Pr. Commissioner Of Income Tax Central, Jaipur, Jaipur v. Virendra Modi

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 149/2018 Pr. Commissioner Of Income Tax Central, Jaipur, Jaipur ----Appellant Versus Virendra Modi S/o Shri Prakash Raj Modi, Modi Lane, Sirohi -307001 ----Respondent For Appellant(s) : Mr. K.K. Bissa HON'BLE MR. JUSTICE SANGEET LODHA HON'BLE MR. JUSTICE DINESH MEHTA Judgment Per Hon’ble Dinesh Mehta, J 30/10/2018 The appellant has preferred the present appeal under Section260A of the Income Tax Act, 1961, (hereinafter referred to as “theAct of 1961”), laying challenge to the order dated 21.02.2018passed by the Income Tax Appellate Tribunal, Jodhpur Bench,Jodhpur, dismissing Department’s appeal against the order dated16.06.2017 passed by the Commissioner Income Tax (Appeals-2),Udaipur. The appellants have sought setting aside of the appellateorders, consequent to favorable adjudication of the followingquestions of law, which according to them are substantialquestions of law:- “1.“Whether the learned ITAT is justified in deletingthe penalty u/s 271D without considering that the amount of Rs.19,35,000/- received by the assessee incash and which is self-evident from the cash booksubmitted by the assessee himself are squarelycovered by the provisions of Section 269SS?” 2.“Whether the learned ITAT is justified in treatingthe receipts as reflected from the assessee’s cash bookas not covered underr the definition of “loans anddeposits” under the provisions of Sec. 269SS?” 3.“Whether the learned ITAT is justified in treatingthe cash receipts representing the peak credit asreflected in the cash book as exempt within themeaning of both the proviso u/s section 269SS?” The facts relevant for the purpose of deciding the presentappeal so also to ascertain as to whether the questions of law asproposed by the appellant do arise; are set out briefly hereunder. A search and seizure was carried out in the assessee’s group,comprising of Adarsh Credit Cooperative Society Limited andAdarsh Cooperative Bank Limited, its Director and other relatedpersons. During the course of assessment proceedings, theAssessing Officer summoned the cash book and accounts of theassessee and found that a sum of Rs.19,35,000/- has beenaccepted by the assessee in cash and proposed to levy penaltyunder Section 271D of the Act of 1961 for the alleged violation ofprovisions of Section 269SS of the Act of 1961. The JointCommissioner, Income Tax issued a show cause notice during thepenalty proceedings. Pursuant to the notice issued by the Joint Commissioner,Income Tax, the respondent - assessee filed a reply and took astand that the aforesaid amount of Rs.19,35,000/- representedundisclosed income of the assessee which had been disclosed in the return of income for the assessment year 2010-11. It wassubmitted by the assessee that the said income forms part of theassessee’s undisclosed income and the same was shown in thecash book under the disclosure of peak amount for which theprovisions of Section 269SS of the Act of 1961 are not attracted. The Joint Commissioner, Income Tax was not satisfied withthe reply of the assessee and levied a penalty of Rs.19,35,000/-under Section 271D of the Act of 1961 and for the alleged breachof Section 269SS qua the sum of Rs.19,35,000/- deposited incash. the return of income for the assessment year 2010-11. It wassubmitted by the assessee that the said income forms part of theassessee’s undisclosed income and the same was shown in thecash book under the disclosure of peak amount for which theprovisions of Section 269SS of the Act of 1961 are not attracted. The Joint Commissioner, Income Tax was not satisfied withthe reply of the assessee and levied a penalty of Rs.19,35,000/-under Section 271D of the Act of 1961 and for the alleged breachof Section 269SS qua the sum of Rs.19,35,000/- deposited incash. Feeling aggrieved with the said imposition of penalty, therespondent preferred an appeal under Section 250 of the Act of1961, which came to be allowed by the Commissioner of IncomeTax (Appeals-2), Udaipur vide his order dated 16.06.2017. Thelearned appellate authority has recorded a finding that the amountof Rs.19,35,000/- represents the undisclosed income of theassessee, disclosed in the return of income already filed. It hasalso been noticed that a perusal of the books of accountsparticularly cash book reveals that the entry relating toRs.19,35,000/- was nothing but an accounting entry reflecting thereceipt of undisclosed income, which has been offered to tax forthe relevant assessment year. It will not be out of place to reproduce the relevant excerptfrom the order of the appellate authority, which reads thus:- “3.4.1 From the perusal of the cash book andsubmissions of the Appellant and order of the JCIT, it isseen that transactions under consideration are relatedto transaction of Rs.19,35,000/- with description‘disclosure of peak amount’ as mentioned in the cash bookandwithrespectiveaccountheaddebited/credited. From this cash book, it wasconcluded by the JCIT that it is the transaction ofreceipt of deposits in in contravention of provisions ofsection 269SS. However, after perusal of the records,it is seen that the said conclusions of the JCIT iswithout establishing the relationship of depositor-lender between the Appellant and parties involved. 