If the assessee is able to establish that all the cash transactions are arising out of the bank withdrawals and recorded in the assesse's books of accounts within a reasonable span of time from the date of cash withdrawals from the respective bank accounts and further if all the entities are pertaining to sister concerns(arising out of the same group of ownership),then the provisions of section 269SS and 269T of the Act will not be applicable and accordingly the penal provisions of section 271.

All these appeals are filed by the assessee against the orders of the Ld. CIT (A)-4, Hyderabad in appeal No.10199, 10200 & 10201/16-17/Addl.CIT, Rg.16/CIT(A)-4/Hyd/19-20, dated 31/05/2019 passed U/s. 271D & 271E r.w.s. 250(6) of the Act for the AYs 2010-11 to 2012-13.

2. The assessee has raised five grounds in its appeal and they are extracted herein below for reference:

Grounds of appeal for the AY: 2010-11:

(1) The order of the Ld CIT (A) is erroneous both on facts and in law.

(2) The Ld. CIT (A) erred in holding that the provisions of section 271D are applicable to the facts of the case.

(3) The Ld. CIT (A) erred in confirming the penalty levied of Rs. 4,00,000/- U/s. 271D of the Act.

(4) The Ld. CIT (A) ought to have seen that the AO did not record the satisfaction note at the time of completion of assessment.

(5) Any other ground that may be urged at the time of hearing.”

Grounds of appeal for the AY: 2011-12:

(1) The order of the Ld CIT (A) is erroneous both on facts and in law.

(2) The Ld. CIT (A) erred in holding that the provisions of section 271D are applicable to the facts of the case.

(3) The Ld. CIT (A) erred in confirming the penalty levied of Rs. 18,03,000/- U/s. 271D of the Act.

(4) The Ld. CIT (A) ought to have seen that the AO did not record the satisfaction note at the time of completion of assessment.

(5) Any other ground that may be urged at the time of hearing.”

Grounds of appeal for the AY: 2012-13:

(1) The order of the Ld CIT (A) is erroneous both on facts and in law.

(2) The Ld. CIT (A) erred in holding that the provisions of section 271D are applicable to the facts of the case.

(3) The Ld. CIT (A) erred in confirming the penalty levied of Rs. 1,01,24,500/- U/s. 271D of the Act.

(4) The Ld. CIT (A) ought to have seen that the AO did not record the satisfaction note at the time of completion of assessment.

(5) Any other ground that may be urged at the time of hearing.”

Grounds of appeal for the AY 2011-12 in ITA No.196/H/2020:

(1) The appellant objects to the appellate order dated 31st May 2019 passed by the CIT (A)-4, Hyderabad which is opposed to law and contrary to facts and evidence on record.

(2) On the facts and in the circumstances of the case and contrary to law, the Ld. CIT (A) has erred in holding that provisions of section 271E of Income Tax Act, 1961 are applicable to the facts of the case.

(3) On the facts and circumstances of the case and contrary to law, the Ld. CIT (A) has erred in confirming the action of the Additional Commissioner of Law, Range-16 in applying the provisions U/s. 269SS & 269T of the Act without considering the submission of the appellant.

(4) On the facts and circumstances of the case and contrary to law, the Ld. CIT (A) has erred in confirming the action of the Ld. AO in levying penalty U/s 271E of the Act for Rs. 52,37,000/- without considering the submission of the appellant.

(5) On the facts and circumstances of the case and contrary to law, the Ld. CIT (A) and Ld. AO erred in not giving opportunity to the appellant.

3. At the outset the Ld.AR submitted before us that there is a delay of four days in filing the appeal before the Tribunal which had occurred due to the ill health suffered by the Chairman & Managing Director of the assessee Company. The Ld.AR further submitted that the assessee had filed a delay condonation petition on that regard and pleaded for Condoning the delay in filing the appeals. The Ld. DR magnanimously did not seriously confront against condoning the delay in filing the appeals. On perusing the reasons for the delay in filing the appeals We find it to be reasonable and accordingly hereby condone the delay in filling the appeal before the Tribunal and proceed to hear the appeals on merit.

