2014 (10) TMI 889 - AT - Income Tax

Penalty levied u/s.271D - Held that - The assessee has been taking consistently inconsistent stand before different authorities. The assessee is trying to weave a cover up stories to cloth his follies. The explanations put forth are after thought which the assessee is trying to fit in by hit and trial. Therefore it is difficult to believe on the stand taken by the assessee before the Tribunal. Be that as it may it is an un-denying fact that the assessee has taken cash loan of 20.00 Lakhs in violation of provisions of section 269SS. Here it would be relevant to mention that whether the loan was taken for personal purpose or for the firm the provisions of section 269SS have equal applicability. The assessee has not been able to furnish explanation worth relying to set aside the penalty. In these circumstances we are constrained to uphold the order of CIT(Appeals) confirming levy of penalty u/s.271D. Penalty u/s.271E - Held that - The Assessing Officer in the penalty order has re-produced the extract of questionnaire wherein Mr.A.Kannan has admitted that he runs money lending business he lends money in cash and receives back in cash. He does not lend or receive back in cheque or draft. The assessee took loan in cash from a private money lender. Once in the trap of private money lender the assessee was forced to follow his diktat. The assessee even if willing to re-pay the loan amount through banking channel was forced to pay in cash due to the terms imposed by the money lender. The assessee re-paid the loan amount in instalments of 2.00 Lakhs each in the period spread over in the AYs.2008-09 & 2009-10. Once in debt assessee had no option but to accept the terms imposed by the money lender Mr.A.Kannan for re-payment of loan amount. In these circumstances we are of considered opinion that the assessee was constrained to re-pay loan amount as per the whims and fancies of Mr.A.Kannan by violating the provisions of section 269T. In the facts of the case we are satisfied that the re-payment of loan amount in cash was out of compelling reasons. The penalty levied u/s.271E is deleted the impugned orders are set aside and the appeals of the assessee are allowed.

Summary

Issues Involved:
1. Legality of penalty under Section 271D for taking a loan in cash violating Section 269SS.
2. Legality of penalty under Section 271E for repaying a loan in cash violating Section 269T.

Detailed Analysis:

Issue 1: Legality of Penalty under Section 271D for Taking a Loan in Cash Violating Section 269SS

The appeal in ITA No.419/Mds/2014 pertains to the assessment year 2008-09, where the assessee challenged the order of the Commissioner of Income Tax (Appeals)-VI, Chennai, which confirmed the penalty levied under Section 271D of the Income Tax Act, 1961 for accepting a loan of Rs. 20.00 Lakhs in cash from Mr. A.Kannan, violating Section 269SS. The facts reveal that a survey under Section 133A of the Act was conducted, and it was found that the assessee had taken and repaid the loan in cash. The assessee initially admitted to taking the loan for personal purposes but later claimed it was an advance for a property sale that did not materialize. The Tribunal noted that the assessee's explanations were inconsistent and unsupported by documentary evidence. The Tribunal upheld the penalty under Section 271D, stating that the assessee failed to provide a reasonable explanation for accepting the loan in cash. The Tribunal emphasized that whether the loan was for personal or business purposes, the provisions of Section 269SS applied equally, and the assessee did not furnish a reliable explanation to set aside the penalty.

Issue 2: Legality of Penalty under Section 271E for Repaying a Loan in Cash Violating Section 269T

The appeals in ITA Nos.420 & 421/Mds/2014 for the assessment years 2008-09 & 2009-10 involved the penalty under Section 271E for repaying the loan in cash, violating Section 269T. The Tribunal noted that the assessee repaid the loan in cash installments of Rs. 2.00 Lakhs each due to the terms imposed by Mr. A.Kannan, who ran an unlicensed money lending business. The Tribunal observed that the assessee was compelled to follow the money lender's terms and had no option but to repay in cash. The Tribunal concluded that the repayment in cash was due to compelling reasons and deleted the penalty under Section 271E, setting aside the impugned orders. The Tribunal allowed the appeals of the assessee for the penalties levied under Section 271E.

Conclusion:

In summary, the Tribunal dismissed the appeal related to the penalty under Section 271D (ITA No.419/Mds/2014) for taking a loan in cash, confirming the penalty. However, the Tribunal allowed the appeals related to the penalty under Section 271E (ITA Nos.420 & 421/Mds/2014) for repaying the loan in cash, deleting the penalty due to compelling reasons.

Order Pronouncement:

Order pronounced on Monday, the 27th October, 2014 at Chennai.