroborative evidence. Rejecting the explanation of the assessee the Assessing Officer made addition of Rs.3,61,500/- being interest for the period for which the money was utilised by the assessee.
3. In appeal the Ld.CIT(A) upheld the addition made by the Assessing Officer by holding as under :
"6. I have carefully gone through the submission of the appellant, assessment order and the material available on record. As far as the issue of giving proper opportunity to the appellant is concerned, I find from the assessment order as well as from the submission of the appellant that the A.O. had supplied copies of the relevant papers found and seized at the premises of Shri Satishchand G. Mittal to the appellant on 07/12/2010. It is an admitted fact that the appellant was 4 given an opportunity to give its explanation on the contents of the seized papers. In fact, the appellant had furnished a detailed reply on 01/12/2010. Therefore, I do not find any merit in the contention of the appellant that there was violation of principle of natural justice. Hence, this ground of appeal is dismissed.
7. As regards receipt of loan and payment of interest, I have perused the copy of seized paper on the basis of which AO has held that the appellant had received a cash loan of `50 lac from Shri Satishchand. The seized document is a copy of the letter head of the appellant company dated 01/04/2007 showing that the appellant company through its director (Shri Kantilal Jain) had received a cash loan of `50 lac on interest from one Shri Satishchand. The receipt has been signed by director of the appellant company for "Nikki Agro Products Pvt. Ltd.", i.e. the appellant company. Shri Satishchand vide letter dtd.27/11/2007 has acknowledged having given a loan of `50 lac on interest to the company. Shri Deepak Kantilal Jain, S/o. Kantilal Jain, another director of the company though in his statement recorded on oath on 22/11/2007 during survey u/s.133A stated that the cash was received by his father in his personal capacity and the company had nothing to do with it, I find the contention totally unacceptable. The receipt is on the letter pad of the company with a revenue stamp and stamp of the company affixed on it and signed by director (Shri Kantilal Jain) for the company stating "received `50 lac on interest". The appellant's further statement that the company was not aware of the transaction is far from truth and devoid of any merit. An affidavit dt. 15/01/2011 given by Shri Kantilal Jain stating that he used the letter pad of the company in a hurry and signed as Director inadvertently is fabricated and seems to be an afterthought effort to save the company from the various legal/penal actions for receiving `50 lac in cash and not reporting the transaction in the regular books of account. Under the facts and circumstances of the case, I am of the considered view that the above referred affidavit is false and contradictory to the contents of the seized document. The same is rejected. In view of the above, it is held that the said loan of `50 lac was received by the company in cash through its director Shri Kantilal Jain. A perusal of the assessment order further reveals that Shri Satish Mittal in his statement recorded on oath on 20/12/2010 has confirmed having given a loan of `50 lac in cash to Nikki Agro Products Pvt. Ltd. through its director Shri Kantilal Jain. Shri Satishchand had offered this amount, i.e. `50 lac and ` 3,651,500/- as interest receivable on `50 lac as his additional income in his statement recorded u/s.132(4) of the Act and subsequently filed return interalia including the said additional income. The director Shri Kantilal Jain never explained the facts of the transaction, i.e. purpose of borrowing `50 lac in cash, how did he used the said cash and what was his source of repayment of the loan etc. All circumstantial evidences thus prove conclusively that the cash loan of `50 lac was in fact borrowed by the appellant company who did not show it in its regular books of accounts. As regards appellant's contention that AO was not justified in treating `3,61,500/- as its unexplained expenditure u/s.69 as it did not pay the amount, I find that all circumstantial evidences contradict the appellant's submission in regard to payment of interest. The undisputed facts of the case (i) the company received `50 lac in cash as loan on interest (ii) the said loan was repaid on 7/11/2007 as per the letter dt.27/11/2007 written by Shri Satishchand to Shri Kantilal Jain (iii) interest was due as on 27/11/2007 and (iv) Shri Satishchand offered interest of `3,61,500/- for taxation in his return of income for AY 2008-09. Since Shri Satishchand has shown this interest of `3,61,500/- as his income, it could be safely concluded that the company had in fact paid this 5 amount to Shri Satishchand during AY 2008-09 outside its regular books of account. The loan as mentioned above was on interest. There was no question of recovery of any paper relating to receipt of interest from the premises of Shri Satishchand as the search took place on 22/11/2007 and the interest was not paid till 27/11/2007. AO under the facts and circumstances of the case was justified in treating the said expenditure of `3,61,500/- as appellant's unexplained expenditure. The addition is confirmed and appellant's ground in this regard is dismissed".
4. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds :
"1. On the facts and in the circumstances prevailing in the case and as per the provision of law, it may please be held that the Ld.CIT(A) has grossly erred in holding that appellant company had taken a Cash loan of Rs.50 lakhs from Shri Satishchand Mittal, though it is taken by the Director for his own purpose, as per affidavit filed by the Director, which was rejected without establishing that contents of the affidavit are untrue. The finding of the CIT(A) that the loan is taken by the appellant company may be vacated.
2. On the facts and in the circumstances prevailing in the case and as per the provision of law, it may please be held that the Ld.CIT(A) has grossly erred in confirming the addition of Rs.3,61,500/- on account of interest claimed to have been receivable by said Mr. Satishchand Mittal. There is no evidence that said interest has been paid by the appellant company. In view of the provision of section 69C of the I.T. Act, no such addition can be sustained unless it is proved that appellant company had incurred such expenditure and hence addition confirmed by the CIT(A) may please be cancelled.
3. On the facts and in the circumstances prevailing in the case and as per the provision of law, it may please be held that the Ld.CIT(A) has grossly erred in holding that there is no violation of principle of natural justice, though, from the appellate order itself speak that copies of said documents were provided on 07/12/2010 and statement of Shri Satishchand Mittal was recorded on 20-12-2010, on the back/behind the appellant and used against the appellant without providing any opportunity of being cross examine to him and hence assessment order passed violating the principle of natural justice. Therefore, assessment order passed and confirmed by CIT(A) is bad in law and void ab-initio and may please be annulled".
4.1 Aggrieved with such order of CIT(A) the assessee is in appeal before us.
5. The Ld. Counsel for the assessee vehemently opposed the order of the CIT(A). He submitted that when the searched person, i.e. Shri Satishchand G. Mittal has offered an amount of Rs.3,61,500/- as 6 interest receivable, therefore, it is proved beyond doubt that the assessee company has not paid any interest to Shri Satishchand G. Mittal. Since the assessee company strongly denied to have received any such loan and since the Director Shri Kantilal Jain has inadvertently gave the acknowledgement on the letter head of the company which was already stated before lower authorities and since the other Director Shri Deepak K. Jain has denied to have received any such loan by the company, therefore, the addition of Rs.3,61,500/- by the Assessing Officer being unexplained expenditure and upheld by the CIT(A) should be deleted.
6. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
7. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. There is no dispute to the fact that during the course of search on 22-11-2007 at the premises of Shri Satishchand Mittal/Agarwal, a paper containing receipt of Rs.50 lakhs by the assessee company was found which was duly acknowledged on Revenue stamp with stamp of the assessee company and signed by the Director Shri Kantilal Jain. There is also no dispute to the fact that Shri Satishchand G. Mittal in his statement recorded u/s.132(4) has confirmed to have given the loan of Rs.50 lakhs to the assessee company. The relevant answer as reproduced by the Assessing Officer at page 5 of the order which reads as under :
"9. Shri Satish Mittal has once again confirmed the transaction of loan as discussed above while giving his statement on oath in answer to question no.3 on 20-12-2010. As discussed earlier and portion of the reply is reproduced here below :7
".... Yes, this paper is receipt of 50 lakh rupees cash loan given by me to Nikki Agro Product Pvt. Ltd. and for which director Shri Kantilal Jain has signed/acknowledged by director of Company to whom cash loan is given by me..."
