Appeal success: Penalty revoked for violating tax sections

The Tribunal allowed the appeal, revoking the penalty of Rs. 5,00,000 imposed under section 271D for violating section 269SS. Relying on precedents and legal principles, the Tribunal concluded that since the transaction was found to be genuine based on previous rulings, the penalty was deemed unwarranted despite the technical violation.

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Issues involved:
Levy of penalty under section 271D of the Act for violating section 269SS by accepting a loan in cash.

Detailed Analysis:
The appeal was filed against the order of CIT(A)- Jamshedpur for the assessment year 2006-07, focusing on the levy of penalty of Rs. 5 lakhs under section 271D of the Act. The Assessing Officer imposed the penalty after the assessee admitted to receiving Rs. 5 lakh in cash from an individual during the assessment proceedings. The penalty was levied for violating section 269SS by accepting the loan in cash.

During the proceedings, the assessee argued that in a previous quantum appeal, the Tribunal confirmed the deletion of an addition of Rs. 5 lakhs made under section 68 of the Act in a different case. The assessee contended that since the transaction violating section 269SS was found to be genuine, no penalty under section 271D should be levied. The assessee relied on a decision of the Hon’ble Jurisdictional Jharkhand High Court to support this argument.

On the other hand, the Revenue supported the orders of the lower authorities, advocating for the penalty to be upheld. The Tribunal referred to the decision of the Hon’ble Jurisdictional High Court in the case of OMEC Engineers, which emphasized that the imposition of penalty for a technical mistake without any revenue loss would be harsh and unsustainable in law if the transaction violating section 269SS was genuine and not mala fide.

In line with the precedent set by the Hon’ble Jurisdictional High Court, the Tribunal found that since the addition under section 68 for violating section 269SS was deleted by the CIT(A) and confirmed by the Tribunal, the transaction was genuine. Therefore, the Tribunal decided to delete the penalty of Rs. 5,00,000/- levied under section 271D, allowing the ground of appeal for the assessee.

Consequently, the appeal filed by the assessee was allowed, and the penalty was revoked based on the genuine nature of the transaction violating section 269SS as established through previous rulings and legal principles.

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