2021 (7) TMI 1097 - AT - Income Tax

Levy of the penalty u/s 271D - assessee has violated provision of section 269SS - HELD THAT - As decided in own case 2020 (6) TMI 410 - ITAT DELHI there is no cash transaction entered into by the assessee with Shri Sant Lal Agarwal, the whole foundation for levy of the penalty u/s 271D has crashed. No information was placed before us by the departmental representative that the above order of the coordinate bench has been challenged or upset by the higher forum. Thus, the finding of the coordinate bench binds us - we do not have any other alternative but to quash the penalty levied by the learned assessing officer and confirmed by the learned CIT A u/s 271D.

Summary

Issues:
- Violation of provisions u/s 269SS of the Income Tax Act, 1961
- Upholding penalty of ?1,58,00,000/- u/s 271D of the Act
- Fair opportunity granted to the assessee during proceedings

Analysis:

Violation of provisions u/s 269SS:
The appeal was filed against the penalty levied under section 271D of the Income Tax Act, 1961. The assessee contended that there was no violation of section 269SS and the penalty should be deleted. The authorities found that the assessee had received a cash loan exceeding ?20,000 from a certain individual through another person. Despite the assessee's denial, evidence from seized material indicated the receipt of cash loans of ?75 lakhs and ?83 lakhs. The penalty was imposed due to the violation of section 269SS, which prohibits cash transactions exceeding a specified limit.

Upholding penalty u/s 271D:
The Commissioner of Income Tax (Appeals) upheld the penalty of ?1,58,00,000/- under section 271D. The confirmation was based on seized material indicating the acceptance of cash loans by the assessee. Statements from individuals involved supported the transaction of cash loans. The Commissioner found substantial evidence supporting the penalty and concluded that the penalty order was valid. The assessee challenged this decision, arguing against the penalty based on the evidence presented during the proceedings.

Fair Opportunity Granted:
The assessee raised concerns about the fairness of the proceedings, alleging a lack of proper opportunities and violation of natural justice principles. The Commissioner noted that the authorized representative did not attend the hearings or respond adequately to notices, leading to a decision based on available material. Despite the absence of the authorized representative, the Commissioner upheld the penalty, considering the evidence and statements provided during the proceedings.

In a subsequent appeal, the Coordinate Bench reviewed the case and found no direct evidence supporting the alleged cash transactions. The Bench concluded that the addition made by the assessing officer lacked merit and directed its deletion. Based on this decision, the penalty imposed under section 271D was deemed unjustified. The appellate tribunal reversed the lower authorities' orders and partially allowed the appeal, quashing the penalty. Grounds 1 and 3, being general in nature, were dismissed, and the appeal was partly allowed on 26/07/2021.