Whether the penalty can be levied u/s 271D / 271E for the amount received and repaid in cash in the hands of the assessee company though as per the statement of the lender the amount was given to and repaid by the directors in their individual capacity

GROWTH AVENUES LTD. Vs JOINT COMMISSIONER OF INCOME TAX

ITAT AHMEDABAD

ITA No. 1939-1940/Ahd/2009

Assessment Year: 2003- 2004

Dated: May 19, 2011

Assessee’s appeal allowed

ORDER

Per: D K Tyagi:

These are two assessee’s appeals against the order of Ld. Commissioner of Income­tax(Appeals)-I, Surat of even date i.e. 31-03-2009 for the assessment year 2003-04.

First we take up ITA No. 1939/Ahd/2009.

2. The assessee has taken following ground:-“1. That on facts and circumstances of the case, the learned CIT(A) has erred in conforming penalty of Rs. 25,00,000/ u/s.271E of the Act which is absolutely erroneous and bad in law requiring outright annulment.”

3. The brief facts of the case as emerged from the order of Ld. CIT(Appeals) are that a search operation u/s.132 was carried out at the residence of Shri Kirtibhai K Shroff (KKS for short), wherein it was found that the assessee had repaid loan of Rs. 25 lakh to Shri KKS in cash. The JCIT therefore issued a notice u/s. 271E r.w.s.s 269T requiring it to show cause as to why penalty u/s.271E be not levied. The assessee replied that Shri KKS was sub-broker of the assessee-company and had regular dealings with the assessee-company in this regard. As a part of business agreement, Shri KKS had agreed to pay the assessee- company a security deposit for which the assessee-company had executed promissory note in his favour. However, as against the promissory note given by the assessee- company cheques of only Rs. 6 lakh was cleared on 11-07-2003 in the account of the assessee company and the balance amount was pending. This promissory note was executed for the safety point of view by the said Shri KKS against the payments to be made by him during the regular business dealings. The assessee stated that however the actual payment received was only Rs. 6 lakh that too through account payee cheque. It was submitted by assessee-company that even during the course of recording of preliminary statement of one of the Directors of the company, Mr. Viren Shah before the Revenue, he had categorically stated that he had received only Rs.6 lakh by account payee cheque against the promissory note and the balance amount was pending. In view of this reason, the assessee contended that there was no violation of provisions of Section 269T. Without prejudice to this argument, the assessee also submitted that if the amount has not been recorded in the regular books of account the Revenue cannot resort to penalty proceedings u/s.271D/271E by alleging the amount as undisclosed. The assessee also placed reliance on the decision of Honourable Delhi High Court in the case of CIT v. Standard Brands Ltd. (2006) 285 ITR 295 (Del), wherein it was held that Revenue having taken this stand that the alleged deposit was undisclosed and thereby unaccounted taken resort to penalty proceedings u/s.271D. The assessee also relied on the decision of ITAT Mumbai in the case of DCIT v. G.S. Entertainment (2007) 109 TTJ 54 (Mum), wherein it was held that the penalty levied u/s.271D in respect of amount added as undisclosed income is invalid.