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TMI Blog2022 (4) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed u/s. 57. CIT(A) in his order has observed that the assessee submitted profit and loss account and balance sheet only reflecting various assets/sundry creditors and debtors but failed to produce books of accounts or any details to establish the nexus between borrowed fund to such loans and advances. In view of the above, we hold that the ld. CIT(A) has not erred in treating interest income as income from other sources. We are of the view that since the assessee has not established that it is engaged in carryout out any business activity, the ld. CIT(A) has not erred in law and on facts in confirming the action of the ld. CIT(A) in disallowing the entire business expenditure after holding that no business was carried out by the assessee. Further, since the assessee has failed to establish any nexus between payment of interest on borrowed fund and giving of loans and advances for earning interest income, in our view, the ld. CIT(A) has not erred in not granting deduction of expenditure u/s. 57 of the Act, against interest income. Addition u/s. 68 - Onus to prove - HELD THAT:- We note that the assessee has not discharged the onus cast upon it u/s. 68 of the Act. Despit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not produce books of accounts, vouchers, evidence etc. in supports of any of its claim. Even in proceedings before the ld. CIT(A), both in quantum and penalty no evidence was produced by the assessee in respect of any of its claim. The assessee despite having ownership of several properties did not offer tax on any rental income in respect of those properties which were not self occupied. In respect of addition made u/s. 68 of the Act, the assessee was unable to prove the genuineness and creditworthiness of the creditors and failed to discharge the initial onus cast upon him. From the above facts of the case, we are of the view that the ld. CIT(A) has not erred in law and on facts in confirming the penalty levied u/s. 271(1)(c). Penalty u/s. 271D and 271E - HELD THAT:- We are in agreement with argument of the Counsel for the assessee that when as per the Rule of Literal interpretation, when the words of the Statute are plain and unambiguous, the same should be understood to represent the legislative intent. In the instant case, the language of sections 271D and 271E is plain and unambiguous and states specifically that penalty shall be imposed by the Joint Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and on the facts of the case in sustaining the addition made by the ld. AO to the extent of ₹ 5,00,000/- u/s. 68 of the Act. 6. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in making addition of ₹ 1,09,200/- u/s. 22 of the Act. 7. The ld. CIT(A) has grossly erred in law and on the facts of the in assuming jurisdiction in recording satisfaction to levy penalty u/s. 271D and 271E of the Act while passing the appellate order without taking into cognizance of the provisions of sub-section (1) to S. 271D and 27 IE of the Act which, categorically provides that the penalty under these provisions can be imposed by the Joint Commissioner. 8. The ld. IT(A) accordingly has erroneously assumed jurisdiction to record satisfaction to levy penalty u/s. 271D and 271E of the Act, which is beyond his power and accordingly bad and illegal in the eyes of law. 9. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 503/- the same were treated as unexplained cash credit u/s. 68 of the Act. The ld. Assessing Officer further observed that the assessee held ownership in several properties in respect of which no income was declared in the return of income. The AO held that out of the above properties, only one can be considered as self occupied property. With respect to the balance two properties, the ld. Assessing Officer computed annual rent of ₹ 1,20,000/- and ₹ 36,000/- respectively and after giving the permissible deduction u/s. 24 of the Act on the notional rent, an amount of ₹ 1,09,200/- was added under the head income from house property. 5. The assessee filed appeal before the ld. CIT(A) against the above order. With respect to claim of the assessee that the interest income amounting to ₹ 6,98,780/- qualifies as business income, the assessee submitted that assessee was in the business of providing need based finance and acting as agent which has given rise to interest income of ₹ 6,98,780/- and brokerage income of ₹ 81,000/- which qualifies as business income. Alternatively the assessee submitted that in the case of lull of business even if there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2. Regarding the addition of ₹ 1,09,200/- u/s. 22 of the Act, the ld. CIT(A) upheld the order of ld. Assessing Officer on the ground that the assessee has factually made incorrect statement and has not brought any evidence to controvert the findings of the ld. CIT(A). 