Kamal Dwarkadas Gadodia Vs ACIT (ITAT Mumbai)
ITAT Mumbai Deletes ₹37 Lakh Penalty u/s 271D: Third-Party Statements Alone Not Enough
The Mumbai Bench of the ITAT allowed the assessee’s appeal for AY 2010-11 and deleted the penalty of ₹37,00,000 levied under section 271D for alleged violation of section 269SS, holding that the penalty was imposed solely on the basis of third-party statements without any corroborative evidence.
The assessee, Kamal Dwarkadas Gadodia, was subjected to penalty proceedings after the Assessing Officer alleged acceptance of cash loans of ₹37 lakh, based on statements recorded from third parties during survey and investigation proceedings. The assessee consistently denied having received any cash loan and contended that there was no documentary or independent evidence to establish contravention of section 269SS.
The CIT(A) upheld the penalty, observing that penalty proceedings under section 271D are independent of assessment proceedings and relying on statements of alleged facilitators of loans.
The ITAT, however, noted that:
- The penalty was imposed entirely on the basis of third-party statements.
- There was no direct evidence, such as books of account, bank entries, or other corroborative material, to prove actual receipt of cash loans by the assessee.
- The assessee was not afforded effective opportunity of cross-examination, and the statements remained untested.
- Loose papers and third-party material, not forming part of the assessee’s regular books, have no independent evidentiary value.
Relying on the Supreme Court decision in Common Cause (A Registered Society) v. UOI, the Tribunal held that penalty under section 271D cannot be sustained merely on uncorroborated third-party statements. Since the Revenue failed to establish actual acceptance of cash loans in violation of section 269SS through cogent evidence, the penalty was unsustainable.
Accordingly, the ITAT set aside the orders of the lower authorities and deleted the penalty of ₹37 lakh, allowing the assessee’s appeal in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Kamal Dwarkadas Gadodia Vs ACIT (ITAT Mumbai)
The instant appeal of the assessee filed against the order of the NFAC Delhi [for brevity, ‘Ld.CIT(A)’], passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act) for the Assessment Year 2010-11, date of order 27/08/2025. The impugned order emanated from the order of the Learned Additional Commissioner of Income-tax 24(2), Mumbai (for brevity, ‘the Ld.CIT’) order passed u/s 271D of the Act, date of order 26/07/2018.
