2018 (9) TMI 1409 - AT - Income Tax

Penalty u/s 271D - change of stand by the Revenue - nature of transaction - assessee had advanced the money from unaccounted sources and assessed the same as undisclosed income in the hands of the assessee - Held that - Department has taken two different stands i. e. while framing the assessment it was held as the monies advanced and assessed as undisclosed income and when the appellate authorities deleted the addition holding that the said sum represents loans borrowed, the department has made the U turn and initiated penalty proceedings u/s 271D. The department is expected to take the consistent view on the facts of the case but not resort to approbate and reprobate stands. The department having held that he assessee has advances the sums outside the books of accounts on two rounds of appeal cannot hold that the said sum represents the loans accepted in cash without bringing the tangible evidence. On the similar facts in the case of Commissioner of Income-tax Vs. Standard Brands Ltd 2006 (7) TMI 126 - DELHI HIGH COURT held that the Revenue could not on the one hand, contend that the amount as undisclosed income in the hands of the assessee and at the same time seek to initiate proceedings against the assessee for violation of the provisions of section 269SS of the Act which deals with cash deposits or loans in excess of ₹ 20, 000/-. - Thus we cancel the penalty levied u/s 271D of the Act and uphold the order of the CIT(A). - Decided in favour of assessee

Summary

Issues Involved:

1. Validity of the penalty imposed under Section 271D of the Income Tax Act.
2. Determination of whether the amount in question was borrowed or advanced.
3. Consistency of the Revenue's stance regarding the nature of the transaction.

Issue-wise Detailed Analysis:

1. Validity of the penalty imposed under Section 271D of the Income Tax Act:

The appeal concerns the penalty imposed under Section 271D for the block assessment period 1995-2002. The JCIT initiated penalty proceedings by issuing a notice under Section 271D. The assessee objected, arguing that penalty proceedings cannot be initiated without evidence of an offence during the assessment proceedings and that the transactions were trade advances, not loans. The JCIT imposed the penalty, stating there was no urgency or business need for accepting cash loans. The CIT(A) deleted the penalty, and the Revenue appealed to the Tribunal. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue had taken inconsistent positions regarding the nature of the transaction.

2. Determination of whether the amount in question was borrowed or advanced:

Initially, the AO assessed the amount as unaccounted advances given by the assessee, treating it as undisclosed income. The CIT(A) reversed this, holding that the amount was borrowed by the assessee. The Tribunal confirmed the CIT(A)'s findings, noting that the seized documents indicated the amounts were borrowings, not advances. The Tribunal emphasized that there was no corroborative evidence to support the AO's conclusion that the amount was an advance. The Tribunal's analysis of the seized material showed that the entries related to expenses and stock credits, indicating borrowings rather than advances.

3. Consistency of the Revenue's stance regarding the nature of the transaction:

The Tribunal criticized the Revenue for taking inconsistent positions—first treating the amount as unaccounted advances and later as cash loans. The Tribunal cited judicial precedents, including the Delhi High Court's decisions in Commissioner of Income-tax Vs. Standard Brands Ltd and Commissioner of Income-tax v. R. P. Singh & Co. (P.) Ltd., which held that the Revenue cannot contend an amount as undisclosed income and simultaneously initiate penalty proceedings for cash loans. The Tribunal noted that the Revenue must maintain a consistent stance and cannot approbate and reprobate based on convenience. The Tribunal concluded that the penalty under Section 271D was not permissible once the amount was assessed as undisclosed income.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order to delete the penalty under Section 271D. The Tribunal emphasized the need for consistency in the Revenue's stance and found that the transactions were borrowings, not advances. The Tribunal's decision was based on a detailed analysis of the seized documents and relevant judicial precedents, ensuring that the penalty was not imposed mechanically or without proper evidence.