The assessee in the instant case never asked the AO to confront Shri Satishchand G. Mittal. The denial by the other director that the money has not been received by the company and is received by the director in his personal capacity does not have any force in absence of any positive statement to show that the same was received by the other director in his personal capacity and not for the company. 7.1 We find that Shri Satishchand G. Mittal has declared an amount of Rs.50 lakhs as his undisclosed income and paid tax on the same and has also offered interest income of Rs.3,61,500/- as accrued to him for the period from 01-04-2007 till 07-11-2007. Under these circumstances, we find no infirmity in the order of the CIT(A) upholding the above addition of Rs.3,61,500/- made by the Assessing Officer being unexplained expenditure for the above period. The submission of the Ld. Counsel for the assessee that the Shri Satishchand G. Mittal has shown the same on accrual basis as interest accrued does not find any force since the amount was not entered in the books of account of the assessee company and it remains outside the books of account. In this view of the matter and in view of the detailed order passed by the Ld.CIT(A), we find no infirmity in his order upholding the addition made by the Assessing Officer. We accordingly uphold the same. The grounds raised by the assessee on this issue are accordingly dismissed.
87.2 So far as one of the ground regarding violation of principles of natural justice, we find the same is also without any merit since the assessee was given adequate opportunity during the course of assessment proceedings. He was confronted with the seized documents from the residence of Shri Satishchand G. Mittal/Agarwal. The Assessing Officer at Page 3 of the assessment order has also observed as under :
"In response to said, assessee has applied for copies of seized papers in question and with a view to meet natural justice, copies of all papers requested by the assessee company were given to the Authorised Representative of the assessee as reflected in order sheet entry dated 07-12-2010. After having possession of such papers, assessee has furnished a written reply dated 08-12-2010 received in this office on the same day"..............
In this view of the matter and in view of the detailed order passed by the CIT(A) the grounds raised by the assessee are dismissed.ITA No.1461/PN/2012 (A.Y. 2008-09) :
8. As mentioned earlier in the preceding paragraphs the assessee company has taken an amount of Rs.50 lakhs on loan @ 1% interest per annum from Shri Satishchand G.Mittal. The copy of acknowledgement on the letter head of the assessee company duly signed by the Director Shri Kantilal Motilal Jain on Revenue stamp with seal of the company was found from the residence of Shri Satishchand G. Mittal during the course of search. Since the loan was received in cash in excess of Rs.20,000/- by contravening the provisions of section 269SS the Assessing Officer referred the matter to the Jt.CIT, Range-2, Jalgaon for initiation of penalty proceedings u/s.271D. The Joint Commissioner issued notice u/s.274 r.w.s. 271D on the assessee company to explain as to why penalty u/s.271D should 9 not be levied for violation of the provisions of section 269SS. In response to the show cause notice the assessee vide its letter dated 03- 03-2011 stated as under :
".... That we have never filed any such acceptance of deposit to any of the authorities of Income tax. Further in the statement of oath taken on 22-11-2007 we have stated that the company has never accepted any such deposit and it is in the personal nature of other director, i.e Shri Kantilal Motilal Jain. Further, we have also given our statement before ADI that though the transaction has been given on the letter head of the company, the transaction has no relation with the company's business and hence not recorded in books of accounts. Thereafter, we have also submitted the copy of affidavit of Shri Kantilal Motilal Jain accepting the said liability of Rs.50 lcas, the copy of which is enclosed herewith. Since the above transactions has no relevant of the company's business nor recorded in books of account we do hereby request you to drop the penalty proceedings of the company...."
