Wp/32558/2023 Of Grandhi Sri Venkata Amarendra v. Joint Commissioner Of Income Tax

IN THE HIGH COURT OF ANDHRA PRADESHAMARAVATI (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 MANDAVAWRIT PETITION NO: 32558 OF 2023 Between: Grandhi Sri Venkata Amarendra, S/o. G. Narendra, Aged about 58 Years,Occ:Business,R/o.7A-P-21/1,MainBazarEluru, AndhraPradesh-534001. ...PETITIONER AND 1.Joint Commissioner of Income Tax, Central Circle, Central Range,VisakhapatnamVisakhapatnam 2. Assistant Commissioner of Income Tax, Central Circle -1,VisakhapatnamVisakhapatnam ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that inthe circumstances stated in the affidavit filed therewith, the High Court maybe pleased to issue a Writ of Mandamus or 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 2016-17in PANABIPA7175R under Section 271D of the Income Tax Act, 1961 bearing DINITBA/PNL/F/271 D/2023-24/1058173981(1),levyingpenaltytoatuneofRs. 3,50,00,000/-, as the being void, illegal, arbitrary,[violative][ of][ Articles][ 14]and 265 of the Constitution of India and consequently[set][ aside][ the][ same.] \ 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]t^prdefdated27/09/2022passedbytheRespondentNo.1fortheAssessment Year 2016-17 in PAN under Section[271D][ of][ the]Income Tax Act. 1961bearing DIN ITBA/PNL/F/271D/2023-[24/1058173]981(1). Counsel for the Petitioner: SRI VIVEK CHANDRA SEKHAR[S]Counsel for the Respondent Nos.1 & 2: SRI VIJAY KUMAR[PUNNA, SC]FOR INCOME TAX 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 MANDAVA WRIT PETITION NO: 32558/2023 ORDER; (Per Hon’ble Smt. Justice Kiranmayee Mandava) The order under challengein the W.P. No.32558of 2023istheproceedings of the assessing officer passed under Section271Dof theIncome Tax Act, 1961, (hereinafter referred to as ‘Act’)[levying][ penalty][ of]Rs.3,50,00,000/-. 2;Thelearned counselfor thepetitioner contends thatpenaltyunder Section 271D of the Act, is levied without recording[any][ satisfaction][ in]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 V.V.Balaksirshna Rao. During the search proceedingsin the caseofV.V.Balakrishna Rao, certain incriminating documents[relating][ to][ the][ petitioner]were found. Applying the provisions of Section 153C[of][ the][ Act,][ the][ petitioner]was asked to submit his return of income. Pursuant[thereto,][ the][ petitioner][ has]furnishedhisreturnofincomeon15-04-2022admittingtotalincomeofRs.21,34,530/-.NoticeunderSection143(2)oftheAct,dated 25-04-2022 was issued to the assessee for making[assessment][ under] 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 V.V.Balaksirshna Rao. During the search proceedingsin the caseofV.V.Balakrishna Rao, certain incriminating documents[relating][ to][ the][ petitioner]were found. Applying the provisions of Section 153C[of][ the][ Act,][ the][ petitioner]was asked to submit his return of income. Pursuant[thereto,][ the][ petitioner][ has]furnishedhisreturnofincomeon15-04-2022admittingtotalincomeofRs.21,34,530/-.NoticeunderSection143(2)oftheAct,dated 25-04-2022 was issued to the assessee for making[assessment][ under] Section 143(3) read with Section 153C of 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 BalakrishnaRaoetc. amountingto Rs.6 Crores.Pursuant to the same, the petitionersubmitted his reply dated 12-05-2022 stating that that he did not take anyloans in cash as alleged. The loans were received through Banking channels.Thereafter another notice under Section 142(1) of the Act, dated 15-06-2022,was issued requesting the petitioner to furnish the information by 22-06-2022.The petitioner submitted his explanation reiterating his previous explanationregarding loans stated to have obtained in cash.It is further contended that asimilar notice was issued to the creditor of the petitioner, Venkata BalakrishnaRao, under Section 133(6) of the Act, dated 06.07.2022, who, after requestingfor timetill 22-07-2022didnot respondto the noticeissued,therefore,summons under Section 131of the Act, dated 27.07.2022, wasissued.Inresponse to the same, the said Balakrishna Rao, submitted his reply.Afterexamining the reply of the said Balakrishna Rao, with reference to the seizedmaterial,thedepartmentissuedshowcausenoticedated10-08-2022,requiring the petitioner to submit reply by 16-08-2022. In the said notice, it wasobserved that on