4. The brief facts of the case are that the assessee is a Private Limited Company engaged in the business of Real Estate. The assessee did not file its return of income for the AY 2010-11, 2011-12 and 2012-13. Therefore, notice U/s. 148 was issued to the assessee on 2/8/2013 for all the three AYs. In response the assessee filed its e- return of income on 4/2/2014 for all the three AYs and intimated the Revenue vide letter dated 7/3/2014 wherein the copies of all the three e-returns were enclosed. During the course of assessment proceedings it was revealed that the assessee has violated the provisions of section 269SS of the Act for the AY 2010-11, 2011-12 and 2012-13 as it had received loans by way of cash in excess of the prescribed limit on various occasions aggregating to Rs. 4,00,000/-, Rs. 18,03,000/-and Rs. 1,01,24,500/- respectively. It was further revealed that during the previous year relevant to the AY 2011-12 the assessee has violated the provisions of section 269T of the Act as it has repaid the loan by way of cash in excess of the prescribed limits aggregating to Rs. 52,37,000/-. Therefore, the Ld. AO invoked the penal provisions of section 271D and 271E of the Act and levied penalty equal to the amount of loan taken in cash and the amount of loan repaid in cash. While doing so, the Ld. AO relied on the decision of the Hon’ble Supreme Court in the case of Assistant Director of Investigation vs. Kumari A.B. Shanti reported in 255 ITR 258 wherein the Hon’ble Apex Court while deciding the Constitutional validity of the section 269SS of the Act held that the object of introducing section 269SS of the Act is to eradicate the evil practice of making false entries in books of accounts and later giving explanation for the same. The Hon’ble Apex Court also observed that such problems would be solved by the introduction of these section in the Act. On appeal, the ld. CIT (A) confirmed the order of the Ld. AO by agreeing with his view.

5. Before us, the Ld. AR submitted that the assessee had received and repaid the amount by way of cash from its sister concerns and therefore the provisions of section 269SS and 269T of the Act will not be applicable. Accordingly, the penal provisions U/s. 271D and 271E of the Act cannot be invoked. The Ld. AR further argued that since all the entities from whom cash was received and repaid in cash were associate concerns the funds belonged to the common ownership and therefore, they cannot be differentiated. The Ld. AR further argued stating that the entire funds received are repaid in cash were withdrawn from the bank accounts of the respective entities and therefore, the genuineness of the fund cannot be doubted. Thereafter, the Ld. AR relied in the decision of the Hon’ble High Court of Gujrat in the case of CIT vs. Shree Ambica Flour Mills Corporation reported in [2008] 6 DTR 169 (Guj.), the decision of the Hon’ble Madras High Court in the case of CIT vs. Idhayam Publications Ltd reported in [2006] 285 ITR 221 (Mad.) and pleaded for deleting the penalty imposed on the assessee U/s. 271D and 271E of the Act. The Ld. DR on the other hand argued in support of the orders of the Ld. Revenue Authorities and requested for confirming the same.

6. We have heard the rival submissions and carefully perused the materials on record. On examining the arguments advanced by the Ld. AR, We, find some merit in the same. If all the relevant entities are sister concerns arising out of the same ownership, it cannot be firmly said that the funds are transferred to or received from different entities though they are treated as different entities by Statute. For holding so we draw strength from the Orders of the Hon’ble High Courts cited by the Ld.AR hereinabove. However, it is also a fact that if the payments are made and received in cash by those entities it might give scope for manipulation of accounts, as explained in the Circular No. 387, dated 6th July, 1984 by the CBDT, and the same is observed in favour of the Revenue by the Hon’ble Appex Court in its Order cited by the Ld.AO. Therefor it cannot be said that the provisions of section 269SS and 269T will not strictly apply in the case of the assessee. Hence, keeping in view of the orders of the Hon’ble High Courts and the Hon’ble Apex Court cited herein above and the fact and circumstance of the case as the assessee is in real estate business wherein on-money transactions are in rampant, we are of the view that if the assessee is able to establish that all the cash transactions are arising out of the bank withdrawals and recorded in the assesse’s books of accounts within a reasonable span of time from the date of cash withdrawals from the respective bank accounts and further if all the entities are pertaining to sister concerns (arising out of the same group of ownership), then the provisions of section 269SS and 269T of the Act will not be applicable and accordingly the penal provisions of section 271D and 271E cannot be invoked. Therefore, in the interest of justice, we hereby remit the matter back to the file of the Ld. AO to examine whether all the concerned entities are sister concerns and whether the cash received and repaid by the assessee are arising out of the cash withdrawals from bank account of the respective entities and the same are recorded in the books of accounts of the assessee within a reasonable span of time and if found so delete the penalty levied invoking the provisions of section 271D and 271E of the Act and if found otherwise pass appropriate order in accordance with law and merit. It is ordered accordingly.

7. In the result, the appeals of the assessee are allowed for statistical purposes as indicated herein above.

Order Pronounced in the open Court on the 8th day of December 2020.

Sd/- Sd/-

(P. MADHAVI DEVI) (A. MOHAN ALANKAMONY)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated: 08/12/2020.