Chennai ITAT Quashes ₹64.60 Lakh Penalty Under Section 271D: Temporary Cash Arranged for Visa Purpose Not a Loan Under Section 269SS

Case Reference

Natarajan Sayikumar Vs ITO (ITAT Chennai)
Assessment Year: 2015-16
Order Date: 08th July, 2026

Background and Context

This matter came before the Chennai Income Tax Appellate Tribunal as a challenge to the order dated 09.01.2026 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi, which had upheld a penalty of ₹64,60,000 imposed on the assessee under Section 271D of the Income-tax Act, 1961.

The assessee, an individual with no taxable income and no originally filed return for the assessment year 2015-16, came under scrutiny when the Assessing Officer detected cash deposits of ₹64,60,000 in his bank account. These deposits had been flagged pursuant to the risk management strategy formulated by the CBDT, which led to the issuance of a notice under Section 148 of the Act on 02.04.2022.

Facts of the Case

The Cash Deposit and Its Purpose

In response to the notice under Section 148, the assessee filed a return of income and furnished a detailed explanation. He stated that the cash amounts had been temporarily handed over to him by close friends and relatives — not as loans or advances — but purely to enable him to demonstrate adequate financial standing, a prerequisite for securing a student visa for his son's admission to NYU Polytechnic School of Engineering, New York.

The sequence of events was straightforward:

  1. Relatives and friends pooled and handed over cash to the assessee.
  2. The assessee deposited the same into his bank account to reflect financial capability.
  3. Within a day of the purpose being served, the cash was withdrawn and returned to each of the contributing parties.

Documentary Evidence on Record

The assessee placed before the authorities a comprehensive set of documents, including:

  • Details of individual cash deposits and corresponding withdrawals
  • Bank statements corroborating the very short holding period
  • Admission requirements letter from NYU Polytechnic School of Engineering, New York, dated 09.07.2014, which mandated submission of a complete declaration of finances demonstrating adequate funding
  • The assessee's son's visa application submitted on 25.12.2014, enclosing the application fee, completed application, copy of passport photopage, financial documentation, and a copy of the NYU admission letter

These documents collectively reinforced the assessee's position that the cash was received solely to satisfy visa-related financial documentation requirements and bore no characteristics of a loan or advance.

Assessment Proceedings

AO's Findings During Reassessment

Following the filing of the return in response to the Section 148 notice, the AO issued notices under Section 142(1) and Section 143(2) and conducted an independent examination of all parties who had contributed the cash. Notices were issued to each of them under Section 133(6) of the Act.

Every party who responded confirmed that: