2024 (2) TMI 334 - AT - Income Tax

Penalty u/s 271D 271E - allegation of cash loan having been taken/repaid - A search u/s 132 of the Act was conducted in case of one PATH Group including assessee and the assessee was managing director of PATH and a key person of PATH Group - HELD THAT - We find that both sides are ad idem to the point that the material on the basis of which the JCIT imposed penalties u/s 271D and 271E are same as in case of appeals of PATH . We further note that in the appeals of PATH , the first appellate authority as well as ITAT have concurrently disagreed and rejected the observations/inferences/ conclusions drawn by assessing authority. Since there is nothing new to be considered or analyed in present appeal, we adopt the same reasoning and same view as taken in PRAKASH ASPHALTINGS TOLL HIGHWAYS (INDIA) LTD. 2024 (2) TMI 241 - ITAT INDORE and accordingly 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. Thus, the CIT(A) means to say that if the factum of taking or repaying loan is itself disputed, there cannot be any default as contemplated u/s 269SS or 269T. In simpler words, section 269SS or 269T has no application when the transactions itself are disputed, those sections can only apply to un- disputed transactions or the existence of the transactions attained finality. We also find merit in this observation/conclusion made by Ld. CIT(A). The above discussions and the reasoning mentioned therein brings us to conclude that the penalties imposed by AO in present cases are not sustainable. Consequently, we are deleting the same. The revenues grounds are dismissed.

Summary

Issues Involved:
1. Deletion of penalties under Section 271D for violating Section 269SS.
2. Deletion of penalties under Section 271E for violating Section 269T.
3. Validity of evidence and documents used for imposing penalties.
4. Adherence to principles of natural justice.

Summary:

Issue 1: Deletion of penalties under Section 271D for violating Section 269SS:
The revenue challenged the deletion of penalties imposed under Section 271D for Assessment Years (AY) 2009-10 and 2010-11. The penalties were levied by the Joint Commissioner of Income-tax (JCIT) for allegedly violating Section 269SS of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) [CIT(A)] had deleted these penalties, and the revenue's appeals were based on the argument that the penalties were imposed on the basis of corroborated documents seized during a search.

Issue 2: Deletion of penalties under Section 271E for violating Section 269T:
Similarly, the revenue contested the deletion of penalties imposed under Section 271E for AY 2009-10 and 2010-11. These penalties were also levied by the JCIT for allegedly violating Section 269T of the Act. The CIT(A) had deleted these penalties, and the revenue's appeals were based on the same argument as for Section 271D penalties.

Issue 3: Validity of evidence and documents used for imposing penalties:
The Tribunal noted that the penalties were based on documents seized during a search, including Tally data and loose papers, as well as statements recorded from an employee of the assessee. The CIT(A) had analyzed these documents and concluded that they were not reliable evidence, as they were either retracted or found to be used for training purposes. The Tribunal upheld this view, stating that the documents were "dumb documents" and could not be used as conclusive evidence without independent corroboration.

Issue 4: Adherence to principles of natural justice:
The Tribunal emphasized the importance of adhering to principles of natural justice, noting that the assessee was not given an opportunity to cross-examine the witness whose statements were used against him. The Tribunal cited various legal precedents to support the view that statements and documents used as evidence must be subjected to cross-examination and independent verification.

Conclusion:
The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s orders deleting the penalties imposed under Sections 271D and 271E. The Tribunal concluded that the penalties were not sustainable due to the lack of reliable evidence and the violation of principles of natural justice. The Tribunal also noted that the penalties could not be imposed based on disputed transactions or mere book entries without establishing the actual movement of money.