cross verification of the details furnished by the petitionerandBalakrishnaRao,there arenodiscrepancies,however,theseizedmaterialcontains document(s), whichincludesaletter dated 02-06-2014,statedtohavebeenissuedbythepetitionertoBalakrishnaRao, acknowledgingtheavailment cashloanof Rs.6crores,andpledgingofimmovable properties as collateral security. By pointing[out][ from][ the][ material]beforeit, the AO concluded that (pg.14 of assessment order) the petitionerhad financial transaction with Balakrishna Rao, outside[the][ books][ and][ outside]banking channels for the subject assessment year. Therelevantmaterialrelied upon by the AO was copied/scanned and pastedin the assessmentorder (Pgs.15 to 48) making the same as part of the[assessment][ order.][ From]the said transactions, 19 transactions were tabulated which indicate advancesto the petitioner and repayment by the petitioner. The Assessing Officer on thebasis of the said material observed that Usha Bala Group had received anamount of Rs.26,15,867/- towards interest.Andit was concludedthat thepetitioner had accepted an amount of Rs.3,50,00,000/- as loan and repaid anamount of Rs.2,44,24,925/- on various dates. He thus did not discharge theprinciple amount. The amount of Rs.26,15,867/- was identified as interest paidto Usha Bala. The petitioner was thus asked to show cause as to why the saidamount of Rs.26,15,867/- 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 any cash repayments were mademuchless the payment of interest. As thepetitioner failedto explain thesourcesforthepayment,theAssessingOfficerwhileconcludingtheassessment proceedingstakingnoteof theletterof thepetitioner dated 02.06.2014, acknowledgingthereceiptof amountof Rs.6,00,00,000/-on22.11.2013, made addition of Rs.26,15,867/-, under Section 69A of the Act,which according to the Assessing Officer was towards[interest.] 02.06.2014, acknowledgingthereceiptof amountof Rs.6,00,00,000/-on22.11.2013, made addition of Rs.26,15,867/-, under Section 69A of the Act,which according to the Assessing Officer was towards[interest.] 4.After passing of the assessment order, the Assessing[Officer][ has]referred thefileto the Joint Commissioner of Income-tax,intimatingtheviolations said to have been committed by the petitioner and for appropriateaction. ThelearnedJoint Commissioner of Income-tax,hasinitiatedthepenalty proceedings under Section 271D of the Income Tax Act, and leviedpenalty of Rs.3,50,00,000/-. Challenging the same, the present Writ Petition isfiled.referred thefileto the Joint Commissioner of Income-tax,intimatingtheviolations said to have been committed by the petitioner and for appropriateaction. ThelearnedJoint Commissioner of Income-tax,hasinitiatedthepenalty proceedings under Section 271D of the Income Tax Act, and leviedpenalty of Rs.3,50,00,000/-. Challenging the same, the present Writ Petition isfiled. 5.Heard, submissions of the learned counsel for the petitioner[and]the respondents.the respondents. 6.Perused the material on record. 7.The main contention of the petitioner is that no satisfaction wasrecorded 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 Vs. Jai Laxmi Rice Mills, Ambala City\[contends][ that][ there]was no 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 theloans receivedincash. Thepetitioner has stated that he has not received any[cash][ loans][ and][ he][ has]recorded 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 Vs. Jai Laxmi Rice Mills, Ambala City\[contends][ that][ there]was no 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 theloans receivedincash. Thepetitioner has stated that he has not received any[cash][ loans][ and][ he][ has] denied to have received any cash loans, what all taken[as][ loans][ were][ through]banking channels alone. There was never any element[any][ element][ of][ cash]involved in the transaction. 8.The learned Senior Standing. Counsel Sri Vijay Kumar[Punna,]appearing for the respondents would contend that against[the][ order][ impugned]an alternative remedy of appeal is provided under the[provisions][ of][ the][ Act.]Without availing such remedy filed the present Writ[Petition,][ which][ would][ not]be maintainable. He relies on the following decisions[in][ support][ of][ his][ case.