Dineshbhai Dahyabhai Patel, , Petlad vs Assessee

1. Shri Dineshbhai बनाम/ 1. The JCIT, Dahyabhai Patel Vs. Range-3, Baroda Azad Chowk At: Vadodla-388 435 Tal: Petlad PAN: ADHPP 8485 C 2. Shri Ganshyambhai 2. -do- Dahyabhai Patel Azad Chowk At: Vadodla-388 435 Tal: Petlad PAN: AGEPS 0583 Q (अपीलाथȸ /Appellants) .. (Ĥ×यथȸ / Respondents) अपीलाथȸ ओर से /Appellants by : Shri S.N.Divetia, AR Ĥ×यथȸ कȧ ओर से/Respondent by : Smt. Sonia Kumar Sr.DR

ु वाई कȧ तारȣख / सन Date of Hearing 08/01/2015 घोषणा कȧ तारȣख /Date of Pronounce ment 23/01/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

These two appeals by the separate assessees are directed against the orders of the Ld.Commissioner of Income Tax(Appeals)-I, Baroda ITA Nos.1787 & 1788 /Ahd/2014 S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -2-

('CIT(A)' in short) both identically dated 26/12/2012 pertaining to Assessment Year (AY) 2008-09. Since common issues are involved, b both these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience.

2. First, we take up the Assessee's appeal (in the case of Dineshbhai Dahyabhai Patel) in ITA No.1787/Ahd/2014 for AY 2008-09 as a lead case. The Assessee has raised the following grounds of appeal:-

"1.1. The order passed u/s.250 on 03-03-2014 for A.Y. 2008-09 by CIT(A)-I, Baroda upholding the penalty of Rs.6 lacs levied u/s.271D made by JCIT is wholly illegal, unlawful and against the principles of natural justice.

1.2. The Ld.CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned penalty.

2.1.The Ld.CIT(A) has grievously erred in law and on facts in confirming that there was contravention of the provisions of section 269SS without sufficient cause and thereby upholding the penalty of Rs.6 lacs levied u/s.271D.

2.3. That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld there was contravention of the provisions of section 269SS without sufficient cause and thereby upholding the penalty of Rs.6 lacs levied u/s.271D.

ITA Nos.1787 & 1788 /Ahd/2014 S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -3-

3.1. The Ld.CIT(A) has erred in upholding that (a) the penalty proceedings initiated u/s.271D r.w.s.274 were not barred by limitation of time (b) there was a difference between the penalty levied u/s.271B and 271D (c) the case law relied upon by the appellant was not applicable in the facts of the case.

It is, therefore, prayed that the penalty of Rs.6 lacs upheld by the CIT(A) may kindly be deleted.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 22.10.2010, thereby the Assessing Officer (AO in short) accepted the income declared in the return of income. Subsequently, the Jt.Commissioner of Income tax Baroda passed a penalty order dated 27.11.2012, thereby a penalty u/s.271D of the Act was imposed amounting to Rs.6 lacs in respect of the loan of Rs.6 lacs received from one Shri Bhupendrabhai Chunibhai Patel on 17/1/2007 in cash. The AO imposed a penalty for contravening the provisions of section 269SS of the Act. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions of the assessee rejected the appeal. Now, the assessee is further in appeal before this Tribunal.

3. Ground Nos.1.1 to 2.3 are on merits of the case. The ld.counsel for the assessee submitted that as per assessment order, the Revenue has not ITA Nos.1787 & 1788 /Ahd/2014 S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -4-

doubted the transactions since the loan was taken from the farmer. The amount could not be taken by way of cheque or the mode prescribed under the Act. He submitted that it was only a technical or venial breach of the provisions of the Act. He submitted that under the identical facts, the Hon'ble Gujarat High Court has taken a view against the Revenue in the case of CIT vs. Maa Khodiar Construction in Tax Appeal No.325 of 2014 dated 28/04/2014. He further reiterated the submissions made before the ld.CIT(A).

3.1. On the contrary, ld.Sr.DR Smt.Sonia Kumar vehemently opposed the submission of the Authorized Representative of the assessee. She strongly supported the orders of the authorities below and submitted that it is evident from the record that the assessee has contravened the provisions of section 269SS of the Act.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT vs. Maa Khodiyar Construction (supra). In this case, the scrutiny assessment proceedings were initiated on the basis of AIR information and the assessment was framed vide order dated 22/10/2010, whereby the AO after verifying the details furnished by the assessee and also verifying the transactions, gave a finding that no discrepancy was ITA Nos.1787 & 1788 /Ahd/2014 S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -5-

found and, accordingly, accepted the income of the assessee in the return of income. It is not in dispute that the assessee accepted a loan in cash. The contention of the assessee is that the loan has been taken from the farmer who is not assessed to income-tax. It is also the contention of the assessee that it was a friendly interest-free loan and under the bona fide belief, the transaction was carried out. The Hon'ble Gujarat High Court, under the identical facts, has affirmed the view of the Tribunal by observing as under:-

"For not inviting the rigour of penalty u/s.271D of the Act as consequence, on the part of the assessee, the reasonable cause needs to be shown. What is pleaded by the respondent was that all these persons were agriculturists and that the genuineness of the transactions at no point of time had been doubted by the Revenue. They stayed in remote areas. Both the authorities, therefore, were of the opinion that reasonable cause had been sufficiently made out and when the very transactions were never doubted by the Revenue authorities, the breach is to be treated as a mere technical or venial breach.

