Wp/32190/2023 Of Grandhi Sri Venkata Amarendra v. Joint Commissioner Of Income Tax

IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI(Special Original Jurisdiction) FRIDAY, THE FOURTH DAY OF OCTOBERTWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SRI JUSTICE G.NARENDARAND THE HONOURABLE SMT JUSTICE KIRANMAYEE MANDAVA Between: WRIT PETITION NO: 32190 OF 2023 Grandhi Sri Venkata Amarendra,S/o. G.Narendra, Aged about 58Years,Occ.Business,R/o.7A-P-21/1MainBazarEluru,AndhraPradesh-534001. AND ...Petitioner ^' Visakha^friam”'^®'^ 2. Assistant Commissioner of income Tax, Centrai Circie -1VisakhapatnamVisakhapatnam ...Respondents Petition under Article 226 of the Constitution of Indiapraying that inthe circumstances stated in the affidavit filed therewith, the High Courtmaybe pleased to issue a Writ of Mandamusor any other appropriate Writ,Order or Direction, setting aside the impugned Order dated 23.11.2023passed by the Respondent No. 1 for the Assessment Year 2015-16 in PANABIPA7175R under Section 27ID of the Income Tax Act, 1961 bearing DINITBA/PNL/F/271D/2023-24/1058173949(1) ievying penaltyto a tune of Rs.66500000/-, as being void, iiiegai, arbitrary, violative of Articies14 and 265of the Constitution of India and consequently set aside the same. Main prayer amendedasper C.O. dt 03.01.2024 vide IA.No.03 of 2024in WP.No.32190 of 2023. lA NO: 1 OF 2023 Petition under Section 151 CPC praying thatin the[circumstances]stated in the affidavit filed in support of the petition,[the][ High][ Court][ may][ be]pleased to stay all further actions including recovery[of][ tax][ pursuant][ to][ the]Orderdated23.11.2023passedbytheRespondentNo.1fortheAssessment Year 2015-16 in PAN under Section[27ID][ of][ the]IncomeTaxAct,1961bearingDINITBA/PNL/F/271D/2023-24/1058173949(1). Interim prayer amended as per C.O.dt 03.01.2024 vide IA.No.02 of2023 in WP.No.32190 of 2023. Counsel for the Petitioner: SRI VIVEK CHANDRA SEKHAR[S] Counsel for the Respondents: SRI VIJAY KUMAR PUNNA The Court made the following order: IN THE HIGH COURT OF ANDHRA PRADESHAT AMARAVATI THE HONOURABLE SRI JUSTICE G.NARENDAR THE HONOURABLE SMT. JUSTICE KIRANMAYEE MANDAVAWRIT PETITION NO: 32190/2023 ORDER; (Per Hon’ble Smt. Justice Kiranmayee Mandava) The order under challengein the W.P. No.32190of 2023istheproceedings of the Assessing Officer passed under Section[271D]of theIncome Tax Act, 1961, (hereinafter referred to as ‘Act’)[levying][ penalty][ of]Rs.6,65,00,000. 2.The learned counselfor thepetitioner contends that penaltyunder Section 271D of the Act, is levied without recording[any][ satisfaction][ m]contemplating levy of penalty. 3.It is stated that a search and seizure operation[was][ conducted]under Section 132 of the Income Tax Act, the case of[M/s.][ Usha][ Bala][ Group]and M/s. V.V.Balaksirshna Rao. During the search proceedings[in][ the][ case][ of]M/s. V.V.Balakrishna Rao,certain incriminating documentsrelatingto thepetitioner were found. Applying the provisions of Section[153C][ of][ the][ Act,][ the]asked to submit his return of income. Pursuant thereto,[the]petitioner was15-04-2022, admitting totalpetitioner has furnished his return of income on income Section143(2)oftheAct,ofRs.23,14,400/-.Noticeunder 2.The learned counselfor thepetitioner contends that penaltyunder Section 271D of the Act, is levied without recording[any][ satisfaction][ m]contemplating levy of penalty. 