2022 (6) TMI 445 - AT - Income Tax

Penalty levied u/s 271D - cash loan in violation of provision of section 269SS - HELD THAT - CIT-A deleted the addition AO himself has recorded in the reasons to belief that cash loan was received by the two firms M/s Green Bird Pvt. Ltd. and P.D. Construction and name of the assessee was appearing in which contact person. Evidently if the loan has been received by the partnership firm/company wherein the assessee is a partner or director, the said loan cannot be added in the hands of the assessee. CIT(A) has rightly advised the AO to consider examination of the transactions in the hands of M/s P.D. Construction and M/s Green Bird Pvt. Ltd for any suitable action. The original statement of Shri Nilesh Bharani were never provided to the assessee despite repeated request for inspection of the original statement, wherein he stated of provided cash loan to two concerns namely P.D. Construction and M/d Green Bird Pvt. Ltd. Shri Nilesh Bharani even retracted his statement made u/s 132(4) of providing cash loan to two concerns. During the cross-examination by the assessee Shri Nilesh Bharani denied of giving any cash loan to the assessee or his concerns. When the issue-in-dispute is in respect of the receipt of loan and source of which is already available on record, it is not understandable how the same become undisclosed income in the hands of the assessee, as source of the same, is already within the knowledge of the Income Tax Department. Addition u/s 69A - AO has on the one hand added cash loan alleged to receipt by the assessee as unexplained cash credit of the assessee as its income and on the other hand, also levied penalty u/s 271D of the Act in contravention of provision of section 269SS of the Act i.e. receipt of the loan otherwise then by account payee cheque. CIT(A) has deleted the penalty. In view of the fact that the addition u/s 69A for receipt of cash loan itself was deleted and therefore said penalty u/s 271D for receiving cash loan in violation of provision of section 269SS cannot be survive.

Summary

Issues Involved:
1. Deletion of addition of Rs. 3,92,00,000/- made under Section 69A of the Income Tax Act, 1961.
2. Penalty levied under Section 271D of the Income Tax Act, 1961 for alleged cash loan transactions.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 69A:

The Revenue appealed against the deletion of an addition of Rs. 3,92,00,000/- made under Section 69A of the Income Tax Act, 1961. The Assessing Officer (AO) had received information from the Investigation Wing that during a search at Bharani Group and M/s Evergreen Enterprises, it was found that two concerns of ‘Parinee Group' received cash loans amounting to Rs. 3.92 crores. The name of the assessee was recorded as a contact person in the seized documents. The AO reopened the assessment under Section 147 and made the addition of Rs. 3.92 crores as unexplained loan under Section 69A.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, noting several points:
- The AO was asked to clarify why the addition was made in the hands of the assessee when the loans were taken by M/s Green Bird Enterprises and M/s P.D. Construction. The AO failed to provide relevant seized documents or comments justifying the addition in the assessee's hands.
- The AO's report indicated that the information pertained to loans taken by M/s Green Bird and P.D. Construction, not the assessee.
- The statement of Shri Nilesh Bharani, who was involved in the alleged cash loan transactions, was retracted shortly after it was made, citing coercion and mental pressure.

The Tribunal upheld the CIT(A)'s decision, emphasizing:
- The AO recorded that the loans were received by M/s Green Bird Pvt. Ltd. and P.D. Construction, and the assessee was merely a contact person.
- The original statements of Shri Nilesh Bharani were never provided to the assessee despite requests.
- Shri Nilesh Bharani retracted his statement and denied giving any cash loan to the assessee during cross-examination.
- The source of the alleged loan was already known to the Income Tax Department, making it unclear how it could be considered undisclosed income for the assessee.

2. Penalty under Section 271D:

The AO also levied a penalty under Section 271D for the alleged receipt of a cash loan in contravention of Section 269SS, which mandates that loans above a certain amount must be received via account payee cheque or bank draft. The CIT(A) deleted the penalty, reasoning that since the addition under Section 69A was deleted, the penalty under Section 271D could not survive.

The Tribunal agreed with the CIT(A), stating:
- The penalty under Section 271D was contingent on the addition under Section 69A, which had been deleted.
- Therefore, the penalty for receiving a cash loan in violation of Section 269SS could not be upheld.

Conclusion:

The Tribunal dismissed the appeals of the Revenue and the cross-objection of the assessee, upholding the CIT(A)'s order to delete the addition under Section 69A and the penalty under Section 271D. The Tribunal noted that the AO should consider examining the transactions in the hands of M/s P.D. Constructions and M/s Green Bird Pvt. Ltd. for any suitable action.