2015 (7) TMI 1090 - AT - Income Tax

Levy of penalty u/s. 271D - Held that - The assessee admitted the fact that the assessee had received a sum of ₹ 20,000/- from each of eleven creditors totaling to ₹ 2,20,000/- in cash. The reasonable cause for receipt of this cash loan was that the assessee received cash loan from relatives, who are neither income tax assessee nor having any bank account. Hence, he has no other alternative except to receive loans in cash for an amount of ₹ 20,000/- from each of them. CBDT Circular No.572 dated 03.08.1990 has clearly brought out the provision of section 269SS explaining that for taking or accepting any loan or deposit in excess of ₹ 20,000/- Considering above, we find that the facts are exactly identical what was before the Hon ble Bombay High Court in MADHUKAR B. PAWAR (2008 (6) TMI 321 - BOMBAY HIGH COURT ) and in each of case cash loan is not exceeding ₹ 20,000/- rather it is exactly ₹ 20,000/- - Decided in favour of assessee

Summary

Issues:
Levy of penalty under section 271D of the Income-tax Act, 1961 for contravention of section 269SS.

Analysis:
The appeal before the Appellate Tribunal arose from the order of the Commissioner of Income Tax (Appeals) confirming the penalty imposed by the JCIT under section 271D of the Act. The main contention was the acceptance of cash loans totaling to Rs. 2,20,000 from eleven creditors, each providing Rs. 20,000, which was in contravention of section 269SS. The assessee argued that the loans were received from relatives without bank accounts, necessitating cash transactions. The assessee relied on CBDT Circular No.572 and a decision of the Bombay High Court to support the argument that the circular's interpretation should prevail. The Tribunal noted that the circular clarified the provision of section 269SS and emphasized that the loans did not exceed Rs. 20,000 individually. Citing the Bombay High Court decision and the circular, the Tribunal concluded that the penalty was not justified and deleted the penalty imposed by the JCIT, thus allowing the appeal of the assessee.

This judgment primarily revolved around the interpretation of provisions related to the acceptance of loans in cash exceeding Rs. 20,000 under sections 269SS and 271D of the Income-tax Act. The Tribunal considered the specific circumstances of the case where cash loans of Rs. 20,000 each were received from relatives without bank accounts. The assessee's argument centered on the applicability of a CBDT circular and a Bombay High Court decision, which highlighted the binding nature of CBDT circulars on departmental authorities. The Tribunal, drawing parallels with the Bombay High Court decision, emphasized that the loans did not breach the Rs. 20,000 limit individually, leading to the deletion of the penalty imposed by the JCIT. This case underscores the significance of legal interpretations, circulars, and precedent in determining the applicability of penalties under tax laws, ensuring a fair and just outcome based on established legal principles.