2019 (1) TMI 1863 - AT - Income Tax

Penalty proceedings U/s 271D and 271E - Default u/s 269SS and 269T - HELD THAT - It is pertinent to note that when the explanation of the assessee that the said amount was deposited by the said person in the bank account of the assessee for the purpose of taking a D.D. in favour of the Excise Department for participating in the tender of liquor shops then it would not fall in the ambit of loan or deposits as contemplated in the provisions of Section 269SS and 269T of the Act. Therefore, once it is not a loan taken by the assessee for his requirement but the explanation was accepted by the Assessing Officer that this amount was deposited by Shri Shreeram for his requirement of participating in the tender of the liquor shops then in absence of any fresh material or contrary record to show that the amount was taken as a loan by the assessee for assessee s requirement, the penalty levied U/s 271D and 271E are not justified. When the Assessing Officer was fully satisfied with the explanation that the amount was deposited by Shri Shreeram for the purpose of making D.D. for participating in the tender of the liquor shop then the said explanation of the assessee itself is reasonable explanation to show that the case of the assessee does not fall in the provisions of Section 269SS or 269T of the Act. Accordingly, we delete the penalty levied in both these appeals U/s 271D and 271E of the Act. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty orders under Sections 271D and 271E of the Income Tax Act, 1961 for A.Y. 2011-12.

Analysis:
1. The assessee, engaged in the supply of building material, declared income under Section 44AD of the Act. During assessment, it was noted that a cash deposit of ?23,36,000 was made in the assessee's personal savings account. The Assessing Officer initiated penalty proceedings under Sections 271D and 271E due to alleged violations of Sections 269SS and 269T of the Act. The penalty orders were confirmed by the ld. CIT(A).

2. The assessee explained that the cash deposit of ?3,36,000 was made by a friend for the purpose of obtaining a Demand Draft (D.D.) to participate in liquor shop tenders. The Assessing Officer accepted this explanation during assessment and made no additions to the income. However, penalties were levied under Sections 271D and 271E. The ld AR argued that as the amount belonged to the friend and was not a loan or deposit by the assessee, penalties were unjustified. The friend did not have a bank account, necessitating the cash transaction. The AR cited relevant case laws to support the argument.

3. The ld DR contended that the cash deposit and repayment were in violation of Sections 269SS and 269T. The assessee failed to provide documentary evidence supporting the purpose of the deposit or bidding details. The Assessing Officer's satisfaction during assessment was questioned.

4. The Tribunal observed that the Assessing Officer accepted the explanation during assessment, indicating the deposit was for the friend's use in obtaining the D.D. for tender participation. As the purpose was clarified and accepted during assessment, penalties under Sections 271D and 271E were deemed unjustified. The Tribunal emphasized that the transaction did not fall under the definition of loan or deposit as per the Act, supporting the deletion of penalties.

5. Consequently, the Tribunal allowed both appeals of the assessee, deleting the penalties under Sections 271D and 271E.

This detailed analysis of the judgment provides insights into the issues, arguments, and reasoning leading to the decision to delete the penalties imposed under Sections 271D and 271E of the Income Tax Act, 1961.