2024 (2) TMI 790 - AT - Income Tax

Penalty u/s 271E - repayment of loan in cash - Default u/s 269T - HELD THAT - As assessee on the aspect of bonafide belief on account of ignorance of law, we do not see any plausible reason to consider the plea of the Ld. AR. In a similar case, ITAT, Raipur has recently adopted a view regarding violation of provisions of section 269T in the case of Kamaljeet Kaur Gill v. Joint Commissioner of Income-tax in 2023 (9) TMI 432 - ITAT RAIPUR wherein is equally applicable in the present case, wherein held that where assessee made repayment of loan in cash for reasons that she was insisted by financer of loan to do so due to poor track record of clearance of cheque and also she was ignorant of provisions of section 269T, since there were multiple other methods of repayment of loan envisaged in section 269T apart from payment through cheque and assessee had failed to come forth with any reasonable cause for such payment in cash, impugned penalty u/s 271E imposed upon her was justified. Ground no. 1 of the appeal of the assessee stands dismissed. Addition u/s 69A - Source of Cash deposit - Assessee contended that same is received in advance against the sale of property - Levy of penalty u/s 271D - Held that - Since the AO had recorded a finding that the amount was the unexplained money of the assessee u/s 69A and thus, chargeable income of the assessee. Impliedly, the stand of Ld. AO while treating the amount received in cash as assessee s own money, establishes that it was neither any loan, a deposit nor specified sum. On one hand when the impugned cash receipts are characterized as assessee s own money the same, on the other hand cannot be a specified sum received from someone else in contravention to provisions of section 269SS, therefore, the very foundation and prerequisite to bring such amount within the realm of section 269SS was lost. Consequently, the penalty imposed under section 271D r.w.s. 269SS by the Ld. AO and confirmed by Ld. CIT(A), therefore, is liable to be quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Penalty under Section 271D of the Income Tax Act.
2. Applicability of amended provisions of Section 269SS.
3. Treatment of cash receipts as unexplained income under Section 69A.

Summary of Judgment:

Issue 1: Penalty under Section 271D
The assessee challenged the penalty of Rs. 7,51,000/- imposed under Section 271D for violating Section 269SS, which mandates that loans or deposits above Rs. 20,000/- must be accepted through account payee cheque or bank draft. The Assessing Officer (AO) had observed that the assessee received cash amounts aggregating Rs. 7,51,000/- in the financial year 2015-16, thereby violating Section 269SS. The CIT(A) upheld this penalty, leading to the present appeal.

Issue 2: Applicability of Amended Provisions of Section 269SS
The assessee argued that the agreements for sale were entered into before the amendment to Section 269SS, which came into effect on 01.06.2015. Therefore, the amended provisions should not apply to transactions based on these agreements. The assessee also claimed ignorance of the amended law, arguing that the transactions were in good faith and based on a bonafide belief. The tribunal referred to the case of Kamaljeet Kaur Gill v. Joint Commissioner of Income-tax, which held that ignorance of law is not a plausible reason for violating Section 269T. Consequently, the tribunal dismissed this ground of appeal.

Issue 3: Treatment of Cash Receipts as Unexplained Income under Section 69A
The assessee contended that the AO had treated the cash receipts as unexplained income under Section 69A, and therefore, the same amount could not be penalized under Section 271D for violating Section 269SS. The tribunal referred to the Delhi High Court's decisions in CIT vs. R.P. Singh & Co. Pvt. Ltd. and Diwan Enterprises vs. CIT, which held that an amount treated as the assessee's own income could not simultaneously be treated as a loan or deposit for the purpose of Section 269SS. The tribunal found that since the AO had already treated the cash receipts as unexplained income, the penalty under Section 271D could not be sustained.

Conclusion:
The tribunal allowed the appeal, quashing the penalty of Rs. 7,51,000/- imposed under Section 271D, on the grounds that the cash receipts were already treated as unexplained income under Section 69A. The appeal was allowed in favor of the assessee.