2023 (6) TMI 723 - AT - Income Tax

Penalty us 271D - Payment of Cash on behalf of Directors - Transactions are in the nature of loan or not? - contravention of the provisions of section 269SS - CIT-A deleted addition - HELD THAT - Penalty was imposed by ignoring the fund flow statement submitted before income tax settlement commission by the M/s. Spaze Towers Pvt. Ltd., which has provided cash fund to the assessee and the ld. CIT(A) considered the same on the right prospective and by considering the order of M/s. K S Chawla Sons 2019 (8) TMI 1413 - ITAT DELHI and therefore the same may kindly be upheld.has categorically held that the order of Tribunal in other group cases on similar facts persuaded him to delete the penalty. CIT(DR) has not shown any contrary order or judgment by co-ordinate bench of Tribunal or Hon ble High which may lead us to take a different view to support the penalty order. Hence we are inclined to hold that there is no ambiguity perversity or any valid reason to interfere with the findings arrived by the ld. CIT(A) and, thus, we uphold the same. Accordingly, grounds of revenue are dismissed.

Summary

Issues Involved:
1. Deletion of penalty under Section 271D of the Income Tax Act.
2. Violation of provisions of Section 269SS of the Income Tax Act.
3. Treatment of transactions between M/s Spaze Towers Pvt. Ltd. and the assessee.
4. Satisfaction requirement for penalty under Section 271D.

Summary:

Issue 1: Deletion of Penalty under Section 271D:
The primary issue was whether the CIT(A) erred in deleting the penalty under Section 271D of the Income Tax Act. The revenue contended that the CIT(A) wrongly relied on the ITAT's order, which held that the payment of Rs. 2,38,00,000/- by M/s Spaze Towers Pvt. Ltd. to the assessee was not a loan transaction violating Section 269SS. The CIT(A) deleted the penalty, considering the ITAT's decision in similar cases, which found no lender-borrower relationship and thus no violation of Section 269SS.

Issue 2: Violation of Provisions of Section 269SS:
The revenue argued that the CIT(A) ignored the fund flow statement submitted before the Settlement Commission, which showed that M/s Spaze Towers Pvt. Ltd. discharged the assessee's liabilities in cash, violating Section 269SS. However, the ITAT found that the transactions were personal expenses of the directors/promoters, not loans or deposits, and thus did not violate Section 269SS.

Issue 3: Treatment of Transactions:
The revenue claimed that the CIT(A) wrongly treated the transactions as liabilities rather than loans or deposits, despite the assessee's admission that these were returnable cash transactions. The ITAT upheld the CIT(A)'s view that the transactions were personal expenses incurred by M/s Spaze Towers Pvt. Ltd. for the directors/promoters, which were acknowledged as liabilities but not as loans or deposits.

Issue 4: Satisfaction Requirement for Penalty:
The revenue contended that the CIT(A) erred in deleting the penalty without proper satisfaction. The ITAT referenced the Supreme Court's ruling in Jai Laxmi Rice Mills, which held that penalty under Section 271D requires specific satisfaction, which was lacking in this case. The ITAT found that the assessment order and the JCIT's penalty order lacked the necessary satisfaction, rendering the penalty unsustainable.

Conclusion:
The ITAT upheld the CIT(A)'s decision to delete the penalties under Section 271D, finding no violation of Section 269SS as the transactions were personal expenses, not loans or deposits. The ITAT emphasized the lack of necessary satisfaction for imposing the penalty, aligning with the Supreme Court's precedent. Consequently, the revenue's appeal was dismissed.