Penalty u/s 271D stayed as assessee denied receiving cash and matter pending in Civil Court

Penalty u/s 271D stayed as assessee denied having received cash loan and matter was pending in Civil Court

In a recent judgment, the Hon’ble High Court has stayed penalty order u/s 271D stayed as assessee denied having received cash loan and matter was pending in Civil Court.

ABCAUS Case Law Citation:
ABCAUS 3949 (2024) (04) HC

In the instant case, the assessee had filed a Writ Petition before the Hon’ble High Court challenging the penalty order passed under section 271D of the Income Tax Act, 1961 (the Act) and consequent Garnishee Notices.

The Income Tax Department had alleged that the petitioner/assessee accepted in cash Rs. 2.20 crores during the financial year 2017-18 i.e., the Assessment year 2018-19 and was not able to establish his claim of non-borrowal of the same from two persons.

Accordingly, the assessee was found to have violated the provisions of section 269SS of the Act and was held liable to pay penalty to the extent he accepted in cash and accordingly, the Assessing Officer (AO) imposed penalty of Rs. 2,20,00,000/- under Section 271D of the Act.

The Petitioner assessee challenged the issuing of Garnishee Notices under Section 226(3) of the Act to the Banks, in which the petitioner was having accounts, for recovery of 20% of the penalty under Section 271D of the Act, imposed.

It was submitted that in respect of the alleged cash transactions, the said loan creditors have filed suits before the District Judge against the present petitioner. The petitioner denied to have borrowed amounts from them and was contesting those suits and also filed written statements and those matters were pending trial court.

In that view, it was argued that it was unjust on the part of the AO to unilaterally hold that the petitioner received an amount of Rs. 2,20,00,000/- in cash from those persons and imposing 100 % penalty on those alleged amounts.

It was further submitted that challenging the penalty order, the petitioner filed appeal before the Appellate authority and the same was pending. It was further submitted that pending aforesaid appeal, the AO issued Garnishee Notices, under Section 226(3) of the Act to Banks, with whom the petitioner maintains his accounts.

It was prayed to have the penalty order set aside.

The Division Bench observed that the petitioner had staunchly denied borrowing the respective amounts from the plaintiffs in civil suits. He had also questioned the capacity of the plaintiffs to lend such huge amounts to the defendant/petitioner. The matters was said to be pending for trial.

The Hon’ble High Court, in the given circumstances, as the matters was sub judice before the competent Civil Court, deemed it fit to consider the prayer of the petitioner to stay further proceedings, pursuant to the impugned penalty order including the Garnishee Notices.

Accordingly, the Hon’ble High Court allowed the writ petition and stayed the impugned penalty order as well as consequential Garnishee Notices till disposal of the appeal filed by the petitioner before the CIT(A).

Download Full Judgment ABCAUS 3949 (2024) (04) HC Click Here >>

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