Wp/32873/2023 Of Grandhi Sri Venkata Amarendra v. Joint Commissioner Of Income Tax Centra Circle

IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI (Special Original Jurisdiction) FRIDAY, THE FOURTH DAY OF OCTOBERTWO THOUSAND AND TWENTY FOURPRESENT THE HONOURABLE SRI JUSTICE G.NARENDAR AND THE HONOURABLE SMT JUSTICE KIRANMAYEE MANDAVAWRIT PETITION NO: 32873 OF 2023 Between: Grandhi Sri Venkata Amarendra, S/o. G. Narendra, Aged about 58 Years,Occ: Business, R/o. 7A-P-21/1, Main Bazar Eluru, Andhra[Pradesh-534001] ...PETITIONER AND 1.Joint Commissioner of Income Tax, Central Circle, Central RangeVisakhapatnamVisakhapatnam 2.Assistant Commissioner of Income Tax, Central Circle -1,Visakhapatnam.Visakhapatnam. ...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,OrderorDirection,setting aside the impugned Orderdated23/11/2023passed by the Respondent No.1 for the Assessment Year[2018-19]in PANABIPA7175R under Section 271D of the Income Tax Act, 1961 bearing DINITBA/PNL/F/271 D/2023-24/1058173995(1), levying penalty[to a][ tune][ of][ Rs.]2,00,00,000/- as being void, illegal, arbitrary, violative[of][ Articles][ 14][ and 265]of the Constitution of India and consequently set aside[the][ same.] V lA NO: 1 OF 2023 Petition under Section151 CPC praying thatin the[circumstances]«stated in the affidavit filed in support of the petition, the High Court may bepleased to stay all further actions including recovery of tax pursuant to the^V^sOrder.dated23/11/2023passedbytheRespondentNo.1fortheAssessment Year 2018-19 in PAN under Section 27ID of theIncomeTaxAct,1961bearingDINITBA/PNL/F/271D/2023-24/1058173995(1.) Counsel for the Petitioner; SRI VIVEK CHANDRA SEKHAR S Counsel for the Respondent Nos.1 & 2:SRI VIJAY KUMAR PUNNA, SCFOR INCOME TAX The Court made the following: ORDER IN THE HIGH COURT OF ANDHRA PRADESHAT AMARAVATI THE HONOURABLE SRI JUSTICE G.NARENDARTHEHONOURABLE SMT. JUSTICE KIRANMAYEE MANDAVAWRIT PETITION NO: 32873/2023 ORDER; (PerHon’ble Smt. Justice Kiranmayee Mandava) the W.P.No.32873of 2023is theTheorder under challengeinproceedings of the assessing officer passed under Section271Dof theas ‘Act’) levying penalty ofIncome Tax Act, 1961, (hereinafter referred toRs.2,00,00,000/-. 2.Thelearnedcounsel for the petitioner contends that penaltyunder Section 271D of the Act, is levied without recording[any][ satisfaction][ in]contemplating levy of penalty. 3.It is stated that asearch and seizure operation was conductedof M/s. Usha Bala Groupunder Section 132 of the Income Tax Act, the caseandV.V.Balaksirshna Rao. During the search proceedingsinthe case ofcertain incriminating documents relating to the petitionerV.V.Balakrishna Raowere found. Applying the provisions of Section 153C[of][ the][ Act,][ the][ petitioner]. Pursuant thereto, the petitioner haswasasked to submit his return of incomefurnishedhisreturnofincomeon18-04-2022admittingtotalincomeSection143(2)oftheAct,ofRs.22,20,000/-.Noticeunder 2.Thelearnedcounsel for the petitioner contends that penaltyunder Section 271D of the Act, is levied without recording[any][ satisfaction][ in]contemplating levy of penalty. 3.It is stated that asearch and seizure operation was conductedof M/s. Usha Bala Groupunder Section 132 of the Income Tax Act, the caseandV.V.Balaksirshna Rao. During the search proceedingsinthe case ofcertain incriminating documents relating to the petitionerV.V.Balakrishna Raowere found. Applying the provisions of Section 153C[of][ the][ Act,][ the][ petitioner]. Pursuant thereto, the petitioner haswasasked to submit his return of incomefurnishedhisreturnofincomeon18-04-2022admittingtotalincomeSection143(2)oftheAct,ofRs.22,20,000/-.Noticeunder 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][ produce]certain copies of bank accounts, explain the cash transaction[with][ Balakrishna]Rao etc., amounting to Rs. 6,00,00,000/-. Pursuant[to][ the][ same,][ the][ petitioner]submitted his reply dated 12-05-2022 stating that that[he][ did][ not][ take][ any]loans 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][ explanation]regarding