NATARAJAN SAYIKUMAR,TIRUVANNAMALAI vs. ITO WARD 1, TIRUVANNAMALAI

आयकर अपीलीय अिधकरण, ’सी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी इंटूरी रामाराव, लेखा सद� एवं �ी एस.एस. िव"ने$ रिव, �ाियक सद� के सम% । BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 352/Chny/2026 िनधा'रण वष'/Assessment Year: 2015-16 Natarajan Sayikumar, Vs. Income Tax Officer, 77, Raja Rajan Street, Ward -1, Tiruvannamalai – 606 601. Thiruvannamalai. [PAN: BNTPS-3565-D] (अपीलाथ*/Appellant) (+,थ*/Respondent) अपीलाथ* की ओर से / Appellant by : Mr. Karunakaran, Advocate +,थ* की ओर से/Respondent by : Ms. Anitha, Addl.CIT सुनवाई की तारीख/ Date of hearing : 07.05.2026 घोषणा की तारीख /Date of Pronouncement 08.07.2026 : आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

This appeal filed by the assessee is directed against the order dated 09.01.2026 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2015-16.

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having no taxable income and no return of income for the assessment

year 2015-16 was filed. The AO found that during the relevant year,

the assessee deposited cash of Rs.64,60,000/- into his bank account

and issued notice u/s. 148 of the Income-tax Act, 1961 (herein after

“the Act”). In response to the said notice, the assessee explained that

the cash was received from close relatives to demonstrate his financial

worth and creditworthiness for securing visa for his son’s higher

education purpose and immediately within a day after the purpose is

served, he had withdrawn the said amount and returned to the

respective parties. The AO, satisfied with the explanation of the

assessee and accepted the transaction as genuine, but however,

initiated penalty proceedings u/s. 271D of the Act for violation of

provisions of section 269SS, for accepting cash loan exceeding

Rs.20,000/-. During the course of penalty proceedings, the AO called

upon the assessee to show cause against the levy of penalty u/s. 271D

of the Act. In response to show cause notice, the assessee submitted

his replies on 18.03.2024 and 27.04.2024. Considering the said

replies, the AO held that the assessee has failed to prove the

reasonable cause for accepting the cash and levied penalty of

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Rs.64,60,000/- u/s. 271D of the Act. Aggrieved, assessee preferred an

appeal before the ld.CIT(A) relying on various judicial precedents and

contended that no penalty is leviable where transactions are genuine.

However, the ld.CIT(A) sustained the penalty. Aggrieved by the order

of the ld.CIT(A), the assessee is before us.

ld.CIT(A) erred in confirming the levy of penalty u/s. 271D of the Act of

Rs. 64,60,000/- and the amounts received by assessee from the friends and relatives represent financial support and not loan or advance within the meaning of section 269SS of the Act to warrant levy of penalty u/s 271D of the Act. He argued that there was reasonable cause for the assessee to accept the financial support from the relatives and friends and no penalty u/s 271D could be levied within the meaning of section

273B of the Act, further submits that when the loans are considered as genuine and accepted by the AO without making any addition, the Assessment unit is not justified in levying penalty under section 271D of the Act. He further submits that keeping in view the object of the provision of section 269SS the cash transaction which was genuine could not be brought under the net of tax under the provision of section 269SS to levy penalty u/s 271D of the Act and provisions of section 269SS are

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not applicable to the assessee’s case. He argued vehemently that the

authorities below are not justified in levying penalty u/s 271D of the Act

and prayed that the penalty of Rs. 64,60,000 levied u/s 271D of the Act

may be deleted.

note that the assessee filed return of income in response to the notice

u/s. 148 of the Act. Said return was examined and accepted vide

assessment order dated 11.01.2024 passed u/s. 147 r.w. 144 & 144B of

the Act. We find the said assessment order at page no. 10 to 16 of the

paper book filed by the assessee. On perusal of the same, we note that

according to the AO, that the assessee is non-filer and based on

information flagged in accordance with the risk management strategy

formulated by CBDT with reference to cash deposits of Rs.64,60,000/-,

the AO issued notice u/s. 148 of the Act on 02.04.2022. As discussed

above, the assessee filed return of income and in response to the same,

the AO issued notices u/s. 142(1) & 143(2) of the Act. The assessee filed

details with reference to the deposit of cash in his bank account which are

reproduced from page no. 4 to 6 of the assessment order. The AO

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examined said parties u/s. 133(6) of the Act, wherein all the parties

confirmed that the cash was given to the assessee and immediately after

few days cash was returned to them by the assessee. Further, we find

that the assessee explained the reasons for cash deposits from his

relatives and friends in order to send his son for further studies to abroad

and to show his creditworthiness to get visa for his son’s education in

abroad. As it appears from the assessment order that the AO found

satisfied with the explanation offered by the assessee in respect of the

cash deposits in his bank account and confirmations by the parties

thereto that the said cash deposits made into assessee’s account only to

show creditworthiness of the assessee to pursue his son’s education in

abroad. On further examination of the assessment record, we find there

was no allegation by the AO that the said amounts were taken by the

assessee by way of loan or advances to his son’s education, but

however, the AO recorded his satisfaction for initiating penalty

proceedings u/s. 271D of the Act for violation of section 269SS of the Act.

bank statement, admission documents from New York University from

page nos. 1 to 9 of the paper book. On perusal of the admission

document from page nos. 5 to 9 of the paper book, we note that the

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assessee’s son received admission requirements from NYU Polytechnic

School of Engineering, NewYork on 09.07.2014 stating that the

assessee’s son must submit the complete declaration of finances

showing that he has adequate funding to support his education at NYU

Polytechnic School of Engineering. Accordingly, the assessee’s son

processed his application by enclosing application fee, completed

application, copy of passport photopage, financial documentation and

copy of NYU admission letter on 25.12.2014 which clearly support

explanation offered by the assessee before the AO with reference to cash

deposits obtained to show his creditworthiness which was confirmed by

his relatives and friends, who offered deposits to assessee to show his

creditworthiness. Therefore, having considered the facts and

circumstances of the case, we find force in the arguments of ld.AR that

there was no loan or advance to attract provisions u/s. 271D of the Act,

as it was only cash deposits to show the creditworthiness of the

assessee. Thus, initiation of penalty proceedings u/s. 271D of the Act for

violation of provisions of section 269SS of the Act does not arise at all,

consequently, penalty imposed u/s. 271D of the Act is deleted.

Therefore, order of the ld.CIT(A) is not justified and set aside. Thus,

grounds raised by the assessee are allowed.

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Order pronounced on 08th July, 2026 at Chennai.

Sd/- Sd/- (INTURI RAMA RAO) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Chennai, Dated: 08.07.2026 JPV आदेश की +ितिलिप अ3ेिषत/Copy to: 1. अपीलाथ*/Appellant, 2.+,थ*/ Respondent, 3. आयकर आयु4/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय +ितिनिध/DR & 5. गाड' फाईल/GF.

Digitally signed by PRASANNA PRASANNA VANI JETTY VANI JETTY Date: 2026.07.09 16:05:58 +05'30'