2015 (7) TMI 331 - AT - Income Tax

Penalty levied u/s. 271D and 271E - assessee accepted the cash deposits and repaid the same in cash in violation of the provisions of section 269SS and 269T - CIT(A) deleted the penalty levy - Held that - It is an undisputed fact that the assessee accepted cash loan of ₹ 7,73,000/- and has repaid the same in cash to the lenders. Thus, the assessee has violated the provisions of section 269SS and 269T of the Act. For the violations of aforesaid sections the assessee had made itself liable for penalty u/s. 271D and 271E, respectively. However, the provisions of section 273B provides an exception, that no penalty shall be imposed u/s. 271D and 271E if the assessee proves that there was reasonable cause for not complying with provisions of the Act. The assessee has given detailed reasons for accepting the loan amount in cash from its Members/Office bearer and repayment of the same in cash. Further, in support of its submissions, the assessee has placed on record letter dated 28-04-2006 from Geeta Sanstha making an offer to settle the loan account by paying an amount of ₹ 6,11,000/- on 12-06-2012 before the Co-operative Court. The assessee has also placed on record the translated copies of the Resolution dated 31-03-2006 and 15-08-2005 to substantiate that the assessee had to repay loan to Geeta Sanstha. The assessee has filed affidavits of the lenders who are agriculturist to substantiate that they have advanced cash loan for the purpose of repayment of arrears of loan to Geeta Sanstha on 12-06-2012. The assessee has also placed on record affidavit of Shri Ramchandra Shivaji Jadhav, Manager, Geeta Sanstha giving the detailed sequence of events that transpired on 12-06-2006 in the Co-operative Court. The Revenue has not disputed the outstanding amount payable by assessee to Geeta Sanstha which is duly reflected in audited balance sheet of the assessee as on 31-03-2007 under the head Loans. The Assessing Officer had summoned the lenders of the cash amount and recorded their statements on 14-10-2009. All the three lenders supported the cause of the assessee. The genuineness of the transactions have been verified. The persons who have advanced cash loans have been identified. They had filed affidavits and their statements were recorded by the Assessing Officer. The Revenue has not been able to controvert the contents of the statements or the affidavits. The circumstances under which cash loan was accepted and repaid have been explained. We are of the considered view that the cash transactions were genuine and bonafide. See CIT Vs. Laxmi Trust Co. (2006 (12) TMI 124 - MADRAS HIGH COURT) and Sharda Educational Trust Vs. ACIT (2005 (1) TMI 309 - ITAT AGRA) . Thus no penalty u/s. 271D and 271E of the Act is leviable. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty u/s. 271D and 271E for accepting and repaying cash loan.

Analysis:
The case involves two appeals by the Revenue against the deletion of penalties u/s. 271D and 271E by the Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The Revenue contended that the assessee accepted cash loans despite having a bank account, failing to show reasonable cause for accepting and repaying the loan amount in cash. The assessee argued that the cash transactions were necessitated by an urgent situation related to a loan repayment to Geeta Sanstha. The assessee presented evidence including affidavits, resolutions, and bank transactions to support their claim. The Revenue relied on various legal precedents to justify the penalties, while the assessee cited relevant case laws to support their position.

The Tribunal noted that the assessee had indeed violated the provisions of section 269SS and 269T by accepting and repaying cash loans. However, the Tribunal emphasized the exception provided under section 273B, which exempts penalties if the assessee proves a reasonable cause for non-compliance. The Tribunal found the assessee's explanations credible, supported by documentation such as loan settlement offers, resolutions, and affidavits from lenders. The Tribunal also highlighted that the Revenue failed to dispute the outstanding loan amount reflected in the assessee's balance sheet or challenge the genuineness of the transactions and the lenders' statements.

Regarding the legal precedents cited, the Tribunal analyzed each case and concluded that they did not align with the current case's circumstances. The Tribunal differentiated the present case from those where penalties were upheld due to lack of evidence or justifications for cash transactions. The Tribunal also referenced favorable judgments where penalties were deleted based on the genuineness of transactions and lack of tax evasion intent. Ultimately, the Tribunal upheld the deletion of penalties u/s. 271D and 271E, ruling that no penalty was leviable given the factual and legal considerations presented. The appeals of the Revenue were dismissed for lacking merit.

In conclusion, the Tribunal's detailed analysis considered the factual background, legal provisions, evidence presented, and relevant case laws to arrive at a decision favoring the assessee's position. The judgment underscores the importance of demonstrating reasonable cause for non-compliance with tax provisions and the significance of substantiating claims with verifiable documentation and legal precedents.