2019 (4) TMI 503 - AT - Income Tax

Penalty levied u/s.271(D) - violation of provisions of Sec.269SS - deposits were received from Sri Muthukumaran Medical College & Research Institute (SMMCH & RI) otherwise than by way of crossed-cheque or demand draft - CIT(A) had come to conclusion that is only journal entry and therefore, the provisions of Sec.269SS are not attracted - HELD THAT - There is nothing on the record to show that the copies of the journal entry were furnished before the Assessing Officer and also the Ld.CIT(A) had not examined the basis on which these journal entry was passed. Further, the Ld.CIT(A) had not examined the crucial aspect whether these two organizations viz., Sri Muthukumaran Medical College & Research Institute (SMMCH & RI) & Arulmigu Meenakshi Amman College of Engineering (AMACE) are part of the respondent-assessee are a different entities and also failed to examine whether deposits are originally accepted in cash in the case of Arulmigu Meenakshi Amman College of Engineering (AMACE). In our considered opinion, these facts would be crucial to decide whether journal entry were passed as a cover up exercise in order to avoid the penal consequences of accepting deposits in cash. Therefore, we remand the matter to the file of Assessing Officer for fresh adjudication in accordance with law after affording due opportunity of being heard to the respondent-assessee - Appeal filed by the Revenue is partly allowed for statistical purpose

Summary

Issues:
Appeal against deletion of penalty under section 271(D) of the Income Tax Act for AY 2013-14.

Analysis:
1. Grounds of Appeal: The Revenue contested the deletion of penalty of ?77,89,500/- under section 271(D) by the Commissioner of Income Tax (Appeals) for AY 2013-14. The Revenue argued that the CIT(A) erred in not considering that the assessee failed to prove funds transfer as Joint Venture. They also cited the decision of the Allahabad High Court to support their case.

2. Facts of the Case: The respondent, a NIDHI Company, faced penalties for accepting cash deposits exceeding ?20,000/- in violation of Sec.269SS of the Act. The Assessing Officer observed multiple cash deposits and loans, leading to the penalty imposition.

3. Assessee's Response: The respondent explained that certain deposits were transferred through journal entries and not accepted in cash. They provided reasons for the deposits and loans, highlighting they were for interest rates and secured loans to shareholders.

4. Assessing Officer's Decision: The Assessing Officer imposed the penalty, rejecting the explanations provided by the respondent. The penalty was upheld due to the failure to substantiate claims and the applicability of Sec.269SS even to journal entries.

5. CIT(A) Decision: The CIT(A) deleted the penalty for deposits from a specific institute but upheld it partially for other cash deposits. The decision was based on the interpretation of Sec.269SS and the reliance on a High Court judgment.

6. Appellate Tribunal Decision: The Tribunal found discrepancies in the case, noting the lack of evidence and examination of crucial aspects. The matter was remanded to the Assessing Officer for further review and a fair hearing for the respondent.

7. Conclusion: The Tribunal partially allowed the Revenue's appeal for statistical purposes and dismissed the Cross-Objection filed by the assessee. The case was remanded for fresh adjudication in line with the law, emphasizing the importance of thorough examination and due process.