Penalty under section 271D quashed where Rs.30,000 cash treated as income, not a loan under section 269SS

HC allowed the writ and quashed the penalty levied under section 271D read with section 269SS. The AO had treated the cash receipt as surrendered income (Rs. 30,000), thereby finding it was not a loan or deposit; once the amount was accepted as income, the foundation for a 269SS contravention and consequent 271D penalty vanished. The penalty under section 271D could not be sustained and was set aside.

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Issues Involved:
1. Quantum of income fixed by the Assessing Officer.
2. Penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.
3. Penalty u/s 271D for accepting a loan in cash in violation of section 269SS.

Summary:

Issue 1: Quantum of Income Fixed by the Assessing Officer
The assessee, engaged in the manufacture of polypropylene and polythene products, filed a return for the assessment year 1991-92 declaring an income of Rs. 29,910. During assessment, it was found that R. R. Jindal had advanced a cash loan of Rs. 30,000 to the assessee, which was surrendered to be treated as income. The Assessing Officer accepted this surrender and disallowed the interest paid on the loan, adding it back to the income. The assessee's revision against this assessment was dismissed, and the court found no fault with the impugned orders, dismissing C.W.P. No. 3870 of 1997.

Issue 2: Penalty u/s 271(1)(c)
The Assessing Officer issued a notice u/s 271(1)(c) for concealing particulars of income. The assessee did not provide any explanation, leading to a penalty of Rs. 31,586. The revision against this penalty was dismissed. The court noted that the surrender of income was unconditional and the burden of proof had shifted to the assessee, who failed to appear before the Assessing Officer. However, the court found a jurisdictional defect as the Assessing Officer did not record satisfaction of concealment during the assessment proceedings. Consequently, C.W.P. No. 3869 of 1997 was allowed, and the penalty was set aside.

Issue 3: Penalty u/s 271D
A penalty of Rs. 30,000 was imposed on the assessee for accepting a cash loan in violation of section 269SS. The revision against this penalty was also dismissed. The court observed that the Assessing Officer had treated the amount as income, not a loan, thereby losing the foundation for penalty u/s 271D. The court held that the Assessing Officer could not treat the amount as income for tax purposes and as a loan for penalty purposes simultaneously. Thus, C.W.P. No. 3868 of 1997 was allowed, and the penalty was quashed.

Conclusion:
C.W.P. No. 3870 of 1997 was dismissed, while C.W.P. Nos. 3869 and 3868 of 1997 were allowed, quashing the penalties u/s 271(1)(c) and 271D, respectively. All petitions were disposed of without any order as to costs.

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