The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench held that the penalty under Section 271D of Income Tax Act for exceeding cash transactions limit should not be imposed on loans taken from through account payee cheques. It was observed that all the amounts were received by way of account payee cheques and the amounts so received were deposited in the bank account of the assessee.
Sanjaykumar Haribhai Patel, the taxpayer , took a loan of 44,70,000/- from Shri Milap Jadeja and of 16 lakhs from M/s Shiv Castings, which is the proprietorship concern of Shri Milap Jadeja. Thereafter, the assessee merged both the accounts, since both the accounts pertained to the same person i.e. Shri Milap Jadeja.
The assessing officer initiated a penalty under section 271D of the Income Tax Act for violation of the provisions of section 269SS of the Income Tax Act.
As per the assessing officer, assessee accepted the loan of 38 lakhs by squaring up the account of Shri Milap Jadeja with his proprietorship concern, and hence the same amounted to violation of the provisions of section 269SS of the Income Tax Act.
Aggrieved by the order, the assessee filed objections before the Commissioner of Income Tax (Appeal){ CIT(A)} . who allowed the appeal of assessee .
CIT(A) observed that all the amounts were received by way of account payee cheques and the amounts so received were deposited in the bank account of the assessee.
Therefore, since the assessee has not received any amount otherwise than by account payee cheques and has only merged the accounts of Shri Milap Jadeja and his proprietorship concern namely M/s Shiv Castings, there is no violation of section 269SS of the Income Tax Act, as far as obtaining the loans is concerned.
Thereafter the revenue filed another appeal before tribunal .
It was observed by the tribunal that no amount was received by the assessee otherwise than by way of account payee cheques. The only ground/basis for imposing penalty under section 271D of the Income Tax Act, was that both the accounts of the lender and his proprietorship concern were merged, leading to violation of the provisions of section 269SS of the Income Tax Act.
The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Waseem Ahmed,(Accountant Member ) and Siddhartha Nautiyal,(Judicial Member) held that no amount otherwise than by way of account payee cheques was received by the assessee.
Sanjay Devadiya , counsel appeared for assessee and Atul Pandey, counsel appeared for the revenue.
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