2019 (8) TMI 503 - AT - Income Tax

Levy of penalty u/s 271D - violation of provision of section 269SS - receipt of cash loan - HELD THAT - During the course of hearing assessee fairly conceded that the assessee has not challenged the addition of this amount. Therefore, the factum of obtaining loan is proved. Considering all the assessee could not controvert the finding of the authorities below in respect of the evidences gathered during the search which proves receipt of loan in cash, therefore, we do not see any reason to interfere in the finding of the authorities below. The grounds raised in this appeal are dismissed. Levy of penalty u/s 271E - violation of provision of section 269T - repayment of loan was made in cash - HELD THAT - There is nothing on record suggesting that the loan amount was repaid in cash by the assessee. The revenue has considered the terms of loan as if the same has been repaid in cash. There is no receipt by the person who has given loan to the assessee accepting or acknowledging the repayment of the loan in cash by the assessee. Even in the statement recorded by the revenue authorities, nothing of this sort is stated by Shri L.N. Gupta, father of Shri Anil Gupta. Therefore, under the facts of the present case and in the absence of the proof that assessee had made repayment of loan in cash, in our considered view, imposition of penalty u/s 271E would not be justified. A.O. ought to have brought some material suggesting that the assessee has made repayment of loan in cash, therefore, we hereby direct the A.O. to delete the penalty.

Summary

Issues:
- Assessment of penalty under sections 271D and 271E of the Income Tax Act, 1961 for the assessment years 2011-12 and 2012-13.
- Justification of penalty imposition based on unsecured loan transactions.
- Dispute regarding repayment of loan in cash and its impact on penalty under section 271E.

Analysis:

Issue 1: Assessment of Penalty under Sections 271D and 271E:
The judgment pertains to two appeals by the assessee challenging the levy of penalties under sections 271D and 271E of the Income Tax Act, 1961. The appeals were against the consolidated order of the Ld. CIT(A)-1, Bhopal confirming the penalties. In the first appeal (ITA No.835/Ind/2017), the penalty under section 271D was upheld as the assessee received an unsecured loan in cash, violating section 269SS of the Act. The A.O. issued a notice under section 271D and imposed a penalty of ?10 lakhs, which was sustained by the Ld. CIT(A) and subsequently dismissed by the ITAT, as the fact of obtaining the loan was not challenged by the assessee. The second appeal (ITA No.836/Ind/2017) involved a penalty under section 271E, where the repayment of the loan was disputed. The ITAT allowed this appeal, directing the A.O. to delete the penalty as there was no evidence of the loan repayment in cash.

Issue 2: Justification of Penalty Imposition based on Unsecured Loan Transactions:
In both appeals, the authorities below, including the A.O. and Ld. CIT(A), upheld the penalties under sections 271D and 271E based on unsecured loan transactions. The A.O. in the first appeal concluded that the assessee had received an unsecured loan of ?10 lakhs in cash, leading to the penalty under section 271D. The Ld. CIT(A) sustained this penalty. However, in the second appeal, the ITAT found merit in the argument that there was no evidence of the loan repayment in cash, leading to the direction to delete the penalty under section 271E. The judgments highlight the importance of proper documentation and evidence in such transactions to avoid penalties under the Income Tax Act.

Issue 3: Dispute Regarding Repayment of Loan in Cash and Its Impact on Penalty under Section 271E:
The crucial difference between the two appeals lies in the repayment aspect of the loan. While the first appeal focused on the receipt of an unsecured loan in cash, leading to the penalty under section 271D, the second appeal contested the repayment of the loan in cash, impacting the penalty under section 271E. The ITAT in the second appeal emphasized the lack of evidence supporting the cash repayment, leading to the decision to allow the appeal and direct the A.O. to delete the penalty. This distinction underscores the significance of proving the mode of loan repayment to avoid penalties under the Income Tax Act.

In conclusion, the judgments by the ITAT in both appeals address the assessment of penalties under sections 271D and 271E of the Income Tax Act, emphasizing the importance of proper documentation and evidence in loan transactions to avoid penalties. The decisions provide clarity on the justification of penalty imposition based on unsecured loan transactions and the impact of disputing the repayment mode on penalties under the Act.