3.It is stated that a search and seizure operation[was][ conducted]under Section 132 of the Income Tax Act, the case of[M/s.][ Usha][ Bala][ Group]and M/s. V.V.Balaksirshna Rao. During the search proceedings[in][ the][ case][ of]M/s. V.V.Balakrishna Rao,certain incriminating documentsrelatingto thepetitioner were found. Applying the provisions of Section[153C][ of][ the][ Act,][ the]asked to submit his return of income. Pursuant thereto,[the]petitioner was15-04-2022, admitting totalpetitioner has furnished his return of income on income Section143(2)oftheAct,ofRs.23,14,400/-.Noticeunder dated 25-04-2022 was issued to the assessee for making[assessment][ under]Section143(3) read with Section 153Cof the Act. Simultaneouslynoticeunder Section 142(1) of the Act was issued requiring the petitioner to producecertain copies of bank accounts, explain the cash transaction[with][ Balakrishna]Rao etc., amounting to Rs.6.65 crores. Pursuant to the same, the petitionersubmitted his reply dated 12-05-2022 stating that he did not take any loans incashasallegedthatsaidtransactionswerereceivedthroughBankingchannels. Thereafteranother notice dated 15-06-2022, was issued requestingthepetitionertofurnishtheinformationby22-06-2022.Thepetitionersubmitted his explanation reiterating his previous explanation regarding loansstated to have obtainedin cash.Itis further contended that a similar noticewas issued to the creditor of the petitioner, Venkata Balakrishna Rao, underSection 133(6) of the Act, dated 06.07.2022, who, after requesting for time till22-07-2022 did not respond to the notice issued, therefore,[summons][ under]Section131of the Act wasissued.Inresponsetothe same,thesaidBalakrishna Rao, submitted his reply.After examining the reply of the saidBalakrishna Rao, with reference to the seized material, the department issuedshow cause notice dated 10-08-2022, requiring the petitioner to submit replyby 16-08-2022. In the said notice,it was observed[that][ on][ cross][ verification of]the details furnishedby the petitioner andBalakrishna Rao, there are nodiscrepancies,however,the seizedmaterialcontains document(s),whichincludesaletterdated02-06-2014,statedtohavebeenissuedbythepetitionertoBalakrishnaRao,acknowledgingthe availmentloanofRs.6 croresandpledgingof immovablepropertiesascollateralsecurity.Bypointing out from the material beforeit,the AO concluded that (pg.14 ofassessment order) the petitioner had financial transaction[with][ Balakrishna]Rao,outsidethebooksandoutsidebankingchannelsforthesubjectassessmentyear.Therelevantmaterialrelieduponbythe AO wascopied/scanned and pastedin the assessment order (Pgs.15 to 54) makingthe same as part of the assessment order. From the said transactions, 60transactions were tabulated whichindicate advances to thepetitioner andrepayment by the petitioner. The Assessing Officer[on][ the][ basis][ of][ the][ said]materialobservedthat UshaBalaGrouphadreceivedanamountofRs,95,14,267/- towards interest.Andit was concluded that the petitioner hadaccepted an amount of Rs.6,65,00,000/- as loan and repaid an amount ofRs.7,70,27,007/-onvariousdates.HethuspaidanamountofRs. 1,05,27,007/-in excess, out of whichRs.95,14,267/-[was]identifiedasinterest paid to Usha Bala. The petitioner was thus[asked][ to][ show][ cause][ as][ to]why the excess amount should not be treated as the amount paid by thepetitionerduringtheyear,withoutsourcesandshallnotbetreatedunexplained money under Section 69A of the Act. The petitioner had statedthat no cash loans were either obtained or no cash repayment made muchless the interest was made by the assessee. The AssessingOfficer, whileconcludingthe assessmentproceedingstakingnoteoftheletterofthepetitionerdated02.06.2014,acknowledgingthereceiptofamountofRs.6,00,00,000/- on 22.11.2013.In response the petitioner[has][ stated]interpointing out from the material beforeit,the AO concluded that (pg.14 ofassessment order) the petitioner had financial transaction[with][ Balakrishna]Rao,outsidethebooksandoutsidebankingchannelsforthesubjectassessmentyear.Therelevantmaterialrelieduponbythe AO wascopied/scanned and pastedin the assessment order (Pgs.15 to 54) makingthe same as part of the assessment order. From the said transactions, 60transactions were tabulated whichindicate advances to thepetitioner andrepayment by the petitioner. The Assessing Officer[on][ the][ basis][ of][ the][ said]materialobservedthat UshaBalaGrouphadreceivedanamountofRs,95,14,267/- towards interest.Andit was concluded that the petitioner hadaccepted an amount of Rs.6,65,00,000/- as loan and repaid an amount ofRs.7,70,27,007/-onvariousdates.HethuspaidanamountofRs. 1,05,27,007/-in excess, out of whichRs.95,14,267/-[was]identifiedasinterest paid to Usha Bala. The petitioner was thus[asked][ to][ show][ cause][ as][ to]why the excess amount should not be treated as the amount paid by thepetitionerduringtheyear,withoutsourcesandshallnotbetreatedunexplained money under Section 69A of the Act. The petitioner had statedthat no cash loans were either obtained or no cash repayment made muchless the interest was made by the assessee. The AssessingOfficer, whileconcludingthe assessmentproceedingstakingnoteoftheletterofthepetitionerdated02.06.2014,acknowledgingthereceiptofamountofRs.6,00,00,000/- on 22.11.2013.In response the petitioner[has][ stated]inter alia (pg. 77) that the letter dated 02-06-2014, was givenin anticipation ofobtaining the loan subject to mortgage of the properties.It was further statedthat thereafter, after issuing the letter dated 02-06-2014, the petitioner has notavailed the loan nor pledged the property. The AssessingOfficer madeaddition of Rs.1,05,27,007/-, under Section 69A of the Act, which according tothe Assessing Officer is excess payment over and above the loans accepted.After passing of the assessment order the Assessing Officer, has referred thefile to the Joint Commissioner of Income-tax, intimating the violations said tohave been committed by the petitioner and for appropriate action. The learnedJoint Commissioner of Income-tax, hasinitiated the penaltyproceedingsunder Section 271D of the Income Tax Act, andleviedpenaltyofRs.6,65,00,000/-. Challenging the same, the present Writ Petition is filed. 4.Heard, submissions of the learned counsel for the petitioner[and]the respondents.the respondents. 4.Heard, submissions of the learned counsel for the petitioner[and]the respondents.the respondents. 5.Perused the material on record. 6.The main contention of the petitioner is that no satisfactionwasrecorded in the assessment order with regard to levy of penalty under Section271D of the Act.The petitioner relying on the decision of the Apex Court inthe case of CIT \/s. Jai Laxmi Rice Mills, Ambala City\ contends that thererecorded in the assessment order with regard to levy of penalty under Section271D of the Act.The petitioner relying on the decision of the Apex Court inthe case of CIT \/s. Jai Laxmi Rice Mills, Ambala City\ contends that therewasno evidence before the Assessing Officer to show that the petitioner hasaccepted the loans in cash. As noted from the assessment proceedings, theassessee wasput onnotice as regards the loans receivedin cash. The^ (2015)64 Taxmann.com75(SC)accepted the loans in cash. As noted from the assessment proceedings, theassessee wasput onnotice as regards the loans receivedin cash. The^ (2015)64 Taxmann.com75(SC) petitioner has stated that he has not received any[cash]loans and he hasdenied to have received any cash loans, what all taken as loans were throughbanking channels alone. There was never any element any element of cashinvolved in the transaction. 7.ThelearnedSeniorStandingCounselSriVijayKumarPunna,appearing for the respondents would contend that against the order impugnedan alternative remedy of appeal is provided under the provisions of the Act.Without availing such remedy filed the present Writ Petition, which would notbe maintainable. He relies on the following decisions in support of his case;- I.In the case of M. Sougoumarin Vs. Assistant Commissioner ofIncomeTax,Circle-1,Puducherry,(2018) 95 taxman.com 240 (Madras)(2018) 95 taxman.com 240 (Madras) In the case of Vasan Healthcare(P)Ltd. Vs. AdditionalCommissioner of Income Tax, Central Range-2, Chennai.