9. However, the Ld. JCIT was not satisfied with the above explanation given by the assessee. He referred to the assessment order wherein the Assessing Officer has discussed the issue after confronting the same to the assessee and after considering the statement of Shri Satishchand G. Mittal recorded during the course of search u/s.132(4) and after going through the affidavit as well as written statement given by the assessee from time to time. He rejected the explanation of the assessee and levied penalty of Rs.50 lakhs for receiving the loan in cash in violation of provisions of section 269SS during the F.Y. 2007-08. The reasoning given by the Ld. JCIT for levying the penalty u/s.269SS are as under :
"As per his request, the case was adjourned to 13th July, 2011. On the said date, neither Shri Kantilal Motilal Jain attended nor any representative of Shri Kantilal Jain or of the assessee Company attended. No written explanation till date has been submitted by the assessee Company. This itself shows that Shri Kantilal Motilal Jain has nothing to say in the matter to support his contention that loan was taken in individual capacity. Also for the following reasons, I am of the firm opinion that the assessee Company has accepted the cash in contravention of section 269SS of the I.T. Act, 1961.
(i) It is very much crystal clear that Nikki Agro Products Pvt. Ltd.
through Director Shri Kantilal Motilal Jain has accepted the cash loan from Shri Satish Mittal in contravention of section 269SS on 01-04- 2007. The noting on the letter pad clearly goes to prove that the 10 assessee Company has accepted the cash of Rs.50 lacs in the capacity of Company only and not in the capacity of the so called Shri Kantilal Motilal Jain. In order to support this contention, the copy of such letter is annexed which will be a part of this order.
(ii) Even for a while, if it is considered that Shri Kantilal Jain has accepted the cash in his individual capacity for the so called reason that he want to purchase a house at Delhi. I have no doubt to state here that such contention is baseless and after thought. To support my say, the statement on oath of Shri Kantilal Motilal Jain has been recorded, wherein, he has stated that he has kept the cash in hand for so called purchase of house through broker but he could not even state the exact name, phone no., mobile no., address of the so called broker or so called location or plot or purchase of house or the name of the broker from whom the property dealing was claimed. In reply to Q.No.5 mentioned supra, it was told that his budget for the purchase of property was Rs.50 lacs only and whereas seller was demanding Rs. one crore. It is a matter of common knowledge that in property dealing when the deal is almost at final stage then only if there is some shortage of fund, the purchaser arranges for the same and major portion of purchase money is being invested by the purchaser from his own source and at least the purchaser can tell the name of the seller as well as the location of the property for which dealing was made. No purchaser will arrange whole of the amount from interest bearing loan and kept it idle for 7 or more months at his residence as is in the case of Shri Kantilal Motilal Jain as claimed. It is to be mentioned here that he was given an opportunity of being heard in the matter to produce any such details to prove his contention at least that he has travelled from Delhi to Jalgaon for the period Ist Nov,2007 to 7th Nov, 2007. To furnish such details he was given time upto 13th July, 2011. But, here also neither any letter for adjournment nor any such proof/ contention has been furnished by Shri Kantilal Motilal Jain, i.e. evidence of his visit from Delhi to Jalgaon from the books of account. In view of above facts, I hold that cash loan was not taken by Shri Kantilal Jain in individual capacity as claimed by him. The money was received by him as the Director of the Company and was repaid by Company. The photo copy of receipt of money has been signed by Shri Kantilal Jain in the capacity of Director duly stamped by the Company.
(iii) Shri Satish Mittal has already surrendered it in his return of income for the A.Yr.2008-09. The copy of computation of income of Shri Satish Mittal is annexed herewith which forms part of this order, which clearly shows that loan was returned by M/s. Nikki Agro Products Pvt. Ltd. on 07/11/2007.
(iv) Shri Satishchandra Mittal has also admitted "that the loan was given by him to the assessee company, as reflected in answer to Question No.2 of his statement recorded u/s.132(4) on 24/11/2007.
(v) Shri Satishchandra Mittal has once again confirmed the transaction of loan in his statement on oath in answer to Question No.3 on 20/12/2010 recorded by A.O. during the assessment proceedings mentioned supra in Para 7(9).
