Income Tax Appellate Tribunal - Rajkot
Shri Shailesh Gopalbhai Akbari,, ... vs The Addl. Commr. Income Tax, Range-2,, ... on 18 December, 2019
आयकर अपील य अ धकरण, राजकोट यायपीठ, राजकोट ।
IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT
[ Conducted through E-Court at Ahmedabad ]
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER And
SHRI WASEEM AHMED, ACCOUNTANT MEMBER
I.T.A. No.666/Rjt/2014
(Assessment Year : 2010-11)
Shailesh Gopalbhai Akbari Vs. The Addl.CIT
M/s.Tulsi Infra Range-2
1-Vaishali Nagar Rajkot
Raiya Road
Nr.Amrapali Cinema, Rajkot
[PAN No. ACRPA 7427 Q]
(Appellant) .. (Respondent)
Appellant by : Shri M.J. Ranpura, AR
Respondent by : Shri Jitender Kumar, CIT-DR
Date of Hearing 19/11/2019
Date of P ronouncement 18/ 12 /2019
ORDER
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)-III, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)-III/0060/13-14 dated 16/09/2014 arising in the assessment order passed under s.143(3) r.w.s.147 of the Income Tax Act, 1961(hereinafter referred to as "the Act") dated 26/03/2013 and penalty order passed u/s.271D of the Act dated 01/05/2013 relevant to Assessment Year (AY) 2010-11.
ITA No.666/Rjt/2014Shailesh Gopalbhai Akbari vs. ACIT Asst.Year - 2010-11 -2-
2. The assessee has raised the following grounds of appeal:
1.0 The grounds of appeal mentioned hereunder are without prejudice to one another. 2.0 The learned Commissioner of Income-tax (Appeals)-III, Rajkot [hereinafter referred to as the "CIT(A)"] erred in law and on facts in confirming penalty u/s.271D of the Income-tax Act, 1961 [hereinafter referred to as to the "Act"] of ₹14,80,000/- levied by the Addl.CIT, Range-2, Rajkot on account of alleged contravention of provision of section 269SS of the Act. The penalty being totally unjustified on facts as also in law may kindly be cancelled. 3.0 That on the facts and in the circumstances of the case the Ld.CIT(A) failed to appreciate that the unsecured loans were taken for purchase of house and the same have been treated as genuine by the AO. Thus there was a reasonable cause in accepting the loans within the meaning of section 273B of the Act and the penalty may kindly be deleted. 4.0 Your Honor's appellant craves leave to add, amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.
The only issue raised by the assessee is that Ld. CIT (A) erred in confirming the penalty levied u/s 271D of the Income Tax Act, 1961, amounting to Rs. 14,80,000/-
3. Briefly stated facts are that the assessee is an individual and engaged in the business of Civil Construction. The assessee during the year has received loan in cash for a sum of Rs.14,80,000/- on different dates from the following persons.
Sr. Name(S/Shri) Amount(in Rs.) Relation
No.
1. Jagdishbhai R. Ramolia 1,75,000/- Father
2. Varshaben S. Akbari 1,90,000/- Mother
3. Gopalbhai G. Akbari 4,75,000/- Wife
4. Ramesh J. Viradiya 1,25,000/- Maternal
Uncle's son
5. Mukeshbhai Ramolia 1,50,000/- Maternal Uncle
6. Vanitaben M. Ramolia 1,75,000/- Maternal Aunty
7. Jyotsnaben G. Akbari 1,90,000/- Wife's Paternal
Uncle
Total 14,80,000/-
ITA No.666/Rjt/2014
Shailesh Gopalbhai Akbari vs. ACIT
Asst.Year - 2010-11
-3-
3.1 In view of the above, the AO initiated the penalty proceedings u/s 271D of the Act, vide show cause notice dated 16/04/2013. The assessee in compliance to such notice failed to submit any reply before the AO. Therefore, the AO held that the unsecured cash loan received by the assessee is in contravention to the provisions of section 269SS of the Act. Accordingly the AO levied the penalty of Rs. 14,80,000/- under the provision of section 271D of the Act.
