The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the penalty under Section 271D of the Income Tax Act, 1961 cannot be imposed on the loan transactions made through banking channels.
The assessee is an agriculturist having agricultural income in the form of salary. The Assessing Officer on receipt of information from the Directorate General of Income-Tax [DDIT(Investigation)] observed that the assessee accepted a loan of Rs. 1,42,000/- from The Berna Gamni Seva Sahakari Mandali Limited. Based on the information, the Assessing Officer issued a show cause notice for the levy of penalty under Section 271D of the Income Tax Act in contravention of Section 296SS of the Income Tax Act Act.
The assessee filed a reply thereby stating that acceptance of a loan of Rs. 1,42,000/- from the society was through a banking channel and not in cash. The assessee submitted the bank statement wherein the transaction of taking the said loan was demonstrated along with documentary evidence.
The Assessing Officer after taking cognizance of the reply of the assessee imposed a penalty under Section 271D of the Income Tax Act amounting to Rs. 1,42,000/- for acceptance of a cash loan in contravention of provisions of Section 269SS of the Income Tax Act.
The Authorized Representative submitted that the issue contested in the present appeal has already been decided by the Tribunal in the assessee’s own case. The facts are identical and therefore the present appeal should also be allowed.
The Departmental Representative relied upon the penalty order and submitted that the certificate issued by the bank was not disputed but the adjustments were not matching or correlated and therefore the penalty was rightly imposed and confirmed by the Commissioner of Income Tax (Appeal) [CIT(A)].
The Single-member bench comprising of Suchitra Kamble (Judicial member) held that the transaction, as well as the ledger along with the certificate, was not doubted and in fact the contention of the Departmental Representative that it was mismatching appears to be not correct and thus there was no cash involved in the present transaction.
Therefore, Section 269SS of the Income Tax Act will not be applicable in the present case and the penalty levied under Section 271D of the Income Tax Act does not survive. Thus, the CIT(A) as well as the Assessing Officer was not correct in levying the penalty under Section 271D of the Income Tax Act. The appeal of the assessee was allowed.
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