These penalties were linked to allegations that the petitioner accepted and repaid loans in cash, surpassing the statutory limits

The Income Tax Appellate Tribunal ( ITAT ) Ahmedabad Bench directed the Assessing Officer ( AO ) to delete penalties amounting to ₹8.25 lakhs each that were imposed on the appellant in the present case for alleged violations of Sections 269SS and 269T of the Income Tax Act, 1961. These penalties were linked to allegations that the petitioner accepted and repaid loans in cash, surpassing the statutory limits, during the assessment year 2013-14. Get a Copy of Handbook To Income Tax Rules, Click here The case arose from a police search at Sudama Resorts, where cash and cheques totaling ₹17.17 lakhs and ₹36.75 lakhs respectively were found. The Income Tax Department assumed that the appellant had engaged in cash transactions that violated the law. The counsel for the petitioner contended that it was evident from the above facts that the allegation of the department of the assessee having taken cash loans and repaid the same in violation of provisions of Section 269SS and 269T of the Act was based merely on surmises and conjectures and there was no concrete evidence substantiating the said fact with the Department.  He also contended that the entire case of the Revenue rests on the statement of Mr. Kaushik  J. Shah; and despite the assessee demanding cross-examination, the same was not afforded to the assessee.  He further pointed out that out of 11 bearer cheques found at Sudama Resorts relating to the assessee of Rs.75,000/- each, some were still not deposited on the date when the search was conducted.  He also pointed out that the Director of the Sudama Resorts had in fact owned up all income on account of the cash and cheque found and the same had been taxed in his hands also by the Department.  It was thus argued that with no concrete findings of the assessee having accepted or repaid loans of Rs.8.25 lakhs in violation of the provisions of Section 269SS and 269T of the Income Tax Act, there was no case for levying any penalty on the assessee. Get a Copy of Handbook To Income Tax Rules, Click here On the other hand, the Departmental Representative relied on the orders of the authorities below pointing out that during penalty proceedings and even in appellate proceedings, the assessee, it was noted by the Revenue Authorities , had not furnished any explanation for the cheques found pertaining to him at Sudama Resorts of Rs.8.25 lakhs, and in the light of the statement recorded of the director of the Sudama Resorts. The Tribunal Bench of Accountant Member Smt. Annapurna Gupta, concluded that the penalties were imposed without sufficient evidence and were based on presumptions rather than solid proof. It was remarked that, “the Revenue Authorities are under obligation to record a clear finding which would leave no scope for doubt and which is based on authentic evidence, that the assessee has committed the offence which was liable to be visited with penalty. That  penalty cannot be imposed on vague and imaginary evidence.” Therefore, the tribunal directed the AO to delete the penalties under Sections 271D and 271E, ruling in favour of the appellant and against the revenue.