2019 (2) TMI 361 - AT - Income Tax

Penalty levied u/s. 271D r.w.s. 273B - reasonable cause for the assessee to accept loan over ₹ 20,000/- in cash - Held that - We agree with the finding of the ld. CIT(A) that there was no reasonable cause for the assessee to accept loan over ₹ 20,000/- in cash in clear contravention of section 269SS. Except for stating that there was business exigency and the loan taken was for business purpose, no cogent evidence has been produced. CIT(A) has given a finding that there was no business transaction between the lender and the assessee. Hence, receiving the cash advance purportedly for business purpose is not proved. Accordingly, we do not find any infirmity in the order of the ld. CIT(A), hence, we uphold the same. - Decided against assessee.

Summary

Issues:
Penalty under section 271D of the Income Tax Act, 1961 for accepting unsecured cash loan.

Analysis:
The appeal was against the penalty levied under section 271D of the Income Tax Act, 1961. The assessee firm had accepted an unsecured cash loan of ?9,75,000 from a company during the assessment year 2009-10. The penalty proceedings were initiated as the loan was in violation of the provisions of section 269SS of the Income Tax Act. The assessee failed to provide satisfactory explanations during the penalty proceedings, leading to the imposition of the penalty.

During the appeal, the assessee argued that the cash received was a business advance and not a loan, taken due to business exigency. The firm claimed that the lender and the assessee belonged to the same group, and the cash was utilized for business purposes. The assessee cited legal precedents to support their argument that the provisions of section 269SS did not apply in this case.

However, the Commissioner of Income Tax (Appeals) was not convinced by the explanations provided. It was observed that the assessee failed to prove any business exigency for accepting the cash loan and did not establish that the cash advance was used for business purposes. The Commissioner concluded that there was no reasonable cause for the violation of section 269SS, and upheld the penalty of ?9,75,000 imposed by the Assessing Officer.

The Appellate Tribunal, after considering the arguments and records, agreed with the Commissioner's findings. It was noted that the assessee did not provide sufficient evidence to justify accepting the cash loan in contravention of the law. The Tribunal upheld the decision of the Commissioner, stating that there was no business transaction between the lender and the assessee, and the purpose of the cash advance for business was not substantiated. Consequently, the appeal was dismissed, and the penalty was upheld.

In conclusion, the Appellate Tribunal affirmed the penalty under section 271D imposed on the assessee for accepting an unsecured cash loan in violation of the Income Tax Act, 1961. The decision was based on the failure of the assessee to demonstrate a valid business reason for the transaction and the absence of evidence supporting the claim that the cash advance was utilized for business purposes.