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INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD

ITA No. 427/Ahd/2013 Assessment Year: 2008-09
Virat Hasmukhrai Khandhar (Appellant) vs. ACIT (Respondent)
Date of Order: 01-02-2016

ORDER

PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER:

This appeal filed by the assessee is directed against the order of the Commissioner of Income-Tax (Appeals)-IV, Surat dated 06.12.2012 for Assessment Year 2004-05, on the following grounds:-

1. That, the Penalty Order passed by the A.O. and retained by the CIT(A) is bad in law and facts, illegal, without jurisdiction, and needs to be quashed.

2.1 That, the A.O. erred on facts and in law by treating advances of Rs.60,000/- for goods from Mrs. Sanal Shah as unsecured loan and levied Penalty u/s.271D and the CIT(A) erred in confirming the Penalty levied.

2.2. On the facts and circumstance of the case and in law, the A.O. erred by treating Rs. 1,00,000/- received from Mr. Utpal Shah as "unsecured loan" against the income offered by the Appellant and also erred by levying penalty u/s. 271D. The CIT(A) also erred in confirming it.

2.3. That, the A.O. failed to appreciate the submissions made, confirmations filed and evidences adduced by the Appellant and levied the penalty and the C.I.T.(A) also erred by confirming penalty of Rs.1,60,000/-. So, the Penalty of Rs.1,60,000/- needs to be deleted.

3. That, both the A.O. and the C.I.T.(A) failed to establish that the Appellant had used money to evade taxes. And Thus, the Penalty levied by the A.O. and confirmed by the C.I.T(A) needs to be vacated.

4. That, the Appellant reserves its right to add, alter, modify or delete any of the Grounds of Appeal hereunto taken before.

2. The brief facts of the case are that during the course of assessment proceedings the Assessing Officer observed that the assessee has received unsecured loan in cash amounting to Rs.1,60,000/-, i.e., the amount aggregating to more than Rs.20,000/- from single person. The particular of receipt of such unsecured loans are as under:-

Name of person from whom unsecured loan received	Date of receipt	Amount (Rs.)	Total Amt (Rs.)
Sonalben V. Shah	06.04.2007 08.08.2007	30,000 30,000	60,000
Utpal V. Shah	09.08.2007 11.08.2007	50,000 50,000	1,00,000
	Total unsecured loan		1,60,000

Accordingly, the Assessing Officer has imposed a penalty of Rs.4,87,000/- u/s 271D of the Income-tax Act as the assessee had accepted loan by way of cash amounting to Rs.1,60,000/- in contravention of the provisions of Section 269SS of the Act. In appeal, the CIT(A) restricted the penalty to Rs.1,60,000/-, on the ground that the loan amount accepted in cash was only to the tune of Rs.1,60,000/-, therefore, the penalty u/s 271D can only be imposed on such amount. Aggrieved by the aforesaid order of the CIT(A), the assessee is now in appeal before us.

2.1 We have heard the rival contentions and material available on record. We find that, during the course of assessment proceedings, the assessee has received unsecured loan in cash amounting to Rs.1,60,000/- from two persons namely Shri Utpal Shah and Smt. Sonal Shah as discussed above. The stand of the assessee has been that the assessee had share trading income alongwith brokerage and commission income. The books of accounts of the assessee were audited as per Section 44AB. In the Tax Audit Report, the CA had mentioned the cash loan from two relatives, i.e. Rs.60,000/- from Smt. Sonal U. Shah, who is sister of the assessee and Rs.1,00,000/- from Shri Utpal V. Shah who is brother-in-law of the assessee. The auditor has treated the advance of Rs.60,000/- as loan and commission income of Rs.1,00,000/- in cash was also treated as loan in absence of confirmation at audit stage. On the basis of the audit report, the Assessing Officer levied penalty u/s 271D of Rs.4,87,000/-. In appeal, the same restricted to Rs.1,60,000/-. In this case, the assessee has submitted the nature of transactions of assessee’s business was found to be bona fide one and not mala fide. Section 273B clearly lays down that the offences enter alia alongwith other similar offences mentioned under this Chapter do not attract penalty if defaulter proves that there was reasonable cause of failure. In the case on hand, the amounts have been received by the assessee from his close relatives. During the course of assessment, the assessee has explained that the amount of Rs.1,00,000/- received from Shri Utpal Shah was as income and not as loan. The confirmation of Shri Utpal Shah in this regard was also filed before the Assessing Officer during the course of assessment proceedings. The assessee was offered the same as income and it was a bona fide mistake of assessee in passing entries of income against the cash received. With regard to Rs.60,000/- received by the assessee from his sister Smt, Sonal Shah, it was stated to be an advance from her purchase of shares/investment as the assessee was dealing in shares and securities. These facts were confirmed by his sister Smt. Sonal Shah during the assessment proceedings before the Assessing Officer.

2.2 Under these facts and circumstances, in our opinion, it is not a fit case to levy penalty u/s 271D of the Act because the reasonable cause for making these transactions was established by the assessee. Hence, the penalty in question is deleted.

3. In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 1st of February, 2016 at Ahmedabad.

(RAJESH KUMAR)                   (SHAILENDRA KUMAR YADAV)
ACCOUNTANT MEMBER        JUDICIAL MEMBER

Penalty 271D levied for cash business advances accepted wrongly classified as cash loans in tax audit report u/s 44AB deleted-ITAT | 04-02-2016 |