2016 (12) TMI 1788 - AT - Income Tax

Levy of penalty u/s.271D - violation of section 269SS - HELD THAT - Addition of ₹ 5 lakh was made u/s.68 of the Act for taking loan by the assessee in cash thereby violating the section 269SS of the Act was deleted in appeal by the CIT(A) which was confirmed by the Tribunal in the appeal filed by the revenue thereagainst. Thus, the transaction in violation of section 269SS was found to be genuine. Therefore, the decision of Hon ble Jurisdictional High Court in the case of OMEC Engineers 2007 (9) TMI 27 - HIGH COURT , JHARKHAND clearly applies to the facts of the case. Respectfully following the same, I delete the levy of penalty and allow ground of appeal of the assessee.

Summary

Issues involved:
Levy of penalty under section 271D of the Act for violating section 269SS by accepting a loan in cash.

Detailed Analysis:
The appeal was filed against the order of CIT(A)- Jamshedpur for the assessment year 2006-07, focusing on the levy of penalty of ?5 lakhs under section 271D of the Act. The Assessing Officer imposed the penalty after the assessee admitted to receiving ?5 lakh in cash from an individual during the assessment proceedings. The penalty was levied for violating section 269SS by accepting the loan in cash.

During the proceedings, the assessee argued that in a previous quantum appeal, the Tribunal confirmed the deletion of an addition of ?5 lakhs made under section 68 of the Act in a different case. The assessee contended that since the transaction violating section 269SS was found to be genuine, no penalty under section 271D should be levied. The assessee relied on a decision of the Hon’ble Jurisdictional Jharkhand High Court to support this argument.

On the other hand, the Revenue supported the orders of the lower authorities, advocating for the penalty to be upheld. The Tribunal referred to the decision of the Hon’ble Jurisdictional High Court in the case of OMEC Engineers, which emphasized that the imposition of penalty for a technical mistake without any revenue loss would be harsh and unsustainable in law if the transaction violating section 269SS was genuine and not mala fide.

In line with the precedent set by the Hon’ble Jurisdictional High Court, the Tribunal found that since the addition under section 68 for violating section 269SS was deleted by the CIT(A) and confirmed by the Tribunal, the transaction was genuine. Therefore, the Tribunal decided to delete the penalty of ?5,00,000/- levied under section 271D, allowing the ground of appeal for the assessee.

Consequently, the appeal filed by the assessee was allowed, and the penalty was revoked based on the genuine nature of the transaction violating section 269SS as established through previous rulings and legal principles.