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2019 (1) TMI 459 - AT - Income TaxPenalty orders passed u/s 271D and 271E - Violation of provisions of section 269SS and 269T while taking/returning the loan amount of ₹ 7,00,00,000/- in cash - CIT(A) has deleted the addition mainly on the ground that AO has made addition on the basis of rough noting recovered from the possession of Tara Health Foods Ltd. during search conducted by the department - Held that:- In the present case, except the presumption drawn by AO from the rough sheet containing the questioned entries, there is no other direct or circumstantial evidence to substantiate the conclusion of AO that the assessee has accepted loan or deposit in cash from Tata Health Food Ltd. within the meaning of section 269SS of the Act. We further notice that Sh. Balwant Singh, MD of Tata Health Food Ltd. has sworn an affidavit stating that the company Tata Health Food Ltd. had neither given any cash loan to the assessee company nor any amount was received by Tata Health Food Ltd. Sh. Balwant singh has further stated that only in the financial year 2008-09, the Tata Health Food Ltd had purchased Machinery from the assessee company. AO has wrongly arrived at the conclusion that the assessee had obtained the amount in question in violation of section 269SS of the Act, on the basis of loose papers containing the questioned entries, without pointing out any corroboration. In any case, even if one is to go by this documents found by the search tem, the Ld. CIT (A) has rightly inferred that, the nature of transaction is not loan but a business advance for purchase of machinery. As per the settled principles of the law, penal provisions are required to be construed strictly. Hence, in our considered view, the material on record is not sufficient to sustain penalty imposed by the assessment officer u/s 271D read with section 269SS of the Act. Section 271E makes a person liable for penalty for repayment of loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the said section. Since, we have dismissed the appeal of the revenue and upheld the findings of the Ld. CIT (A), holding that the assessee has not violated the provision u/s 269SS of the Act, there is no reason to hold the assessee liable for penalty u/s 271E of the Act for violation of the provisions of section 269T of the Act. We therefore, agree with the Ld. CIT (A) and delete the penalty - Decided in favour of assessee.
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