Income Tax Appellate Tribunal - Pune
P.M. Chordia,, Aurangabad vs Assessee on 9 May, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER
AND
SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA Nos. 708, 709, 710 & 711/PN/2011
Assessment Years : 2005-06 & 2006-07
Shri P.M. Chordia, Income Tax Officer (Central),
Plot No. 10, Ahinsa Nagar, Aayakar Bhawan,
Opp. Akashwani, Jalna Road, Vs. Contanmant, Aurangabad
Aurangabad
(Appellant) (Respondent)
PAN No.AAHPC1004H
Appellant By: Shri Sunil Ganoo
Respondent By: Shri Rajesh Domar
Date of hearing : 09-05-2013
Date of pronouncement : 30-07-2013
ORDER
PER R.S. PADVEKAR, JM:-
This batch of four appeals are filed by the assessee which is arising out of the penalties levied by the Assessing Officer u/s. 271D and 271E of the Income-tax Act. The assessee has challenged the respective impugned orders of the Ld. CIT(A), Aurangabad dated 01-04-2011 for the A.Ys. 2005-06 and 2006-07. In the original grounds taken by the assessee in all the appeals, there was a mistake and hence, the assessee has filed the modified grounds which are permitted. The assessee has also filed additional ground which is as under:
"Since the impugned penalty has been levied after inordinate delay from the date of knowledge by the department about the alleged default committed by the appellant, the impugned penalty is bad in law, void ab initio and null and void and without jurisdiction and hence the same may please be annulled."
2. We have heard the parties. On admission of the additional ground, we find that the additional ground raised by the assessee is a legal ground and same can be adjudicated on the basis of the facts as well as record available before us. We, therefore, following the principles 2 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad laid down in the case of National Thermal Power Co. 229 ITR 83 (SC) admit the additional ground in all the appeals.
3. In the additional ground taken by the assessee it raises the preliminary legal objection that there is inordinate delay in levying the penalties and hence, the penalty orders cannot be sustained. The facts which revealed from the record are as under. There was a search and seizure action u/s. 132(1) of the Income-tax Act in the Chordia Group in which the assessee was also covered. The assessments of the assessee have been completed u/s. 153A r.w.s. 143(3) of the Income-tax Act, 1961. After examining the seized material, it was noticed by the Assessing Officer that the assessee have violated the provisions of Sec. 269SS and 269T of the Income-tax Act. The Assessing Officer, therefore, initiated the penalty proceedings at the time of passing the assessment order. As per the provisions of law penalties u/s. 271D and 271E can only be levied by the officer in the rank of Joint CIT. The Assessing Officer, therefore, sent the proposal to the Joint CIT(Central), Nashik for initiating the penalty proceedings against the assessee u/s. 271D and 271E of the Income-tax Act.
4. In the additional ground the assessee has challenged the penalty orders passed by the Joint Commissioner (Central), Nashik by taking the plea that the said orders are passed with inordinate delay. The Joint Commissioner (Central), Nashik passed the penalty orders u/s. 271D and 271E of the Income-tax Act on 30-09-2009 for the A.Ys. 2005-06 and 2006-07. The Learned Counsel submits that even if there is no specific time limit prescribed under the Act for initiation of the penalty proceedings u/s. 271D and 271E but as per the law laid down by the different Courts it should be within a reasonable time. He submits that the assessment order is passed on 31-12-2007 and the Assessing Officer sent the proposal to the Joint CIT(Central), Aurangabad on 02-07-2009. He submits that there is inordinate delay by the Assessing Officer for 3 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad sending the proposal to the Joint CIT (Central), Nashik and hence, on this ground itself he plead that the penalties may be cancelled. In support of his contention the Learned Counsel placed his reliance on the following decisions:
(i) CIT Vs. Harinagar Sugar Mills Ltd. 176 ITR 289 (Bom.).
(ii) Chimanlal Motilal P. Ltd. Vs. CIT 140 ITR 809 (Bom.).
(iii) Govt. of India Vs. Citedal Fine Pharmaceuticals 2002-TIOL-680-SC-
CX.
(iv) CIT Vs. M/s. Satluj Jal Vidyut Nigam Ltd. 2012-TIOl-349-HC-HP-IT.
