2014 (5) TMI 388 - AT - Income Tax

Scope of section 269SS of the Act Journal entries Penalty proceedings u/s 271D of the Act Held that - Following Smt. C. Swapna, Hyderabad 2014 (4) TMI 71 - ITAT HYDERABAD - The assessee challenged the penalty proceedings initiated u/s 271D of the Act on the ground of illegal borrowings in contravention of section 269SS of the Act - there is no proof of receipt of such loan from the records and they were only found to be journal entries - relying on an entry in the journal, no penalty proceedings can be initiated - the CIT(A) have followed the order of the coordinate bench and the AO is directed to verify and delete the penalty in case it is found as merely journal entries and no cash loans was taken - there is no infirmity in the order of the CIT(A) thus, the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues:
Appeal against CIT(A) order, Violation of sec. 269SS of the IT Act, Penalty u/s. 271D initiated, Cash loans received from M/s. Lahari Green Park, Assessment Years 2004-05, 2006-07, 2007-08, and 2008-09, Journal entries vs. cash loans, Verification of transactions, CIT(A) decision upheld.

Analysis:
The appeal by the Revenue was against the CIT(A) order for Assessment Years 2004-05, 2006-07 to 2008-09, and specifically for A.Y. 2007-08. The grounds raised included the contention that the CIT(A) order was erroneous both factually and legally. The main issue revolved around the interpretation of sec. 269SS of the IT Act and whether genuine transactions attract its provisions. The case involved cash loans received by the assessee from M/s. Lahari Green Park, which were utilized for purchasing land. The CIT(A) observed a contravention of sec. 269SS and initiated penalty proceedings u/s. 271D.

Upon receiving a show cause notice, the assessee argued that there was no cash credit u/s. 68 and hence no violation of sec. 269SS. It was contended that the land purchase was funded by M/s. Lahari Green Park, and no cash loan was directly received by the assessee. The Jt. Commissioner of Income-tax upheld the violation of sec. 269SS, stating that the transaction between M/s. Lahari Green Park and the assessee constituted a loan, leading to the initiation of penalty proceedings.

On appeal, the CIT(A) compared the case to a similar one and directed the Assessing Officer to verify if the cash loans were actually received or were mere journal entries. It was found that no cash loan was actually received, leading to the cancellation of penalties u/s. 271D. The Tribunal, following previous judgments, upheld the CIT(A) decision, emphasizing that penalties cannot be imposed based solely on journal entries without actual cash transactions. The appeal by the Revenue was dismissed, confirming the order of the CIT(A) for all the years under consideration.

In conclusion, the Tribunal upheld the CIT(A) order, rejecting the grounds raised by the Revenue. The decision was based on the verification that the transactions were journal entries and not actual cash loans, leading to the dismissal of the appeal by the Revenue.