6. Before us, the ld. counsel for the assessee submitted that the ld. Assessing Officer erred in holding that the assessee was not carrying out business since this fact has been accepted by the Department in later years as well. The ld. counsel for the assessee drew our attention to pages 36 onwards of the paper book and also to order passed by the ld. CIT(A) for A.Y. 2004-05 to contend the fact that assessee is engaged in business activities has been accepted by the Department in later years. The ld. counsel for the assessee drew our attention to page 4, para 7 of the assessment order for A.Y. 2004-05 in support of his contention. The ld. counsel for the assessee submitted that on the principle of consistency, the ld. CIT(A) erred in coming to the conclusion that assessee is not engaged in carrying on business activities. Alternatively, he contended that even if entire income is treated as 'income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. counsel for the assessee submitted that the Department has in the later years as well have accepted the position that the assessee is carrying on business activities and hence the ld. CIT(A) has erred in confirming the action of ld. Assessing Officer in treating interest income of ₹ 6,98,780/- as income from other sources. However, we note that this assertion of the Ld. Counsel for the assessee that the Department has accepted the position that the assessee is engaged in carrying on business activities has not been accepted by the Department. We would like to reproduce the relevant extracts of order of ld. CIT(A) for A.Y. 2004-05 from which it becomes evident that the Department has never accepted this contention of the assessee: It is evident from above observation that appellant for the previous year relevant to A.Y. 02-03 though does not have any direct income but shown entire indirect income except Agri. Income, Director's remuneration and deposit interest as business income. But on the same fact during Prv. Year relevant to A.Y. 06-07 no such business income is shown despite having similar indirect income. It is therefore, there is no consistency of treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , vouchers, etc. in support of the genuineness of the claim. Regarding the alternate claim of the assessee that in the event the interest income is treated as income from other sources then the interest expenses should be allowed as a deduction against such interest income u/s. 57 of the Act, we are of the view that in absence of evidence from the assessee that such borrowing is directly linked with such loans/advances, such deduction cannot be allowed u/s. 57 of the Act. The ld. CIT(A) in his order has observed that the assessee submitted profit and loss account and balance sheet only reflecting various assets/sundry creditors and debtors but failed to produce books of accounts or any details to establish the nexus between borrowed fund to such loans and advances. In view of the above, we hold that the ld. CIT(A) has not erred in treating interest income of ₹ 6,98,780/- as income from other sources. We are of the view that since the assessee has not established that it is engaged in carryout out any business activity, the ld. CIT(A) has not erred in law and on facts in confirming the action of the ld. CIT(A) in disallowing the entire business expenditure of ₹ 5,82,16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. In the result, ground no. 6 of the assessee is dismissed. 13. Regarding ground nos. 7 and 8 in respect of initiation and imposition of penalty u/s. 271D and s. 271E of the Act by the CIT(Appeals), the matter is being taken up in separate appeal filed by the assessee before us and no separate adjudication is required for these grounds in this appeal. 14. Ground nos. 8 to 11 are general for which no separate adjudication is required. 15. In the result, the appeal of the assessee is dismissed. ITA No. 1032/Ahd/2013 A.Y. 2004-05 16. The assessee has raised following grounds of appeal:- 1. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in framing and passing the assessment order u/s. 144 of the Act as valid and appropriate action. 2. The ld. CIT(A) has erred in law and on the facts of the case in sustaining the addition made by the ld. AO to the extent of ₹ 2,80,000/- u/s. 68 of the Act. 3. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in disallowing entire business expenditure of ₹ 5,98,616/- after holding that no business was carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer accordingly requisitioned the assessee to produce the books of accounts for verification. However, the assessee did not file any reply and accordingly the ld. Assessing Officer disallowed the entire expenses of ₹ 5,98,616/- on the ground that the same was not incurred for earning business income. During the course of assessment proceedings, the ld. Assessing Officer further noted that the assessee was having immoveable properties in respect of which he had not been offered any rental income in the return of income. The ld. Assessing Officer accordingly treated one of the immoveable properties