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April 5, 2022

ITAT eliminates the Section 271E penalty since the assessee is deceased and the transaction’s legitimacy cannot be established.

by CA Shivam Jaiswal in Income Tax

ITAT eliminates the Section 271E penalty since the assessee is deceased and the transaction’s legitimacy cannot be established.

Fact and Issue of the case

The captioned appeals have been filed at the instance of the assessee against both the orders of  the  Commissioner of  Income Tax (Appeals, Hisar [‘CIT(A)’ in short], dated 10.03.2018 arising from even orders dated  27.03.2014  passed  by  the  Assessing Officer (AO) under Section 271E and  271D  of  the  Income  Tax Act, 1961 (the Act) concerning AYs 2010-11 and 2011-12, respectively.

The assessee has challenged the action of Assessing Officer towards imposition of penalty to Rs.2  lac  levied  under  Section 271E on the ground that assessee has repaid  loan  of  Rs.2  lac  in cash during the year under consideration in violation of Section 269T of the Act.

When the matter was called for hearing, ld. counsel for the assessee submitted that the penalty under Section  271E  in the hands of the deceased-assessee is not justified for the reason that allegations of Assessing Officer are not corroborated from  the record. It was pointed out that the basis for imposition of penalty is ‘loose paper no.98’ impounded during  the  course  of  survey, copy of  which is placed on  record. It was pointed out that paper was hand written by somebody other than assessee as self evident from loose paper. The paper is neither  signed  by  assessee  nor acted upon. It is not known from whom the money  has  come  nor the amount of Rs.2 lac is mentioned anywhere in the loose paper. It was further pointed out that the  assessee  has  since  died therefore such vague and nondescript document should not be used against the deceased assessee on the basis  of  suspicion  and surmises. It was further pointed out  that  the  Assessing  Officer itself in paragraph no.7 of  assessment  order  dated  27.03.2014 stated that no addition is required to be made towards cash loans in Assessment Year  2011-12  as the  alleged  amount  was  received in Assessment Year 2010-11. It was thus submitted that the action of the Joint Commissioner of Income Tax imposing  penalty  is marred with non application of mind. Consequently, the penalty is required to be struck down.

Ld. DR for the Revenue, on the other hand, relied upon the orders of the lower authorities and submitted that the loose papers found during the survey operation evidences the factum of repayment of loan in cash by the assessee which attracts the provisions of Section 269T and in turn Section 271E without any further requirements in law. Ld. DR thus submitted that no interference with the order of the CIT(A) is called for.

Observation of the Court

Court has carefully considered the rival submissions.  As pointed out on behalf of the assessee, an assessment under Section 143(3) r.w. Section 147  was  completed  in the  instant  case, wherein the Assessing Officer has not observed any repayment of loan in cash as alleged in the  penalty  order.  On  perusal  of  the loose paper no.98, we find that no  such  amount  of  Rs.2  lac  is borne out in the loose paper, insofar as Financial Year 2010-11 relevant to Assessment Year  2011-12 in question is concern. We also find traction in  the plea of the  assessee that the loose paper in the instant case are neither signed by the deceased-assessee nor prepared by him and also simultaneously vague and  non-descript. The loose paper was purportedly prepared by some nephew of the assessee who was neither identified nor cross-examined. The loose paper no.98 also does not spell out as to with whom the alleged cash transactions as entered into the loose paper has  been  carried out, i.e., the corresponding party to the transaction is not known. The assessee is since deceased and thus the authenticity of the transaction cannot vouched. Under these mitigating circumstances, we find that plausible cause exists to question the propriety of allegations. The assessee thus deserves to be exonerated from the clutches of Section 269T r.w. Section 271E of the Act.

The order of the CIT(A) is accordingly  set  aside  and  the order of the Assessing Officer  reversed.  The  penalty  imposed under Section 271E stands cancelled.

In the result, the appeal of the  assessee in ITA No.90/Del/2019 is allowed.

The assessee has challenged the imposition of penalty of Rs.22,50,000/- allegedly received in cash by way of loans  or deposits in contravention of  Section  269SS r.w.  Section 271D  of the Act.

Ld. counsel for the assessee submitted that the basis of imposition of penalty under Section 271D is a ‘loose paper marked page no.94’ impounded in the course of survey from the business premises of the  assessee. The  Ld.  Counsel thereafter adverted to the copy of loose paper no.94 and submitted that a bare reading of loose paper, if it were to be believed, would show that Rs.15 lac (page 94 of loose paper)  was  purportedly  received  21  months back, i.e., somewhere in July, 2008 and does not concern the Assessment Year 2011-12 in question. Likewise, another sum of Rs.7,50,000 (page 98 of loose paper) is stated to be received on 12.09.2009 i.e. in the F.Y. 2009-10 relevant to A.Y. 2010-11. The assessment order framed under Section 143(3) r.w. Section 147 for AY 2011-12 is also silent on  Rs.7.50 lakhs. It was next submitted that the assessee is since deceased, and therefore, in the absence of any signature from the assessee and in the absence of  any particular of the person from whom the money was  allegedly received etc., the document i.e., loose paper cannot be conceived more than a flippant or dumb document and thus cannot be relied upon for the purposes of. Ld. counsel thus urged for cancellation of penalty under Section 271D of the Act.

The Ld. DR relied on the action of revenue authorities.

Court has  carefully  considered  the  rival  submission.  The imposition of penalty under Section 271D for purportedly contravention of Section 269SS is in issue. It is alleged  in the penalty order that the assessee has controverted the provisions of Section 269SS of the Act having raised  cash  loan  of  Rs.15  lakh and Rs.7.5 lakh  in aggregate during the  Assessment Year  2011-12 in question. In this regard, we  observe that there was  some  figures of Rs.15 lac at  page no.94 and figure of Rs.7,50,000/- at page 98 of the loose paper, which is basis for alleging violation of Section 269SS of the  Act  and  income escaped assessment under  Section 147 of the Act on the other hand. While recording the reasons for reopening of the assessment, it is noticed that, as per paragraph 7 of the  assessment order under Section 143(3) r.w.  Section 147  of the Act, the Assessing Officer himself has held that no addition is required to be made on the basis of document no.98 concerning Rs.7.50 lakhs as the loan was received by the  assessee  on 12.09.2009, i.e., in the Financial Year  2009-10. Thus,  the imposition of penalty on alleged cash loan of Rs.7,50,000/- arising out of loose paper no.98 does  not  arise in Assessment Year  2011- 12 in question.

Adverting to loose paper no.94 giving rise to imposition of penalty of Rs.15 lac, it is self-evident from the calculation of the interest shown in the loose paper that the alleged cash loan was not received in the Financial Year 2010-11 in question  but  the alleged cash loan relates back to Financial Year 2008-09 relevant to Assessment Year 2009-10. The  calculation of  interest vouches that the loan of Rs.15 lac in question was received about 21 month back, i.e., in July 2008, if such loose papers are to be believed at its face value. On this ground alone,  the  jurisdiction  of  the Revenue to imposition of penalty under Section 271D r.w. Section 296SS is ousted, insofar as Assessment Year 2011-12 in question is concerned. We therefore find prima facie merit in the plea on behalf of the assessee for its exoneration from the  clutches  of Section 271D of the Act.

Consequently, the order of CIT(A) is set aside and the Assessing Officer is directed to cancel the penalty.

Conclusion

In the result, the court allowed the appeal of the assesse.

Mohit-Singh-LH-of-Late-Shri-Balwant-Singh-Vs-Joint-Commissioner-of-Income-Tax-ITAT-Delhi

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