5. Per contra, the Ld. DR submits that 16 months delay cannot be said to be inordinate delay. He further submits that as per the provisions of law, penalty can only be levied by the officer in the rank of Joint Commissioner and hence, there was small time gap for sending the proposal by the Assessing Officer on administrative reasons. He pleads that the additional ground taken by the assessee has having no merit and the same may be dismissed.
6. So far as Sec. 275 of the I.T. Act is concerned, it provides for the limitation in passing the penalty orders but there is no specific provisions for initiating the proceedings for levying of the penalty, more particularly for Sec. 271D and 271E of the Act. In the case of Harinagar Sugar Mills Ltd. (supra), the issue before the Hon'ble High Court was the delay in reopening the excess profit tax proceedings has not been properly explained in spite of the fact that there was no time limit for initiation of the action provided under the excess profit tax in 1940. There was no detail discussion in the said decision on the issue what would be the reasonable period. As per the facts mentioned in the said decision there was delay of 13 to 14 years for taking the proceedings.
7. In the case of Chimanlal Motilal P. Ltd. (supra) the issue again came before the Hon'ble Jurisdictional High Court if the inordinate delay 4 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad is alleged for institution and completion of penalty proceedings, then the said proceedings can be held as illegal. The Hon'ble High Court held that the delay in given case is inordinate or not and whether the delay has been properly explained or not, will be question of fact, to be determined by the appropriate authority before whom the controversy falls for consideration. As per the said decision the issue is to be classified in the two limbs - (i) whether there is inordinate delay and (ii) whether the revenue has explained the inordinate delay. In the case of Govt. of India Vs. Citedal Fine Pharmaceuticals (supra) the issue was under the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956. The Hon'ble Supreme Court held that no hard and fast rule can be laid down on this aspect as the determination of the question of inordinate delay will depend upon the facts of each case.
8. In the case of M/s. Satluj Jal Vidyut Nigam Ltd. (supra) the proceedings were initiated u/s. 201(1) and 201(IA) of the Income-tax Act beyond the 4 years and hence, the said order was challenged by taking the plea that there was inordinate delay for initiating the proceedings u/s. 201(1) and 201(IA) of the Act. The Hon'ble High Court held that on the facts of the said case, no interference is called for in the appeal filed by the revenue as it is a question of fact. In the said decision in assessee's own case for the A.Ys. 1991-92 and 1992-93, the Hon'ble High Court has observed that even the 4 years may be the reasonable period of time for initiating the action in the case where no limitation is prescribed. On the perusal of all the judgments on which the Learned Counsel has placed his heavy reliance we find that said decision does not lay down any formula or principles which can be applied to the charge made by the assessee. In fact, whether there is inordinate delay or not that depends on the facts of the each case. In the present case there is at the most delay of 16 months. It is noticed that the proposal was send by the Assessing Officer to the Joint Commissioner, Nashik on 02-07-2009 for considering the initiation of the penalty proceedings 5 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad against the assessee u/s. 271D and 271E of the Act and hence, in our opinion the period between passing of the assessment order and sending the proposal i.e. 16 months cannot be said to be inordinate delay. We, therefore, dismiss the additional ground taken by the assessee.
9. Now we take up the matters on merit. We fist decide the penalty orders levying the penalty u/s. 271D of the Act for the A.Y. 2005-06. The Ld. CIT(A) has passed the consolidated order deciding the faith of the penalties levied u/s. 271D and 271E of the Act. The particulars of the cash transactions/loan transactions which were found on the examination of the seized materials are as under:
A.Y. Loan Date of Name of the Loan Date/Year of Name of Accepted loan Lender Repaid and Repayment the & Penalty accepted Penalty Lender levied u/s. levied u/s.
271D 271E
2005- 5,00,000 28/02/05 Dr. 4,00,000 05/05/04 P.P.
06 Jainendra Surana
Challani
1,90,000 01/03/05 -do- 50,000 02/03/05 Dr.
Jainendr
a
Challani
35,000 29/03/05 -do- 50,000 12/03/05 -do-
2,00,000 22/01/05 Suresh 2,00,000 25/03/05 -do-
Agarwal
1,50,000 25/01/05 -do- 50,000 26/03/05 -do-
30,000 12/03/05 -do- 2,00,000 24/01/05 Suresh
Agarwal
1,10,000 29/03/05 -do- 1,50,000 05/02/05 -do-
1,00,000 24/02/05 Kiran
Waghmare
10,000 22/02/05 -do-
50,000 31/03/05 V.L. Gavli
Total 13,75,000 ----------- ---------- 11,00,000 ---------- ----------
2006- 2,00,000 17/12/05 Suresh 1,85,000 01/04/05 Dr.