We notice that the requirement of Section 273B is for the assessee to prove that there was a reasonable cause for its having failed to abide by the provisions of Section 269SS. As emerges from the record, not only the substantiating evidence like 7/12 Extracts were produced, but, also additionally, transactions were reflected in the accounts of assessee and the advancement of loan to the assessee had been reflected in the books of account of those persons from whom the loan had been received. The identity of those persons has also been well established. The assessee also had given satisfactory reason for taking such loan. His bona fide belief that such transactions would not attract provision of Section 269SS on the ground that they were agriculturists and lived in remote villages also was one of the grounds which has weighed with both the authorities.

In view of forgoing discussion, we are of the opinion that no error has bee committed by both the authorities below in deleting the penalty. It is true that the respondent has income from other business and these transactions were not between agriculturists having only agriculture income, not liable to tax which have been ITA Nos.1787 & 1788 /Ahd/2014 S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -6- exempted from such rigor of law and yet, the cause advanced is when found to be sufficiently reasonable, no interference would be desirable."

4.1. In the present case, undisputedly, the AO has verified the transactions and found no discrepancy in respect of the transactions. The explanation of the assessee with regard to accepting the loan in cash that he obtained from farmers, who were staying in remote village and the transaction is bona fide and there is no intention of evading the tax. The AO has also verified the transactions. Therefore, respectfully following the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Maa Khodiyar Construction(supra), we are of the considered view that the authorities below were not justified in levying the penalty, therefore penalty levied vide order dated 27/11/2012 and affirmed by the ld.CIT(A) vide order dated 03/03/2014 is hereby deleted. Thus, this ground of assessee's appeal is allowed.

5. Ground No.3.1 is against the penalty being barred by limitation. Since we have allowed the appeal on merit, this ground of assessee's appeal has become academic. Hence we are not adjudicating the same.

6. In the result, assessee's appeal in the case of Dineshbhai Dahyabhai Patel (ITA No.1787/Ahd/2014 - AY 2008-09) is allowed.

7. Now, we take up the Assessee's appeal (in the case of Ghanshyambhai Dahyabhai Patel) in ITA No.1788/Ahd/2014 for AY 2008-09. The Assessee has raised the following grounds of appeal:-

ITA Nos.1787 & 1788 /Ahd/2014 S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -7-

"1.1. The order passed u/s.250 on 03-03-2014 for A.Y. 2008-09 by CIT(A)-I, Baroda upholding the penalty of Rs.7,35,000/- levied u/s.271D made by JCIT is wholly illegal, unlawful and against the principles of natural justice.

1.2. The Ld.CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned penalty.

2.1.The Ld.CIT(A) has grievously erred in law and on facts in confirming that there was contravention of the provisions of section 269SS without sufficient cause and thereby upholding the penalty of Rs.7,35,000/- levied u/s.271D.

2.2. That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld there was contravention of the provisions of section 269SS without sufficient cause and thereby upholding the penalty of Rs.7,35,000/- levied u/s.271D.

3.1. The Ld.CIT(A) has erred in upholding that (a) the penalty proceedings initiated u/s.271D r.w.s.274 were not barred by limitation of time (b) there was a difference between the penalty levied u/s.271B and 271D (c) the case law relied upon by the appellant was not applicable in the facts of the case."

It is, therefore, prayed that the penalty of Rs.7,35,000/- upheld by the CIT(A) may kindly be deleted.

7.1. In this appeal, the facts are identical to the facts of assessee's appeal in ITA No.1787/Ahd/2014 for AY 2008-09(supra). The respective representatives of the parties adopted their arguments as were addressed in ITA No.1787/Ahd/2014(supra), wherein we have allowed ITA Nos.1787 & 1788 /Ahd/2014 S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -8-

the appeal of the assessee by following the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Maa Khodiyar Construction (Tax Appeal No.325 of 2014, dated 28/04/2014). Accordingly, the appeal of the assessee (in the case of Dineshbhai Dahyabhai Patel for AY 2008-09), for the same reasoning, we allow the ground Nos.1.1 to 2.2 on merits and the ground related to penalty being barred by limitation has become academic, hence we are not adjudicating the same. As a result, this appeal of the assessee is allowed.

8. In the combined result, both the appeals; i.e. ITA No.1787/Ahd/2014 (in the case of Dineshbhai Dahyabhai Patel) & ITA No.1788/Ahd/2014 (in the case of Ghanshyambhai Dahyabhai Patel) for AY 2008-09 both are allowed.

Order pronounced in the Court on Friday, the 23rd day of January, 2015 at Ahmedabad.

Sd/- Sd/- (अǓनल चतव ु ȶदȣ) (कुल भारत) लेखा सदèय ÛयाǓयक सदèय ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 23/ 01 /2015

टȣ.सी.नायर, व.Ǔन.स./T.C. NAIR, Sr. PS ITA Nos.1787 & 1788 /Ahd/2014

S/Shri Dineshbhai D.Patel & Ghanshyambhai D.Patel vs. JCIT respectively Asst.Year(s) - 2008-09 -9-

आदे श कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to :

1. अपीलाथȸ / The Appellant

2. Ĥ×यथȸ / The Respondent.

3. संबंͬधत आयकर आयुÈत / Concerned CIT

4. आयकर आयुÈत(अपील) / The CIT(A)-I, Baroda

5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड[ फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स×याͪपत ĤǓत //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 16.1.15 (dictation-pad 12- pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ...19.1.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......23.1.15

7. Date on which the file goes to the Bench Clerk.....................23.1.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................