2019 (1) TMI 953 - HC - Income Tax

Penalty u/s 271D - receipt in cash being undisclosed income - Violation of provisions of Section 269SS - Held that - A perusal of Section 269SS of the Act of 1961 reveals that it prohibits receipt of loan or deposit made by any person, otherwise than by way of an account payee cheque or account payee draft. Loan or advance is a sine qua non or foundational fact for the applicability of the provisions of Section 269SS of the Act of 1961. In the extant facts, the assessee has stated that the amount represented assessee s undisclosed income and the same was debited in cash book as peak cash deposit. It was upon the Assessing Officer to have recorded the finding that the assessee had received a loan or deposit or advance from a third party. In absence of such fact, which is a precursor for establishing of breach of Section 269SS of the Act of 1961, the penalty cannot be levied. Commissioner (Appeals-2), Udaipur was perfectly justified in holding that there is no violation of the provisions of Section 269SS of the Act of 1961 and thus, levy of penalty under Section 271D of the Act of 1961 was void. - Decided in favour of assessee.

Issues:
1. Interpretation of Section 269SS and Section 271D of the Income Tax Act, 1961.
2. Justification of penalty deletion by the Income Tax Appellate Tribunal.
3. Burden of proof in penalty proceedings and applicability of Section 269SS.

Analysis:
1. The appellant challenged the order passed by the Income Tax Appellate Tribunal, Jodhpur, regarding the deletion of penalty under Section 271D of the Income Tax Act, 1961. The main contention was whether the cash receipts of ?19,35,000 accepted by the assessee were covered by the provisions of Section 269SS, which regulate loans and deposits. The Tribunal found that the amount in question was not a loan or deposit but represented undisclosed income of the assessee, duly disclosed in the return of income. The Tribunal emphasized the necessity of establishing a lender-depositor relationship for the application of Section 269SS. The burden of proof in penalty proceedings lies with the revenue, and in this case, the Assessing Officer failed to prove the violation of Section 269SS, leading to the dismissal of the penalty.

2. The Tribunal upheld the appellate authority's decision, stating that the cash amount in question was not a loan or deposit but part of the assessee's disclosed income, as reflected in the cash book. The Tribunal emphasized that the burden of proof rests with the Revenue, and without concrete evidence of a loan or deposit, the penalty under Section 271D cannot be justified. The Tribunal rejected the Department's appeal, affirming that the cash receipt was not in violation of Section 269SS, and thus, the penalty was unwarranted.

3. The High Court concurred with the Tribunal's decision, emphasizing that Section 269SS applies only when there is acceptance of a loan or advance in cash. In this case, the assessee clarified that the cash amount represented undisclosed income and was not a loan or deposit. The Court highlighted the Assessing Officer's failure to establish the receipt of a loan or deposit from a third party, a crucial element for invoking Section 269SS. Consequently, the Court upheld the appellate authority's ruling that there was no breach of Section 269SS, leading to the dismissal of the penalty under Section 271D. The Court concluded that no substantial question of law was involved, affirming the decision of the appellate authority and the Tribunal.

In summary, the judgment focused on the interpretation of Section 269SS and Section 271D of the Income Tax Act, 1961, emphasizing the necessity of proving a loan or deposit for penalty imposition. The decision highlighted the burden of proof on the Revenue in penalty proceedings and concluded that the cash receipts in question did not violate Section 269SS, leading to the dismissal of the penalty.

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