(2019)411 ITR499 (Madras)Commissioner of Income Tax, Central Range-2, Chennai.(2019)411 ITR499 (Madras) In the case of Five Star Marine Exports (P) Ltd. Vs DeputyCommissionerofIncomeTax,Chennai(2018) 92 Taxman.com 404 (Madras)CommissionerofIncomeTax,Chennai(2018) 92 Taxman.com 404 (Madras)IV.In the case of Vasan Healthcare(P.)Ltd. Vs. AdditionalCommissionerofIncomeTaxRange2Chennai,(2021)278 Taxman 273 (SC)CommissionerofIncomeTaxRange2Chennai,(2021)278 Taxman 273 (SC) V.InthecaseofAlAmeenEducationalTrustVs.Commissioner of Income Tax, (2021) 283 Taxman 285 (SC)Commissioner of Income Tax, (2021) 283 Taxman 285 (SC)VI.In the case of Assistant Director of Inspection InvestigationVs. Kum.A.B. Shanthi, (2002) 255 ITR 258 (SC)Vs. Kum.A.B. Shanthi, (2002) 255 ITR 258 (SC) vii.Inthecaseof AshokKumarVs.StateofHaryana(2010) 12 see 350viii.In the case of Dilip N. Shroff Vs. eiT, (2007)[6][ See][ 329] 8.We have gone through the material placed on record.[The][ Assessing]Officer,exceptto basehisaddition on theletterofthe assesseedated02-06-2014, did not record any finding that there has been any violation of theprovisions of Sec.269SS of the Act by the assessee,[nor][ was][ any][ satisfaction]recorded to the effect that the alleged transaction of acceptance of loan wouldattract penal consequences.In the absence of any finding[to][ the][ said][ effect,]inourconsideredview,thepenaltycannotbelevied.A presumption can be drawn,in the absence of a finding[by][ the][ Assessing]OfficertotheeffectthatthepetitionerhasviolatedtheprovisionsofSec.269SSof the Act,that the department has accepted the explanationfurnished by the petitioner denying allegation of loan[in][ cash. Therefore,]it canunhesitatinglybesaidthat,havingsatisfiedwiththeexplanationof theintheassesseethe AssessingOfficerdidnotrecordanysatisfactionassessment order to the effect that the provisions[of][ Section][ 269SS][ of][ the][ Act,]are violated and did not contemplate levy ofpenalty[under][ Sec.271D][ of][ the]Act. 9.In our view, the satisfaction of the Assessing Officer[is][ required][ to] berecorded because the officer, who passed the assessment[order][ would]notbe levying the penalty under Sec.271D of the Act, unless[it][ is][ recorded][ in]therecorded because the officer, who passed the assessment[order][ would]notbe levying the penalty under Sec.271D of the Act, unless[it][ is][ recorded][ in]the assessmentorder,he cannotrefer thefileto superiorofficeri.e.,JointCommissioner, for initiating levy of penalty.Unless the AssessingOfficer,whoistheprimaryauthority,basedonthematerialbeforeit,duringassessment proceedings, arrives at a finding that there has been a violation ofthe provisions, like in the present case, of Section 269SS, there will not beanyoccasion to the Joint Commissioner, whois not the AssessingOfficer,toexercise his jurisdiction to levy Penalty under Section 271D. Following thedecision of the Hon'ble Supreme Court in the case of Jai Laxmi Rice Millsreferred supra, we set aside the order passed under Sec.271 D of the Act.10.The Writ Petition is accordingly allowed. There shall be no order as tocosts. As a sequel,interlocutory applications pending,if any,shallstandclosed. To, //TRUE COPY// SD/-N NAGAMMAASSISTANT REGISTRAR SECTION OFFICER Tax, Central Circle, Central Range,Tax, Central Circle -1,Tax, Central Circle -1, 3. One CC to Sri Vivek Chandra SekharS, Advocate S, Advocate 4. One CC to Sri Vijay Kumar PunnaAdvocate Advocate 5. Three CD CopiesRAM HIGH COURT DATED:04/10/2024 ORDERWP.No.32190 of 2023 ALLOWING THE WPWITHOUT COSTS