2018 (8) TMI 1489 - AT - Income Tax

Penalty u/s. 271D r.w.s. 269SS - assessee has accepted the loan/deposit of ₹ 1. 70 crores in contravention of the provisions of section 269SS - loans accepted in an assessment u/s. 143(3) - Held that - No penalty u/s. 271D can be levied on an assessee where the loans have been accepted in an assessment u/s. 143(3) of the Act made by the Assessing Officer as genuine. We find that in the instant case, in an assessment u/s. 143(3)of the Act, the Assessing Officer has accepted the loan as genuine and, therefore we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of the revenue is dismissed. See OMEC ENGINEERS VERSUS COMMISSIONER OF INCOME-TAX 2007 (9) TMI 27 - HIGH COURT , JHARKHAND and COMMISSIONER OF INCOME-TAX VERSUS SAINI MEDICAL STORE. 2005 (2) TMI 72 - PUNJAB AND HARYANA HIGH COURT - decided against revenue

Summary

Issues involved:
1. Appeal against deletion of penalty under sections 271D and 269SS of the Income Tax Act.

Detailed Analysis:
1. The primary issue in this case pertains to the deletion of a penalty amounting to ?1,70,00,000 under sections 271D and 269SS of the Income Tax Act by the CIT(A). The Assessing Officer had initiated penalty proceedings due to the assessee accepting loans in cash from sister concerns, violating the provisions of section 269SS. The penalty was imposed based on the violation of these provisions.

2. The CIT(A) justified the deletion of the penalty by emphasizing that the loans were genuine transactions received from sister concerns to meet urgent cash requirements at remote sites for labor payments. The CIT(A) considered the business expediency and the common management of the entities involved. Additionally, the CIT(A) referenced legal precedents such as the case of K. K. Enterprises v. JCIT and Sri Nikhil Banik Mazumdar v. JCIT to support the assessee's case.

3. During the appeal process, the ITAT noted that the loans in question were accepted as genuine after verification by the Assessing Officer in an assessment under section 143(3) of the Act. The ITAT further relied on decisions from the Mumbai and Kolkata Benches of the Tribunal to support the deletion of the penalty by the CIT(A).

4. Legal precedents from various High Courts were also cited to bolster the argument against imposing the penalty. The judgments highlighted the genuineness of transactions, absence of tax evasion motives, and the technical or venial nature of the default as reasons for canceling penalties under similar circumstances.

5. Ultimately, the ITAT upheld the decision of the CIT(A) to delete the penalty, citing the acceptance of the loans as genuine in the assessment made under section 143(3) of the Act. The ITAT found no grounds to interfere with the CIT(A)'s order, confirming the deletion of the penalty and dismissing the appeal filed by the revenue.

This comprehensive analysis of the judgment showcases the legal intricacies involved in the case and the reasoning behind the decision to delete the penalty under sections 271D and 269SS of the Income Tax Act.