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2014 (8) TMI 1185 - AT - Income TaxPenalty u/s 271D - contravention of the provisions of section 269SS - journal entries or cash loans - HELD THAT - We find that the issue relating to justification for the penalties u/s 271D of the Act in identical facts and circumstances of the case has come up before the Tribunal in the case of assessee s mother Smt. G. Venkata Lakshmi 2013 (7) TMI 1017 - ITAT HYDERABAD and 2012 (11) TMI 1171 - ITAT HYDERABAD wherein held there is no proof of receipt of such loan from the records and they were only found to be journal entries. The learned Tribunal, in our view, correctly observed that relying on an entry in the journal, no penalty proceedings can be initiated. Hence, it was sent for clarification whether actual flow of money did take place - Decided against revenue
Issues:
Penalty imposed under section 271D of the Income-Tax Act, 1961 for assessment years 2005-06 to 2008-09. Analysis: Issue 1: Justification for penalties under section 271D The appeals filed by the department were against the order of CIT(A)-I Hyderabad canceling penalties imposed under section 271D of the Income-Tax Act, 1961 for the assessment years 2005-06 to 2008-09. The Assessing Officer (A.O.) had noticed that the assessee received cash loans from M/s. Lahari Green Park, which were utilized for purchasing land. The CIT(A) deleted the additions made by the A.O. under section 68 of the Act, stating that the cash loans were taken by the assessee from M/s. Lahari Green Park. However, it was observed that there was a contravention of section 269SS of the Act, leading to the initiation of penalty proceedings under section 271D by the A.O. Issue 2: CIT(A)'s decision and appeal In response to the penalty notice, the assessee argued that as per the CIT(A)'s decision in the quantum proceedings, there was no cash credit under section 68, and thus, no violation of section 269SS. The land was purchased in the name of the assessee, and the payment was made by M/s. Lahari Green Park. The A.O. imposed penalties under section 271D for all the years under appeal, which led to an appeal before the CIT(A). The CIT(A) referred to a similar case involving Smt. G. Venkatalakshmi and directed the A.O. to verify if the cash loans were actually received by the appellant or were merely journal entries. The CIT(A) decided in favor of the appellant, subject to verification. Issue 3: Tribunal's decision and confirmation The revenue appealed against the CIT(A)'s order, leading to the matter being brought before the Tribunal. The Tribunal considered the issue in light of previous judgments and directed the A.O. to verify and delete the penalty if the cash loans were found to be journal entries. The Tribunal's order was confirmed by the High Court, emphasizing that penalty proceedings cannot be initiated based solely on journal entries without proof of actual receipt of loans. The Tribunal upheld the CIT(A)'s order, citing no infirmity and in line with previous decisions. Conclusion The Tribunal dismissed all four appeals of the revenue, upholding the CIT(A)'s order to cancel the penalties under section 271D for the assessment years 2005-06 to 2008-09. The decision was based on the verification that the cash loans were merely journal entries and not actual borrowings, aligning with previous judgments on similar cases.
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