3.4.2It is clear from the bare perusal of thesection 269SS of the Act that it prohibits acceptance ofloans or deposits otherwise than by way of accountpayee cheque or draft (specified modes). Thus,following are the necessary ingredients for applicationof section 269T of the Act: a. There is transaction of loan or deposit b. There is acceptance of such loan or deposit c. Acceptance is made otherwise than way of specified modesmodes d. acceptance is made from any person 3.4.3It is well settled judicial principle thatburden of proof in relation to penalty proceedings ison the revenue, however, in the instant case, the JCIThas levied the penalty only on the basis of rejection ofthe explanation of the Appellant and there is noconcrete finding as to whether (I) there is transactionof loan or deposit, (ii), there is acceptance of suchloan or deposit and (iii) there is acceptance madeotherwise than by way of specified mode. In theinstant case, it is being agitated by Appellant thattransactions amounting to Rs.19,35,000/-, is relatedto undisclosed income of peak amount disclosed inreturn of income filed. It is seen from the bare perusalof the cash book, the transaction on which penalty islevied, is nothing but accounting entry reflectingreceipt of undisclosed income, which is duly reflected in return of income of the Appellant, therefore,penalty u/s 271D is not attracted on such transaction. in return of income of the Appellant, therefore,penalty u/s 271D is not attracted on such transaction. 3.4.4It is well settled judicial principle thatburden of proof in relation to penalty proceedings is onthe revenue, however, in the instant case, the JCIT hasfailed to establish with a finding as to whether (i) thereis transaction of loan or deposit, (ii), there isacceptance of such loan or deposit and (iii) acceptanceis made otherwise than by way of specified mode. Inthe instant case, it has not been established whetherdeposit was taken, when was deposit taken and whatwas the amount of deposit taken. This burden has notbeen discharged, therefore, bare allegation upon theAppellant without establishing aforesaid requirements,do not justify levy of penalty u/s 271D of the Act.” Feeling aggrieved with the said order of the appellateauthority, the Department preferred an appeal before the IncomeTax Appellate Tribunal, Jodhpur Bench, Jodhpur, which came to berejected by the Tribunal vide its order dated 21.2.2018. Learned Members of the Tribunal while rejecting the appealfiled by the Department and upholding the order of the appellateauthority has held that the fact that it was not a case ofacceptance of cash towards loan or deposit, attracting theprovisions of Section 269SS of the Act. The Tribunal also held thatthe burden of proof in relation to the penalty proceedings was onthe Revenue and that the Assessing Officer has failed to establishthat the amount of Rs.19,35,000/- is the amount of peak cashdeposited, reflected in return of income, which by no stretch ofimagination be termed as acceptance of deposit. Mr. Bissa, learned counsel for the appellant contended thatthe learned Members of the Tribunal have erred in holding that the burden of proof in cases of penalty proceedings is on the Revenue.He submitted that the onus lay upon the assessee to establishthat the cash brought in the books was not in violation of theprovisions of Section 269SS of the Act of 1961. He also submittedthat the provisions of Section 269SS of the Act of 1961 areapplicable upon taking or accepting any loan or deposit in cashirrespective of the genuineness or otherwise of such transaction.He however failed to point out from the record that from whomthe assessee had received sum of Rs.19,35,000/- in cash. We have considered the arguments advanced by Mr. Bissaand perused the material available on record including theprovisions of Section 269SS of the Act of 1961. A perusal of record leaves no room for doubt that therespondent assessee had surrendered a sum of Rs.19,35,000/- ashis undisclosed income for the assessment year 2010-11 and hasinfused the said amount in his channel of accounts. As a matterof fact, it was not acceptance of any amount in cash as loan ordeposit. A perusal of Section 269 SS of the Act of 1961 reveals that itprohibits receipt of loan or deposit made by any person, otherwisethan by way of an account payee cheque or account payee draft.A bare look at the aforesaid provision leaves no room forambiguity that the rigours of the said provision is attracted only inthe event when the assessee accepts loan or advance in cash. Inother words, loan or advance is a sine qua non or foundationalfact for the applicability of the provisions of Section 269SS of theAct of 1961. In the extant facts, the assessee has stated that theamount of Rs.19,35,000/- represented assessee’s undisclosedincome and the same was debited in cash book as peak cash deposit. It was upon the Assessing Officer to have recorded thefinding that the assessee had received a loan or deposit oradvance from a third party. In absence of such fact, which is aprecursor for establishing of breach of Section 269SS of the Act of1961, the penalty cannot be levied. deposit. It was upon the Assessing Officer to have recorded thefinding that the assessee had received a loan or deposit oradvance from a third party. In absence of such fact, which is aprecursor for establishing of breach of Section 269SS of the Act of1961, the penalty cannot be levied. That being the fact situation, we are of the consideredopinion that the learned Commissioner (Appeals-2), Udaipur wasperfectly justified in holding that there is no violation of theprovisions of Section 269SS of the Act of 1961 and thus, levy ofpenalty under Section 271D of the Act of 1961 was void. In view of the aforesaid, while concurring with the views ofthe appellate authority and the Income Tax Appellate Tribunal, wedo not find any substantial question of law involved in the presentappeal. The same is hereby dismissed. (DINESH MEHTA),J (SANGEET LODHA),J Arun/PS (37)