ITAT Mumbai Deletes ₹1 Crore Penalty Under Section 271D; Cash Loan Allegation Not Established
Court / Authority
Income Tax Tribunal
Update / Judgement Date
24 Aug 2026
Source
WCP News Bulletin
Author
Manas Yadav — WCP Legal Desk
Reading Time
2 min read
View Count
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.
Full Judgement / Attachment
Full Judgement
Frequently asked questions about Income Tax Tribunal
- What is the Income Tax Appellate Tribunal (ITAT)?
- The ITAT, set up in 1941, is the second appellate authority in direct tax matters and the final fact-finding body. It hears appeals against orders of the Commissioner (Appeals) and certain other authorities, through benches across India.
- What is the time limit to file an appeal before the ITAT?
- An appeal must be filed within two months from the end of the month in which the order is communicated. This rule has applied since 1 October 2024 and continues under the Income-tax Act, 2025. The Tribunal can condone delay for sufficient cause.
- Can the ITAT stay a tax demand?
- Yes. The Tribunal can stay recovery of a disputed demand while an appeal is pending, usually on deposit of a part of the demand or furnishing security. Stays are granted for a limited period, and the appeal is expected to be decided within it.
- Where does an appeal go after the ITAT?
- An appeal against an ITAT order lies to the High Court, but only on a substantial question of law. A further appeal lies to the Supreme Court.
- How can White Collar Professional help with a ITAT matter?
- Post your requirement on White Collar Professional to receive proposals from verified Chartered Accountants and tax Advocates, compare them, and pay securely through the platform. This page also tracks the latest ITAT ITAT orders as they are reported.
