Unexplained Cash Deposit Finding Alone Cannot Sustain Section 271D Penalty: ITAT Mumbai

ACIT Vs AL Global Beverages Private Limited (ITAT Mumbai)

Summary: The Mumbai Bench of the Income Tax Appellate Tribunal dismissed the Revenue’s appeal and upheld deletion of penalty of Rs.72,89,500/- imposed under Section 271D for alleged violation of Section 269SS of the Income-tax Act, 1961. The dispute related to Assessment Year 2017-18 and cash deposited in the assessee-company’s bank account during the demonetization period. In the assessment completed under Section 144, the Assessing Officer had treated Rs.70,97,000/- as unexplained under Section 68 read with Section 115BBE. A reference was thereafter made for initiation of penalty proceedings under Section 271D.

The JCIT noted that the assessee had failed to explain the source of cash deposits of Rs.72,89,500/- and, relying upon the assessment findings, concluded that the assessee had accepted cash deposits in contravention of Section 269SS. A penalty equal to the amount of cash deposits was accordingly imposed. Before the CIT(A), however, the assessee submitted that it had opening cash-in-hand of Rs.52,33,974/- as reflected in its audited balance sheet and had furnished the breakup of cash available at various shops and with its director. Its director, Shri Rahul Leekha, had also appeared pursuant to summons under Section 131 and explained that the deposits were made out of cash-in-hand recorded in the books.