2019 (3) TMI 1582 - AT - Income Tax

Penalty u/s 271D - violation of the provisions of section 269SS - assessee's plea that cash loan was taken on different occasions in small amounts due to business exigencies - HELD THAT - Assessee has taken cash loan in small amounts on different occasions to meet the urgent business needs. The amount has been taken from the company in which assessee is a director and shareholder. In these circumstances section 273B comes to the rescue of the assessee. The said section provides that the impugned penalty need not be levied if there was reasonable cause for the transgression by the assessee. Reasonable cause given by the assessee for taking the said cash loan duly mandate that levy of penalty u/s 271D is not warranted. In this regard, we also place reliance upon the decision of Hon ble Supreme Court in the case of Hindustan Steel vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT that penalty for technical and venial breach may not be levied. Accordingly we delete the levy of penalty in this case. - Decided in favour of assessee.

Summary

Issues involved:
Penalty under section 271D of the Income Tax Act for receiving cash loans in violation of section 269SS.

Detailed Analysis:

Issue 1: Penalty under section 271D
The appeal was directed against the order of the CIT(A)-26, Mumbai, upholding a penalty of ?4,00,000 levied under section 271D of the Income Tax Act by the Assessing Officer. The Assessing Officer found that the assessee had received loans in cash totaling ?4,00,000 from M/s. Greenfield Infra Pvt Ltd., constituting a violation of section 269SS. The penalty was imposed by the Joint Commissioner of Income Tax. The assessee's plea that the cash loans were taken on different occasions in small amounts from friends and relatives due to business exigencies was rejected. The assessee contended that the loans were taken from a company in which they were a Director and Shareholder, along with their wife, to meet urgent business needs, believing that such loans did not fall under the provisions of section 269SS.

Issue 2: Reasonable cause and application of section 273B
Upon hearing both parties and examining the records, the Tribunal found that the assessee had indeed taken cash loans in small amounts on various occasions to address urgent business requirements. The loans were obtained from the company where the assessee held a directorial and shareholder position. The Tribunal invoked section 273B, which states that if there is a reasonable cause for the transgression, the penalty need not be levied. Considering the facts and circumstances, the Tribunal concluded that the reasonable cause presented by the assessee for taking the cash loans justified not imposing the penalty under section 271D. The Tribunal also referred to the decision of the Hon’ble Supreme Court in Hindustan Steel vs. State of Orissa 83 ITR 26, emphasizing that penalties for technical and venial breaches may not be imposed. Consequently, the Tribunal allowed the appeal, ruling in favor of the assessee and deleting the penalty.

This judgment highlights the importance of considering the circumstances and reasonable cause behind actions when determining penalties under tax laws, emphasizing that penalties should not be imposed for technical or minor breaches. The case underscores the need for a thorough examination of facts and legal provisions to ensure fair and just outcomes in tax penalty disputes.