Penalty on Cash loan in violation of Sec 269SS cannot survive when addition u/s 69A for receipt of cash loan was deleted

A search was conducted at premises of Bharani Group and M/s Evergreen Enterprises, during which it was found that two concerns of ‘Parinee Group’ namely, ‘Green Bird P. Ltd.’ and ‘P.D. Construction’ received cash loan to the tune of Rs. 3.92 crores and contact details of assessee were available in the documents. A statement was recorded on oath by partner of the Company wherein he stated that M/s Evergreen Enterprises had entered into cash loan transaction with P.D. Construction. After this the AO reopened the assessment u/s 147 of the Act and notice was issued. The Assessing Officer completed the assessment u/s 147 r.w.s. 143(3) of the Act, and made an addition of Rs. 3.92 crores as unexplained loan in terms of section 69A of the Act.

Appeal before CIT(A): Aggrieved the assessee filed an appeal before CIT(A). In the appeal, CIT(A) deleted the additions.

Appeal before ITAT: Aggrieved, the Revenue appealed before the Tribunal raising the ground, whether Ld. CIT(A), erred in deleting the addition of Rs. 3,92,00,000 made in the hand of Mr. Vipul D. Shah u/s 69A of the Income Tax Act, 1961 without appreciating the fact that the assessee did not account and offer the amount of said loan for tax.

The tribunal appreciated the reasoning of CIT(A) that the Assessing Officer himself has recorded in the reasons to belief that cash loan was received by the two firms. If received by the partnership firm/company wherein the assessee is a partner or director, the loan cannot be added in the hands of the assessee. The Ld. CIT(A) had rightly advised the Assessing Officer to consider examination of the transactions in the hands of M/s P.D. Construction and M/s Green Bird Pvt. Ltd for any suitable action.

Secondly, Shri Nilesh Bharani even retracted his statement made u/s 132(4) of providing cash loan to two concerns. During the cross-examination by the assessee Shri Nilesh Bharani denied of giving any cash loan to the assessee or his concerns. Also, when the issue-in-dispute is in respect of the receipt of loan and source of which is already available on record, it is not understandable how the same become undisclosed income in the hands of the assessee, as a source of the same, is already within the knowledge of the Income Tax Department.

The tribunal did not find any error in the order of the Ld. CIT(A) on the issue-in-dispute hence, upheld the same. The grounds raised by the Revenue were accordingly dismissed.

Similarly in the appeal of the Revenue in ITA No. 1277/Mum/2021 the ground raised by the Revenue the CIT(A), erred in deleting the addition of Rs. 3,92,00,000 as penalty made in the hand of Mr. Vipul D. Shah u/s 271D of the Income Tax Act, 1961, the AO had levied penalty u/s 271D of the Act in contravention of the provision of section 269SS of the Act i.e. receipt of the loan otherwise than by account payee cheque. The Ld. CIT(A) was correct in deleting the penalty as the addition u/s 69A for receipt of cash loan itself was deleted and therefore said penalty u/s 271D for receiving cash loan in violation of the provision of section 269SS cannot survive.

Therefore, the appeals of the Revenue as well cross-objections of the assessee were dismissed.

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