Mitul Jagdishchandra Shah Vs ITO (ITAT Pune)
Pune ITAT Deletes ₹50 Lakh Penalty U/s 271D; Third-Party Statement Alone Cannot Prove Cash Loan
In a significant ruling, the Pune ITAT deleted a penalty of ₹50 lakh levied under section 271D for alleged violation of section 269SS, holding that the Revenue cannot impose penalty merely on the basis of a third-party statement and loose papers without any independent corroborative evidence proving receipt of a cash loan.
The assessee was alleged to have received a cash loan of ₹50 lakh from another person based on information gathered during a search conducted on a third party. Throughout the assessment and penalty proceedings, the assessee consistently denied having received any such cash loan and repeatedly sought copies of the incriminating material, the relevant statement relied upon by the Department, and an opportunity to cross-examine the person whose statement formed the sole basis of the allegation. These requests were not acceded to.
The Tribunal observed that the Assessing Officer had accepted the returned income and initiated penalty proceedings solely on the basis of the lender’s statement. No documentary evidence, corroborative material, banking trail, or other evidence was brought on record to establish that the assessee had in fact received any cash loan. Further, no opportunity for cross-examination was provided, despite specific requests by the assessee.
Relying on the Supreme Court decision in Common Cause v. Union of India, the Tribunal reiterated that loose sheets and random entries have no evidentiary value unless supported by independent and reliable evidence. It held that allegations based on third-party material cannot be sustained where the assessee has neither admitted the transaction nor been confronted with admissible evidence establishing the receipt of cash.
The Tribunal concluded that the penalty proceedings were founded on surmises and conjectures, and that the Revenue had failed to prove any violation of section 269SS. Accordingly, the penalty of ₹50 lakh under section 271D was deleted and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to the Assessment Year 2022-23 is directed against the order dated 01.01.2026 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Assessment Order dated 19.03.2024 passed u/s.143(3) r.w.s.144B of the Act.
