Facts of the Case

During assessment proceedings for Assessment Year 2017-18, the assessee submitted that he had received loans aggregating to ₹8,00,000, comprising ₹4,00,000 from Ms. Shikha Jaiswal and ₹4,00,000 from Shri Shubham Jaiswal. The Assessing Officer held that the loans were accepted in violation of section 269SS of the Income-tax Act, 1961, and accordingly levied penalty of ₹8,00,000 under section 271D.

The Assessing Officer further observed that the assessee had repaid loans aggregating to ₹2,70,776 to Ms. Sangeeta Jaiswal, Shri Saurabh Jaiswal, and Shri Pradeep Kumar. Holding that the repayments were made in violation of section 269T, the Assessing Officer levied penalty of ₹2,70,776 under section 271E.

Aggrieved, the assessee preferred appeals before the NFAC, which dismissed both appeals ex-parte and confirmed the penalties.

 Issues Involved

  1. Whether penalties under sections 271D and 271E for alleged violations of sections 269SS and 269T were sustainable in law.
  2. Whether the NFAC was justified in confirming the penalties without adjudicating the appeals on merits.
  3. Whether denial of effective opportunity due to ex-parte disposal violated principles of natural justice.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that the penalties were confirmed without appreciating the complete facts of the case, which could not be placed on record due to serious illness and subsequent demise of the assessee’s counsel. It was submitted that the loans were received from and repaid to close relatives who were income-tax assessees, and the transactions were entered into under bona fide belief.

The assessee further argued that the penalty orders were passed in violation of statutory provisions relating to jurisdiction, limitation, and procedural requirements, and that the NFAC erred in dismissing the appeals ex-parte without considering the grounds raised or permitting additional evidence.

 Respondent’s (Revenue’s) Arguments

The Department opposed the appeals and supported the orders passed by the Assessing Officer and the NFAC, contending that the penalties were rightly levied for violations of sections 269SS and 269T and that the assessee failed to comply with statutory requirements.

 Court Order / Findings

The Tribunal observed that both the appeals before the NFAC were dismissed ex-parte without adjudication on merits. Considering the peculiar facts and circumstances of the case, the Tribunal held that the assessee deserved one more opportunity to present his case and place relevant material on record.

Accordingly, the Tribunal set aside the impugned NFAC orders and restored both appeals to the file of the NFAC with directions to adjudicate the matters afresh on merits after granting reasonable opportunity of hearing. Both appeals were allowed for statistical purposes.

 Important Clarification

The Tribunal categorically cautioned that the assessee must fully comply with the notices and directions issued by the NFAC in the set-aside proceedings. Failure to do so would entitle the NFAC to pass orders in accordance with law on the basis of material available on record, even on an ex-parte basis.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770627986_SANTOSHKUMARATARRABANDAVS.INCOMETAXOFFICERBANDA.pdf  

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