loans stated to have obtained in cash.It[is][ further][ contended][ that][ a]similar notice was issued to the creditor of the petitioner,[Venkata][ Balakrishna]Rao, under Section 133(6) of the Act, dated 06.07.2022,[who,][ after][ requesting]for timetill22-07-2022didnotrespondtothenoticeissued,therefore,summons under Section 131of the Act, dated 27.07.2022,[was][ issued.]Inresponse to the same, the said Balakrishna Rao, submitted[his][ reply.]Afterexamining the reply of the said Balakrishna Rao, with[reference][ to][ the][ seized]material,thedepartmentissuedshow causenoticedated10-08-2022,requiring the petitioner to submit reply by 16-08-2022.[In][ the][ said][ notice,][ it][ was]observed that on cross verification of the details furnished by the petitionerandBalakrishnaRao,therearenodiscrepancies,however,*-[the]seized material contains document(s), which includes aletter[dated]02-06-2014,statedtohavebeenissuedbythepetitionertoBalakrishnaRao,acknowledging the availment 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][ petitioner]had 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 54) making the same as part of the[assessment][ order.][ From]the said transactions, 11 transactions were tabulated[which][ indicate][ advances]to the petitioner and repayment by the petitioner.[The][ Assessing][ Officer][ on][ the]basis of the said material observed that Usha Bala[Group][ had][ received][ an]amount of Rs.28,18,344/- towards interest. Andit was[concluded][ that][ the]petitioner had accepted an amount of Rs. 2,00,00,000/-[as][ loan][ and][ repaid][ an]amount of Rs.1,43,18,344/- on various dates. The petitioner[was][ thus][ asked][ to]show cause asto why the interest amount of Rs.28,18,344/- should[not][ be]treated as unexplained money under Section 69A of the[Act.][ The][ petitioner][ in]reply to the show cause notice has stated that no cashloans were eitherobtained or cash repayments were made much less the[interest][ was][ paid,]TheAssessingOfficerwhileconcludingtheassessmentnoteof theletter of the petitioner dated 02.06.2014proceedings taking acknowledgingthereceiptof amountofRs.6,00,00,000/-on22.11.2013madeadditionofRs.28,18,344/-underSection69AoftheAct.Afterpassing of the assessment order the Assessing Officer,[has][ referred][ the][ file][ to]the Joint Commissioner of Income-tax, intimating the[violations][ said][ to][ have]been committed by the petitioner and for appropriate[action.][ The][ learned][ Joint]Commissioner of Income-tax,hasinitiatedthe penalty proceedings underSection271DoftheIncomeTaxAct,andleviedpenaltyofRs. 2,00,00,000/-. Challenging the same, the present[Writ][ Petition][ is][ filed.] 4.Heard, submissions of the learned counsel for the petitioner[and]the respondents.the respondents. 5.Perused the material on record. 6.The main contention of the petitioner is that no satisfaction[was]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 was put onnotice as regards the loans 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 throughrecorded 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 was put onnotice as regards the loans 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. 7.ThelearnedSeniorStandingCounselSriVijayKumarPunna,appearing for the respondents would contend that against[the][ order][ impugned]appearing for the respondents would contend that against[the][ order][ impugned]analternative 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;-]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 ITR499 (Madras)Commissioner of Income Tax, Central Range-2, Chennai.(2019)411 ITR499 (Madras) III.In the case of Five Star Marine Exports (P) Ltd.