2012 (11) TMI 401 - AT - Income Tax

Penalty u/s 271(1)(c) - unaccounted cash credits - Held that - The assessee had placed on record the confirmation of HUF details of bank account along with details of land holding as per 7/12 and 8A details. It is also noted by CIT(A) that the assessee has also placed on record the confirmation details of bank account along with details of land holding of 12 HUFs who had advanced money to the assessee HUF. On the basis of these facts this finding is given by CIT(A) that the assessee has not only proved the immediate source of the credit but also the source of the source - addition & penalty deleted - in favour of assessee. Penalty u/s. 271E - loan repayment in cash - Held that - Persuing the two lists of names it is clear that the names are not the same regarding receipt of loan by cheques and repayment of loans in cash. Thus argument of D.R. is not valid that when the persons are having bank account at the time of giving the money to the assessee how they were not having bank account when repayment was made to them. A clear finding is given by CIT(A) that these persons were residing in small villages and the nearest bank was situated about 15 km away from their villages. He has also given a finding that out of 11 persons 4 persons were not having by bank account and one person had expired and therefore the assessee was compelled to make repayment in cash to his legal heirs on their request. Regarding the remaining 6 persons he has given finding that they were residing in the villages where no bank and banking facilities were available to them and the assessee has repaid in cash to them - addition & penalty deleted - in favour of assessee.

Summary

Issues involved:
1. Quantum appeal regarding addition of unexplained cash credits under section 68 of the Income Tax Act.
2. Penalty appeal regarding cancellation of penalty levied under section 271E of the Income Tax Act.

Quantum Appeal Analysis:
The quantum appeal involved the addition of Rs.21,11,000 as unexplained cash credits under section 68 of the Income Tax Act. The Revenue contended that the CIT(A) erred in deleting the addition without appreciating the facts and material on record. However, the CIT(A) found that the appellant had provided documentary evidence, including confirmations, bank account details, and land holdings of both the appellant's HUF and the 12 HUFs from whom the money was received. The CIT(A) concluded that the immediate source of credit and the source of the source were adequately established, citing precedents from the Gujarat High Court. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue failed to challenge the CIT(A)'s findings, resulting in the dismissal of the quantum appeal.

Penalty Appeal Analysis:
The penalty appeal concerned the cancellation of a penalty imposed under section 271E of the Income Tax Act. The Revenue argued that the CIT(A) erred in canceling the penalty without considering the underlying intention behind the relevant section. The CIT(A) based the cancellation on the grounds that some recipients of the funds did not have bank accounts and resided in villages far from banking facilities, justifying cash repayments. The Revenue contended that since these recipients had bank accounts when providing the funds, they should have had accounts during repayment. However, the CIT(A) found reasonable causes for cash repayments, such as lack of nearby banks and requests from legal heirs. The Tribunal upheld the CIT(A)'s decision, emphasizing the uncontested findings regarding the recipients' circumstances, leading to the dismissal of the penalty appeal.

In summary, the Appellate Tribunal ITAT, Ahmedabad, addressed both the quantum and penalty appeals related to unexplained cash credits and penalty imposition under the Income Tax Act. The Tribunal upheld the CIT(A)'s decisions in both cases, emphasizing the importance of documentary evidence and reasonable causes for cash transactions, resulting in the dismissal of the Revenue's appeals.