2008 (12) TMI 669 - AT - Income Tax

Summary

Issues Involved:
1. Confirming the penalty imposed u/s 271D of the Income-tax Act, 1961.

Summary:

Issue 1: Confirming the penalty imposed u/s 271D of the Income-tax Act, 1961

The only issue for consideration relates to confirming the penalty imposed under section 271D of the Income-tax Act, 1961. The assessee had purchased agricultural lands and explained the source of investment as loans raised from relatives in cash, violating section 269SS. The Assessing Officer initiated penalty proceedings under section 271D for this violation.

During penalty proceedings, the assessee argued that the loans were raised under critical circumstances to prevent the attachment of ancestral property due to a failed business loan. The Additional Commissioner of Income-tax found the explanation unsatisfactory, noting that the loans were taken in cash over several days, and the payment to the father was made later, indicating no immediate urgency. The financial status of the lenders also showed they had bank accounts, suggesting the loans could have been taken through banking channels.

The Commissioner of Income-tax (Appeals) upheld the penalty, stating the explanation for obtaining cash loans was unsatisfactory and the assessee had ample time to arrange loans through banking channels. The assessee's plea of ignorance of the law was also rejected as he was an educated person aware of income-tax laws.

Before the Tribunal, the assessee reiterated the arguments, citing pressing circumstances and ignorance of the law. The Tribunal found that the urgency of the loan was not proven with evidence, and the transactions were not genuine and bona fide. The Tribunal also noted that the provisions of section 269SS were applicable as the lenders had taxable income, and the assessee's case did not fall under the exceptions provided in the second proviso to section 269SS.

The Tribunal concluded that the assessee failed to demonstrate a reasonable cause for accepting loans in cash, and the penalty under section 271D was justified. The appeal filed by the assessee was dismissed.

In the result, the appeal filed by the assessee is dismissed.

The order pronounced in the open court on December 24, 2008.