2015 (7) TMI 196 - AT - Income Tax

Penalty u/s.271D - violation of S. 269SS - Held that - For imposing penalty u/s.271D there must be some direct evidence to substantiate that the assessee has infact accepted cash loan in violation of the provisions of section 269SS. In the instant case, there is no direct evidence brought on record by the Revenue. The assessee was categorically denying of any such cash loan from Shri Kachrulal Nathmal Mutha. There is nothing on record to suggest that any such statement has been recorded from either of the persons so as to prove that such cash loan has been given or taken. The entire process is on the basis of surmises and presumptions. It is also a fact that the assessee is no more and has expired. Considering the totality of the facts of the case, we are of the opinion that it is not a fit case for levy of penalty u/s.271D of the I.T. Act in absence of any direct evidence to show that the assessee, in the instant case, has accepted cash loan in violation of provisions of section 269SS. In this view of the matter, we set-aside the order of the CIT(A) and direct the AO to cancel the penalty levied u/s.271D. Since the assessee succeeds on merit, we refrain ourselves from deciding the legal arguments advanced by the Ld. Counsel for the assessee to the proposition that the penalty order is barred by limitation. - Decided in favour of assessee.

Summary

Issues:
Violation of Section 269SS of the Income Tax Act, 1961 leading to penalty under Section 271D - Merit of the case - Limitation of penalty order.

Analysis:

Violation of Section 269SS and Penalty under Section 271D:
The case involved a situation where the assessee was alleged to have accepted a cash loan of Rs. 6 lakhs from a money lender, which was in contravention of Section 269SS of the Income Tax Act. The Assessing Officer (AO) initiated penalty proceedings under Section 271D, contending that the loan was accepted improperly. The Additional Commissioner of Income Tax (Addl.CIT) upheld the penalty, directing the assessee to pay Rs. 6 lakhs. The Commissioner of Income Tax (Appeals) [CIT(A)] also affirmed this decision, stating that the appellant had indeed accepted the cash loan. The CIT(A) rejected the appellant's explanations and contentions, emphasizing that the provisions of Section 269SS were applicable, and no reasonable cause for the default was presented by the appellant. Consequently, the penalty under Section 271D was confirmed.

Merit of the Case and Lack of Direct Evidence:
The appellant challenged the penalty order on various grounds, asserting that there was no violation of Section 269SS and that the penalty was unjustified. The appellant argued that there was no direct evidence to prove the acceptance of the cash loan, and the penalty was based on presumptions. The appellant also highlighted the absence of entries in the books of accounts as evidence. The Tribunal noted that there was no concrete evidence presented by the Revenue to substantiate the alleged cash loan acceptance. The appellant consistently denied receiving the loan, and there was no recorded statement from either party confirming the transaction. Considering the lack of direct evidence and the demise of the appellant, the Tribunal concluded that the penalty under Section 271D was unwarranted and set aside the CIT(A)'s decision, directing the AO to cancel the penalty.

Limitation of Penalty Order:
While the appellant also raised the issue of the penalty order being barred by limitation, the Tribunal did not delve into this aspect as the case was decided on merit. The Tribunal refrained from addressing the legal arguments regarding the limitation of the penalty order, as the appellant succeeded on the merit of the case.

In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside the penalty under Section 271D of the Income Tax Act, 1961, based on the lack of direct evidence to establish the alleged violation of Section 269SS. The decision highlighted the importance of concrete evidence in imposing penalties under tax laws and emphasized the need for a factual basis for such actions.