07 Agarwal Jainendr
a
Challani
30,000 17/12/05 -do- 2,00,000 18/12/05 Suresh
Agarwal
81,000 04/01/06 -do-
50,000 01/04/05 V.L.
Gavli
Total 2,30,000 ----------- ---------- 5,16,000 ---------- ---------
In respect of the cash transactions found on the name of Dr. Jainendra Challani and Suresh Agarwal, the assessee contended before the Assessing Officer that those entries related to the land transactions and no way concern with the assessee business. The said land transactions could not be completed for some reasons and hence, the amounts were 6 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad returned back by the assessee. The assessee also took up plea that Sec. 269SS contemplate the "Loan" but as the amounts in respect of Dr. Jainendra Challani does not represent loans and hence, no penalty can be levied u/s. 271D of the Act. The assessee also gave the particulars of land in respect of each transaction. It was claimed that the assessee had received the amount from Dr. Jainendra Challani and Shri Suresh Agarwal towards land deal only. The Assessing Officer was not impressed with the explanation of the assessee. The Assessing Officer placed his reliance on the statement of Shri Kishore Chordia recorded u/s. 131 on 21-03-2006. As observed by the Assessing Officer the said statement of Shri Kishore Chordia relates to the documents impounded during the course of the search action. It appears that as per the notings found in the seized documents the wordings are "Dr.", "HL". The Assessing Officer therefore interpreted the "HL" as a Hand Loan and "Dr." means Dr. Jainendra Challani. It appears that Shri Kishore Chordia has admitted the said writing. The Assessing Officer, therefore, concluded that the amount of Rs.7,75,000/- represents the cash loan accepted from Dr. Jainendra Challani and he levied the penalty u/s. 271D of the Act for contravention of the provisions of Sec. 271D of the Act.
10. In respect of the transactions found on the name of Shri Suresh Agarwal, the assessee contented before the Assessing Officer that the said money was received as well as paid by him which was pertaining to the land dealing. The assessee also submitted that the details of the amount received from Sri Suresh Agarwal which were to the extent of Rs.4,90,000/-. The assessee also contended that the land transactions could not be completed and hence, the money was returned back to Shri Suresh Agarwal. The assessee also gave the details with the dates on which the amounts were returned to Sri Suresh Agarwal. The Assessing Officer was not impressed with the explanation of the assessee and placed his reliance on the statement of Sri Kishore Chordia recorded 7 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad u/s.131 of the Act on 21-03-2006. The Assessing Officer has observed that assessee was asked to file documentary evidence in support of the claim but no documentary evidence was found.
11. In respect of amount found return of Rs.1.10 lacs with letters K.G.W. the assessee explained before the Assessing Officer that "K.G.W." represents one Shri Kiran Waghmare who is Engineer and Employee of the assessee. The two entries dated 24-02-2005 & 22-02-2005 amounting to Rs.1,00,000/- and Rs.10,000/- respectively were in respect of the cash with the said employee and there is no question of taking any cash loan from Sri Waghmare. The assessee stated before the Assessing Officer that as Waghmare was employee and cash was given to him for the assessee's business, no question of treating the same as loan. The Assessing Officer rejected the explanation of the assessee and levied the penalties.
12. As regards the entries of cash of Rs.50,000/- transaction found on the name of Shri V.L. (means V.L. Gavali), the assessee explained to the Assessing Officer that he is Site Engineer as well as employee of the assessee and hence, the amount of Rs.50,000/- represents the assessee's own cash. The assessee also filed the affidavit of Shri V.L. Gavali which was also rejected by the Assessing Officer. The Assessing Officer treated the said entry as cash loan and levied the penalties u/s.271D. In the assessment proceedings the assessee filed the affidavits of Dr. Jainendra Challani and Shri Suresh Agarwal in which it was asserted that the transactions found noted in the seized documents were pertaining to the land transactions. The Assessing Officer rejected the affidavits filed by the assessee and concluded proceedings for the A.Y. 2005-06 by levying the penalty of Rs.13,75,000/- u/s.271D of the Act.
8
ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad
13. So far as the A.Y. 2006-07 is concerned the Assessing Officer treated the following amounts as violation of Section 269SS and levied the penalty of Rs.2,30,000/-.
