Srinaga Vs ITO (ITAT Bangalore)
In the case of Srinaga vs. ITO (ITAT Bangalore), the Bangalore Bench of ITAT ruled that the initiation of penalty under Sections 271D and 271E of the Income Tax Act must be linked to the assessment proceedings and must be clearly mentioned in the assessment order. The Tribunal also noted that a temporary loan borrowed by the assessee from close family members without any interest could not be classified as a loan or deposit subject to these penalty provisions. The assessee faced penalties under Sections 271D and 271E for accepting and repaying cash loans exceeding the prescribed limit, which the authorities deemed a violation of Section 269SS. However, the assessee argued that the transactions were genuine, temporary, and conducted between family members without any interest or formal repayment terms. Despite these arguments, both the Assessing Officer and CIT(A) upheld the penalties, leading to an appeal. Honourable Bangalore Bench of ITAT in its recent decision held that It is a prerequisite condition that the initiation of penalty under Section 271D or Section 271E of the act must arise out of the assessment proceedings and the initiation should be noted in the assessment order.
Bangalore Tribunal in a subsequent decision in ITA No.1978/Bang/2024 (AY 2012-13) dt 5.8.25 in the case of Azad Coach Builders Pvt. Limited Vs ITO held that in view of the dictum laid down by the Hon’ble Apex Court in the case of CIT Punchkula Vs. Jayalakshmi Rice Mills Ambala City (2015) 64 taxmann.com 75 (SC) to the effect “that where there is no satisfaction was recorded regarding penalty in the Assessment order, then no penalty could be levied”, deleted the penalty on the same ground.
