IN INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. Nos. 1386 & 1387/HYD/2013 Assessment Years: 2007-08 & 2008-09 Income Tax Officer, Sri Srinivasulu Reddy Ward-1(4), Vs Chennareddy, HYDERABAD HYDERABAD [PAN: AATPC3959K] (Appellant) (Respondent) C.O. Nos. 65 & 66/HYD/2015 (in ITA Nos. 1386 & 1387/Hyd/2013) Assessment Year: 2007-08 & 2008-09 Sri Srinivasulu Reddy Income Tax Officer, Chennareddy, Vs Ward-1(2), HYDERABAD HYDERABAD [PAN: AATPC3959K] (Cross-Objector) (Respondent) For Revenue : Shri K. J. Rao, DR For Assessee : Shri K.C. Devdas, AR Date of Hearing : 15-09-2016 Date of Pronouncement : 28-09-2016 ORDER PER B. RAMAKOTAIAH, A.M. : These appeals are by Revenue and Cross-objections are by Assessee against orders of Ld. Commissioner of Income Tax (Appeals)-II, Hyderabad dated 27-08-2013 for AYs. 2007-08 & 2008-09 on issue of levy of penalty u/s. 271D for violation of I.T.A. Nos. 1386 & 1387/Hyd/13 :- 2 -: C.O. Nos. 65 & 66/Hyd/15 provisions of Section 269SS of Income Tax Act [Act]. Issues being similar in both years, these are considered together. 2. Briefly stated facts for AY. 2007-08 as stated in Ld. CIT(A) order in page 3 are as under: a) assessee filed his return of income of Rs. 2,46,940/- alongwith agricultural income of Rs. 83,600/- for AY. 2007-08. b) order u/s. 143(3) dated 05.08.2009 was passed accepting income returned. c) penalty notice u/s. 271D was issued on 27.09.2011 asking assessee to explain as to why penalty should not be levied for receiving loans in cash exceeding Rs. 20,000/- in violation of provisions of section 269SS of Act. d) In meantime CIT-I passed order u/s. 263 dated 19.03.2012 directing Assessing Officer to verify genuineness of cash credits introduced in books of assessee and assessment order was set aside. e) Penalty order u/s. 271D was passed on 31.03.2012 levying penalty of Rs. 13,65,000/-. f) Order u/s. 143(3) r.w.s. 263 was passed on 11.01.2013 by holding cash credits of Rs. 14,40,000/- was unexplained cash credit u/s. 68 of I.T. Act. Penalty proceedings u/s. 271(1)(c) were also initiated. g) It is pertinent to mention that as on date order u/s. 263 dated 19.03.2012 is pending before Hon'ble ITAT, Andhra Pradesh . 3. Ld. CIT(A) after considering grounds has finally allowed assessee s appeal by stating as under: 12. eighth and ninth grounds of appeal are that since CIT had passed order u/s. 263 setting aside original assessment as on date of passing penalty u/s. 271D there was no conclusion with regard to cash deposits. In absence of such conclusion no penalty can be levied. I.T.A. Nos. 1386 & 1387/Hyd/13 :- 3 -: C.O. Nos. 65 & 66/Hyd/15 12.1. It is to be mentioned here that in set aside assessment proceedings u/s. 143(3) r.w.s. 263 dated 11.01.2013 cash loans of Rs. 14,40,000/- were treated as unexplained cash credits u/s. 68 and added to income returned. 12.2. Now, moot point is if cash loans are treated as income of appellant and are taxed in his hands, now penalty proceedings u/s. 271D can be levied on ground that loans were received in cash from third person. moment such cash credits are assessed in hands of assessee as his income, no penalty u/s. 271D can be initiated as held in following case laws: (a) Diwan Enterprises Vs. CIT (2000) 246 ITR 571 (Del); (b) CIT Vs. Standard Brands Ltd (2006) 204 CTR (Del) 48; Since department stand is that cash loans were appellant s own income and are taxed in his hands penalty levied u/s. 271D is deleted . 4. Aggrieved, Revenue has raised following grounds: 1. order of CIT(A) is erroneous in law and on facts of case. 2. CIT(A) erred in deleting penalty u/s. 271D of I.T. Act. 3. CIT(A) ought to have considered fact that assessee s appeal is pending before ITAT and has not reached its finality. 4. Any other ground that may be urged at time of hearing . 5. Ld. DR submitted that order of CIT u/s. 263 has been set aside by ITAT, therefore Ld. CIT(A) should have considered penalty on merits and should not have deleted. 6. Ld. Counsel submitted that assessee has preferred Cross- objections as genuineness of creditors has not been adjudicated. He relied on Co-ordinate Bench decision in case of M.S. Lokaiah in ITA No. 1272/Hyd/2015 dt. 03-08-2016 I.T.A. Nos. 1386 & 1387/Hyd/13 :- 4 -: C.O. Nos. 65 & 66/Hyd/15 and judgement of Hon'ble Allahabad High Court in case of CIT Vs. Dimple Yadav in ITA No. 174 of 2015 dt. 21-08-2015. 7. We have considered rival contentions and perused documents placed on record. Ld.CIT(A) has not examined contentions of assessee as relief was given on reason that credits were treated as income in consequential proceedings, after order u/s. 143(3) was set aside u/s. 263. Now that original order u/s. 143(3) is restored, credits are no longer treated as income of assessee. contentions of assessee are to be examined in light of provisions of Section 271D r.w.s. 269SS and case law on issue. Therefore, allowing grounds of Revenue, we restore appeal of assessee before Ld.CIT(A) to be adjudicated afresh on merits. order of Ld.CIT(A) is accordingly set aside and appeal is restored to file of Ld.CIT(A). 8. Facts in AY. 2008-09 are similar except amounts involved. Therefore, for reasons stated above in para 7, order of Ld.CIT(A) in AY. 2008-09 is also set aside and appeal before Ld.CIT(A) is restored for fresh adjudication. 9. Cross-objections of assessee are filed with delay of 630 (Six Hundred and Thirty) days accompanied by affidavit and prayer for condonation of delay. Since Revenue appeals are allowed, there is no need to adjudicate contentions raised in Cross- objections. Assessee is free to raise contentions before Ld. CIT(A), who should consider facts and law on issue while I.T.A. Nos. 1386 & 1387/Hyd/13 :- 5 -: C.O. Nos. 65 & 66/Hyd/15 adjudicating these appeals afresh. Cross-objections are treated as academic in nature. 10. In result, both Revenue appeals are allowed for statistical purposes and Cross-objections raised by assessee are treated as dismissed , being academic in nature. Order pronounced in open Court on 28th September, 2016 Sd/- Sd/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 28th September, 2016 TNMM Copy to : 1. Income Tax Officer, Ward-1(4), Hyderabad. 2. Income Tax Officer, Ward-1(2), Hyderabad. 3. Sri Srinivasulu Reddy Chennareddy, Plot No. 24, Sundar Nagar Colony, OPP: Errgadda Rythu Bazar, Hyderabad. 4. CIT(Appeals)-II, Hyderabad. 5. CIT-I, Hyderabad. 6. D.R. ITAT, Hyderabad. 7. Guard File. Income-Tax Officer, Ward-1(4), Hyderabad v. Srinivasulu Reddy