2020 (3) TMI 1236 - HC - Income Tax

Penalty u/s 271D - assessee accepted loan or deposit in cash - Default u/s 269SS - diary seized and inventorized as per Annexure A-1 during the course of search, which contains the sharafit transactions of the assessee with Shri Jivraj V.Desai Group - ITAT deleted the penalty stating there is no material possessed by the Revenue showing acceptance of any loan or deposits by the assessee from Shri Jivraj V. Desai. Revenue has mis-constructed or misinterpreted the seized material as well as statement of Shri Arvindbhai A. Shah, alleged author of the diary - HELD THAT - In view of the finding of fact given by the Tribunal that the Appellant-Revenue is not able to establish that assessee accepted any loan or deposit from Shri Jivraj V. Desai. In absence of any material showing acceptance of any loan or deposits by the respondent-assessee, we are of the opinion that the Tribunal has rightly deleted the penalty levied under Section 271D of the Act. Revenue's this appeal fails and is hereby dismissed as no substantial question of law arises.

Summary

Issues:
- Appeal against order passed by Income Tax Appellate Tribunal
- Deletion of penalty under Section 271D of the Income Tax Act

Analysis:
1. The High Court of Gujarat heard a Tax Appeal under Section 260A of the Income Tax Act, 1961, filed by the Revenue against the order of the Income Tax Appellate Tribunal. The dispute was regarding the deletion of a penalty under Section 271D of the Act for the Assessment Year 2001-02.

2. The main question proposed by the Revenue for the Court's consideration was whether the Tribunal was correct in deleting the penalty of ?2,68,23,300 levied under Section 271D. Section 269SS of the Act prohibits accepting loans or deposits exceeding specified sums in cash, and non-compliance leads to penalties under Section 271D.

3. The Assessing Officer alleged that the respondent had accepted a cash loan from a specific individual, justifying the penalty. However, the Tribunal, in its decision, highlighted the lack of evidence establishing the acceptance of any loan or deposit from that individual, thereby questioning the basis for the penalty.

4. The Tribunal's decision emphasized that the Revenue failed to prove any transactions between the respondent and the individual in question. It noted discrepancies in the interpretation of seized materials and statements, leading to the conclusion that no penalty should be imposed under Section 271D due to the absence of concrete evidence.

5. Based on the Tribunal's factual findings, the High Court upheld the decision to delete the penalty, stating that the Revenue could not substantiate the claim that the respondent accepted the alleged loan or deposit. Consequently, the appeal by the Revenue was dismissed as no substantial question of law arose from the Tribunal's order.

In summary, the High Court of Gujarat upheld the Tribunal's decision to delete the penalty under Section 271D, emphasizing the lack of evidence supporting the Revenue's claim of cash transactions. The judgment highlighted the importance of concrete proof in imposing penalties under the Income Tax Act, ultimately leading to the dismissal of the Revenue's appeal.