Rudra Buildwell Projects P. Ltd. Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi has ruled in favor of Rudra Buildwell Projects Pvt. Ltd., deleting the penalty of ₹3,50,000 levied under Section 271D of the Income Tax Act, 1961. The penalty was originally imposed for alleged violation of Section 269SS, which prohibits acceptance of cash loans above a specified limit. However, the ITAT found that since the assessment under Section 153C was quashed, the penalty could not survive.
The penalty was imposed by the Assessing Officer (AO) on the grounds that the assessee had accepted a cash loan of ₹3,50,000 in violation of Section 269SS. The assessee argued that the amount was not a loan or deposit but merely a contra entry, as the sum had been advanced via cheque to an employee for purchasing a car and was later refunded. Despite these arguments, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty. The assessee then appealed to the ITAT.
The tribunal considered the assessee’s contention that the Section 153C assessment order was already quashed by the CIT(A) for lack of incriminating material, rendering any penalty arising from it invalid. The ITAT referred to Supreme Court’s ruling in CIT vs. Jayalakshmi Rice Mills (2015) 379 ITR 521 (SC) and the ITAT Mumbai decision in Ravi Nirman Nigam Ltd. vs. ACIT (2024), both of which held that if the underlying assessment is declared void, penalties imposed based on that assessment cannot stand.
