2022 (4) TMI 228 - AT - Income Tax

Penalty u/s 271E - assessee has repaid loan in cash during the year under consideration in violation of Section 269T - HELD THAT - On perusal of the loose paper no.98, we find that no such amount of ₹ 2 lac is borne out in the loose paper, insofar as Financial Year 2010-11 relevant to Assessment Year 2011-12 in question is concern. We also find traction in the plea of the assessee that the loose paper in the instant case are neither signed by the deceased-assessee nor prepared by him and also simultaneously vague and non-descript. The loose paper was purportedly prepared by some nephew of the assessee who was neither identified nor cross-examined. The loose paper no.98 also does not spell out as to with whom the alleged cash transactions as entered into the loose paper has been carried out, i.e., the corresponding party to the transaction is not known. The assessee is since deceased and thus the authenticity of the transaction cannot vouched. Under these mitigating circumstances, we find that plausible cause exists to question the propriety of allegations. The assessee thus deserves to be exonerated from the clutches of Section 269T r.w. Section 271E of the Act. The order of the CIT(A) is accordingly set aside and the order of the AO reversed. The penalty imposed under Section 271E stands cancelled. Penalty allegedly received in cash by way of loans or deposits in contravention of Section 269SS r.w. Section 271D - HELD THAT - While recording the reasons for reopening of the assessment, it is noticed that, as per paragraph 7 of the assessment order under Section 143(3) r.w. Section 147 AO himself has held that no addition is required to be made on the basis of document no.9 As the loan was received by the assessee on 12.09.2009, i.e., in the Financial Year 2009-10. Thus, the imposition of penalty on alleged cash loan arising out of loose paper no.98 does not arise in Assessment Year 2011-12 in question. Adverting to loose paper giving rise to imposition of penalty it is self-evident from the calculation of the interest shown in the loose paper that the alleged cash loan was not received in the Financial Year 2010-11 in question but the alleged cash loan relates back to Financial Year 2008-09 relevant to Assessment Year 2009-10. The calculation of interest vouches that the loan of ₹ 15 lac in question was received about 21 month back, i.e., in July 2008, if such loose papers are to be believed at its face value. On this ground alone, the jurisdiction of the Revenue to imposition of penalty under Section 271D r.w. Section 296SS is ousted, insofar as Assessment Year 2011-12 in question is concerned. We therefore find prima facie merit in the plea on behalf of the assessee for its exoneration from the clutches of Section 271D of the Act. Appeal of the assessee is allowed.

Summary

Issues:
1. Challenge against penalty imposed under Section 271E for cash loan repayment.
2. Alleged contravention of Section 269SS leading to penalty under Section 271D.

Analysis:

Issue 1: Challenge against penalty under Section 271E:
The assessee contested the penalty imposed under Section 271E for repaying a cash loan of ?2 lac, alleging violation of Section 269T. The Assessing Officer relied on a loose paper found during a survey, implicating the deceased-assessee. However, the loose paper was not signed by the assessee, lacked details of the transaction, and was prepared by someone else. The Tribunal noted that the loose paper did not mention the ?2 lac repayment and lacked authenticity due to the deceased status of the assessee. Consequently, the Tribunal found the penalty unjustified and canceled it, overturning the CIT(A)'s decision.

Issue 2: Alleged contravention of Section 269SS and penalty under Section 271D:
In another matter, the assessee challenged a penalty of ?22,50,000 imposed for allegedly receiving cash loans in violation of Section 269SS, attracting penalty under Section 271D. The penalty was based on loose papers seized during a survey. The Tribunal observed discrepancies in the loose papers regarding the timing and amounts of the alleged loans, which did not align with the relevant assessment years. The Tribunal found that the alleged cash loans were received in prior years, not during the assessment year in question. Due to these inconsistencies and lack of concrete evidence, the Tribunal directed the cancellation of the penalty under Section 271D, setting aside the CIT(A)'s decision.

In both cases, the Tribunal emphasized the importance of concrete evidence, proper documentation, and adherence to relevant legal provisions before imposing penalties under the Income Tax Act. The decisions highlight the necessity for thorough scrutiny and substantiated allegations to uphold penalties related to cash transactions and loans.