Wp/32875/2023 Of Grandhi Sri Venkata Amarendra v. Joint Commissioner Of Income Tax Central 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.NARENDARAND THE HONOURABLE SMT JUSTICE KIRANMAYEE MANDAVAWRIT PETITION NO: 32875 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, AndhraPradesh-5[34001.]...PETITIONER AND 1. Joint Commissioner Of Income Tax, Central Circle, Central RangeVisakhapatnamVisakhapatnam 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 appropriateWrit,Order or Direction,setting aside the impugned Orderdated23/11/2023passed by the Respondent No.1 for the Assessment Year[2017-18][ in] PANABIPA7175R under Section 271D of the Income Tax Act, 1961 bearing DINITBA/PNL/F/271D/2023- 24/1058173985(1), levying penaltyto a tuneofRs.1,50,00,000/-as being void, illegal, arbitrary,[violative][ of][ Articles][ 14][ and]265 of the Constitution of India and consequently set[aside][ the][ same.] f 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 theOrderdated23/11/2023passedbytheRespondentNo.1fortheAssessment Year 2017-18 in PAN under Section 271D of theIncomeTaxAct,1961bearingDINITBA/PNL/F/27ID/2023-24/1058173985(1). Counsel for the Petitioner: SRI VIVEK CHANDRA SEKHAR SCounsel 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.NARENDAR THE HONOURABLE SMT. JUSTICE KIRANMAYEE MANDAVAWRIT PETITION NO: 32875/2023 ORDER: (Per Hon’ble Smt. Justice Kiranmayee Mandava) TheorderunderchallengeintheW.P.No.32875of 2023istheproceedingsof the assessingofficer passedunder Section271DoftheIncome Tax Act,1961,(hereinafter referred to as ‘Act’) levying penalty ofRs.1,50,00,000/-. 2.Thelearnedcounselfor thepetitioner contendsthatpenaltyunder Section 271D of the Act, is levied without recording any satisfaction inthe assessment order to the effect that the penalty[under][ Section][ 271D][ of][ the]Act, had been contemplated.under Section 271D of the Act, is levied without recording any satisfaction inthe assessment order to the effect that the penalty[under][ Section][ 271D][ of][ the]Act, had been contemplated. 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 Groupand V.V.Balaksirshna Rao.Duringthe search proceedingsinthecaseofV.V.BalakrishnaRao,certainincriminatingdocumentsrelatingtothepetitioner were found.Applying the provisions of Sec.153C[of][ the][ Act,][ the]petitioner was asked to submit his return of income.[Pursuant][ thereto,][ the] 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 Groupand V.V.Balaksirshna Rao.Duringthe search proceedingsinthecaseofV.V.BalakrishnaRao,certainincriminatingdocumentsrelatingtothepetitioner were found.Applying the provisions of Sec.153C[of][ the][ Act,][ the]petitioner was asked to submit his return of income.[Pursuant][ thereto,][ the] petitioner has furnished his return of incomeon 15-04-2022 admitting totalincome of Rs.24,13,920/-Notice under Section 143(2) of the Act dated25-04-2022 was issued to the assessee forassessment under Section 143(3)of the Act read with Section 153C of the Act. Simultaneously notice underSection 142(1) of the Act was issued requiring the petitioner to producecertain copies of bank accounts, explain the cash transaction with BalakrishnaRaoetc..Pursuantto the same, the petitioner submitted his reply dated12-05-2022 stating that that he did not takeany loans in cash as alleged. Theloans were received through Banking channels. Thereafteranothernoticedated15-06-2022wasissuedrequestingthepetitionertofurnishtheinformation by 22-06-2022. The petitioner submitted his reply reiterating hisprevious explanation regarding loans stated to have obtainedin cash.Itisfurther contendedthat a similar notice was issuedto the creditor of thepetitioner under Section 133(6) of the Act, dated 06.07.2022 to the creditor ofthe assessee/petitioner Venkata Balakrishna Rao, who, after requesting fortime tiil 22-07-2022 did not respond to the notice issued therefore, summonsunder Section 131 of the Act was issued.In response to the same the saidBalakrishna 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 furnished by the petitioner andBalakrishna Rao, there are nodiscrepancies,however,the seizedmaterialcontainsdocument(s),whichincludesaletterdated02-06-2014,statedtohave beenissuedbythepetitioner to Balakrishnarao, depicting the availing cash loan of Rs.6 crores,and pledging of immovable properties as collateral security by pointing outfrom the material before it the AO concluded that (pg.14 of assessment order)thepetitioner hadfinancial transaction withBalakrishnaRao,outsidethebooks and outside banking channels for the subject assessment year. Therelevant material was copied and pasted in the assessment order (Pgs.15 to56)makingthe sameaspartof the assessmentorder.Fromthesaidtransactions, 17 transactions were tabulated which indicate advances[ to] thepetitioner and recoveries made from the petitioner.The assessing officer onthe basis of the said material observed that Usha Bala Group had received anamount of Rs.29,03,267/- towards interest.Andit was[concluded]that thepetitioner had accepted an amount of Rs. 1,50,00,000/-[as][ loan]on variousdates and repaid an amount of Rs.3,29,03,267/- on various[dates.][ He][ thus]paidanamountofRs.1,50,27,007/-inexcess,apartfrominterestofRs.29,03,267/- paidto Usha Bala. The petitioner was[thus][ asked]to showcause as to why the excess amount should not be treated as the amount paidby the petitioner during the year, without sources[and]shallnot be treatedunexplained money under Section 69A of the Act. The petitioner had stated that no cash loans were either obtained or any repayments[in] cash were mademuch less the interest payment. The assessing officer while concluding theassessment proceedings takingnoteof theletterof the petitioner dated02.06.2014, acknowledging the receipt of amount of Rs.6,00,00,000/- madeaddition of Rs.47,12,325/-, 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][ to]have been committed by the petitioner and for appropriate action. The learnedJoint Commissioner of Income-tax, hasinitiated the penaltyproceedingsunder Section 271Dof the Income Tax Act, andleviedpenaltyofRs.6,65,00,000/-. Challenging the same, the instant Writ Petition is filed. 