[Vs][ Deputy]CommissionerofIncomeTaxChennai,(2018) 92 Taxman.com 404 (Madras)CommissionerofIncomeTaxChennai,(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(2010) 12 see 350 VIII.In the case ofDilip N. Shroff Vs. CIT, (2007) 6 SCC[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(2010) 12 see 350 VIII.In the case ofDilip N. Shroff Vs. CIT, (2007) 6 SCC[329] 8.We have gone through the material placed on record. The AssessingOfficer, 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 satisfactionrecorded to the effect that the alleged transaction of acceptance of loanincash would attract penal consequences.In the absence of any finding to thesaideffect,inourconsideredview,thepenaltycannotbelevied.A presumption can be drawn, in the absence of a finding by the AssessingOfficertotheeffectthatthepetitionerhasviolatedtheprovisionsofSec.269SSof the Act, that the department has accepted the explanationfurnished by the petitioner denying allegation of loan in cash. Therefore,it canunhesitatinglybesaidthat,havingsatisfiedwiththeexplanationof theAssessingOfficer didnot record any satisfactionin[the][ assessment][ order]contemplating levy of penalty under Sec.271 D of the[Act.]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 satisfactionrecorded to the effect that the alleged transaction of acceptance of loanincash would attract penal consequences.In the absence of any finding to thesaideffect,inourconsideredview,thepenaltycannotbelevied.A presumption can be drawn, in the absence of a finding by the AssessingOfficertotheeffectthatthepetitionerhasviolatedtheprovisionsofSec.269SSof the Act, that the department has accepted the explanationfurnished by the petitioner denying allegation of loan in cash. Therefore,it canunhesitatinglybesaidthat,havingsatisfiedwiththeexplanationof theAssessingOfficer didnot record any satisfactionin[the][ assessment][ order]contemplating levy of penalty under Sec.271 D 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][ not][ be]levying the penalty under Sec.271 D of the Act, unlessitis recordedin theassessmentorder,hecannotrefer thefiletosuperiorofficeri.e.,JointCommissioner,for initiatinglevy of penalty.Unless the Assessing Officer,recorded because the officer, who passed the assessment[order][ would][ not][ be]levying the penalty under Sec.271 D of the Act, unlessitis recordedin theassessmentorder,hecannotrefer thefiletosuperiorofficeri.e.,JointCommissioner,for initiatinglevy of penalty.Unless the Assessing Officer, whoistheprimaryauthority,basedonthematerialbeforeit,duringassessment proceedings, arrives at a finding that there[has][ been][ a][ violation][ of]the provisions, like in the present case, of Section 269SS, there will not be anyoccasionto the Joint Commissioner, whoisnot the AssessingOfficer,toexercisehis jurisdiction to levy Penalty under Section 271D. Following thedecision of the Hon'ble Supreme Court in the case of[Jai][ Laxmi][ Rice][ Mills]referred supra, we set aside the order passed by the 1®' respondent dated23.11.2023 under Sec.271 D of the Act. 10.The Writ Petition is accordingly allowed. There shall[be no][ order][ as][ to]costs.costs. As a sequel,interlocutoryapplicationspending,if any,shallstandclosed. SDI- N.NAGAMMAASSISTANT REGISTRAR//TRUE COPY//SECTION OFFICER To, whoistheprimaryauthority,basedonthematerialbeforeit,duringassessment proceedings, arrives at a finding that there[has][ been][ a][ violation][ of]the provisions, like in the present case, of Section 269SS, there will not be anyoccasionto the Joint Commissioner, whoisnot the AssessingOfficer,toexercisehis jurisdiction to levy Penalty under Section 271D. Following thedecision of the Hon'ble Supreme Court in the case of[Jai][ Laxmi][ Rice][ Mills]referred supra, we set aside the order passed by the 1®' respondent dated23.11.2023 under Sec.271 D of the Act. 10.The Writ Petition is accordingly allowed. There shall[be no][ order][ as][ to]costs.costs. As a sequel,interlocutoryapplicationspending,if any,shallstandclosed. SDI- N.NAGAMMAASSISTANT REGISTRAR//TRUE COPY//SECTION OFFICER To, 1. The Joint Commissioner of Income Tax, Central Circle, Central Range,VisakhapatnamVisakhapatnam2. The Assistant Commissioner of Income Tax, Central Circle -1,Visakhapatnam.Visakhapatnam.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.4. One CC to Sri Vijay Kumar Punna, SC for Income Tax 5.Three CD Copies.ssb HIGH COURT DATED:04/10/2024 ORDERWP.No.32873 of 2023 O52 8 OCT 202^ ALLOWING THE W.P. WITHOUT COSTS