as self occupied, and in respect of other two properties arrived at annual notional rent of ₹ 1,56,000/- and after allowing deduction of ₹ 46,800/- u/s. 24 of the Act, added an amount of ₹ 1,09,200/- under the head income from house property. The ld. Assessing Officer also initiated penalty proceedings u/s. 271(1)(c) of the Act. 18. In appeal before ld. CIT(A), he dismissed the appeal of the assessee in respect of all grounds raised before him. In respect of loan of ₹ 2,80,000/- from M/s. Ram Lakhan Sharma, ld. CIT(A) noted that except the copy of ledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated interest of ₹ 658498 as income from other sources but disallowed the expenses so claimed. Now coming to alternative ground that deduction of payment of interest out of the interest income be given to appellant if the income is assessed under the head 'Income from other sources'. I am inclined with the contention of the appellant that if there is no business activity these earning of interest can be linked with payment of interest on borrowed fund and deduction of such interest is allowable but in the absence of evidences from the appellant that such borrowing is directly linked with such loan advances and not for other personal expenditure of purchase of flats, car or other asset, such deduction can be allowed u/s. 57, of the Act. The appellant submitted profit loss account and balance sheet only reflecting various asset, sundry creditor debtor but not produced books of account or details to establish the nexus between borrowed fund to such loan advances. Further, The A.O. has not treated the interest income as income from other sources. It is therefore such alternative ground cannot be accepted. In totality this ground is dismissed. 19. Regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations made by us for A.Y. 2003-04 would equally apply to this year as well. We find no infirmity in the order of Ld. CIT(A), where he has held that the assessee has taken inconsistent position in various years. Further, the Ld. CIT(A) has also specifically observed that there has been non production of books of accounts, bills, vouchers etc. for various expenses claim being genuine both during assessment as well as in appeal proceeding where no such bills, vouchers, were produced. Accordingly, we are of the view that ld. CIT(A) has not erred in confirming the action of the ld. Assessing Officer in disallowing the business expenditure of ₹ 5,98,616/-. Accordingly, ground no. 3 of the assessee's appeal is hereby dismissed. 25. In the result, ground no. 3 of the assessee's appeal is dismissed. 26. Regarding ground No. 4 in respect of addition of ₹ 1,09,200/- u/s. 22 of the Act as noted in the order for A.Y. 2003-04, the ld. counsel for the assessee has submitted that the Department has already granted 30% deduction against the presumptive addition u/s. 22 of the Act and he has nothing further to submit in the matter. 27. Accordingly ground no. 4 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to comply and hence another show cause notice dated 23-08-2016 was issued. The assessee again did not comply with the aforesaid notice and accordingly the ld. Assessing Officer passed minimum penalty u/s. 271(1)(c) of the Act at 100% of concealed income which worked out to ₹ 33,55,999/-. The assessee filed appeal against the order of penalty passed by ld. Assessing Officer 33. In appeal, the ld. CIT(A) observed that on perusal of records of appellant from A.Y. 2003-04 to A.Y. 2006-07, the appellant has inconsistently taken up the income assessable under the head 'income from other sources' as 'business income' to claim deduction of various expenditure which are otherwise not allowable. Against such income declared under the head 'income from business or profession', ld. CIT(A) held that despite being good receipts, the appellant through his dubious and deliberated method has not paid any tax from A.Y. 2003-04 to A.Y. 2005-06 and in 2006-07 paid an amount of ₹ 1300 as self assessment tax. The appellant did not co-operate in assessment proceedings to avoid scrutiny of his case and he did not even file appeal against such order. The books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s addition. Regarding the penalty in respect of addition of ₹ 1,09,200/- in respect of annual value of property, the ld. counsel for the assessee submitted that such addition has been made with respect to notional income estimated by Assessing Officer. No such income has been actually earned by the assessee and therefore when there is no real income, then, even if addition is confirmed in quantum proceedings, then no case is made out for penalty u/s. 271(1)(c). The ld. counsel for the assessee cited various case laws in support of his contention that mere fact addition has been confirmed in quantum proceedings does not straightway result penalty u/s. 271(1)(c) of the Act. He further submitted that it is a settled law that once any assessee offers plausible explanation, substantiated the same with documentary evidence and such explanation is not found to be false by Department then even if such explanation is not acceptable to the Department then also the penalty u/s. 271(1)(c) cannot be levied. The ld. Departmental Representative relied upon the observations made by the ld. CIT(A) in his order. 