2011 (8) TMI 616 - HC - Income Tax

Search - Undisclosed Income - Journal Entries passed in assessee books of account - Penalty u/s 271D - held that - Tribunal deleted the penalty by recording a finding of fact in para. 13 of its order to the effect that the assessee has neither received any amount by way of loan nor received any deposit and it is the director of the company who had utilized his undisclosed income for and on behalf of the assessee. The Income-tax Appellate Tribunal has recorded a finding of fact that the director had explained the source of his undisclosed income and the said explanation has been accepted by the Department. Thus, in the present case, there was no question of receiving any amount by the assessee as a loan or deposit from the director of the assessee. In these circumstances, deletion of penalty imposed under section 271D of the Income-tax Act, 1961, cannot be faulted.

Summary

Issues:
Whether the Income-tax Appellate Tribunal was justified in deleting the penalty levied under section 271D of the Income-tax Act, 1961?

Analysis:

1. The case involved a situation where the income-tax authorities searched the premises of a director of the assessee-company and found incriminating documents related to unaccounted expenditure. The director offered to tax the undisclosed expenditure incurred by him on behalf of the company for construction activities.

2. The Assessing Officer levied a penalty under section 271D of the Income-tax Act, 1961, as the credit entries in the assessee's books were not made through account payee cheque or bank draft, violating section 269SS. The Commissioner of Income-tax (Appeals) upheld the penalty.

3. The assessee appealed to the Income-tax Appellate Tribunal, which deleted the penalty. The Tribunal found that the director had utilized his undisclosed income for the company, and the assessee did not receive any amount as a loan or deposit. The Tribunal accepted the director's explanation of the source of his undisclosed income, which was also accepted by the Department.

4. The Tribunal's decision was based on the fact that there was no receipt of any amount by the assessee as a loan or deposit from the director. Therefore, the deletion of the penalty under section 271D was deemed appropriate in this case.

5. As a result, all the appeals were dismissed, and no costs were awarded in this matter.