2013 (1) TMI 108 - AT - Income Tax

Penalty u/s 271D & 271E - search and seizure - unaccounted accepting & repayment loans and deposits - defaults within the meanings of section 269SS and section 269T - Held that - A detailed enquiry was made from Shri Yogesh Gupta, directors/partners of the assessee and the group concerns in respect of various papers seized from him and in respect of not a single paper, he has stated that the noting on the paper is relating to borrowing by the assessee. In respect of each and every paper, he explained the nature of transaction and in most of the cases also explained the name of the group concern to which such paper belonged. In respect of only few papers he mentioned that these papers belonged to M/s Home Developers (P) Ltd., i.e., the assessee. He stated that these papers are relating to purchase of property No.A-9/33, Vasant Vihar, New Delhi in respect of which cash payment of Rs.54 lakhs was made and which was offered as additional income. The Hon ble Jurisdictional High Court has also considered his statement while deciding the Revenue s appeal for AY 2001-02, 2002- 03 & 2003-04 and has recorded the similar finding that with regard to the loose papers, Shri Yogesh Gupta had stated that these were unaccounted transactions in cash. In his statement, he also surrendered the income of Rs.13 crores in his name and in the name of the group concern & the Revenue was fully satisfied by the surrender made and closed their investigation. The above finding of the are squarely applicable to the year under appeal also because in this year also, the Revenue has brought no other material on record to establish that as per the loose papers, any amount was borrowed by the assessee. They have not even examined the person whose name is claimed to have been mentioned on the loose papers. In the loose papers, no where it is mentioned that they belonged to the assessee i.e. M/s Home Developers (P) Ltd. which is a company. All the entire addition is based upon the presumption of the AO. On the loose papers, there is noting of dates and amounts without any narration. The total of such amount is Rs.2,40,000/- & not as presumed Rs.2,40,00,000/-. The noting is relating to loan taken by the assessee & the loan was repaid during the accounting year relevant to the assessment year under consideration alongwith interest at the rate of 20%. On these series of presumptions, he not only made huge additions running into crores of Rupees but also levied penalties under Sections 271D & 271E. His finding is neither based upon the noting on the loose papers nor any corroborative evidence brought on record during the course of assessment proceedings - thus when it is not established that the assessee had taken loan or deposit, the question of further presumption that such loan or deposit was repaid during the year under consideration was without any basis or material on record - the penalties levied u/s 271D and 271E cancelled - in favour of assessee.

Summary

Issues Involved:
1. Addition of alleged repayment of loans along with interest.
2. Penalty levied under Section 271D for acceptance of loans in cash.
3. Penalty levied under Section 271E for repayment of loans in cash.

Detailed Analysis:

1. Addition of Alleged Repayment of Loans Along with Interest:

The case involved a search and seizure operation at the business premises of the assessee and other group concerns, including the residence of the directors/partners. During the search at the residence of Shri Yogesh Gupta, documents were found and seized. In his statement, Shri Yogesh Gupta surrendered Rs.13 crores as unaccounted transactions. The Assessing Officer (AO) presumed that the notings on the papers were in respect of loans taken by the assessee, which were repaid along with interest. The AO made additions for alleged repayment of loans with interest for AY 2004-05 to 2006-07.

On appeal, the CIT(A) deleted the addition regarding the repayment of the principal amount of the loan but partly sustained the addition concerning the alleged repayment of interest. The year-wise position of the addition deleted and sustained by the CIT(A) is as follows:
- AY 2004-05: Deleted Rs.4,49,65,000/-, Sustained Rs.28,35,000/-
- AY 2005-06: Deleted Rs.1,85,08,500/-, Sustained Rs.13,36,500/-
- AY 2006-07: Deleted Rs.9,08,85,750/-, Sustained Rs.73,69,682/-

The Tribunal found that the entire addition was based on the presumptions of the AO without any corroborative evidence. The Tribunal noted that the loose papers were found from Shri Yogesh Gupta and not the assessee company. The statement of Shri Yogesh Gupta indicated that these were unaccounted transactions, and the income from such transactions was surrendered and accepted by the Revenue. The Tribunal held that the AO's findings were based on a series of presumptions and lacked material evidence. Therefore, the addition made by the AO for unexplained repayment of loans and interest thereon was not sustainable. The Tribunal upheld the CIT(A)'s deletion of the addition and reversed the addition sustained by the CIT(A).

2. Penalty Levied Under Section 271D for Acceptance of Loans in Cash:

The AO levied penalties for acceptance of loans in cash under Section 271D of the Income-tax Act, 1961. The CIT(A) partly sustained the penalties. The year-wise position of the penalty levied and sustained by the CIT(A) is as follows:
- AY 2004-05: Levied Rs.3,84,60,000/-, Sustained Rs.61,00,000/-
- AY 2005-06: Levied Rs.2,25,50,000/-, Sustained Rs.2,25,50,000/-
- AY 2006-07: Levied Rs.9,78,63,940/-, Sustained Rs.25,00,000/-

The Tribunal noted that the facts of the case were similar to earlier years where the ITAT and the Hon'ble Jurisdictional High Court had held that the acceptance of loan in cash by the assessee was not proved. The Tribunal found that there was no evidence of acceptance of loans in cash by the assessee and, therefore, the penalties levied under Section 271D were not justified. The Tribunal canceled the penalties under Section 271D.

3. Penalty Levied Under Section 271E for Repayment of Loans in Cash:

The AO also levied penalties under Section 271E for repayment of loans in cash, which were partly sustained by the CIT(A). The year-wise break-up of the penalty levied and sustained by the CIT(A) is as follows:
- AY 2004-05: Levied Rs.1,36,69,400/-, Sustained Rs.68,50,000/-
- AY 2005-06: Levied Rs.8,80,000/-, Sustained Rs.11,33,500/-
- AY 2006-07: Levied Rs.8,46,33,100/-, Sustained Rs.10,00,000/-

The Tribunal held that since it was not established that the assessee had taken or repaid loans in cash, the penalties under Section 271E were also not sustainable. The Tribunal canceled the penalties under Section 271E.

Conclusion:
The Tribunal allowed all the appeals of the assessee and dismissed all the appeals of the Revenue. The additions made for the alleged repayment of loans and interest were deleted, and the penalties under Sections 271D and 271E were canceled.