3.2. Aggrieved assessee preferred an appeal to the Ld. CIT (A). The assessee before the Ld. CIT (A) submitted that the he has taken cash from his close relatives for the purpose of purchasing the residential property which were duly recorded in books of accounts. The assessee also claimed that their (loan parties) primary source of income is from agricultural activity. Assessee further claimed that if such loans would not have been taken, he would not have been able to purchase such residential property.
3.3. The transaction of receiving the cash from the relatives was within the family. The AO did not doubt this fact. Therefore the penalty provision u/s 271D of the Act cannot be attracted to the transaction made among the family members.
3.4. The assessee in support of his claim relied on the various case laws as recorded in the order of the Ld. CIT(A).
3.4. However, the Ld. CIT(A) disregarded the contention of the assessee, and confirmed the penalty imposed by the AO by observing as under.
"5. I have considered carefully, the submissions made by the appellant and the penalty order passed by the assessing officer. The appellant, neither before the assessing officer nor before the ITA No.666/Rjt/2014 Shailesh Gopalbhai Akbari vs. ACIT Asst.Year - 2010-11 -4- undersigned, has adduced any credible arguments with supporting evidence to demonstrate that there was reasonable cause in accepting cash loans by the appellant during the assessment year under consideration. The authorized representative also failed to furnish documentary evidence in support of the argument that the primary source of the impugned creditors, who have given cash loans, is from agriculture. Hon'ble Supreme Court in the case of Kumari A.B. Shanthi in 255 ITR 258, while upholding the constitutional validity of section 269SS and 271D of the IT act, 1961 has observed that 269SS r.w.s. 271D has been brought into statute book under chapter XX- B to curb the menace of black money circulation, which leads to evasion of taxes. These provisions are essentially meant to counter act evasion of tax by debarring the tax payers from accepting unsecured loans/deposits in cash. In fact, the original section 276DD was more stringent in as much as it provides imprisonment of the person, who accepts cash loans upto two years and also liable to a fine equal to the amount of loan or deposit. The newer section 271D provides only for fine equal to the amount of loan/deposit taken or accepted.
6. The appellant also failed to give any credible explanation, so as to establish that there was reasonable cause on the part of the appellant to accept cash loans, as discussed supra. The argument of the appellant that the loans in cash are taken to purchase a residential property do not constitute reasonable cause in terms of section 273B of the IT Act, 1961. Also failed to place any documentary evidence on record to substantiate the argument that the income of the persons, who have given cash loans is from agriculture. The appellant, engaged in the business of civil construction, a regular tax payer cannot be ignorant of these penal provisions, which are intended to counter the tax evasion. Having regard to the facts of the case and the written submission given by the appellant, I am of the view that the case of the appellant is covered squarely by the provisions of section 271D of the IT act, 1961 for contravention of provisions in section 269SS of the IT Act, 1961. Therefore, I uphold the penalty levied by the assessing officer at Rs.14,80,000/- u/s.271D of the IT Act, 1961. This ground of appeal is dismissed."
Being aggrieved by the order of the Ld. CIT (A) assessee is in appeal before us.
4. The Ld. AR before us filed a paper book running from pages 1 to 66 and submitted that there is no doubt on the genuineness of the loan taken from the relatives.
4.1. The Ld. AR further submitted that the provision of section 269SS was brought under the statue intending to deter the assessee of justifying unaccounted cash found during search/survey. As such the object of the provision of section 269SS was to discourage the assessee to justify their unaccounted money by taking ITA No.666/Rjt/2014 Shailesh Gopalbhai Akbari vs. ACIT Asst.Year - 2010-11 -5- cash entries from different persons. In the case on hand, the genuineness of the transaction was not doubted by the authorities below. Therefore, the penalty cannot be levied u/s 271D of the Act.
5. On the other hand, the Ld. DR submitted that there was no reasonable cause furnished by the assessee for accepting the loan in cash. Therefore no immunity can be given under the provision of section 271D r.w.s. 273B of the Act. The Ld. DR vehemently supported the order of the authorities below:
6. We have heard the rival contention and perused the materials available on record. From the preceding discussion we note certain facts as detailed under:
i) The AO did not doubt the genuineness of the transaction. Otherwise the same should have been treated as unexplained cash credit u/s 68 of the Act.
ii) The transaction was carried out with the relatives of the assessee.
