ITAT Mumbai Deletes ₹1 Crore Penalty Under Section 271D; Cash Loan Allegation Not Established

Key Facts and Tribunal Findings

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, allowed the appeal of Ramesh S. Shah for Assessment Year 2011–12, deleting penalty of ₹1 crore imposed under Section 271D for alleged violation of Section 269SS of the Income Tax Act.

The penalty arose from search proceedings conducted in the case of Ess Gee Group, during which a loose paper allegedly indicated that the assessee had received a cash loan of ₹1 crore from one Shri Suresh Gandhi. The Assessing Officer relied on the seized document and the statement recorded under Section 132(4), wherein the lender purportedly admitted to advancing the loan.

Based on this material, penalty proceedings were initiated, and the Additional Commissioner imposed penalty equal to the alleged loan amount. The penalty was subsequently upheld by the Commissioner (Appeals).

Before the Tribunal, the assessee consistently denied having received any such loan. It was further submitted that the quantum assessment itself, wherein related additions were made, had already been quashed by the Tribunal in earlier proceedings.

The Tribunal noted that the existence of the alleged cash loan was not conclusively established. It observed that the addition in quantum proceedings had not attained finality due to quashing of the assessment order. Further, the alleged loan transaction was based on a loose paper found in a third-party search and a statement indicating that the transaction was routed through an unidentified broker.

The Tribunal held that neither the identity of the broker was established nor any enquiry was conducted to verify the transaction. In absence of conclusive evidence proving receipt of cash loan, the alleged violation of Section 269SS remained unsubstantiated.

Accordingly, the Tribunal held that penalty under Section 271D could not be sustained and directed deletion of the entire penalty.