2016 (4) TMI 1085 - HC - Income Tax

Penalty u/s 271D - Held that - The fact that ₹ 15,00,000/- was received from Sri.K.C.Basheer on behalf of the assessee is undisputed, although the receipt of the amount or its utilisation are not reflected in the books of accounts of the assessee. Initially in his letter dated 13.12.2010, Sri.K.C.Basheer himself had confirmed that the payment was by way of a loan. It was on that basis the assessee was issued notice dated 24.02.2011. In his reply to the said notice the assessee had stated that he had not accepted any loan or deposit from anybody and that ₹ 15,00,000/- received on his behalf was towards advance for the property that was intended to be sold. It was along with that reply that he enclosed a clarification from Sri.K.C. Basheer to the effect that the amount paid was towards advance as contended by the assessee. The story that payment made was towards the advance was disbelieved by the Tribunal and the reasons thereof have been given by the Tribunal. Such being the case, we are clearly of the view that the transaction was correctly taken as a loan and if so the provisions of Section 269SS and Section 271D are attracted to the case. - Decided against assessee.

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act regarding penalty under Section 271D for assessment year 2008-2009.

Analysis:
The appeal was filed challenging the order passed by the Income Tax Appellate Tribunal, Cochin Bench, which set aside the order of the Commissioner of Income Tax (Appeals) and restored the penalty under Section 271D. The Tribunal found that the payment of Rs. 15,00,000 received by the assessee was towards a loan, not an advance for property sale as claimed. The Tribunal highlighted discrepancies in the agreement for property sale, lack of explanation for delays, and absence of supporting materials. The Tribunal concluded that the explanation provided by the assessee was not substantiated, leading to the restoration of the penalty.

The assessee contended that the payment was an advance for a property sale, not a loan, as clarified by a letter from the payor. However, the Revenue argued that the initial acknowledgment of the payment as a loan was not convincingly refuted by the subsequent claim of an advance for property sale. The Revenue maintained that the provisions of Section 269SS and Section 271D were applicable due to the lack of substantiation for the advance theory. The Tribunal found the Revenue's arguments more compelling, leading to the restoration of the penalty.

The Tribunal's findings were based on the undisputed receipt of Rs. 15,00,000, discrepancies in the property sale agreement, lack of supporting documents, and inconsistencies in the explanations provided. The Tribunal highlighted the failure to explain delays, absence of confirmation letters, and contradictions in the payor's statements. These factors led the Tribunal to reject the assessee's explanation of the payment being an advance for property sale, ultimately upholding the penalty under Section 271D. The High Court dismissed the appeal, affirming the Tribunal's decision based on the unassailable facts presented.