2020 (3) TMI 882 - HC - Income Tax

Assessment u/s 153C - addition of interest payment u/s 69C on the basis of the documents seized from a third party - penalty under Section 271D and 271E Levied - Such documents seized from the third party reflected loan transactions in cash - HELD THAT - Tribunal took notice of the fact that such documents were not found or recovered from the possession of the assessee. In such circumstances, no presumption under Section 132(4A) as well as under Section 292C of the Act 1961 could be drawn. The Tribunal also took notice of the fact that the Assessing Officer had based his findings on the basis of a statement, but the statement has not been found to be acceptable in view of the conflicting stance. The Tribunal concurred with the findings recorded by the CIT(A) that it is not established that the loans were obtained and repaid in cash. The Tribunal also took notice of the fact that the quantum proceedings had attained finality. In short, in view of the concurrent findings of the fact recorded by the two authorities, there is nothing to substantiate the case of the Revenue that the assessee had obtained the loan in cash and the same was also repaid in cash. In view of the aforesaid findings of fact recorded by the Tribunal, we are of the view that none of the questions, as proposed by the Revenue, could be termed as substantial questions of law

Summary

Issues:
- Appeal against order under Section 260A of the Income Tax Act, 1961
- Dispute over penalty under Section 271E of the IT Act
- Consideration of evidence from third party in penalty proceedings

Analysis:
1. The appeal under Section 260A of the Income Tax Act, 1961 was filed by the Revenue against the order passed by the Income Tax Appellate Tribunal. The case involved a search action under Section 132 of the Act in the group cases of Creative Trendz Group, leading to the scrutiny of the assessee's case for multiple assessment years. The dispute primarily revolved around the addition of interest paid in cash to the total income of the assessee under Section 69C of the Act.

2. The Revenue challenged the deletion of penalty under Section 271E of the IT Act by the CIT(A) and subsequent affirmation by the Appellate Tribunal. The Revenue argued that the penalty was justified based on materials seized during the search action and statements recorded. However, the Tribunal found that the documents supporting the loan transactions in cash were not found in the possession of the assessee, thus negating the applicability of presumptions under Section 132(4A) and Section 292C of the Act.

3. The Tribunal emphasized that the Assessing Officer's findings were based on statements that were not consistent and lacked credibility. Moreover, the Tribunal noted that the quantum proceedings had already concluded with no substantiation of the cash loan transactions by the assessee. Therefore, the Tribunal concurred with the CIT(A) that there was no concrete evidence to prove that the assessee had taken or repaid loans in cash as reflected in the seized material from a third party.

4. Considering the totality of facts and the absence of substantial questions of law, the Tribunal dismissed all the Tax Appeals filed by the Revenue. The judgment highlighted the importance of concrete evidence and the lack of proof regarding the alleged cash transactions, ultimately leading to the dismissal of the appeals.

By analyzing the findings and reasoning presented in the judgment, it is evident that the case involved intricate details related to the assessment of income, application of penalty provisions, and the weightage given to evidence obtained from third parties during a search action. The judgment underscores the significance of concrete evidence and consistency in statements when determining tax liabilities and penalties under the Income Tax Act.