Sl. No. Party Details Date Amount 1 Suresh Agarwal 17-12-2005 Rs.2,00,000/- 2 Shri Mahendra Sanklecha 23-11-2005 Rs.5,00,000/- 3 Rupesh Seth 17-12-2005 Rs.30,000/-
The amounts mentioned above are alleged to be the cash loans taken by the assessee in the F.Y. 2005-06. In respect of Suresh Agarwal, the assessee stated before the Assessing Officer that the said amount was in respect of a loan dealing between him and Sri Agarwal. He also stated that in addition of Rs.2 lacs, Sri Agarwal has also paid Rs.30,000/- which is appearing on the name of Sri Rajesh Seth. He has stated that the amount of Rs.2.30 lacs has been received from Sri Suresh Agarwal in total. However, said amount did not in respect of any loan transactions. In this year also the Assessing Officer placed reliance on the statement of Sri Kishore Chordia and levied penalty u/s.271D on the said amount. In respect of Shri Mahendra Sanklecha nothing is discussed in the assessment order. In respect of explanation of the assessee on the said transaction, the Assessing Officer treated the entire amount as violation of section 269SS and levied the penalties of Rs.7,30,000/-. The Ld. CIT(A) confirmed the penalties levied u/s. 271D in the A.Y. 2006-07.
14. We have heard the parties. The Ld. Counsel submits that affidavits were filed by all the parties before the Assessing Officer specifically denying that they had advanced any loan to the assessee and all those affidavits were discarded by the Assessing Officer. He submits that penalty proceedings are distinct from the assessment proceedings and the Assessing Officer was duty bound to consider the said affidavits or to bring on record any material showing the affidavits are false. He submits that to make out a case u/s. 269SS the nature of the 9 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad transaction must be established by the Assessing Officer. He pleaded for deleting the penalties levied by the Assessing Officer. Per contra the Ld. DR supports the order of the Assessing Officer.
15. The issue before us in these two assessment years is in respect of alleged violation of section 269SS. Section 269SS reads as under:
"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 from 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 [twenty] 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 by,--
(a) Government ;
(b) any banking company, post office savings bank or co-operative bank ;
(c) any corporation 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.
Explanation.--For the purposes of this section,--
(i) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act ;] 10 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad
(ii) "co-operative bank" shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ;
(iii) "loan or deposit" means loan or deposit of money."
16. In the present case, the charge of the Assessing Officer is that the above amounts represent the loans taken by the assessee in cash. There is no discussion in the assessment order on this particular transactions. We find that during the penalty proceedings itself the assessee came forward with the explanation in respect of all these transactions and also filed the affidavit of Dr. Jainendra Challani, Sri Suresh Agarwal, Shri Mahendra Sanklecha, Shri V.L. Gavali and Shri Kiran Waghmare but the Assessing Officer discarded the said affidavits by showing that all the transactions pertains to the loans and affidavits are afterthoughts. We further find that even though the transactions were reflected in the seized documents in the short form i.e. by using letters or short names but assessee explained nature of the said transactions and also filed the affidavits of all the parties.
17. So far as Sri Suresh Agarwal is concerned, the explanation of the assessee is that the transactions found noted in the seized material pertain to the land dealing and it has nothing to do with the loan transactions. In respect of Dr. Jainendra Challani it is stated by the assessee that the said transactions were also relating to land dealing only. In respect of Kiran Waghmare and G.L. Gavali, both the persons have filed affidavits before the Assessing Officer stating that they are the employees and the said cash was of the assessee only. It is seen that the above notings were found in the diary written by Sri Kishore Chordia, son of the assessee. Sri Kishore Chordia explained the entries made in the said diary in his statement. It is true that in respect of Dr. Challani and Sri Agarwal, no documentary evidence is filed to show that in fact those transactions relate to the land dealing but the fact remain that the provisions u/s.271D are very harsh provisions being penal in nature. The burden is on the Assessing Officer to establish that in fact the 11 ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad transactions found recorded in the diary seized from custody of Shri Kishore Chordia which admittedly also written by him cannot be used directly against the assessee as a base for visiting the assessee with penalties u/s. 271D and 271E of the Act. After considering the totality of the facts, we hold that it is not clearly established by the Assessing Officer that the transactions found between the assessee and above persons are in the nature of the loans. In our opinion, unless the basic nature of the transaction is established as "loan" or "deposit" no penalty can be levied under section 271D. We therefore delete the penalties levied by the Assessing Officer in both these assessment years u/s. 271D of the Act.