35. We have heard the rival contentions and perused the material on record. Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 39. In the result Ground No. 2 of the assessee's appeal is dismissed. 40. Ground Nos. 3 and 5 of the assessee's appeal are general in nature and do not require any specific adjudication. 41. In the result Ground No. 3 and 5 of the assessee's appeal is dismissed. 42. Ground No. 4 of the assessee's appeal that Ld. AO did not record mandatory satisfaction for initiating penalty proceedings u/s. 271(1)(c) of the Act, is factually incorrect and hence being dismissed. Such satisfactions forms part of the assessment order. 43. In the result Ground No. 4 of the assessee's appeal is dismissed. 44. In the result, the appeal of the assessee is dismissed. ITA No. 1031/Ahd/2013 A.Y. 2004-05: 45. The assessee has raised following grounds of appeal:- 1. The ld. CIT(A) has erred in law and on the facts of the case in directing the ld. AO to confirm the levy of penalty u/s. 271(1)(c) of the Act on the additions sustained in the quantum appellate order, which is wholly unsustainable in law and on facts and as such the appellant could not be charged with any guilt of furnishing inaccurate particulars of income or concealing particulars of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any tax from A.Y. 2003-04 to A.Y. 2005-06 and in 2006-07 paid an amount of ₹ 1300 as self assessment tax. The appellant did not co-operate in assessment proceedings to avoid scrutiny of his case and it did not even file appeal against such order. The books of accounts, bills, vouchers etc. were never produced before Department at any level even in appellate proceedings for both quantum as well as penalty order, no such bills, vouchers of expenditure, confirmation from creditors were produced. The ld. CIT(A), therefore, held that appellant cannot be given dual benefit of evading and avoiding scrutiny proceedings at assessment stage and immunity of penalty at appeal stage taking advantage of such non-compliance and non-production. The ld. CIT(A) placed reliance on the case of CIT vs. Indian Metal and Ferro Alloys Ltd. (1994) 117 CTR (Orissa) 378 and held that the phases furnishing of inaccurate particulars and concealment of income are squarely applicable in view of non-compliance of notices and non-production of books of accounts, bills, vouchers to justify how such return of income is arrived at. Further, the ld. CIT(A) held that with regard to the various case laws relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department then also the penalty u/s. 271(1)(c) cannot be levied. The ld. Departmental Representative relied upon the observations made by the ld. CIT(A) in his order. 49. We have heard the rival contentions and perused the material on record. From the facts on record, we are in agreement with the order of ld. CIT(A) that the assessee has been inconsistent in his approach wherein in one year, he has shown interest as income from other sources whereas in another year he has offered the same as business income . The assessee has not been able to establish that he is carrying on any business and ld. CIT(A) has correctly noted that interest income has been categorized as business income and not as income from other sources in order to claim deduction of various expenses against such income so as to avoid payment of taxes. When the case was opened for scrutiny, the assessee deliberately did not cause appearance and did not produce books of accounts, vouchers, evidence etc. in supports of any of its claim. Even in proceedings before us, the ld. CIT(A) both in quantum and penalty no evidence was produced by the assessee in respect of any of its claim. The assessee despite having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of appeal:- 1. The ld. CIT(A) has erred both in law and on the facts of the case in imposing penalty of ₹ 95,000/- u/s. 271D of the Act for alleged violation of provisions of S. 269SS of the Act. 2. The order passed by the ld. CIT(A) is barred by limitation and beyond his jurisdiction. 3. The ld. CIT(A) has erred in both in law and on the facts of the case that in not appreciating the scheme of the Act whereby penalty u/s. 271D of the Act can be imposed only by the Joint Commissioner of Income Tax and not by the Commissioner of Income Tax (Appeals). 4. The ld. CIT(A) ought to have appreciated that powers as envisaged u/s. 251 of the Act would ceases to be operational once the appellate order has already been passed. 5. Ld. CIT(A) has accordingly erred in law in passing the order on 24/09/2013 by invoking provisions of S. 251 of the Act to impose penalty u/s. 271D of the Act after the appellate order has already been passed by him on 28/01/2013 and no appeal was pending before him while imposing penalty. 