2016 (4) TMI 303 - AT - Income Tax

Penalty order u/s 271D - Held that - The case of the assessee squarely falls under the provisions of section 269SS of the Act and a clear contravention has been made by the assessee of the provisions of section 269SS of the Act as the assessee has accepted loan and was deposited which exceeded ₹ 20,000/- i.e. ₹ 76,000/- otherwise by account payee cheque or draft or by electronic transfer through bank account during the year. It is pertinent to note that assessee is based at Surat and the sister concern from whom loan was taken is also based in Surat and there was no reason for taking loan in cash and as the assessee has made contravention of section 269SS of the Act then penalty proceedings u/s 271D has been rightly imposed because there was no reasonable cause put forward by the assessee before the lower authorities and before us which could have proved that there was a reasonable cause due to which the loan was taken in cash. We are of the view that penalty u/s 271D has been rightly imposed and confirmed by ld. CIT(A). - Decided against assessee

Summary

Issues Involved:
1. Limitation of the penalty order under Section 271D.
2. Validity of the demand notice under Section 156.
3. Loan transactions with sister concerns.
4. Applicability of the Gujarat High Court judgment in CIT vs Shree Ambica Flour Mills Corporation.

Detailed Analysis:

1. Limitation of the Penalty Order under Section 271D:
The appellant contended that the penalty order passed by the Addl. CIT was barred by limitation. The appellant argued that the penalty proceedings were initiated on 30.11.2010, and the order was passed on 25.08.2011, beyond the permissible period. However, the CIT(A) clarified that the penalty proceedings under Section 271D were initiated on 26.04.2011, and the order was passed on 25.08.2011. According to Section 275(1)(c) of the Act, the limitation period is reckoned from the date when the penalty proceedings are initiated by the Addl. CIT, not from the date of completion of assessment proceedings. Hence, the order was within the time limit, and the appellant's contention was dismissed.

2. Validity of the Demand Notice under Section 156:
The appellant argued that the demand notice issued under Section 156 should have been signed by the Addl. CIT, Range-3, Surat. The CIT(A) observed that the penalty order under Section 271D was signed by the Addl. CIT, while the demand notice and challan were rightly signed by the ITO Ward 3(1), Surat, as the jurisdiction over the appellant vested with the latter. Therefore, this ground of appeal was dismissed.

3. Loan Transactions with Sister Concerns:
The appellant contended that the loan transactions in cash were with sister concerns (family members) only, and thus should not attract penalty under Section 271D. The CIT(A) noted that the appellant accepted cash loans of Rs. 19,000 each on four different dates, totaling Rs. 76,000, from M/s Jay Mahalaxmi Textiles, which was in contravention of Section 269SS of the Act. The appellant argued that these transactions were genuine and bona fide, carried out due to a shortage of cash for business purposes. However, the CIT(A) found that the transactions did not fall under the exceptions provided in Section 269SS, and the penalty was correctly imposed.

4. Applicability of the Gujarat High Court Judgment in CIT vs Shree Ambica Flour Mills Corporation:
The appellant relied on the Gujarat High Court's decision in CIT vs Shree Ambica Flour Mills Corporation, where transactions between sister concerns were considered genuine and reasonable. The CIT(A) distinguished the facts of the present case from the cited judgment, noting that the transactions in the appellant's case were purely loan transactions in cash, deliberately kept below Rs. 20,000 on each date to avoid detection. Therefore, the penalty under Section 271D was upheld.

Tribunal's Findings:
The Tribunal upheld the findings of the CIT(A), confirming that the penalty under Section 271D was rightly imposed and within the statutory time limit. The Tribunal dismissed the appellant's contentions regarding the genuineness of the transactions and the applicability of the Gujarat High Court judgment. The appeal was dismissed in its entirety.

Conclusion:
The appeal was dismissed, and the penalty of Rs. 76,000 under Section 271D for contravention of Section 269SS was upheld. The Tribunal confirmed that the penalty proceedings were initiated and completed within the statutory time limit, and the transactions in cash with sister concerns did not fall under the exceptions provided in the Act.