2018 (6) TMI 1561 - AT - Income Tax

Penalty u/s 271D - assessee has received cash loan from the company namely M/s Ceigall India Ltd. Ludhiana in which he is a Director - amounts in cash have been received were varying from ₹ 15,000/- to ₹ 8,00,000/- - whether penalty can be levied in the absence of any other material to prove or indicate introduction of unaccounted money or any doubt casted by the department regarding the genuineness of the source or whether the assessee has brought reasonable cause to enter into such transactions. Held that - Transactions have been undertaken between two bank accounts by withdrawing cash from one account and depositing the cash into the other account. The source of repayment or payment of loan was never in question. There was no leakage of Revenue or detection of circulation of unaccounted money by way of cash loans which was the fundamental purpose to curb the circulation of black money. The transactions have been taken place between two current accounts and also between the Director of the Company and the Company itself in the form of maintenance of a current account for contingencies of business purpose and also for contingencies of the Director for salary and payment of credit card dues. While such transactions may attract other provisions of the Income Tax Act,1961, but it is not a fit case for the levy of penalty under section 271E/271D. Absence of any evidence of introduction of unaccounted money and following the judgments of CIT Vs. Saini Medical Stores 2005 (2) TMI 72 - PUNJAB AND HARYANA HIGH COURT and CIT Vs. Sunil Kumar Goyal 2009 (3) TMI 131 - PUNJAB AND HARYANA HIGH COURT and keeping in view the facts and circumstances specific to the instant case, no penalty can be leviable under section 271E and Section 271D - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271D and 271E for various Assessees.

Analysis:
The appeals were filed against the order of the Ld. CIT(A)-3, Ludhiana, regarding penalties under sections 271D and 271E. The issues common to all appeals were adjudicated together using the case of Mohinder Pal Singh as the lead case.

The Assessees contested the imposition of penalties under sections 271D and 271E, claiming the penalties were arbitrary and unjustified. They argued that reasonable causes were not properly considered, making the orders erroneous and untenable.

The Assessees received cash loans from a company where they were directors, ranging from ?15,000 to ?8,00,000. During penalty proceedings, they explained that the cash withdrawals and deposits were due to business exigencies, with no mala fide intentions or revenue losses. They provided bank statements and detailed explanations to support their claims.

The Assessing Officer found no reasonable cause for the cash transactions, stating emergencies could not occur on 35 occasions in a year. Consequently, the penalties were deemed leviable due to lack of evidence supporting the reasonable cause.

The Ld. CIT(A) upheld the penalties, emphasizing the strict application of Section 269SS and citing relevant judgments. The Assessees failed to substantiate the urgency of the cash loans, leading to the penalty confirmation.

During the appeal, the Ld. AR argued that the transactions between the Assessees and the company did not constitute loans or deposits under Section 269SS. They provided explanations and cited case laws to support their position.

The Ld. DR supported the Ld. CIT(A)'s order, asserting that the provisions of the Act were correctly applied, with no contradictory decisions presented.

The Tribunal considered whether penalties could be imposed without evidence of unaccounted money or doubts about the transaction genuineness. Upon review, it was concluded that the transactions did not involve unaccounted money circulation and did not warrant penalties under sections 271D and 271E. Citing relevant judgments, the Tribunal ruled in favor of the Assessees, allowing all appeals.

In summary, the Tribunal found that the transactions between the Assessees and the company did not violate the provisions of Section 269SS, as they were regular business transactions and not loans or deposits. Consequently, penalties under sections 271D and 271E were deemed unwarranted, and the appeals of the Assessees were allowed.