2017 (11) TMI 1358 - HC - Income Tax

Disallowing the adjustment in the amount of penalty imposed u/s 271D - Held that - Section 271-D of the Act are in the nature of compliance provisions that seek to impose penalty for non-compliance of the statutory scheme contained in Section 269 SS being that no loan in excess of ₹ 20,000/- be taken from any person, through cash mode. A plain reading of Section 269SS indicates that the bar has been created against taking loans in cash, in excess of ₹ 20,000/-. In fact the legislature clearly appears to contemplate that loan in excess of ₹ 20,000/- should be taken only through banking channel and not through cash mode. There is no room for allowing the benefit of the loan taken up to ₹ 20,000/ on the reasoning adopted by the CIT (Appeals). The bar operates in three contingencies. First, if the total loan amount, by way of a single transaction exceeds ₹ 20,000/-. Second, it operates where unpaid amount of an earlier loan exceeds ₹ 20,000/-. Third, it operates where the aggregate amount of first and second contingencies taken together exceeds ₹ 20,000/-. At any rate, it is not the case of the assessee that the loan had been taken by it in parts such that one part of the cash loan was for ₹ 20,000/- and the other in excess thereof. In fact the aggregate amount of loan taken by the assessee from Vikas Motor Finance Company was ₹ 1,00,000/- and that from Singh Traders was in excess of ₹ 70,000/-. Thus, the bar created by Section 269SS of the Act is clearly attracted. Reliance has been placed by learned counsel for the assessee on the judgment in the case of Commissioner of Income Tax Vs. Ajanta Dyeing and Printing Mills reported in (2003 (1) TMI 31 - RAJASTHAN High Court) as made an interpretation in favour of the assessee and granted adjustment of Rs, 20,000/-. However, with due respect, we disagree with the view taken by the Rajasthan High Court inasmuch as the language of the Act is clear and unambiguous. It does not contemplate granting of any such adjustment or benefit to the assessee to the extent of ₹ 20,000/- in respect of loan taken in cash is exceeds of ₹ 20,000/-. In fact the language only suggests, in case the aggregate amount of loan exceeds ₹ 20,000/- or where loan may have been taken in parts, or where fresh loan and outstanding loan taken together exceed ₹ 20,000/-, no penalty would be leviable, to any extent, if the loan in excess of ₹ 20,000/- is taken through banking channel. However, otherwise, penalty is mandatory and no adjustment in penalty is contemplated. - Decided against the assessee

Summary

Issues:
1. Interpretation of Section 269SS and 271-D of the Income Tax Act regarding penalty for cash loans exceeding statutory limit.

Analysis:
The case involved an appeal against the Income Tax Appellate Tribunal's order imposing penalties on an assessee for taking cash loans exceeding the statutory limit of ?20,000. The appellant had taken multiple cash loans on different dates, and penalties were imposed by the Assessing Officer under Section 271-D read with Section 269SS of the Income Tax Act.

The Commissioner of Income Tax partially allowed the appeal, considering exceptional circumstances for loans taken on weekends and reducing the penalties for those loans. However, penalties for loans taken on weekdays were upheld to the extent that they exceeded the statutory limit.

Both the revenue and the assessee appealed to the Tribunal, which upheld the penalties for loans taken on weekdays but deleted the penalties for loans taken on weekends. The Tribunal's decision was based on the mandatory nature of the provisions in Section 269SS and 271-D, which impose penalties for non-compliance with the statutory scheme of not taking loans exceeding ?20,000 in cash.

The court analyzed the provisions of Section 269SS and 271-D, emphasizing that the bar against cash loans exceeding ?20,000 was clear and unambiguous. The court disagreed with a previous Rajasthan High Court judgment that allowed adjustments for loans up to ?20,000, stating that the language of the Act did not provide for such adjustments. The court clarified that penalties are mandatory for cash loans exceeding ?20,000, regardless of whether the loan is taken in parts or in combination with outstanding loans.

Ultimately, the court ruled in favor of the revenue, upholding the penalties imposed on the assessee for cash loans exceeding the statutory limit. The appeal was dismissed, emphasizing the mandatory nature of penalties for non-compliance with the provisions of Section 269SS and 271-D of the Income Tax Act.