2010 (10) TMI 119 - HC - Income Tax

Acceptance of loan in cash - amount has been found deposited in cash in the books of account - assessing authority was of the view that section 269 SS of the Act was flouted - penalty under section 271D of the Act has been levied to the extent - Assessee contended that persons from whom the loan were taken were agriculturist and in emergency the amount has been taken in cash - Held that - no error in the impugned order of the Tribunal. Under section 273 B of the Act in case it is established that there was the reasonable cause in accepting the deposit in cash - penalty is not leviable

Summary

Issues:

1. Violation of section 269SS of the Income Tax Act regarding cash loan.
2. Imposition of penalty under section 271D for alleged violation.
3. Appeal against the penalty order before the Income Tax Appellate Tribunal.
4. Assessment of genuineness of the loan and explanation provided by the assessee.
5. Consideration of the reasonable cause for accepting the deposit in cash.

Analysis:

The case involved an appeal under section 260A of the Income Tax Act against a Tribunal order related to the assessment year 1998-99. The assessee had taken a loan in cash from several individuals, leading to the assessing authority imposing a penalty under section 271D for allegedly violating section 269SS of the Act. However, the assessing authority did not doubt the genuineness of the loan and did not make any addition under section 68 of the Act.

The Commissioner of Income Tax (Appeal) allowed the appeal and deleted the penalty, which was challenged by the revenue before the Tribunal. The Tribunal dismissed the revenue's appeal, noting that the depositors were agriculturists and the loans were given under emergency circumstances, duly explained before the assessing authority. The Tribunal confirmed the order of the CIT (Appeals) for deleting the penalty, emphasizing that the assessing authority did not question the genuineness of the loan.

The Tribunal's finding, supported by the CIT (Appeals), established that there was a reasonable cause for accepting the deposit in cash, as per section 273B of the Act. The Tribunal and the CIT (Appeals) accepted the explanation provided by the assessee regarding the reasonable cause, leading to the dismissal of the appeal against the penalty. The Court found no error in the Tribunal's decision, ultimately dismissing the appeal.