Patel Prakashchandra Ambalal HUF Vs ACIT (ITAT Ahmedabad)
The Ahmedabad ITAT deleted massive penalty of ₹1.01 crore levied under Section 271D against an HUF engaged in finance and investment activities, holding that penalty for alleged cash loan/deposit transactions cannot survive in absence of clear finding regarding contravention of Section 269SS during assessment proceedings.
The assessee was engaged in advancing loans and recovering the same along with interest. During revenue audit, the department alleged that the assessee had accepted cash loans/deposits in violation of Section 269SS based on entries found in the cash book produced during scrutiny assessment. Relying upon audit objections, penalty proceedings under Section 271D were initiated and penalty equal to the alleged cash receipts was imposed.
Before the Tribunal, the assessee argued that no finding regarding violation of Section 269SS was recorded during the original assessment proceedings and that the penalty proceedings were triggered merely because of subsequent audit objection and change of opinion. It was further contended that the authorities ignored the balance-sheet disclosures, loan/deposit details and supporting evidences already furnished during assessment.
The ITAT accepted the contention and observed that the Assessing Officer had not recorded any specific finding during assessment that the assessee violated Section 269SS. The Tribunal relied upon the Supreme Court ruling in Joint CIT vs. Grandhi Sri Venkata Amarendra holding that penalty under Section 271D cannot be sustained where the assessment order itself contains no finding regarding such violation.
The Tribunal also referred to the Supreme Court decision in CIT vs. Sahara India Financial Corporation Ltd., where practical realities of cash dealings in areas lacking banking facilities were considered relevant while examining Section 269SS violations. Holding that mere second opinion arising from audit objections cannot automatically justify penalty, the ITAT deleted the entire penalty in full.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This is an appeal filed against the order dated 03-12-2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.
