2019 (9) TMI 342 - AT - Income Tax

Penalty under Income Tax Act for non-cash loans deleted due to legitimate transactions

The penalty of Rs. 20,24,50,000 imposed under Section 271D of the Income Tax Act, 1961, was deleted as it was found that the loans in question were ... Levy of penalty u/s.271D - receipt of cash loans for violation of provisions of section 269SS - loose sheet seized from the premises of Shri Samir Shah during his search action u/s.132 apparently indicates loan transactions of the assessee - HELD THAT:- Findings given by the CIT(A) in the appellate order passed for Shri Samir Shah that the disputed loans were not received in cash and rather they were received through normal banking channels. Hence, this fact is also accepted by the AO of Shri Samir Shah in his remand report. Hence, it goes to prove beyond doubt that there is no receipt of any cash loan by the assessee from Shri Samir Shah in violation of provisions of Section 269SS of the Act. Accordingly, the penalty u/s.271D of the Act levied in the hands of the assessee deserves to be deleted Accordingly, we direct the ld. AO to delete the penalty levied u/s.271D - Decided in favour of assessee. Issues Involved:1. Justification of the levy of penalty under Section 271D of the Income Tax Act, 1961.2. Examination of whether the loans were accepted in cash, violating Section 269SS of the Income Tax Act, 1961.Detailed Analysis:1. Justification of the Levy of Penalty under Section 271D:The matter at hand revolves around the imposition of a penalty of Rs. 20,24,50,000 under Section 271D of the Income Tax Act, 1961, by the Additional Commissioner of Income Tax (Addl. CIT), which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalty was levied on the grounds that the assessee had accepted loans in cash, thereby violating Section 269SS of the Act.The assessee, a real estate developer, contended that the loose paper (page No. 206 of Annexure A-1) seized during a search operation did not represent any cash loan. The assessee argued that the loans were accepted through banking channels and were reflected in the books of accounts, thus not violating Section 269SS.2. Examination of Whether the Loans Were Accepted in Cash:The Addl. CIT and the CIT(A) both concluded that the assessee had accepted loans in cash based on the seized document. The CIT(A) noted that the assessee failed to provide satisfactory evidence to counter the findings of the Addl. CIT, who had established beyond reasonable doubt that the loans were accepted in cash. The CIT(A) emphasized that the onus was on the assessee to prove that the loans were received through banking channels, which the assessee failed to do.However, during the appellate proceedings, it was revealed that the seized document (page No. 206, Annexure A-1) was found at the premises of Shri Samir Shah, a finance broker. The document indicated loan transactions involving the assessee. Shri Samir Shah, in his assessment proceedings, provided additional evidence that the loans were given through banking channels. The Assessing Officer (AO) of Shri Samir Shah verified these claims and confirmed that the loans were reflected in the regular books of accounts of the Rohan Group, the entity to which the assessee belonged.The remand report by the AO of Shri Samir Shah, submitted during the appellate proceedings, categorically stated that the loans mentioned in the seized document matched the book entries in the regular books of accounts of the Rohan Group. The AO also issued summons to the lenders and recorded their statements, establishing the identity, genuineness, and creditworthiness of the loan transactions.The CIT(A) in the appellate proceedings for Shri Samir Shah accepted the additional evidence and the remand report, concluding that the loans were not received in cash but through banking channels. Consequently, the addition of Rs. 20,24,50,000 on account of alleged cash loans was deleted.Based on these findings, it was determined that there was no receipt of any cash loan by the assessee from Shri Samir Shah in violation of Section 269SS. Therefore, the penalty under Section 271D of the Act levied on the assessee was deemed unjustified and was ordered to be deleted.Conclusion:The appeal was allowed, and the penalty of Rs. 20,24,50,000 levied under Section 271D of the Income Tax Act, 1961, was directed to be deleted, as the loans were received through banking channels and not in cash, thereby not violating Section 269SS of the Act.