4.Heard, submissions of the learned counsel for the petitioner[and]the respondents.the respondents. 5.Perused material on record. 6.The main contention of the petitioner is that no satisfaction wasrecorded in the assessment order with regard to levy of penalty under Section271 D of the Act.The petitioner relying on the decision of the Apex Court inthe case of CIT Vs. JaiLaxmi Rice Mills, Ambala City\ contends that therewas no evidence before the Assessing Cfficer to show that the petitioner has^ (2015)64 Taxmann.com75(SC)recorded in the assessment order with regard to levy of penalty under Section271 D of the Act.The petitioner relying on the decision of the Apex Court inthe case of CIT Vs. JaiLaxmi Rice Mills, Ambala City\ contends that therewas no evidence before the Assessing Cfficer to show that the petitioner has^ (2015)64 Taxmann.com75(SC) accepted the loans in cash.As noted from the assessment proceedings, theassessee was put onnotice as regards theloans receivedincash.Thepetitioner has stated that he has not received any[cash][ loans][ and][ he][ denied][ to]havereceived any cashloans, whatall was taken was throughbankingchannels. 7.The learned Senior Standing CounselSri Vijay Kumar[Punna,]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 filing the present WritPetition wouldnot bemaintainable. He relies on the following decisions in support of his case.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 filing the present WritPetition wouldnot bemaintainable. He relies on the following decisions in support of his case. In the case of M. Sougoumarin Vs. Assistant CommissionerofIncomeTaxCircle-1,Puducherry,(2018) 95 taxman.com 240 (Madras)ofIncomeTaxCircle-1,Puducherry,(2018) 95 taxman.com 240 (Madras)II.In the case of VasanHealthcare(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) HI.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. AdditionalCommissionerofIncomeTaxRange2,Chennai,(2021)278 Taxman 273 (SC)CommissionerofIncomeTaxRange2,Chennai,(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 350(2010) 12 see 350 VIII.In the case of Dilip N. Shroff Vs. CIT, (2007)[6][ SCC][ 329] 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 350(2010) 12 see 350 VIII.In the case of Dilip N. Shroff Vs. CIT, (2007)[6][ SCC][ 329] 8.Wehave gone throughthematerialplacedonrecord.TheAssessing Officer, except to base his addition on the letter of the assesseedated 02-06-2014, did not record any finding that there has been any violationof 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 findingto the saideffect,in our considered view, the penalty[cannot]belevied.A presumption can be drawn from the absence of a finding by the AssessingOfficertotheeffectthatthepetitionerhasviolatedtheprovisions ofSec.269SS of the Act, that the department has accepted the explanation givenby thepetitioner denyingacceptanceof loanincash,therefore,havingsatisfied with the same the Assessing Officer did not record any satisfaction orcontemplated initiating the penalty under Sec.291D[of][ the][ Act.]Assessing Officer, except to base his addition on the letter of the assesseedated 02-06-2014, did not record any finding that there has been any violationof 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 findingto the saideffect,in our considered view, the penalty[cannot]belevied.A presumption can be drawn from the absence of a finding by the AssessingOfficertotheeffectthatthepetitionerhasviolatedtheprovisions ofSec.269SS of the Act, that the department has accepted the explanation givenby thepetitioner denyingacceptanceof loanincash,therefore,havingsatisfied with the same the Assessing Officer did not record any satisfaction orcontemplated initiating the penalty under Sec.291D[of][ the][ Act.] 9.In our view, the satisfaction of the Assessing Officer is required tobe recorded because the same officer, who passed the[assessment][ order]would not be levying the penalty under Sec.271D of the Act.Unless thebe recorded because the same officer, who passed the[assessment][ order]would not be levying the penalty under Sec.271D of the Act.Unless the Assessing Officer, who is the primary authority, based[on][ the][ material][ before]it, during assessment proceedings, arrives at a finding[that][ there][ has][ been][ a]violation of the provisions, likein the present case,[of][ Section] 269SS,[ there]will not be any occasion to the Joint Commissioner, who is not the AssessingOfficer,toexercisehisjurisdictiontolevyPenaltyunderSection271D.Following the decision of the Hon'ble Supreme Court[in][ the][ case][ of][ Jai][ Laxmi]RiceMills,referredsupra,wesetasidetheorderpassedbythe1®‘ respondent dated 23.11.2023, under Sec.271D of[the][ Act.] 10.The Writ Petition is accordingly allowed. There shall[be no][ order] as to costs. Asasequel,interlocutory applicationspending,if any,shall stand closed. //TRUE COPY// SOI- 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.32875 of 2023 m52 8 OCT 202^ ALLOWING THE W.P. WITHOUT COSTS