8. In view of the above, I have no hesitation to state here that the assessee company has accepted the loan of Rs.50 lacs from Shri Satish Mittal by cash only in contravention of section 269SS without reasonable cause. The assessee company could not substantiate its contention even after availing ample opportunities given by the undersigned.
11
9. Therefore, I am imposing a penalty of Rs.50 lacs (Rs.Fifty lacs only) being an amount of loan accepted in cash in violation of provisons of section 269SS during the F.Y.2007-08 relevant to A.Yr.2008-09".
10. In appeal the Ld.CIT(A) upheld the action of the JCIT by holding as under :
"5. I have carefully gone through the penalty order, submission of the appellant and the material on record. The appellant has reiterated its earlier submission that the cash loan of `50 lac from Shri Satish G. Mittal was taken by Shri Kantilal Jain, one of the directors of the appellant company, in his personal capacity. The appellant has made similar argument during the assessment proceedings as well as the penalty proceedings. Shri Kantilal M. Jain in his statement recorded on oath on 04/07/2011 by AO stated that the said cash loan of `50 lac was taken by him in his personal capacity to buy an immovable property in Delhi. He further stated that since he could not finalize any immovable property, he returned the loan amount after 7-8 months. He stated that he did not pay any interest though the loan was taken at the interest rate of `1/-[(12 % pa)]. Shri Kantilal Jain however, could not produce any documentary evidence in support of his claim that he took the cash loan in his personal capacity for buying immovable property in Delhi. He could not provide any details of the identified properties or the broker. He even did not remember the date on which he returned the huge amount of `50 lac to the lender. Shri Kantilal Jain reiterated that he had kept this money with him in Delhi from where he brought it back and returned to the lender in person. He however, could not tell when the said amount was returned. Shri Satish G. Mittal vide letter dt. 27/01/2007 addressed to Shri Kantilal Jain has acknowledged that his son Amol Mittal received this amount from Kantilal Jain on 07/11/2007. Shri Kantilal Jain however, could not produce any evidence that he travelled from Delhi to Jalgaon during the 1st week of November, 2007. Shri Kantilal jain and his son Shri Deepak K. Jain another director in the company have filed affidavits that the said cash loan of `50 lac was received by the former (Shri Kantilal Jain) in his individual capacity. This issue has been discussed in detail in the appeal order in the case of appellant company for A.Y. 2008-09 (Appeal No.Nsk/CIT(A)-II/431/10-11 dt. 10/10/2011) wherein it has been held that the cash loan of `50 lac was borrowed by the appellant company on Interest from Shri Satish G. Mittal. Page 40 of Annexure S-l, found and seized from the residence of Shri Satishchand G. Mittal during search u/s.132 of the Act on 22/11/2007 clearly establishes this fact. The said receipt has been signed by Shri Kantilal Jain as director for Nikki Agro Products (P) Ltd. on the letter head of the company wherein he has acknowledged having received `50 lac on interest from 'Seth' Satishchandji. This fact of advancing `50 lac to the company gets further substantiated by the statement of Shri Satishchand Mittal recorded on oath on 24/11/2007 wherein he has offered `50 lac as his undisclosed income for A.Y. 2008-09. He has accepted having given this amount to 'Nikki Agro'. While Shri Satishchand G.Mittal when confronted on 22/11/2007 with the above referred page 40 of Annexure S-l (receipt & issued by Nikki Agro Products (P) Ltd acknowledging the loan of `50 lac on interest) excused himself in giving the explanation on health ground accepted the fact and disclosed `50 lac as additional income for A.Y. 2008-09 on 24/11/2007. Similarly, Shri Deepak Jain (Director of Nikki Agro Products (P) Ltd and son of Shri Kantilal M.Jain) was 12 confronted with the above referred receipt on the day of search (22/11/2007) . He in ans. no.4 of the statement stated that in regard to loan of `50 lac by the company from Satishchand G. Mittal on 01/04/2007 he had telephonic conversation