-] I,In the case of M. Sougoumarin Vs. Assistant CommissionerofIncomeTax,Circle-1Puducherry,(2018) 95 taxman.com 240 (Madras)ofIncomeTax,Circle-1Puducherry,(2018) 95 taxman.com 240 (Madras) II.In the case of Vasan Healthcare (P)Ltd. Vs. AdditionalCommissioner of Income Tax, Central Range-2, Chennai.(2019) 411 ITR 499 (Madras)Commissioner of Income Tax, Central Range-2, Chennai.(2019) 411 ITR 499 (Madras) 111.In the case of Five Star Marine Exports (P) Ltd.[Vs][ Deputy]CommissionerofIncomeTax,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[Investigation]Vs. 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 350 VIII.In the case of Dilip N. Shroff Vs. eiT, (2007)[6][ See][ 329] 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[Investigation]Vs. 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 350 VIII.In the case of Dilip N. Shroff Vs. eiT, (2007)[6][ See][ 329] 9.Wehave gone throughthematerialplacedonrecord.TheAssessing Officer, except to base his addition on the[letter][ of][ the][ assessee]dated 02-06-2014, did not record any finding that there has been any[ violation]of the provisions of Sec.269SS of the Act by the assessee,nor was anysatisfaction recorded to the effect that the alleged transaction of acceptance ofloan in cash would attract penal consequences.In the[absence][ of][ any][ finding]to thesaideffect,in our considered view, the penalty[cannot]belevied.A presumption can be drawn, in the absence of a finding[by][ the][ Assessing]OfficertotheeffectthatthepetitionerhasviolatedtheprovisionsofSec.269SS of the Act, that the department has accepted[the] explanationfurnished by the petitioner denying allegation of loan[in][ cash. Therefore,]it canunhesitatingly besaidthat,havingsatisfiedwiththeexplanationof theAssessing Officer did not record any satisfactionin[the][ assessment][ order]contemplating levy of penalty under Sec.271D of the[Act.]Assessing Officer, except to base his addition on the[letter][ of][ the][ assessee]dated 02-06-2014, did not record any finding that there has been any[ violation]of the provisions of Sec.269SS of the Act by the assessee,nor was anysatisfaction recorded to the effect that the alleged transaction of acceptance ofloan in cash would attract penal consequences.In the[absence][ of][ any][ finding]to thesaideffect,in our considered view, the penalty[cannot]belevied.A presumption can be drawn, in the absence of a finding[by][ the][ Assessing]OfficertotheeffectthatthepetitionerhasviolatedtheprovisionsofSec.269SS of the Act, that the department has accepted[the] explanationfurnished by the petitioner denying allegation of loan[in][ cash. Therefore,]it canunhesitatingly besaidthat,havingsatisfiedwiththeexplanationof theAssessing Officer did not record any satisfactionin[the][ assessment][ order]contemplating levy of penalty under Sec.271D of the[Act.] 10.In our view, the satisfaction of the Assessing Officer[is] required[ to] be recorded because the officer, who passed the assessment[order][ would][ not]be 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 Assessing Officer,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 be anyoccasion 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 by the1®* respondent dated23.11.2023 under Sec.271 D of the Act. 10.The Writ Petition is accordingly allowed. There shall be no order as tocosts.costs. As asequel,interlocutory applications pending,ifany,shallstand closed. //TRUE COPY// SO/- N.NAGAMMAassistant registrar SECTION OFFICER To, 1. The Joint Commissioner of Income Tax, Central Circle,[Central][ Range,]VisakhapatnamVisakhapatnam 2. The Assistant Commissioner of Income Tax, Central[Circle][ -1,]VisakhapatnamVisakhapatnam 3. One CC to Sri Vivek Chandra Sekhar S, Advocate - 4. One CC to Sri Vijay Kumar Punna, SC for Income Tax[ ] 10.The Writ Petition is accordingly allowed. There shall be no order as tocosts.costs. As asequel,interlocutory applications pending,ifany,shallstand closed. //TRUE COPY// SO/- N.NAGAMMAassistant registrar SECTION OFFICER To, 1. The Joint Commissioner of Income Tax, Central Circle,[Central][ Range,]VisakhapatnamVisakhapatnam 2. The Assistant Commissioner of Income Tax, Central[Circle][ -1,]VisakhapatnamVisakhapatnam 3. One CC to Sri Vivek Chandra Sekhar S, Advocate - 4. One CC to Sri Vijay Kumar Punna, SC for Income Tax[ ] 5.Three CD Copies. HIGH COURT DATED:04/10/2024 ORDERWP.No.32558 of 2023 ALLOWING THE W.P. WITHOUT COSTS