Penalty u/s 271E deleted in the absence of proof /receipt acknowledging the repayment of loan in cash by the assessee.
ABCAUS Case Law Citation:
ABCAUS 3139 (2019) (09) ITAT
In the instant case, the assessee had filed appeal against the order of the CIT(A) whereby he had confirmed levy of penalty u/s 271E & 271D of the Income Tax Act, 1961 (the Act).
A search & seizure operation was carried out at the residential premises of on business group u/s 132(1) of the Act. During the course of search loose papers were found and seized.
It was observed by the Assessing Officer (AO) that as per the documents so seized, the assessee had taken unsecured loan of Rs.10 lakhs from the searched person in cash. Further, the assessee had deposited a security cheque against the loan which was to be repaid in six months.
The case of the assessee was reopened after recording the reasons. During the course of assessment, the assessee was asked to explain the taking of loan and repayment of the same. The AO after considering the submissions, came to the conclusion that the assessee had received and repaid an unsecured loan of Rs.10 lakhs in violation of provision of section 269SS of the Act.
Therefore, notices u/s 271D and 271E of the Act was issued and after considering the submissions, the A.O. levied penalty u/s 271D and 271E of the Act. The CIT(A) sustained the penalty.
Before the Tribunal, the assessee submitted that though the assessee had approached his friend (the searched party) and paid a cheque for security, he did not availed the financial assistance ultimately.
It was further stated that the documents seized nowhere stated that transaction was in cash. The receipt also did not state that the loan was taken in cash. Even the security cheque could not be deposited due to it being seized in the search
The Tribunal observed that considering the rival submissions and the facts available on record, the assessee could not controvert the finding of the authorities below in respect of the evidences gathered during the search which proves receipt of loan in cash, therefore, this ground of appeal was dismissed.
Regarding levy of penalty u/s 271E the assessee submitted that there was no evidence suggesting that the loan was repaid in cash.
The assessee submitted that the penalty had been levied purely on the guess work. He relied on the provisions of section 271E of the Act and also the provisions of section 269T. He submitted that the penalty can be levied only in the event where the assessee has repaid the loan in cash. It was not the case where the authorities below have found any evidence of making repayment of loan in cash.
The Tribunal noted that the CIT had confirmed the penalty observing that the loan was never returned back by the appellant assessee in cheque. According to the CIT(A), the assessee had also not asserted or claimed that the loan was still payable by him. Thus the CIT(A) was of the view that the only possible conclusion was that the appellant had repaid the loan in cash.
The Tribunal observed that the revenue had considered the terms of loan as if the same had been repaid in cash. There was no receipt by the person who had given loan to the assessee accepting or acknowledging the repayment of the loan in cash by the assessee. Even in the statement recorded by the revenue authorities, nothing of this sort was stated.
Therefore, under the facts of the case and in the absence of the proof that assessee had made repayment of loan in cash, the Tribunal opined that the imposition of penalty u/s 271E was not justified.
The Tribunal stated that here the A.O. ought to have brought some material suggesting that the assessee had made repayment of loan in cash.
Therefore, the AO was directed to delete the penalty.
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