2019 (3) TMI 426 - AT - Income Tax

Levy of penalty u/s 271D and 271E - cash transactions exceeding permissible limit - taking of loan or repayment of loan in cash - HELD THAT - The assessee had furnished all the necessary details of the transaction before the CIT (A), but the CIT (A) has failed to consider the details filed by the assessee. On examination of the documents filed by the assessee, we are convinced that the amount received and repaid by the assessee subsequently is not a loan. This is a transaction done on behalf of his children to accommodate than in obtaining DD s without charges and cannot be considered as taking of loan or repayment of loan in cash. The decisions relied upon by the learned Counsel for the assessee, i.e. CIT vs. Deccan Designs (India) P Ltd 2010 (7) TMI 818 - MADRAS HIGH COURT and Director of Income Tax (Exemption) vs. All India Deaf and Dumb Society 2005 (5) TMI 32 - DELHI HIGH COURT are to the effect that where the transactions are genuine and enough reasons are offered by the assessee to justify the cash transaction, the penalty is not leviable both u/s 271D and 271E of the Act. - Decided in favour of assessee.

Summary

Issues:
- Appeal against the levy of penalty u/s 271E of the IT Act
- Appeal against the levy of penalty u/s 271D of the IT Act

Analysis:
1. Appeal against Penalty u/s 271E:
The assessee contested the penalty u/s 271E of the IT Act for the A.Y 2010-11. The grounds of appeal included challenging the correctness of the penalty, arguing that section 269T provisions were not applicable to the cash amounts paid, asserting that the amounts were not loans or advances, and highlighting the circumstances of the cash payments. The AO initiated penalty proceedings due to cash loans received and repaid by the assessee, alleging violations of sections 269SS and 269T. The assessee explained that the cash transactions were related to a failed property purchase by family members, involving canceled DDs and repayments. The AO disagreed, leading to the penalty imposition. The CIT (A) upheld the penalty, prompting the assessee's appeal to the ITAT.

2. Appeal against Penalty u/s 271D:
Additionally, the assessee challenged the penalty u/s 271D, citing improper opportunity accorded before penalty imposition and asserting that the CIT (A) failed to appreciate the circumstances of cash loans taken. The case involved the assessee's return of income, scrutiny, and subsequent penalty proceedings for receiving and repaying cash loans. The assessee's argument focused on the property purchase agreement, DDs, bank transactions, and the nature of the transactions as not falling under loan or advance categories per sections 269SS and 269T. The ITAT, after considering the submissions and documents, found the transactions to be genuine and not constituting loans. Citing relevant case law, the ITAT allowed the appeals against both penalties, emphasizing the absence of loan transactions and justifying reasons for the cash dealings.

In conclusion, the ITAT Hyderabad, comprising Smt. P. Madhavi Devi and Shri S. Rifaur Rahman, allowed the assessee's appeals against the penalties u/s 271D and 271E of the IT Act for the A.Y 2010-11, based on the genuine nature of the transactions and the lack of loan character in the cash dealings. The judgment highlighted the importance of justifying cash transactions and provided relief to the assessee based on the evidence presented and legal precedents referenced.