Penalty under section 271E upheld for cash loan repayment despite ignorance plea, section 271D penalty quashed

ITAT Raipur upheld penalty u/s 271E for loan repayment in cash, rejecting assessee's plea of ignorance regarding section 269T provisions. Court noted multiple alternative repayment methods existed beyond cheques, and assessee failed to demonstrate reasonable cause for cash payment. However, penalty u/s 271D r.w.s. 269SS was quashed as AO treated cash receipts as assessee's own unexplained money u/s 69A rather than specified sum received from others, negating the foundational requirement for section 269SS application.

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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.

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