Penalty under section 271D cannot be sustained on a cash receipt already taxed as unexplained cash credit.
Penalty under section 271D was held unsustainable where the same cash transaction had already been assessed as unexplained cash credit under section 68. The court reasoned that once the receipt was taxed on the footing that the explanation was unsatisfactory, the transaction could not again be used to invoke section 269SS and impose consequential penalty under section 271D on the same facts. The authorities also accepted that the cash receipts arose from cheque discounting for urgent business needs and that reasonable cause existed. Deletion of the penalty was therefore sustained in favour of the assessee.
Issues: Whether penalty under section 271D could be sustained for alleged violation of section 269-SS when the same transaction had been assessed as unexplained cash credit under section 68.
Analysis: The amount received in cash was treated by the assessing authority as unexplained cash credit and added to income under section 68 because the explanation for the transaction was found unsatisfactory. In that situation, the same transaction could not be used again to invoke section 269-SS and the consequential penalty under section 271D. The transaction was also accepted by the appellate authorities as genuine, with cash receipts arising from cheque discounting for urgent business needs, and reasonable cause was found to exist.
Conclusion: Penalty under section 271D was not leviable, and the deletion of penalty was sustained in favour of the assessee.
Final Conclusion: The appeal failed because the penalty provisions could not be applied to a transaction already brought to tax as unexplained cash credit, and no interference with the deletion of penalty was warranted.
Ratio Decidendi: Where a cash receipt from a transaction is assessed as unexplained cash credit under section 68, penalty for violation of section 269-SS under section 271D cannot be sustained on the same facts, particularly when reasonable cause is shown.
TaxTMI 
AI Drafter ✕
TaxTMI 
