2014 (10) TMI 1058 - AT - Income Tax

Levy of penalty u/s. 271D - Cash Loans taken - whether the assessee has accepted cash loans from various parties in contravention of the provisions of sec. 269SS so as to invite the rigour of the penal provision of S.271D ? - HELD THAT - From the records available before us, we are not able to decide the issue as to whether the assessee has taken cash loan as stated by the department, or there are only journal entries as claimed by the assessee, since material to that effect have not been furnished before us. We therefore, deem it just and proper to remit the matter to the file of the Assessing Officer, to verify the fact as to whether the assessee has actually received cash loan from five parties or there were mere journal entries to that effect. If ultimately, it is found that no cash loan was actually received by the assessee in the course of the transactions from five parties to the tune of Rs. 10,85,010/- and there were only journal entries to that effect, then no penalty can be levied under Sec.271D - AO shall accordingly redecide the issue of applicability of the penal provisions of Sec.271D to the facts of the present case, in accordance with law, keeping in view our aforesaid direction, and after giving reasonable opportunity of hearing to the assessee. Levy of Penalty on payments other than account payee cheques - CIT(A) has given categorical finding after examining the bank certificates furnished before the Assessing officer, that transactions of M/s. Madura Capital Market Services Pvt. Ltd. and Mr. Vishal M. Kapadia were not be account payee cheques. Also for M/s. Padinjarathala Securities Ltd. only part of the transaction was by account payee cheque. Being so, the CIT(A) justified the levy of penalty of 20% of the amount of and confirmed the levy of penalty . Regarding the deposits relating to transactions amounting to Rs. 25.50 crores - Admittedly, the CIT(A) has not called for remand report from the Assessing officer in order to verify the correctness of the bank certificate. The CIT(A) should have called for remand report from the Assessing officer so as to physically examine the copies of Cheque Nos. 191212, 191106, 191121 and 191181. Without examining the copy of cheques physically, she deleted the penalty which is not proper. In our opinion, it is just and proper to remit the entire issue to the file of the Assessing officer to conduct necessary enquiry and the assessee has to produce necessary evidence in support of its claim and if the assessee fails to produce the necessary evidence, the Assessing officer is at liberty to take adverse inference and decide accordingly. Levy of penalty u/s. 271E - Amounts paid as commission by way of book entries and repayment of loan by book entries - HELD THAT - It is just and proper to remit the entire issue to the file of the Assessing officer to conduct necessary enquiry and the assessee has to produce necessary evidence in support of its claim and if the assessee fails to produce the necessary evidence, the Assessing officer is at liberty to take adverse inference and decide accordingly.

Summary

Issues Involved:
1. Levy of penalty under Section 271D of the Income Tax Act.
2. Levy of penalty under Section 271E of the Income Tax Act.
3. Admissibility of additional evidence without a remand report.
4. Verification of transactions made through account payee cheques.

Detailed Analysis:

1. Levy of Penalty under Section 271D of the Income Tax Act:

The core issue in the first set of appeals was whether the assessee accepted cash loans from various parties in contravention of Section 269SS, thereby inviting the penal provisions of Section 271D. The Assessing Officer imposed a penalty of Rs. 5,15,87,002/- for amounts accepted as commission, loans, and deposits through book entries rather than account payee cheques. The CIT(A) confirmed the penalty for commission payments amounting to Rs. 2,17,002/- but deleted the penalty for loans from Geojit Credits Pvt. Ltd., amounting to Rs. 5,10,00,000/-.

Upon appeal, it was noted that the CIT(A) admitted additional evidence without calling for a remand report, violating Rule 46A of the I.T. Rules. The Tribunal remitted the matter back to the Assessing Officer to verify whether the transactions were indeed cash loans or merely journal entries. If found to be journal entries, no penalty under Section 271D would apply.

2. Levy of Penalty under Section 271E of the Income Tax Act:

In the second set of appeals, the issue was the levy of penalty under Section 271E for repayments made through book entries rather than account payee cheques. The Assessing Officer imposed a penalty of Rs. 5,14,65,697/-. The CIT(A) confirmed the penalty for commission payments amounting to Rs. 2,29,531/- but deleted the penalty for repayments to Geojit Credits Pvt. Ltd., amounting to Rs. 5,10,00,000/-, and other payments totaling Rs. 2,36,165/-.

The Tribunal noted that the CIT(A) admitted additional evidence without a remand report and remitted the issue back to the Assessing Officer for fresh consideration. The Assessing Officer was directed to verify the transactions and the assessee was instructed to provide necessary evidence.

3. Admissibility of Additional Evidence without a Remand Report:

The Tribunal observed that the CIT(A) admitted additional evidence, such as bank certificates, without calling for a remand report from the Assessing Officer. This was deemed improper as it violated Rule 46A of the I.T. Rules. The Tribunal emphasized the need for the Assessing Officer to physically examine the copies of cheques and other relevant documents to verify the transactions.

4. Verification of Transactions Made Through Account Payee Cheques:

The Tribunal directed the Assessing Officer to verify whether the transactions were made through account payee cheques or were merely book entries. The assessee was required to furnish necessary evidence, such as bank statements and ledger accounts, to support their claim. If the transactions were found to be through account payee cheques, no penalty would be applicable under Sections 271D and 271E.

Conclusion:

The Tribunal remitted the issues back to the Assessing Officer for fresh consideration and verification of the transactions. Both the assessee's and the revenue's appeals were allowed for statistical purposes, requiring further examination and proper verification of the evidence provided.