SHRI MOHAN LAL,JAIPUR vs. JCIT RANGE-4, JAIPUR, RANGE-4, JAIPUR

1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of ld. AO of imposing penalty of Rs. 2,50,000/- U/s 271D of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the penalty of Rs. 2,50,000/- imposed by the ld. AO and confirmed by the ld. CIT(A).

The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.

However, before us it was submitted that as per the provisions of Section 271D of the Act it was incumbent upon the A.O. to bring on record the evidence to prove that the assessee had actually taken or accepted any loan in contravention of provisions of Section 269SS of the Act. Whereas it was the specific stand of the assessee during the year 3 ITA 221/JP/2019_ Sh. Mohan Lal Vs JCIT 2009-10, that one Shri Aditya Kumar Sharma approached to the assessee and asked him to make available finance for the new Mini vehicle on this pretext he collected some papers alongwith blank signed cheque from the assessee. It was further submitted that the said Aditya Kumar Sharma could not manage loan and had demanded some money in consideration of loan processing and when the assessee refused to pay as he could not manage loan, therefore, the said Aditya Kumar Sharma who was having blank signed cheque of the assessee misused the said cheque and got dishonoured and filed a complaint U/s 138 of the N.I. Act r.w.s. 190 of the Cr.PC. The stand of the assessee from the very beginning had been specific that he had not actually received any cash loan from Shri Aditya Kumar Sharma hence question of penalty U/s 271D of the Act do not arise. Although, the assessee has also submitted that the said Aditya Kumar Sharma is a person of criminal nature and various FIR in different police station are already lodged against him and the copies of the said documents were submitted before the A.O.

We noticed that, although, the Magistrate had convicted the assessee on the complaint filed U/s 138 of the N.I. Act by Shri Aditya Kumar Sharma but that does not ipso facto mean that assessee has taken or accepted any loan or deposit or any specified sum in cash from the said Aditya Kumar Sharma. The A.O. was under an obligation to make 4 ITA 221/JP/2019_ Sh. Mohan Lal Vs JCIT necessary independent enquiry in this respect but the A.O. has not even called the said person i.e. Shri Aditya Kumar Sharma who has lodged complaint case against the assessee and even no opportunity to cross examine the said Aditya Kumar Sharma was ever given to the assessee. The only conclusion drawn by the A.O. with regard to genuineness of the transaction was merely based on the ground that the Magistrate in a separate complaint filed U/s 138 of the N.I. Act had convicted the assessee but the said decision of the Magistrate cannot ipso facto leads to the conclusion that the assessee had taken or accepted any loan or deposit in contravention of provisions of Section 269SS of the Act, therefore, in our view, the A.O. was under an obligation to independently prove by carrying out necessary enquires or bringing on record evidence that the cash loan was taken by the assessee from Shri Aditya Kumar Sharma in contravention of provisions of Section 269SS of the Act. Accordingly the A.O. as well as the CIT(A) fell in error by merely relying upon the copies of the order of the Magistrate regarding conviction of the accused, more particularly when there was no independent evidence or material brought on record by the A.O. to the effect that the cash loan was taken or accepted by the assessee in contravention of Section 269SS of the Act. We are further of the view that merely because the Magistrate on a complaint filed had convicted the assessee on the ground of dishonoring of cheque U/s 138 of the N.I. Act it cannot automatically lead 5 ITA 221/JP/2019_ Sh. Mohan Lal Vs JCIT to presume that the assessee had in fact taken or accepted cash amount of Rs. 2.5 lacs as loan in contravention of provisions of Section 269SS of the Act. The proceedings before Income tax authorities are independent proceedings and the A.O. being the adjudicator as well as investigator was under an obligation to carryout independent enquiries and to bring on record cogent and convincing independent evidence to specifically prove that the assessee had accepted loan of Rs. 2.50 lacs or deposit in cash in contravention of provisions of Section 269SS of the Act but the said exercise has not been done by the A.O. Therefore, merely relying on the decision of the Magistrate is not enough to presume that there was violation by the assessee of Section 269SS of the Act. Considering the totality of the facts and circumstances of the case that there was no independent evidence on record to conclude that cash of Rs. 2.50 lacs was actually accepted or received by the assessee in contravention of provisions of Section 269SS of the Act, therefore, we are of the view that the penalty levied and upheld by the A.O. and the ld. CIT(A) are without any basis or foundation, accordingly, we direct to delete the same.