6. The ld. CIT(A) has further erred in law in imposing penalty for the year under consideration after a gap of almost 10 years, which is beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of appellate proceedings in Appeal No. CIT(A)-XV/ITO 9(2)/111/10-11 A.Y. 2003-04, the ld. CIT(A) observed that assessee had made infringement of section 269SS of the Act as well as section 269T of the Act which calls for levy of penalty u/s. 271D and 271E of the Act. The ld. CIT(A) while disposing of quantum appeal for A.Y. 2003-04 vide order dated 28-01-2013, on the basis of facts available on record, drew satisfaction in the said appeal order and initiated penalty proceedings u/s. 271D and 271D of the Act. As per provisions of section 269SS, acceptance of deposit in cash exceeding ₹ 20,000/- is prohibited for which penalty u/s. 271D of the Act may be levied. As per the provisions of section 269T of the Act repayment of deposit exceeding ₹ 20,000/- in cash is prohibited for which penalty u/s. 271E of the Act is provided. The ld. CIT(A) issued show cause notice dated 11-03-2013 asking the assessee to provide an explanation in respect of the transactions tabulated below:- Transaction Amount in Rs. Section under which penalty required to be imposed Amount of penalty in Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed u/s. 144 of the Act. The assessee expired on 06-02-2008 and legal heir Shri Pawan Sharma filed an appeal with condonation of delay of 1600 days. Importantly, PAN, confirmation, address of all such parties from whom cash was accepted and repaid were filed by the legal heir and therefore he was well aware of the business affairs of the deceased assessee. Considering the background of criminal proceedings against assessee, such acceptance and repayment of loan in cash are within the objective of promulgation of section 269SS and 269T of the Act. Therefore, the ld. CIT(A) held that the assessee cannot be held as prevented by reasonable cause for acceptance of such cash and repayment of such loan in cash. So far as objection that the notice is bad in law since penalty u/s. 271D and 271E can be imposed only by the Joint Commissioner, the ld. CIT(A) rejected this objection by observing that Explanation to section 251 of the Act give wide ranging power to Commissioner(Appeals) to enter into the shoes of the Assessing Officer and act accordingly. In this regard, the intention and objective of legislature has to be looked into. In the hierarchy, the ld. CIT(A) is higher than Joint Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that while disposing of an appeal against order of assessment, ld. CIT(A) would not have initiated penalty proceedings u/s. 271D and section 271E. Section 251 of the Act provides for power of CIT(A) in disposing of an appeal. Once the appeal before CIT(A) has been disposed off, no further action can be taken by him. The ld. Departmental Representative on the other hand relied upon the order of the ld. CIT(A) imposing penalty u/s. 271D and 271E. 65. We have heard the rival contentions and have perused the material on record. We are in agreement with the argument of the counsel for the assessee that the language as per section 271D and 271C of the Act is very categorical and is not open to interpretation. The operative part of the section is being reproduced for ready reference: Penalty for failure to comply with the provisions of section 269SS. 271D. (1)...... (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. Penalty for failure to comply with the provisions of section 269T. 271E. (1) ....... (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. In the said secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult. The very concept of interpretation connotes the introduction of elements as are necessarily extrinsic to the words in the statute. Though the words 'interpretation' and 'construction' are used interchangeably, the idea is somewhat different. The rule of construction that if the statutory provision is susceptible or admits of two reasonably possible views, then the one which would promote its constitutionality should be preferred on the ground that the Legislature is presumed not to have intended to exceed its own jurisdiction, is subject to the further rule that it applies only where two views are reasonably possible on the statutory language. 65.2. We are therefore in agreement with argument of the Counsel for the assessee that when as per the Rule of Literal interpretation, when the words of the Statute are plain and unambiguous, the same should be understood to represent the legislative intent. In the instant case, the language of sections 271D and 271E is plain and unambiguous and states specifically that penalty shall be imposed by the Joint Commissioner of Income Tax. We therefore are of the view that the CIT(Appeals) erred in law and in facts in init ..... X X X X Extracts X X X X X X X X Extracts X X X X
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