2024 (2) TMI 332 - AT - Income Tax

Penalty u/s 271D 271E - default committed in violation of section 269SS 269T - Reliance on search proceeding documents - Transactions being mere book entries - assessing authority observed that the assessee has taken loans in cash and also made repayments in cash - During search, the authorities seized a laptop from premise of assessee and took Tally data from laptop and also seized loose papers from the premise of one employee of assessee as recorded u/s 132(4) wherein he stated that unsecured loans were taken from various people which were out of books HELD THAT - Since there is nothing new to be considered or analyed in present appeals, we adopt the same reasoning and same view as taken by ITAT in 2024 (2) TMI 241 - ITAT INDORE and 2023 (1) TMI 1342 - ITAT INDORE held that tally account as dummy one created for training purpose incorporating the data from different sources including that of assessee and therefore, the Tally account found in the laptop as well as loose paper were held to be having no evidentiary value being dump documents and retraction of the statement by filing the affidavit and non-consideration of the same by the AO or examination of the said affidavit to ascertain the correct facts is a serious laps on the part of the AO while making addition. Also to bring into the effect of penalty provision us 271D or 271E, it has to be established with independent evidence and not merely corroborative evidence (i.e. book entries) that Assessee has actually committed the default contemplated in section 269SS or 269T i.e. it has taken loan in cash or it has repaid the loan in cash exceeding Rs. 20,000. The explanation below 269SS defines the Loans or deposits MEANS Loans or deposits of money. The use of word Means by legislature in the Explanation below Section 269SS or 269T is with a purpose and it is to restrict the meaning to only Loan of Money . The use of Word Means indicates that definition is hard and fast and no other meaning can be assigned to the expression that is put down in definition P.Kasilingham vs. PSG College of Technology 1995 (3) TMI 466 - SUPREME COURT . The expression money means currency/cash. Therefore, very essential ingredient to constitute a default within the meaning of 269SS or 269T is that whether there is movement of money. Mere book entries alone, during the course of training, cannot entail a default of taking or repaying the loan in cash, unless it is established that Moneys moved from one person to another person, which is in the nature of loans or deposits Accordingly, we hold that the orders passed by CIT(A) in present appeals deleting the penalties are in order and do not require any interference from our side. Decided against revenue.

Issues Involved:
1. Legality of penalties imposed under Section 271D for violating Section 269SS.
2. Legality of penalties imposed under Section 271E for violating Section 269T.
3. Validity of evidence and documents used to impose penalties.
4. Adherence to principles of natural justice, including the right to cross-examine witnesses.

Summary:

Issue 1: Legality of penalties imposed under Section 271D for violating Section 269SS

The Appellate Tribunal ITAT Indore examined appeals concerning penalties imposed under Section 271D of the Income-tax Act, 1961, for alleged violations of Section 269SS. The penalties were based on documents seized during a search operation, including Tally data and loose papers. The Tribunal noted that the Commissioner of Income-tax (Appeals) [CIT(A)] had deleted these penalties, observing that the documents were "dumb documents" and lacked corroborative evidence. The Tribunal upheld the CIT(A)'s decision, emphasizing that the material relied upon by the Joint Commissioner of Income-tax (JCIT) was the same as in previous quantum appeals, where the ITAT had dismissed the revenue's appeals.

Issue 2: Legality of penalties imposed under Section 271E for violating Section 269T

Similar to the Section 271D penalties, the Tribunal also examined penalties imposed under Section 271E for alleged violations of Section 269T. The Tribunal noted that the CIT(A) had deleted these penalties as well, based on the same reasoning that the documents were "dumb documents" and lacked corroborative evidence. The Tribunal upheld the CIT(A)'s decision, reiterating that the material relied upon by the JCIT was the same as in previous quantum appeals, where the ITAT had dismissed the revenue's appeals.

Issue 3: Validity of evidence and documents used to impose penalties

The Tribunal scrutinized the evidence used to impose the penalties, including Tally data and loose papers seized from the premises of the assessee and a third party. The Tribunal found that these documents were not reliable as they were not corroborated by independent evidence. The Tribunal also noted that the statements of a key witness, Shri G.C. Patidar, were retracted, and the assessing officer failed to provide the assessee an opportunity to cross-examine the witness. The Tribunal concluded that the penalties were based on assumptions and presumptions without substantial evidence.

Issue 4: Adherence to principles of natural justice, including the right to cross-examine witnesses

The Tribunal emphasized the importance of adhering to principles of natural justice, particularly the right to cross-examine witnesses. The Tribunal found that the assessing officer had relied on the statements of Shri G.C. Patidar without allowing the assessee to cross-examine him. This was deemed a violation of natural justice, rendering the assessment orders null and void. The Tribunal cited several judicial precedents to support its conclusion that statements and documents used against the assessee must be corroborated by independent evidence and subjected to cross-examination.

Conclusion

The Tribunal upheld the CIT(A)'s orders deleting the penalties imposed under Sections 271D and 271E, concluding that the penalties were not sustainable due to lack of corroborative evidence and violation of principles of natural justice. The appeals filed by the revenue were dismissed.

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