2021 (12) TMI 863 - AT - Income Tax

Penalty Levy u/s 271D - assessee has received unsecured loan in cash in contravention of the provisions contained u/s 269SS - HELD THAT - Undisputedly AO has verified the claim of the assessee as to taking loan of ₹ 6,00,000/- in cash from his father out of the sale proceeds of the agricultural land sold by him to deposit the bank guarantee with Delhi Doordarshan Kendra which he has actually deposited by way of cheque on 20.03.2013 so as to enable him to get a 50% advance against making TV serials of 13 episodes on 31.03.2015, it was a genuine reason and contingency exercised by the assessee company as a purely business prudence. When source of the cash receipt of ₹ 6,00,000/- is not in dispute and transaction between Shri Sanjay Malik and his father Shri Iqbal Singh Malik has also not been disputed by Revenue and it has not prejudiced the interest of the Revenue in any manner as no tax avoidance and tax evasion has been alleged or proved, we find that AO/ld.CIT(A) have erred in levying/confirming the penalty. Consequently, impugned order passed by the ld. CIT (A) is set aside and penalty levied by AO and confirmed by ld. CIT(A) is ordered to be deleted - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271D of the Income-tax Act, 1961 - Upholding of penalty by CIT(A) - Failure to adjudicate grounds other than limitation.

Analysis:

Issue 1: Penalty under section 271D of the Income-tax Act, 1961
The case involved the imposition of a penalty under section 271D of the Income-tax Act, 1961 on the assessee, M/s. Malik Movies Organiser Pvt. Ltd., for receiving an unsecured loan in cash in contravention of the provisions of section 269SS of the Act. The Assessing Officer (AO) initiated penalty proceedings and levied a penalty equal to 100% of the amount of the loan received in cash. The assessee appealed to the Commissioner of Income-tax (Appeals) who confirmed the penalty. The Tribunal observed that the cash loan of ?6,00,000 was received by the director of the company from his father out of the sale proceeds of agricultural land for the purpose of issuing a bank guarantee to Delhi Doordarshan Kendra. The Tribunal found that the transaction was genuine and for business purposes, with no tax avoidance or evasion involved. Therefore, the Tribunal held that the penalty was unjustified, and the order confirming the penalty was set aside, directing the deletion of the penalty.

Issue 2: Upholding of penalty by CIT(A)
The second issue raised was the failure of the Commissioner of Income-tax (Appeals) to adjudicate on grounds other than limitation. The Tribunal noted that the CIT(A) had dismissed the appeal without considering other grounds raised by the assessee. Despite the absence of the assessee during the proceedings, the Tribunal reviewed the case based on the documents available and the arguments presented by the Revenue's Departmental Representative. The Tribunal ultimately concluded that the penalty was not warranted in the circumstances of the case, leading to the allowance of the appeal and the deletion of the penalty imposed by the AO and confirmed by the CIT(A).

In conclusion, the Tribunal's judgment in this case revolved around the genuineness of the transaction, the absence of tax implications, and the business necessity behind the cash loan received by the assessee. The decision emphasized the importance of considering the specific facts and circumstances of each case while imposing penalties under tax laws, ultimately leading to the deletion of the penalty in this instance.