2015 (7) TMI 848 - HC - Income Tax

Penalty u/s 271D and u/s 271E - accepting and repayment of loan in cash in excess of ₹ 20,000/- within the purview of the provisions in section 269SS and section 269T - Held that - The sworn statement recorded from Mr.A.Kannan, Prop. of M/s Vadamalayan Finance, in response to the summons issued under Section 131 on 21.9.2011 shows that the financier has admittedly lent a huge amount of ₹ 74 lakhs to various parties by cash and he has also admitted that he had lent ₹ 2 lakhs to the appellant. When a specific question was posed to him as to whether he was doing the money lending business by cheque or cash, he has answered that till then he has been doing the money lending business only by cash payment and cash repayment. Again Mr.Kannan, Prop. of M/s Vadamalayan Finance has also further admitted that he has been doing money lending business for the last 30 years. The appellant having taken loan amount by cash in contravention of the provisions of Section 269SS and repaying the same by cash in contravention of the provisions of Section 269T, cannot seek the support of Section 273B. The appellant has not explained as to the urgency, compulsion or any other important circumstance for the breach and that too repeatedly. Taking into account the conduct of the assessee, the assessing authority, after giving repeated reasonable opportunities, finding no explanation whatsoever, was unable to exercise his discretion under Section 273B and accordingly imposed the penalty under Sections 271D & 271E of the Act. Penalty orders confirmed - Decided against assessee.

Summary

Issues Involved:

1. Levy of penalty under Section 271D for accepting loan in cash exceeding Rs. 20,000 in violation of Section 269SS.
2. Levy of penalty under Section 271E for repaying loan in cash exceeding Rs. 20,000 in violation of Section 269T.
3. Consideration of reasonable cause under Section 273B for the penalties imposed under Sections 271D and 271E.

Detailed Analysis:

1. Levy of Penalty under Section 271D for Accepting Loan in Cash Exceeding Rs. 20,000:

The appellant-assessee was penalized under Section 271D for accepting loans in cash exceeding Rs. 20,000, which is a violation of Section 269SS of the Income Tax Act for the assessment years 2008-09 to 2011-12. The appellant contended that the transactions were genuine and bona fide, and the lender insisted on cash transactions. However, the court observed that the assessee repeatedly took loans and repaid them in cash, which was a clear violation of the provisions. The court emphasized that the appellant failed to provide any reasonable cause for not complying with the statutory requirements, and thus, the penalty under Section 271D was upheld.

2. Levy of Penalty under Section 271E for Repaying Loan in Cash Exceeding Rs. 20,000:

Similarly, the appellant was penalized under Section 271E for repaying loans in cash exceeding Rs. 20,000, violating Section 269T of the Income Tax Act for the assessment years 2008-09 to 2012-13. The appellant argued that the transactions were genuine and due to commercial and personal compulsions. However, the court found that the appellant's conduct of repaying loans in cash was in breach of the provisions, and no reasonable cause was established to justify the violation. Consequently, the penalty under Section 271E was also upheld.

3. Consideration of Reasonable Cause under Section 273B:

The appellant argued that the transactions were conducted under emergency and compulsion, and thus, there was a reasonable cause under Section 273B to waive the penalties. The court noted that the appellant did not provide any explanation or justification at the first instance before the assessing authority. Despite several opportunities, the appellant failed to establish any reasonable cause for the cash transactions. The court highlighted that the conduct of the appellant did not demonstrate bona fide intentions, and the repeated violations indicated a deliberate infraction of the law. Therefore, the court concluded that the appellant did not satisfy the conditions for invoking Section 273B to waive the penalties.

Conclusion:

The court found that the penalties imposed under Sections 271D and 271E were justified due to the appellant's repeated violations of Sections 269SS and 269T. The appellant failed to establish any reasonable cause under Section 273B for the violations. The court dismissed the appeals, affirming the penalties and finding no substantial questions of law. The judgment emphasized the importance of adhering to statutory requirements and the lack of bona fide justification for the appellant's conduct.