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2018 (5) TMI 1635 - AT - Income TaxPenalty u/s 271D and 271E - assessee has obtained loan/deposits in cash and violated provisions of section 269SS - three directors who have advanced money to the assessee-company and have been repaid in cash. - Held that - Transactions of availing loans and its user by the assessee have not been doubted. These are found to be genuine. Only allegation against the assessee is of venial and technical breach. No doubt breach is there but the assessee has a plausible explanation. It has been in the business since 1980 in exporting dyes and intermediatries. Thus in order to re-establish itself it has availed certain cash loans which has been used for fulfillment of promises given for the purpose of BIFR. An identical situation has been evaluated by ITAT s Third Member decision in the case of Mrs.Rupali R. Desai (2003 (7) TMI 647 - ITAT MUMBAI). As far as repayment of cash loans is concerned identical circumstances are available with the assessee therefore we are of the view that the assessee has been able to demonstrate reasonable cause for not visiting the assessee with penalty under section 271D and 271E. We allow both the appeals of the assessee and delete penalty. - Decided in favour of assessee.
Issues Involved:
1. Confirmation of penalty under section 271D of the Income Tax Act. 2. Confirmation of penalty under section 271E of the Income Tax Act. 3. Violation of sections 269SS and 269T of the Income Tax Act. 4. Reasonable cause for accepting and repaying loans in cash. 5. Timeliness of the penalty order under section 271D. Detailed Analysis: 1. Confirmation of Penalty under Section 271D: The assessee was penalized for violating section 269SS by accepting loans/deposits in cash. The penalty imposed amounted to ?1,74,99,700/-. The assessee argued that the penalty order was time-barred and should have been passed within a reasonable time, citing decisions from various courts that suggest a four-year period for such actions. The Tribunal examined whether the assessee demonstrated a reasonable cause under section 273B to absolve itself from the penalty. 2. Confirmation of Penalty under Section 271E: Similarly, the assessee was penalized ?55,16,065/- for repaying loans/deposits in cash, violating section 269T. The Tribunal evaluated whether the assessee had a reasonable cause for these repayments in cash. 3. Violation of Sections 269SS and 269T: Sections 269SS and 269T mandate that loans or deposits above ?20,000/- must be accepted or repaid through an account payee cheque or bank draft. The penalties under sections 271D and 271E are equal to the amount of the loan or deposit taken or repaid in violation of these sections. 4. Reasonable Cause for Accepting and Repaying Loans in Cash: The assessee argued that due to financial crises, it had no option but to accept and repay loans in cash to ensure the survival of the business. The Tribunal considered several precedents where genuine business exigencies and the bona fide nature of transactions were accepted as reasonable causes for such violations. The assessee demonstrated that the transactions were genuine, involving directors and relatives, and were necessary to honor cheques and maintain business credibility. 5. Timeliness of the Penalty Order under Section 271D: The assessee contended that the penalty order was passed beyond a reasonable time, which should be within four years from the end of the relevant assessment year. The Tribunal noted that although there is no specific time limit prescribed under the statute, penalties must be imposed within a reasonable period, typically considered to be four years. Conclusion: The Tribunal considered the financial crisis faced by the assessee, the genuine nature of the transactions, and the business exigencies that necessitated accepting and repaying loans in cash. The Tribunal referred to various judicial precedents that supported the assessee's case. It was concluded that the assessee had demonstrated a reasonable cause for its actions, and thus, the penalties under sections 271D and 271E were deleted. The appeals of the assessee were allowed.
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