2016 (3) TMI 1298 - AT - Income Tax

Initiation of penalty u/s 271E & 271D - busniss urgency in repayment of loans in cash - Mode of undertaking transactions - Held that - Assessee has no reasonable cause for accepting loans in cash and repaid the same in cash - cash transactions have not been recorded in the regular books of accounts of the assessee - thus assessee was unable to specify under what circumstances he has borrowed loans in cash and repaid in cash exceeding 20,000/- - thus penalty u/s 271E & 271D is correctly imposed - Decided against the assessee.

Summary

Issues Involved:
1. Deletion of penalty levied under section 271E of the Income Tax Act, 1961 for the assessment year 2008-09.
2. Deletion of penalty levied under section 271D of the Income Tax Act, 1961 for the assessment year 2012-13.

Issue 1: Deletion of Penalty Under Section 271E for Assessment Year 2008-09

The case originated from a survey conducted under section 133A of the Income Tax Act on 08.09.2011, revealing that the assessee repaid a loan of ?20,00,000 in cash to the proprietor of Vadamalayan Finance. The Assessing Officer (AO) issued a notice under section 271E r.w.s. 269T, observing that the assessee had not denied taking and repaying the loan in cash. The AO concluded that the transactions were not accounted for in the regular books and lacked any business exigency, thereby imposing a penalty of ?20,00,000 under section 271E.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] referenced a decision by the Tribunal in the assessee’s own case for earlier years and directed the AO to delete the penalty. The Revenue appealed this decision, citing the Tribunal’s and Jurisdictional High Court’s decisions in similar cases, arguing that the CIT(A)’s order should be reversed.

The Tribunal reviewed the facts and found that the assessee had borrowed and repaid ?20,00,000 in cash on multiple occasions during the assessment year 2008-09. The assessee claimed that the repayments were made at the lenders' insistence and that the transactions were genuine and accounted for. However, the Tribunal noted that if the money was accounted for, it should have been transacted through banking channels. The Tribunal found that the assessee had consistently violated the provisions of sections 269SS and 269T from assessment years 2008-09 to 2012-13.

The Tribunal referenced the case of P. Muthukaruppan v. JCIT, where the Jurisdictional High Court upheld penalties for similar violations, stating that mere statements of business exigency without substantiating material do not constitute a reasonable cause under section 273B. The Tribunal concluded that there was no justifiable reasonable cause for the cash transactions, and the violations were intentional and persistent. Therefore, the Tribunal reversed the CIT(A)’s order, sustaining the penalty under section 271E.

Issue 2: Deletion of Penalty Under Section 271D for Assessment Year 2012-13

For the assessment year 2012-13, the issue involved the deletion of the penalty levied under section 271D for accepting loans in cash exceeding ?20,000. The AO observed that the assessee had accepted and repaid loans in cash across multiple years without any business exigency or urgency, thereby violating sections 269SS and 269T. The AO imposed a penalty under section 271D.

The CIT(A) directed the deletion of the penalty, referencing the Tribunal’s decision in the assessee’s own case for earlier years. The Revenue appealed, arguing that the CIT(A)’s decision should be reversed based on the Tribunal’s and Jurisdictional High Court’s decisions in similar cases.

The Tribunal reviewed the facts and found that the assessee had consistently accepted and repaid loans in cash, violating the provisions of sections 269SS and 269T. The Tribunal referenced the Jurisdictional High Court’s decision in the case of P. Muthukaruppan, which held that repeated violations without reasonable cause do not warrant the benefit of section 273B. The Tribunal concluded that there was no reasonable cause for the cash transactions, and the violations were intentional and persistent. Therefore, the Tribunal reversed the CIT(A)’s order, sustaining the penalty under section 271D.

Conclusion:

The Tribunal allowed the appeals filed by the Revenue for both assessment years, reversing the CIT(A)’s orders and sustaining the penalties levied under sections 271E and 271D of the Income Tax Act, 1961. The Tribunal emphasized the consistent and intentional nature of the violations, which lacked any reasonable cause or business exigency.