Natarajan Sayikumar Vs ITO (ITAT Chennai)
Chennai ITAT Deletes ₹64.60 Lakh Penalty U/s 271D; Temporary Cash Support to Show Visa Funds Is Not a Loan
The Chennai ITAT allowed the assessee’s appeal and deleted the penalty of ₹64,60,000 levied under Section 271D for alleged violation of Section 269SS. The assessee had deposited ₹64,60,000 in cash, explaining that the amounts were temporarily received from relatives and friends to demonstrate financial worth for obtaining a visa for his son’s higher education abroad and were returned shortly thereafter. During assessment proceedings under Sections 147, 142(1) and 143(2), the Assessing Officer examined the parties under Section 133(6), who confirmed providing and receiving back the cash, accepted the explanation as genuine, and made no addition in the assessment, but initiated penalty proceedings under Section 271D. The Tribunal noted that the assessment records, confirmations, bank statements, admission documents from New York University, and visa-related financial documentation supported the assessee’s explanation. It found that the amounts were received only to demonstrate creditworthiness and not as loans or advances. Holding that there was no loan or advance to attract Section 269SS, the Tribunal concluded that initiation of penalty proceedings under Section 271D was unwarranted, set aside the CIT(A)’s order, and deleted the penalty.
The Chennai ITAT deleted a penalty of ₹64.60 lakh levied u/s 271D, holding that temporary cash received from friends and relatives solely to demonstrate financial capability for the assessee’s son’s overseas education did not constitute a loan or deposit so as to attract the provisions of section 269SS. The assessee had deposited ₹64.60 lakh in his bank account, which was subsequently withdrawn within a day and returned to the respective parties after the purpose of obtaining a student visa was served. Although the Assessing Officer accepted the explanation as genuine during reassessment proceedings and made no addition on account of the cash deposits, he nevertheless initiated penalty proceedings for alleged violation of section 269SS.
The Tribunal noted that the AO had conducted independent verification by issuing notices u/s 133(6) to the persons who had provided the cash. All of them confirmed that the money had been temporarily handed over to the assessee and returned shortly thereafter. The assessment records also established that the cash was received only to demonstrate the assessee’s creditworthiness for securing a visa for his son’s admission to New York University Polytechnic School of Engineering, and not as a loan or advance. The admission documents and financial requirements placed on record corroborated the assessee’s explanation.
Holding that the transaction was merely temporary financial support and not a loan or deposit, the Tribunal concluded that the essential ingredients of section 269SS were absent. Since the very provision was inapplicable, the initiation of penalty proceedings u/s 271D was held to be without basis. Accordingly, the Tribunal set aside the order of the CIT(A), deleted the entire penalty of ₹64.60 lakh, and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
