2022 (3) TMI 1018 - AT - Income Tax

Addition u/s 69D - Hundies - Search seizure operation - Unsigned hundies and promissory note found in search - theory of probability adopted by the investigation wing of Delhi - Hon'ble Settlement Commission observed that it is inconceivable that a person (Shri Satish Shahwney) would allow an amount of ₹ 3.80 crores to remain outstanding for such a long period - HELD THAT - In the instant case, the Revenue has not brought on record any material establishing that the assessee has actually received the sum of ₹ 3,80,00,000/- during the period relevant to assessment year 2012-13. Therefore, we find from the perusal of the receipts promissory note (unsigned) that the receipts relied upon do not fall in the category of hundis in any manner We find that the Revenue was not convinced with as regard to the transaction, if any, carried out and the period during which such transaction was carried out. Thus, the theory being hypothesis was not conclusive. Therefore, application of Section 69D was unjustified. The documents were in English and the transactions were not between three parties. They were bilateral. The transactions were on the lines of a promissory note. The documents had waived the notice of dishonor and no grace period was granted. This was also indicative of the transaction not being a hundi transaction. Section 69D was not applicable. We find that the facts of the assessee s case are identical to the above reported case of Dexan Pharmaceuticals Pvt. Ltd 1995 (1) TMI 54 - ANDHRA PRADESH HIGH COURT and therefore, the provisions of sec. 69D were not applicable in the case of the assessee. Thus addition made by the Assessing Officer by invoking section 69D was bad in law and the action of Ld. Commissioner of Income Tax (Appeals) deleting this addition contains no infirmity and the same deserves no interference. Thus, the only ground raised by the Revenue stands dismissed. Penalty u/s 271D - contravention to the provisions of section 269SS - HELD THAT - While deciding the quantum addition above we have held that at no point of time, it was proved that the assessee had actually received any loan or deposit specifically during the period relevant to Assessment Year 2012-13 as there was no material evidence in respect of the same. Since we have already confirmed the deletion of quantum addition by ld. CIT(A) while deciding the very foundation for initiation of penalty under section 271D has now become baseless.

Summary

Issues Involved:
1. Justification of addition under Section 69D of the Income Tax Act.
2. Deletion of penalty under Section 271D of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Justification of Addition under Section 69D of the Income Tax Act

The Revenue's appeal questioned whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition of ?3.80 crores made by the Assessing Officer under Section 69D of the Income Tax Act. The facts reveal that the assessee, an individual deriving income from consultancy and interest, had submitted a return declaring an income of ?10,33,110, which was accepted under Section 143(1).

A search and seizure operation conducted at the premises of an individual in Delhi led to the discovery of 10 receipts of ?38 lakhs each, signed by the assessee, and an unsigned promissory note dated April 2007. Based on this, proceedings under Section 153C were initiated for the assessment years 2006-07 to 2011-12. The Settlement Commission taxed ?3.8 crores in the hands of the individual whose premises were searched, in the year of the search (A.Y. 2012-13). Consequently, the Assessing Officer made an addition of ?3.80 crores under Section 69D in the hands of the assessee for A.Y. 2012-13.

The CIT(A) deleted the addition, noting that the same amount had already been taxed in the hands of the other individual by the Settlement Commission, and there was no concrete evidence to show that the loan was taken during the period relevant to the assessment year under consideration. The Tribunal upheld this deletion, emphasizing that the genuineness of the transaction must be proved beyond doubt for Section 69D to be invoked. The Tribunal also noted that the receipts did not qualify as "hundis" and that the Revenue failed to establish that the amount was received during the relevant assessment year.

2. Deletion of Penalty under Section 271D of the Income Tax Act

The Revenue also appealed against the deletion of a penalty of ?3.80 crores levied under Section 271D of the Income Tax Act. The penalty was initially imposed on the allegation that the assessee had received a cash loan of ?3.80 crores in contravention of Section 269SS. The CIT(A) deleted the penalty, concluding that no loan or deposit was received in contravention of Section 269SS during the relevant period.

The Tribunal upheld the CIT(A)'s decision, noting that since the quantum addition under Section 69D was found to be unjustified, the foundation for the penalty under Section 271D was baseless. The Tribunal confirmed that there was no material evidence proving that the assessee had received any loan or deposit during the relevant assessment year.

Conclusion

Both appeals by the Revenue were dismissed. The Tribunal confirmed the deletion of the addition under Section 69D and the penalty under Section 271D, finding no infirmity in the orders of the CIT(A). The Tribunal emphasized the lack of concrete evidence from the Revenue to substantiate the claims against the assessee.