6.1. At this juncture we find important to refer to the Circular issued by the CBDT bearing No.387 dated 06/07/1984 which reads as under:
CIRCULAR No.387 Explanatory notes on the provision of the Finance Act, 1984.
BENAMI LOANS AND DEPOSITS S 281A 269SS 276DD (xxiv) Prohibition against taking or accepting certain loans and deposits in cash ITA No.666/Rjt/2014 Shailesh Gopalbhai Akbari vs. ACIT Asst.Year - 2010-11 -6- 32.1 Unaccounted cash found in the course of searches carried out by the IT Department is often explained by taxpayers as representing loans from or deposits made by various persons.
Unaccounted income is also brought into the books of account in the form of such loans and deposits, and taxpayers are also able to get confirmatory letter from such persons in support of their explanation.
32.1 With a view to countering this device, which means taxpayers to explain away unaccounted cash or unaccounted deposits, the Finance Act has inserted a new s. 269SS in the IT Act debarring person from taking to accepting, after 30th June, 1984 from any other persons any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan and deposit is Rs.10000 or more. This prohibition will also apply in cases where on the date of taking or accepting such loan or deposit, any loan or deposit taken or the aggregate amount of such loan and deposit is Rs.10000 or more. This prohibition will also apply in cases where 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), and the amount or the aggregate amount remaining unpaid is Rs.10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date of which such loan or deposit is proposed to be taken is Rs.10,000 or more.'' 6.2 From the above we note that the provision of section 269SS was brought under the statue to discourage the assessee to justify their unaccounted money. However, in the case on hand, there is no allegation that the assessee has introduced unaccounted money in his business. Thus, keeping in view the object of the provision of section 269SS of the Act the cash transaction which is genuine cannot be brought under the net of tax under the provision of section 269SS of the Act.
6.3. The facts of the case in the judgment of Hon'ble Allahabad High Court in the case of Mahak Singh Vs. CIT reported in 37 taxmann.com 390 as referred by the ld. DR, were different so far there was no issue of close relationship between the assessee and other parties provided loan in cash. But in the case on hand, admittedly, the assessee had transactions with the close relatives. So, we are not inclined to rely on the same.
ITA No.666/Rjt/2014Shailesh Gopalbhai Akbari vs. ACIT Asst.Year - 2010-11 -7- 6.4. We also note that such transactions between the relatives and sister concern are not subject to the provisions of section 269SS of the Act in view of the order of Bangalore Bench of ITAT in the case of G.D. Subraya Sheregar vs. Income-tax Officer, Ward 2, Udupi (10 SOT 378) where the issue was decided in favor of the assessee. The relevant extract of the order is reproduced as under:
"6. The expression "any other person" appearing in section 269SS has been interpreted by the two Benches of the Tribunal in two different ways. One view is that the said expression excludes all those persons who are closely connected with the assessee and the other view is to the opposite effect. Both views are possible views. It is well-settled that there are two possible views, the view favourable to the assessee will have to be accepted [Refer CIT v. Madho Pd. Jatia [1976] 105 ITR 179 (SC)]. Therefore, the transactions between closely related persons such as father and son must be held to fall outside the scope of section 269SS."
6.5. In view of the above proposition, we are of the opinion that the genuineness of the cash transaction has not been doubted. Therefore, the penalty levied u/s 271D of the Act is not sustainable. Thus, we are inclined to reverse the order of authorities below. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the penalty u/s 271D of the Act. Hence, the ground of appeal of the assessee is allowed.
7. In the result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 18 / 12 /2019
Sd/- Sd/-
( RAJPAL YADAV ) ( WASEEM AHMED )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 18 12 /2019
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
ITA No.666/Rjt/2014
Shailesh Gopalbhai Akbari vs. ACIT
Asst.Year - 2010-11
-8-
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु#त / Concerned CIT
4. आयकर आयु#त(अपील) / The CIT(A)-III, Rajkot
5. 'वभागीय त न ध, आयकर अपील य अ धकरण,राजोकट/DR,ITAT, Rajkot
6. गाड5 फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या'पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot
1. Date of dictation 17.12.2019(word processed by Hon'ble AM in his computer by dragon)
2. Date on which the typed draft is placed before the Dictating Member ...17.12.2019
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......18.12.19
7. Date on which the file goes to the Bench Clerk.....................18.12.19
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................