18. Now we take up the penalties levied by the Assessing Officer u/s. 271E of the Act in the A.Ys. 2005-06 and 2006-07. In the A.Y. 2005-06 the Assessing Officer has observed that the assessee has repaid the loan in cash to the following persons:
Sr. No. Party Details Date Amount
1 P.P. Surana 05.05.2004 Rs.4,00,000/-
2 Shri Jainendra Challani 02.03.2005 Rs.50,000/-
12.03.2005 Rs.50,000/-
20.03.2005 Rs.1,90,000/-
25.03.2005 Rs.2,00,000/-
26.03.2005 Rs.50,000/-
3 Suresh Agarwal 24.01.2005 Rs.2,00,000/-
05.02.2005 Rs.1,50,000/-
Total Rs.12,90,000/-
19. So far as the A.Y. 2006-07 is concerned the Assessing Officer has observed that the assessee has repaid the following loans:
Sr. No. Party Details Date Amount
1 Dr. Jainendra Challani 01.04.2005 Rs.1,85,000/-
2 Shri Suresh Agarwal 18.12.2005 Rs.2,00,000/-
04.01.2006 Rs.81,000/-
3 V.L. 01.04.2005 Rs.50,000/-
Total Rs.5,16,000/-
12
ITA Nos.708,709,710,&711/PN/2011,
Shri P.M. Chordia, Aurangabad
20. So far as party No. 1 Sri P.P. Surana is concerned, as observed the Ld. CIT(A) that the said amount is treated as assessee's income u/s.69D of the I.T. Act and he deleted the penalty levied u/s.271D in the A.Y. 2004-05. As per the Hundi found during the course of search, it is observed that the alleged loan was to be repaid on 05-05-2004 and the search was carried on 02-02-2006. If the assessee has repaid the loan then there is no question of hundi to be with the assessee at the time of search. Sri P.P. Surana has filed the affidavit stating that no loan was advanced by Sri Surana to the assessee. In our opinion, it is not clearly established that Sri P.P. Surana has given the loan to the assessee as per the facts and evidence of the records. If the factum of the loan is not established then no presumption can be drawn that there is repayment of the loan. We, therefore, delete the levied penalty of Rs.4 lacs in respect of amount found on the name of Shri P.P. Surana.
21. So far as Dr. Jainendra Challani is concerned, we have already held that it is not clearly established by the Assessing Officer that the transactions with the Dr. Jainendra Challani were in the nature of cash loans and we have deleted the penalty levied by the Assessing Officer u/s.271D. As in this case, the factum of the loan has not been established then there cannot be presumption that there is a repayment of the loan. We, therefore, delete the penalty in respect of Dr. Jainendra Challani.
22. So far as Suresh Agarwal is concerned we have already deleted the penalty by holding that the Assessing Officer has not established the factum of loan transaction in the clear terms. As the loan transactions itself is not established in this also, there cannot be presumption of repayment. We, therefore, delete the penalty levied u/s. 271E on the amount found in respect of Shri Suresh Agarwal. In the results, ground taken by the assessee in the A.Y. 2005-06 is allowed on merit. 13
ITA Nos.708,709,710,&711/PN/2011, Shri P.M. Chordia, Aurangabad
23. So far as assessment year 2006-07 is concerned, the transactions were found on the name of Dr. Jainendra Challani, Suresh Agarwal and V.L Gavali. We have already deleted the penalty in respect of charge of accepting the cash loan and violation of Sec. 269SS. As the factum of loan is not established, there is no question of drawing the presumption against the assessee in respect of alleged repayment of loan. We, therefore, on this logic, delete the penalty levied by the Assessing Officer u/s.271E in the A.Y. 2006-07 and ground taken by the assessee is allowed on merit.
24. In the result, all the four appeals of the assessee are allowed.
Pronounced in the open Court on 30-07-2013
Sd/- Sd/-
(G.S. PANNU) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
RK/PS
Pune, Dated: 30th July, 2013
Copy to
1 Assessee
2 Department
3 The CIT(A), Aurangabad
4 The CIT(C), Nagpur
5 The DR, ITAT, "B" Bench, Pune.
6 Guard file.
//True Copy//
By Order
Private Secretary
Income Tax Appellate Tribunal
Pune