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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 640/2005
Date of decision: 24th May, 2018
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr. Deepak Anand, Jr. Standing
Counsel for Mr.Zoheb Hossain, Sr. Standing
Counsel for Revenue
Versus
PAWAN KUMAR JAIN ..... Respondent
Through Mr. Prakash Kumar, Advocate
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR
SANJIV KHANNA, J. (ORAL):
This appeal preferred by the Revenue impugns order dated 3rd
September, 2004 passed by the Income Tax Appellate Tribunal (for
short ,,the Tribunal) in ITA No. 903/Del/2003 in the case of Pawan
Kumar Jain versus Assistant Commissioner of Income Tax. The
appeal relates to Assessment Year 1999-2000.
2. By the impugned order, the Tribunal has deleted penalty of
Rs.21,47,019/- imposed by the Assessing Officer under Section 271D
of the Income Tax Act, 1961 (for short ,,the Act).
3. By order dated 12th July, 2006, present appeal was admitted for
hearing on the following substantial question of law:
ITA No.640/2005 Page 1 of 7
"Whether the Tribunal was right in law in deleting
the penalty of Rs.21,47,019/- levied under Section
271D of the Income Tax Act by holding that the
amount in issue was not a loan within the meaning
of Section 269SS of the Act?"
4. The Assessing Officer in the penalty order had referred to the
assessment order and thereupon had given his finding wherein the
contention of the assessee that cash payment of Rs.6,50,000/- and
Rs.14,97,019/- received on 3rd April, 1998 and 26th June, 1998,
respectively, were towards imprest was rejected, inter alia, observing
as under:
"Further the claim of the assessee that money was
more of an imprest than loan is not acceptable for
the following reasons:-
1) There was no reason for keeping separate
imprest if as per assessees own admission, he
was General Secretary of Jain Sahitya Sadan and
was incharge of cash of Jain Sahitya Sadan. The
assessee was never separate from Jain Sahitya
Sadan according to his submissions, for all
practical purposes, therefore, there was no need
for creation of any separate imprest account out
of funds received from Jain Sahitya Sadan.
2) The assessee has purchased FDRs in his name
and has in his I.T. return for A.Y. 1999-2000.
Considering the fact that the assessee has
utilized the money and even earned interest on
the same goes against the claim of the assessee
that it was merely an imprest money with him."
ITA No.640/2005 Page 2 of 7
5. The aforesaid findings were upheld and sustained by the
Commissioner of Income Tax (Appeals) [for short ,,CIT(A)], who had
elucidated:
"....Therefore, the AO has rightly initiated and levied
the penalty u/s 271D of the Act. The appellant
submits that he received the amount for the purchase
of old manuscripts. There is no evidence produced
to show that any resolution was passed by the Sadan
before transferring the money to the imprest account
that it was for the purpose of purchase of old
manuscripts. Secondly, even if it is accepted that it
was meant for the purchase of old manuscripts, it is
all the more justified to levy penalty because the
appellant utilized the funds not for the purchase of
old manuscripts but for his personal benefits of
making FDRs and earning interest on that. Purchase
of old manuscripts on behalf of the Sadan as claimed
by the appellant does not absolve him of having
utilized the funds unauthorizedly and immorally for
his personal purpose and benefits. Secondly, the
explanation is not credible. The appellant failed to
give the names and address of the persons from
whom the manuscripts were purchased. It is not
known which manuscripts cost how much. No
evidence is brought on record of the Sadan having a
library or its inventory to show which manuscript
was purchased when. The ld. AR showed some
manuscripts but there was no proof that it belonged
to the Sadan or to show when it purchased and from
whom. Therefore, the claim that the money of
Sadan has been returned to it through the purchase
of manuscripts is itself doubtful."
6. The Tribunal in the impugned order had held as under:
ITA No.640/2005 Page 3 of 7
"6. We have heard the submissions of the ld.
Counsel for the assessee as well as ld. DR. We may
at the outset point out that in the block assessment
order while initiating the penalty and also in the
order imposing penalty u/s 271-D and the order of
the CIT(A) confirming the said order, the revenue
authorities have proceeded on the basis that the
money which the assessee possessed as General
Secretary of Jain Sahitya Sadan, a charitable and
religious organization was a loan by the said
organization to the assessee. This receipt by the
assessee was in cash and was beyond the limits laid
down u/s 269 SS of the Act and therefore penalty
proceedings were initiated and also levied. The plea
of the assessee was that this money was kept as
imprest with the assessee and was to be utilized for
the purpose of purchase of old manuscripts. The fact
that this sum was shown in the assessee's books of
accounts is also not in dispute. A copy of the said
account as appearing in the books of accounts of the
assessee is placed at page no. 62 of assessee's paper
book. The account is titled "imprest account" (Jain
Sahitya Sadan), the description found therein also
shows the receipts as for purchase of old
manuscripts. As on 3/4/98 and (sic) amount of
Rs.6,50,000/- was received and on 20/6/98 a sum of
Rs.14,97,019/- under the heading "amount received
from Jain Sahitya Sadan against imprest account" is
duly recorded in this account. There is also some
purchase of manuscripts which have been shown as
a debit in this account. In the order of assessment
passed by the AO while completing the block
assessment there is a mention that the Inspector of
Income Tax has also confirmed the plea as raised by
the assessee on enquiry from Jain Sahitya Sadan.
Thus it is clear from the facts available on record
that the conclusions of the revenue authorities that
the assessee availed of a cash loan from Jain Sahitya
ITA No.640/2005 Page 4 of 7
Sadan is not correct. The essence of a loan is that
there must be a debtor and creditor relationship,
there must be an agreement between the parties
namely the borrower and the lender and such
agreement should be for return of the money by
borrower from the lender. In the absence of such an
agreement it can not be said that there was any loan.
From the facts available on record it is clear that the
money was lying with the assessee as the imprest
account. This fact clearly stands established. There
is no debtor-creditor (sic) relationship as between
the assessee and Jain Sahitya Sadan. The penalty in
the present case has been imposed on the assumption
that there has been a loan availed by the assessee
from Jain Sahitya Sadan. In view of our findings that
there was no such loan there is no violation of
provisions of S. 269 (SS) of the Act. There is a
reference in the order imposing penalty that the
utilization of funds by the assessee is contrary to the
purpose for which the money was lying with him. In
other words it was submitted that the assessee has
unjustly enriched himself. We are not concerned in
the present case as to whether the assessee is guilty
of any misappropriation of funds of Jain Sahitya
Sadan. The question before us is as to whether the
assessee had taken loan in cash from Jain Sahitya
Sadan. These arguments put forth before us are
therefore considered as superfluous. In conclusion
were (sic) hold that there was no loan availed by the
assessee in cash from Jain Sahitya Sadan. The
imposition of penalty on the assumption that the
assessee had availed of loan in cash from Jain
Sahitya Sadan cannot be sustained. The same is
therefore directed to be deleted. We do not wish to
go into the other arguments that were put forth
before us namely the arguments that even assuming
there was a violation of provisions of S. 269 (SS) of
the Act no penalty can be imposed as there is a
ITA No.640/2005 Page 5 of 7
reasonable cause in as much as the transactions are
bonafide. For reasons stated above the appeal of the
assessee is allowed. The penalty imposed is directed
to be cancelled."
7. It is noticeable that the Tribunal in the impugned findings has
primarily relied on entries in the books of account that the two cash
payments were imprest, and therefore neither loan nor deposit. The
Tribunal has not considered and noticed specific aspects referred to in
the order on penalty under Section 271D of the Act and the
observations and findings of the CIT(A) holding that the contention
and claim of imprest was sham and facile. Learned counsel for the
Revenue had also drawn our attention to the assessment order under
Section 158BC of the Act dated 31st January, 2003 in the case of the
respondent/assessee, which states that interest accrued on the FDRs
was duly reflected in the returns of income of the assessee in the
Assessment Year 1999-2000. The assessment order states that
Rs.6,50,000/- received in cash on 3rd April, 1998 was utilized for
acquiring seven FDRs of Rs.90,000/- and one FDR for Rs.95,000/-,all
dated 11th April, 1998 Similarly, Rs.14,97,019/- received in cash on
26th June, 1998 was utilized for acquiring 14 FDRs of Rs.90,000/-
each and one FDR of Rs.87,000/- total amounting to Rs.13,47,000/-
on the same day.
8. At this stage, learned counsel for the respondent/assessee
submits that the matter may be remanded to the Tribunal for fresh
adjudication without making and expressing firm comments. He
submits that the assessee had raised a number of other points which
ITA No.640/2005 Page 6 of 7
have not been considered by the Tribunal. Our attention is drawn to
the arguments as recorded in the order of CIT(A).
9. We take the statement made by the counsel for the respondent/
assessee on record and accordingly set aside the impugned order dated
3rd September, 2004 with an order of remand to the Tribunal. We
clarify that we have not given any firm or final opinion on whether
penalty under Section 271D of the Act was justified. The Tribunal
will independently apply its mind without being influenced by this
order or the impugned order dated 3rd September, 2004. It will be
open to the respondent/assessee to raise all contentions and issues in
accordance with law. Substantial question of law would be treated as
answered in favour of the revenue and against the respondent/
assessee, but with the aforesaid observations.
No costs.
SANJIV KHANNA, J.
CHANDER SHEKHAR, J.
MAY 24, 2018
pk
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