2015 (4) TMI 920 - AT - Income Tax

Penalty u/s.271D - acceptance of loan in cash - violation of the provisions of section 269SS - Held that - Respectfully following the decision of the Hon ble jurisdictional High Court cited in Madhukar B. Pawar 2008 (6) TMI 321 - BOMBAY HIGH COURT we hold that penalty u/s.271D is not leviable on account of cash loan of ₹ 20,000/- received from Shri Ravindra by the assessee since the loan is not in excess of ₹ 20,000/-. The AO is accordingly directed to delete the penalty on this amount. We hold and direct accordingly. So far as the amount of ₹ 80,000/- received in cash from Shri Balakrishna Nagmoti is concerned, it is the submission of the Ld. Counsel for the assessee that the seized diary does not contain name of the above mentioned person. We, therefore, direct the Assessing Officer to verify the notings in the seized diary found during the course of search. In case the name of the above mentioned person is not appearing in the notings in the seized diary, then the Assessing Officer has to delete the penalty u/s.271D on account of cash loan of ₹ 80,000/- received from the above mentioned person. We hold and direct accordingly. So far as the cash loan of ₹ 1 lakh received from Shri Patil Saheb of Jalgaon is concerned, the Ld. Counsel for the assessee fairly conceded that there is violation of provisions of section 269SS. We, therefore, uphold the levy of penalty u/s.271D on account of acceptance of cash loan of ₹ 1 lakh from Shri Patil Saheb of Jalgaon. - Decided partly in favour of assessee. Account payee cheques have been added by the AO u/s.68 - Held that - So far as the amount of ₹ 20,000/- received in cash on 12-03-2004 from Smt. Kalpana R. Patil is concerned the same has to be deleted in view of the decision Madhukar D. Pawar (Supra). Penalty u/s.271D on this amount is directed to be deleted.- Decided partly in favour of assessee. So far as the amount of ₹ 50,000/- received from Smt.Latadevi Malpani, ₹ 50,000/- from Smt.Neetadevi Malpani, ₹ 50,000/- from Smt.Rupali Malpani and ₹ 1,20,000/- from Shri Sonali Malpani are concerned in view of the submission of the Ld. Counsel for the assessee the amounts are taken from different persons not exceeding ₹ 20,000/- in each case, the same are restored to the file of the AO with a direction to verify from the seized diary and take appropriate decision as per law and facts after giving due opportunity of being heard to the assessee. So far as the amount of ₹ 50,000/- received from Shri Ramesh D. Pawar and ₹ 1,30,000/- from Shri Shivaji Kothawade are concerned the same is restored to the file of the AO with a direction to verify the submission of the Ld. Counsel for the assessee that the above persons are agriculturists and have no banking facility at their respective villages. If the same is found to be correct, then in our opinion there exists reasonable cause for accepting such cash loan from the agriculturists having no banking facility and the Assessing Officer is directed to cancel the penalty u/s.271D. So far as the amount of ₹ 1,40,000/- received from Shri S.L. Patil is concerned it is the submission of the Ld. Counsel for the assessee that he has received an amount of ₹ 80,000/- by account payee cheque from Shri S.L. Patil and the loan of ₹ 60,000/- has been added by the AO u/s.68 of the I.T. Act. Similarly, it is the submission of the Ld. Counsel for the assessee that the amount of ₹ 1,60,000/- received from Mr. Jagannath Pawar is not correct and it is only ₹ 16,000/- as per the seized diary and the assessee has taken further loan of ₹ 1000/- which was also repaid. Thus restore this issue to the file of the AO with a direction to verify from the seized diary regarding the veracity of the above submission of the Ld. Counsel for the assessee and decide the issue afresh in accordance with law after giving due opportunity of being heard to the assessee. So far as the amount of ₹ 50,000/- received from Shri Jambo Seth and ₹ 6 lakhs from Shri Jyoti Mahajan are concerned in absence of any satisfactory explanation given by the assessee regarding non levy of penalty u/s.271D we uphold the order of the CIT(A) confirming the levy of penalty on the above amounts. Since according to the Ld. Counsel for the assessee, no penalty has been levied in the case of loan from Smt. Sujata Bhamre, we are not dealing with this issue.

Summary

Issues Involved:
1. Levy of penalty under Section 271D for acceptance of cash loans in violation of Section 269SS.
2. Reasonable cause for accepting cash loans.
3. Verification of seized diaries and records.
4. Application of precedents and Circular No. 572 by CBDT.
5. Treatment of cash loans under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271D for Acceptance of Cash Loans in Violation of Section 269SS:
The primary issue in the appeals was the levy of penalties under Section 271D for the acceptance of cash loans exceeding Rs. 20,000 in violation of Section 269SS. The assessee had received substantial cash loans during the assessment years 2003-04, 2004-05, and 2005-06, resulting in penalties amounting to Rs. 2 lakhs, Rs. 12,57,000, and Rs. 1,58,95,000 respectively.

2. Reasonable Cause for Accepting Cash Loans:
The assessee argued that the Karta of the HUF was uneducated and unaware of the provisions of Section 269SS, residing in rural areas with no banking facilities. The Tribunal considered these arguments, noting that reasonable cause could be a valid defense against the penalty. Specifically, the Tribunal directed the AO to verify claims regarding the lack of banking facilities for certain lenders and to cancel penalties if the claims were substantiated.

3. Verification of Seized Diaries and Records:
The Tribunal emphasized the need to verify the notations in the seized diaries. For instance, the Tribunal directed the AO to verify whether the name of Balkrishna Nagmoti appeared in the seized diary and to delete the penalty if it did not. Similarly, the Tribunal instructed the AO to verify the amount of cash loans from various persons, such as the amount received from Shri R.B. Suryawanshi, and to adjust the penalties accordingly.

4. Application of Precedents and Circular No. 572 by CBDT:
The Tribunal relied on the precedent set by the Hon'ble Bombay High Court in the case of CIT Vs. Madhukar B. Pawar, which held that penalties under Section 271D could only be levied for cash loans exceeding Rs. 20,000. This interpretation was based on CBDT Circular No. 572. Consequently, the Tribunal directed the deletion of penalties for cash loans of Rs. 20,000 or less, following the binding nature of the CBDT circular.

5. Treatment of Cash Loans under Section 68 of the Income Tax Act:
The Tribunal noted that certain cash loans had been treated as unexplained cash credits under Section 68 and added to the assessee's income. The Tribunal held that penalties under Section 271D should not be levied on amounts already taxed under Section 68. The AO was directed to verify and delete penalties where such additions had been confirmed in appeals.

Conclusion:
In conclusion, the Tribunal provided a detailed analysis and directions on each issue, emphasizing the need for verification of facts and adherence to legal precedents. The appeals were partly allowed for statistical purposes, with specific directions for the AO to verify claims and adjust penalties accordingly. The Tribunal's decision underscores the importance of reasonable cause and proper verification in the imposition of penalties under Section 271D.