2017 (5) TMI 1652 - AT - Income Tax

Penalty u/s 271D r.w.s. 274 - assessee has received loans from certain creditors in cash, amounting to ₹3,00,000/- - assessment under section 153C r.w.s. 153A - Held that - If at all to believe the contentions of the assessee, what the assessee did with those advances of ₹.50,000/- 2,00,000/- stated to have received from Shri Natesan so that the assessee was put to take loan for repayment of the above amount. As rightly noticed by the authorities below, the assessee has no pressure from Shri Natesan to get back the money. The first advance was given on 01.04.2007 and second advance on 31.12.2007. The same were settled on 31.03.2008. When Shri Natesan could wait for one whole year, i.e., from 01.04.2007 to 31.03.2008, it is not palatable that he would not have waited for another 3 to 4 days, if the assessee had to repay the amount by cheque. It could be clearly established that no such emergency/urgency existed for the assessee to take loan in cash. Since the assessee having failed to establish such material evidence to show that there was urgency for the assessee to avail of loan in cash, the amount taken from the relatives clearly fall under the provisions of section 269SS of the Act and definitely would not come under the exception clause of section 271D. It is not the case of the assessee that the assessee was under bankruptcy or under any emergency situation; she borrowed money from the relatives to meet the expenses or so. In this case, the situation of the assessee was to repay that money she already received from the so called Shri Natesan. To repay the money of ₹.2,50,000/-, which was already received by the assessee, what was the necessity of taking loan of ₹.3,00,000/-, was not at all explained by the assessee either before the Addl. CIT during the course of penalty proceedings or before the ld. CIT(A) during the appellate proceedings or even before the Tribunal. - decided against assessee

Summary

Issues: Penalty under section 271D of the Income Tax Act for receiving loans in cash without substantiating urgent necessity.

Analysis:
1. The appeal was against the penalty under section 271D of the Income Tax Act for receiving loans in cash without proving urgent necessity. The Assessing Officer initiated penalty proceedings after finding that the assessee received loans in cash without justifying the urgent need. The penalty was imposed as the case fell under section 269SS of the Act and did not qualify for an exception under section 271D.

2. The assessee contended before the authorities that there was a reasonable cause for taking the loans in cash. However, the authorities, including the ld. CIT(A), upheld the penalty under section 271D after considering the submissions and case law presented. The Tribunal heard both sides, reviewed the records, and found that the assessee received unsecured loans in cash from various parties but failed to provide sufficient evidence to support the urgent necessity for cash loans.

3. The Tribunal analyzed the sequence of events where the assessee received advances from one party and then borrowed from others to repay, without clarifying the need for cash transactions. The Tribunal emphasized that the assessee did not demonstrate any emergency or urgency that warranted taking loans in cash. The Tribunal also highlighted the lack of pressure from the creditor to demand immediate repayment, questioning the necessity for cash transactions.

4. The Tribunal distinguished a precedent cited by the assessee, emphasizing the absence of urgency in the present case compared to the cited case involving a cash gift for a specific purpose. Additionally, a case law cited by the ld. DR supported that transactions without evidence of urgency do not qualify for an exception under section 271D, aligning with the current case's circumstances.

5. Ultimately, the Tribunal upheld the penalty under section 271D, concluding that the assessee failed to provide valid reasons or evidence to justify the cash transactions. The Tribunal dismissed the appeal, affirming the decision of the ld. CIT(A) regarding the penalty imposed under section 271D of the Income Tax Act.