Question And Answer
Subject: Penalty U/Sec. 271D and 271E, loan or deposit , cash
Querist: Manali
Answered by:
Tags: , ,
Date: January 13, 2023
Query asked by Manali

Assessee is partnership firm engaged in the business of Dignostic center.  During the search in the year 2017 with third party who is finance broker, a diary was found where noting about amount received and amount given , rate of interest and his commission was recorded. In the said dairy names were recorded in coded form, he has given statement that he earns only commission in the transcations , but did not disclosed the name of party. However, employee of the said assessee has given the details of names which are written in coded form.

On the basis of such noting, assessee firm has received SCN for contravention of provisions of Sec. 269SS and 269T .  Assessee has given the reply that he had no connection with said broker,, no other documents except that noting or statement of employee of broker was found. AO levied the Penalty U/sec. 271D and 271E for A.Y.2017-18 and 2018-19.

Whether assessee can challenge the penalty order on following grounds ;

1. No assessment u/Sec. 143(3) was completed for the AY 2017-18 and 2018-19. Therefore reference made by AO to JCIT is invalid as same is not made during the course of any  proceedings .

2. No documents which were relied upon have been provided to assessee firm

3. No opportunity of cross exMination is provided even though it is asked for .

4. No other evidence such as promissory notes,,or post dated cheques or noting of cash amounts or signature of assessee was found.

Pl guide whether assesee’s above line of action is correct ?

Suggest Any other ground to be taken and any judicial decisions to support the case of assessee.

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Scrutiny proceedings and proceedings under sections 269SS and 269T of the Income-tax Act, 1961(Act) are independent of each other. The penalty is levied on the basis of the statement recorded and circumstantial evidence. The assessee has the right to request for cross-examination as not granting the same would be in violation of the principles of Natural Justice.

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