Penalty u/s 271D deleted as cash loan was repaid by cheque. Reasons accepted in quantum proceedings should have been accepted in penalty proceeding
ABCAUS Case Law Citation:
ABCAUS 2992 (2019) (06) ITAT
Important Case Laws Cited/relied upon by the parties:
Dimple Yadav 379 ITR 177 (All.)
The assessee was a salaried employee. During the assessment proceedings u/s 143(3) of the Income Tax Act, 1961 (the Act), the assessee submitted revised computation of income offering an additional income. The Assessing Officer (AO) accepted the revised computation of income and raised a demand of tax accordingly.
Thereafter, the AO initiated the penalty proceedings u/s 271D of the Act for accepting cash loans, by issuance of penalty notice.
In response to the said notice the assessee submitted that he had accepted cash loans from the two persons in cash and that the loans were returned to them by way of cheques. He further submitted that being a salaried employee, he was not aware of the provisions of section 269SS ad 269T and further that the loans had been repaid by NEFT/RTGS to the vendors and therefore, penalty u/s 271D may not be invoked.
The AO however, held that the provisions of 269SS were applicable to all the persons, including salaried employees. With regard to the second objection that section 269T cannot be invoked, he observed that in the case of the assessee, the penalty u/s 271E is not levied.
The AO further held that the assessee had failed to justify taking the loans in cash. Therefore, AO levied the maximum penalty of 100% of cash loan.
Aggrieved, the assessee preferred an appeal before the CIT (A), who confirmed the order of the Assessing Officer (AO).
Before the Tribunal, the assessee contended that the assessment order was passed without making any disallowance or the addition on account of receipt of loans in cash, but the penalty was initiated by issuance of notice thereafter which was beyond a reasonable period. Therefore, the penalty itself was to be held null and void.
It was submitted that before the CIT (A), the assessee had raised the grounds against the initiation of penalty by stating that the assessee had taken the loan in cash on the occasion of his sister’s marriage. He submitted that the CIT (A) has failed to consider this issue.
It was further stated that the CIT (A) had erroneously held that the penalty should have been imposed within six months of issuance of notice u/s 274 r.w.s. 271D and therefore, the penalty proceedings are well within the time.
The Tribunal observed that the penalty u/s 271D is subject to the provisions of section 273B of the Act. Therefore, penalty u/s 271D is not automatic and when the assessee provides a reasonable explanation, the penalty is not leviable.
The Tribunal noted that the assessee’s contention that the loans were taken for the marriage of his sister had not been found to be incorrect and also the fact that the loans have been repaid by cheques was not controverted.
Further, the Tribunal noted that the Coordinate Bench of the Tribunal had considered a similar issue where the revenue had accepted the explanation of cash deposit in the bank account, in the quantum proceedings, therefore no penalty proceeding were initiated in the quantum proceedings. The Tribunal had held that since the revenue had accepted the explanation of cash in the assessment proceedings, therefore, the same set of facts and documents could be made basis for imposition of penalty.
The Coordinate Bench had observed that the assessee had submitted the reasons for accepting the cash in the quantum proceedings and the said reasons were accepted by the AO and the same reasoning should have been accepted in penalty proceeding as well.
The Coordinate Bench had opined that though the assessment proceedings and proceedings for violation of Section 269SS of the Act were independent proceedings but in the light of the case, the revenue was not permitted to take contrary stand.
The Tribunal also observed that for coming to the above conclusion, the Coordinate Bench had relied upon the judgment of the Hon’ble Allahabad High Court wherein it was held that the object of introducing Section 269SS of the Act was to ensure that a tax payer was not allowed to give false explanation for his unaccounted money or if the tax payer made some false entries, he would not escape by giving false explanation for the same.
The Hon’ble High Court had deleted the penalty u/s 271D observing that even though the assessee had taken loan in cash, nonetheless, the loan transaction was a genuine transaction and was routed through the bank account by way of deposit in the bank
The Tribunal opined that there existed reasonable cause for the assessee accepting the loans in cash and particularly since the loans had been repaid by way of RTGS. Accordingly, the penalty levied by the AO u/s 271D of the Act and confirmed by the CIT (A) was deleted.