2013 (7) TMI 1029 - AT - Income Tax

Summary

Issues involved: Appeal against penalty imposed u/s 271D of the Income Tax Act for receiving cash loans beyond prescribed limit u/s 269SS.

Summary:
The appeal was filed against the penalty imposed by the Commissioner of Income-tax (Appeals) upholding a penalty of Rs. 2,50,000 imposed by the Assessing Officer u/s 271D of the Act for the assessment year 2005-2006. The assessee received cash loans of Rs. 1,00,000 and Rs. 1,50,000 on 30.11.2004, which led to the penalty imposition due to a violation of section 269SS. The contention was that the loans were taken to make a payment for purchase of TDRs, crucial for the business. The cheque issued for the payment would not have been cleared without the cash loans. The CIT(A) upheld the penalty despite the explanation provided by the assessee.

Upon review, it was noted that receiving loans in cash beyond the prescribed limit u/s 269SS warrants penalty u/s 271D, unless there is a reasonable cause as per section 273B. In this case, the cash loans were crucial for meeting a business exigency, as they were used to make a payment that would have caused significant loss to the business if not cleared. The loans were received before the cheque for the payment was encashed, indicating a reasonable cause for accepting the cash loans. Therefore, the penalty imposed u/s 271D was overturned, and the deletion of penalty was ordered.

In conclusion, the appeal was allowed, and the penalty imposed u/s 271D was deleted based on the reasonable cause for accepting the cash loans. The order was pronounced on 31st July 2013.