with his father at 3.30p.m. who told that because of health problems, he was not in a position to answer the query without looking at the documents in question. From the above it is established beyond doubt that on the day of the search both Shri Satishchand G.Mittal, the lender and Shri Deepak Jain and for that matter Shri Kantilal Jain (with whom Deepak Jain was stated to be in touch on telephone) were in the denial mode about the receipt showing a cash loan of `50 lac on interest by Shri Satishchand G.Mittal to Nikki Agro Products (P) Ltd. through its director Shri Kantilal Jain. The amount of `50 lac was not a small amount that a normal person engaged in business would lose sight of or would not remember. Further, the receipt was dated 01/04/2007 and the search took place on 22/11/2007 i.e. gap of 8 months only. This period too was not that long period that a person would forget about the transaction. Under the facts and circumstances as discussed above, it is established that subsequent statements/receipts showing that the loan was taken in personal capacity of Shri Kantilal M.Jain are afterthought, concocted and fabricated and therefore dismissed. Last but not the least, the fact that the said loan was given to the appellant company gets further reinforced by many other documents related to the company found and seized from the residential premises of Shri Satishchand G.Mittal eg. Page 27,28, and 38 show business transactions with Nikki Agro Products, Jalgaon by Shri Naresh Mittal / Shri Satishchand Mittal. To sum up, if the loan was received in the individual capacity, Shri Satishchand G.Mittal, Shri Deepak Jain and Shri Kantilal Jain who were specifically confronted with the loan of `50 lac on the date of search itself (22/01/2007) would have told this fact to the department. Similarly Satishchand G.Mittal when confronted on recovery of cash of `1,04,79,895/- from his residence did not say that the available cash interalia included recovery of cash loan of `50 lac from Nikki Agro though he mentioned so many other names whose cash was stated to be included in `1,04,79,895/-. Shri Satishchand's receipt dt. 27/11/2007 issued to Shri Kantilal Jain stating that his son Amol Mittal received back `50 lac from the latter (Shri Kantilal Jain) on 07/11/2007 is, therefore, nothing but an attempt to explain the source of cash of `1,04,79,895/-, recovered from his residence on 22/11/2007. Again `50 lac is huge sum and if he had received this amount on 07/11/2007 as claimed by him, he would have certainly said this fact in his statement recorded on 22/11/2007 during the course of search proceedings especially when he was specifically confronted with the source of availability of cash amounting to `1,04,79,895/-. To conclude, it is held that a loan `50 lac was received by the appellant company i.e. Nikki Agro Products (P) Ltd., Jalgaon in cash on 01/04/2007 from Shri Satishchand G.Mittal, r/o Jalgaon on interest. The appellant's grounds/ submissions in this regard are therefore, rejected. The AO was thus justified in initiating penalty proceedings u/s. 271D in the case of the appellant company.
6. The appellant's other grounds and submission relate to intention of introducing the sec. 269SS/ 269T of the I T Act 1961. Appellant has stated that the AO has failed to bring on record that the transaction was made with the appellant company. As regards the name of the loanee, it has been discussed in detail in the aforesaid para that the appellant company took a loan of `50 lac in cash on interest from Satischand G. Mittal on 01/04/2007 through its director Shri Kantilal M.Jain. Appellant's repeated arguments on this issue are therefore, devoid of merit and rejected. As regards applicability of Sec. 269SS of the IT Act, the provisions of Sec. 269SS are as follows:13
269SS :-
No person shall, after the 30th day of June, 1984 take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,
(a) The amount of such loan or deposit or the aggregate amount of such loan and deposit; or
(b) On the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person form the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or
(c) The amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause(b), is thousand rupees or more.
Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from or any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by
(a) Government;
(b) Any banking company, post office savings bank or co-operative bank
(c) Any government established by a Central, State or provincial Act
(d) Any government company as defined in section 617 of the companies Act, 1956(1 of 1956)
(e) Such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the official Gazette:
[Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act] Since it is established beyond doubt that the appellant company has violated the above mentioned provisions of sec.269SS by accepting a loan of ``50 lac in cash, the provisions of sec. 271D i.e. penalty for failure to comply with the provisions of sec.269SS are applicable in its case. Sec. 2 71D states as under:-
271D :-
[1] If a person takes or accepts any loan or deposit 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 so taken or accepted.
[2] Any penalty imposable under sub-section (1) shall be imposed by the Jt. Commissioner [Penalty for failure to comply with the provisions of section 269T.] Jt. Commissioner has levied a penalty of `50 lac u/s. 271D vide his order 14/07/2011. I find from the submission that the appellant company has not given any reasonable cause for borrowing /accepting the loan of `50 lac in cash. The appellant has also failed to bring on 14 record that there was an immediate need for cash or the readily available cash would have given any advantage in its business negotiations without any loss of time. The appellant has also failed to prove that the cash loan was obtained in the best interest of business to expedite any business deal or the cash loan was taken on the ground of business expediency. The provisions of sec. 269SS and 269T were introduced to curb circulation of black money in the business. In this case Shri Satishchand G. Mittal used his unaccounted money in giving a cash loan of `50 lac to the appellant. Shri Satishchand G. Mittal could not explain the source of this cash and disclosed the same as his additional income for A.Y. 2008-09. Both Shri Mittal as well as the appellant company did not record the transactions in their regular books of accounts. Conduct of the appellant clearly shows that it has violated the provisions of Sec. 269SS of the Act. The very fact that the transaction was not reflected in the regular books by either of the person, prove malafide nature of the loan transaction. Had the intention been bonafide, the transaction would have been routed through the bank accounts. The sole purpose was to hide the use of unaccounted money from the department and to evade tax on interest income and unaccounted investment on the part of lender and use of black money in the business on the part of loanee. The said undisclosed cash loan of `50 lac has not been taxed in the hands of the appellant company as undisclosed income or in any other form whatsoever. It has been taken into consideration for levy of penalty u/s.271D for violating the provisions of sec. 269SS of the Act.
7. In view of the aforesaid facts and circumstances of the case it is held that the appellant company has breached the statutory provision of Sec.269SS of the Act by borrowing a loan of `50 lac in cash on interest on 01/04/2007 from Shri Satishchand G. Mittal. It is further held that the appellant has been unable to justify the existence of any reasonable cause for the default, committed by it in terms of the provision of sec.271D of the Act. The action of JCIT in levying a penalty of `50 lac being equal to the amount of cash loan taken, is this found to be in order and its accordingly confirmed."
11. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds :
"1. In the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in confirming the penalty of Rs.50.00 lacs levied by the Ld. Assessing Officer u/s.271D of the I.T. Act, 1961, without appreciating the fact that the said alleged loan was not obtained by the appellant company but was obtained by its director Mr. Kantilal Motilal Jain in his personal capacity. In the circumstances the impugned penalty be deleted.
2. The Ld.CIT(A) has erred in holding that the alleged loan of Rs.50.00 lacs was obtained by the appellant company, without appreciating the fact that the director Mr. Kantialal Motilal Jain had admitted that the said loan was obtained by him in his personal capacity by mistakenly using the letter head and stamp of the appellant company. In the circumstances it may please be held that the said alleged loan was not obtained by the appellant company and consequently the impugned penalty may please be deleted."15
12. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). He submitted that although Shri Kantilal Motilal Jain has acknowledged the receipt of the loan on the letter head of the company the other Director namely Shri Deepak Kumar Jain has categorically denied to have received any such loan by the assessee company and he has stated before the Assessing Officer that Shri Kantilal Jain might have received the money in his individual capacity. Under these circumstances, the Ld. Counsel for the assessee submitted that the department cannot simply brush aside the statement of the other director. He submitted that although the principles of Evidence Act does not apply to the I.T. proceedings, however, the same cannot be overlooked. Referring to section 31 of the Indian Evidence Act, 1872 he submitted that admissions are not conclusive proof of the matters admitted but they may operate as estoppels under the provisions. He submitted that nothing prevented the department in not taking any action against the director who has received the money in his individual capacity. He accordingly submitted that in absence of any positive evidence the statement of the other director namely Shri Deepak Kumar Jain cannot be ignored and therefore the penalty so levied by the Addl.CIT and upheld by the CIT(A) should be deleted.
13. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the Ld.CIT(A) has elaborately discussed the issue and rejected the contentions advanced by the assessee before him. Since the Ld.counsel for the assessee could not bring any fresh material so as to take a different 16 view than the view taken by Ld.CIT(A), therefore, he submitted that the order of the CIT(A) be upheld.
14. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions relied on by both the sides. There is no dispute to the fact that the documents relating to receipt of cash loan of Rs.50 lakhs by the assessee company was found from the residence of Shri Satishchand G. Mittal during search which was duly acknowledged by one of the directors Shri Kantilal Jain on the letter head of the assessee company with the seal of the company on revenue stamp. There is also no dispute to the fact that Shri Satishchand G. Mittal in his statement recorded u/s.132(4) on 24-11-2007 has categorically stated that he has given the loan to M/s. Niki Agro Products Pvt. Ltd. for which director Shri Kantilal Jain has signed/acknowledged for such loan. Further, Shri Satishchand G. Mittal in his statement on oath before the Assessing Officer on 20-12-2010 has again confirmed the above fact that the loan was given to the company and not Shri Kantilal Jain. Under these circumstances, the JCIT levied penalty of Rs.50 lakhs u/s.271D which has been upheld by the CIT(A). 14.1 It is the submission of the Ld. Counsel for the assessee that another director Shri Deepak Kumar Jain has stated that the cash loan was not received by the company, that the loan might have been received by the other director in his individual capacity and that statement of the other director cannot be brushed aside and that the department should have taken action against the director Shri Kantilal 17 Jain and not the assessee company. We do not find any merit in the above arguments advanced by the Ld. Counsel for the assessee. As stated earlier, the paper was found at the residence of Shri Satichand G. Mittal which contains receipt of Rs.50 lakhs by the assessee company duly stamped on the letter head of the assessee company with the seal of the company on revenue stamp and signed by the director. Shri Satishchand G. Mittal had also categorically stated in his statement recorded u/s.132(4) as well as statement on oath before the AO that he has given the loan to the assessee company. Nothing was brought to the notice of the Assessing Officer or CIT(A) or even before us to substantiate that the loan was infact received by Shri Kantilal Jain in his individual capacity and not for the assessee company. The subsequent statement by the director who is son of the other director, in our opinion, is an afterthought and self-serving statement in absence of any contrary material brought to our notice. At no point of time, the assessee has shown his desire to cross examine Shri Satish chand G. Mittal to the proposition that the money was infact given to Shri Kantilal Jain in his personal capacity and not to the assessee company. Under these circumstances, it is proved beyond doubt that the loan was received by the assessee company in cash in contravention of provisions of section 269SS. In this view of the matter and in view of the detailed discussion by the Ld.CIT(A) confirming the penalty levied u/s.271D we find no infirmity in his order. Accordingly, the same is upheld. The grounds raised by the assessee are accordingly dismissed.
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15. In the result, both the appeals filed by the assessee are dismissed.
Pronounced in the Open court on 31-12-2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated : 31st December, 2013
Satish
Copy of the order is forwarded to :
1. The Assessee
2. The Department
3. The CIT(A)-II, Nashik
4. The CIT-II, Nashik
5. D.R. "A" Bench, Pune
6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune