2011 (6) TMI 747 - AT - Income Tax

Summary

Issues involved: Appeal against imposition of penalty under section 271D of the Income Tax Act, 1961 for the assessment year 2005-06.

Grounds of appeal raised by the assessee:
1. CIT(A) erred in upholding that the appellant is not an agriculturist and violated section 269SS.
2. CIT(A) erred in upholding that the appellant is a partner in a firm and drawn salary, violating section 269SS.
3. CIT(A) erred in upholding penalty order without considering submissions made during appellate proceedings.
4. CIT(A) erred in upholding penalty order without considering reasonable cause as appellant believed section 269SS did not apply.

Summary of Judgment:
The Appellate Tribunal ITAT Amritsar heard the appeal against the penalty imposed under section 271D of the Income Tax Act, 1961 for the assessment year 2005-06. The assessee contended that section 269SS was not applicable to their case, citing relevant case laws. The Tribunal noted that the loans in question were taken before the assessee became a partner in the firm, and both lender and borrower were agriculturists with no taxable income. Relying on the second proviso to section 269SS and the case laws presented, the Tribunal found in favor of the assessee and deleted the penalty.

The Tribunal considered the facts, submissions, and relevant provisions of the Act, along with the case laws cited by the assessee's counsel. It was established that the loans were taken before the assessee became a partner, and both parties involved were agriculturists with no taxable income. The Tribunal found that the penalty imposed was not sustainable based on the second proviso to section 269SS and the case laws presented. Consequently, the penalty imposed on the assessee was deleted.

In conclusion, the appeal filed by the assessee was allowed, and the penalty under section 271D was set aside based on the applicable case laws and provisions of the Income Tax Act. The decision was pronounced in open court on 13th June 2011.