Decided on April 25,2008



Deepak R. Shah, Accountant Member - (1.) ALL these appeals by assessee ares directed against the order of learned CIT(A), Muzaffarnagar dated 5.1.2006 in an appeal against order levying penalty Under Section 271D of the Income-tax Act, 1961 (the Act). In all these appeals, the assessee challenges levy of penalty Under Section 271D of the Act. Since all these assesses are related to each other and facts in all the cases are identical, these appeals were heard together and are disposed of by a common order.
(2.) The three assesses became partners of a partnership firm M/s Jai Laxmi Cane Crusher at Village Kukavi, Distt. Saharanpur, UP. Each of these partners introduced capital of Rs. 1,50,000/- in the books of firm. The capital introduced was received by them from their grandfather Shri Rodhu Singh through cheque drawn on District Cooperative Bank. The AO issued notice Under Section 148 requiring the assessee to file return of income. The assessee filed the return of income declaring income in the form of salary and interest from the above referred firm. In the course of assessment, the AO required the assessee to furnish evidence about nature and source of deposit made by them. The assessee submitted that the amount was received from their grandfather out of his bank account. The grandfather had sizeable agricultural land generating agricultural income for providing financial help. The AO was satisfied about the genuineness of the loan. However, on further enquiry, the AO found that the amount was received by way of bearer cheque. He accordingly concluded that the amount was received otherwise than by account payee cheque and hence, in violation of provisions of Section 269SS of the Act. In the assessment order dated 27.1.2003, the AO being Income-tax Officer, Deoband, noted that "No doubt the loan was raised by the assessee from his grandfather through bearer cheque and also the grandfather was in possession of agricultural land and the loan was given out of sale proceeds of agricultural income to grandson (the assessee) but the assessee has violated the provisions of Section 269SS of the Act for which a separate show cause notice has been issued vide notice dated 10.1.2003. Penalty proceedings are being, initiated for committing the default for accepting the loan in cash i.e. through bearer cheque".
(3.) SUBSEQUENTLY, another show cause notice dated 8.10.2003 was issued to the assessee requiring him to show cause as to why penalty Under Section 271D may not be imposed as there is contravention of Section 269SS. This show cause notice was issued by Addl. CIT, Saharanpur. The assessee submitted that notice dated 8.10.2003 is time barred as per provisions of Section 275(1)(c) of the Income-tax Act. Reliance was placed on the decision of ITAT, Jodhpur Bench in the case of Hissaria Bros. v. CIT 73 TTJ 1 and in the case of Dillu Cine Enterprises (P) Ltd. 80 ITD 484. It was also submitted that the genuineness of amount has been accepted in the assessment order and, therefore, default, if any, is only technical in nature and no penalty be levied under such circumstances. The Addl. CIT levying the penalty held that the decision of the Tribunal has no force because penalty Under Section 271D cannot be imposed by ITO. The same can be imposed only by JCIT/ACIT. Thereafter, the ITO referred this case for imposition of penalty and a show cause notice has been issued only on 8.10.2003. Therefore, the penalty will be time barred only on 30.4.2004. The AO, being Additional CIT levying the penalty held that the assessee has deposited Rs. 1,50,000/- in the books of firm by raising a loan from his grandfather through a bearer cheque in his own name and after withdrawing cash himself therefrom. Thus, the provisions of Section 269SS is violated as the loan is otherwise than by account payee cheque. Since the provisions of Section 269SS is violated, penalty Under Section 271D is attracted.;

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