Penalty u/s 271D when claim of cash imprest was sham and facile-Case remanded to ITAT

Penalty u/s 271D when claim of cash imprest was sham and facile. The cash was itilised for making fixed deposits in the name of the assessee. High Court remanded case to ITAT

The instant appeal was preferred by the Revenue against the order passed by the Income Tax Appellate Tribunal (Tribunal/ITAT) whereby it had deleted penalty imposed by the Assessing Officer (AO) under Section 271D of the Income Tax Act, 1961 (the Act) by holding that the amount was not a loan within the meaning of Section 269SS of the Act.

ABCAUS Case Law Citation
ABCAUS 2353 ( 2018) 05 HC

The respondent assessee was General Secretary of an institution and his contention that the cash payment received were towards imprest was rejected by the AO.

The AO had observed that the assessee was never separate from the institution and thus for all practical purposes there was no need for creation of any separate imprest account out of funds received from the institution.

It was also found that the the assessee had purchased FDRs in his name by utilizing the money and even earned interest on the same which went against the claim of the assessee that it was merely an imprest money with him.

CIT(A) held that the AO had rightly initiated and levied the penalty u/s 271D of the Act. The assessee had submitted that he received the amount for the purchase of old manuscripts. However CIT(A) found that there was no evidence produced to show that any resolution was passed before transferring the money to the imprest account that it was for the purpose of purchase of old manuscripts.

However the Tribunal held that the conclusions of the revenue authorities that the assessee had availed of a cash loan was not correct. The ITAT opined that there was no debtor-creditor relationship as between the assessee and the charitable institute and the penalty had been imposed on the assumption that there had been a loan availed by the assessee. It was held that there was no loan availed by the assessee in cash. The imposition of penalty on the assumption that the assessee had availed of loan in cash could not be sustained.

The Hon’ble High Court observed that the Tribunal had primarily relied on entries in the books of account that the cash payments were imprest, and therefore neither loan nor deposit. The Tribunal had not considered and noticed specific aspects referred to in the order on penalty under Section 271D of the Act and the observations and findings of the CIT(A) holding that the contention and claim of imprest was sham and facile.

It was observed that as per the assessment order under Section 158BC of the Act in the case of the assessee, the interest accrued on the FDRs was duly reflected in the returns of income of the assessee. The assessment order stated that amount received in cash was utilized for acquiring FDRs within a short span or on the same day.

On the request of the assessee, the Hon’ble High Court set aside the impugned order to the Tribunal.

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