2024 (8) TMI 341 - AT - Income Tax

Levy of penalty u/s 271D 271E - default u/s 269SS and 269T -assessee received cash loans from certain directors and related concerns and certain loans were also repaid in cash - assessee submitted that the cash was received from the directors to meet the urgent expenses at the project site when the company did not have funds to meet the expenditure and that the directors were having sufficient sources HELD THAT - First and foremost argument of Ld. AR is that receipt / repayment of cash loans from directors would not be covered under the provisions of Sec.269SS and 269T is to be rejected at the outset considering the fact that no such exception has been carved out in either of these statutory provisions. When the statutory mandate is clear, applying the doctrine of literal construction, no violence could be done to the explicit language of statute. Therefore, we reject these arguments of Ld. AR. Limitation argument - We find that the assessment was framed on 30-12-2019 wherein Ld. AO made reference to appropriate authority for imposition of impugned penalties. JCIT issued show-cause notice to the assessee on 26-05-2022 and completed penalty proceedings on 29-11-2022 which is well within the prescribed statutory limit. Argument that there was inordinate delay between the date of reference and issue of show-cause notice is to be rejected considering the fact that substantial period falls within lockdown situation arising out of Covid-19 Pandemic and therefore, this period is to be excluded for all limitation purposes. Therefore, this argument also does not find favor with us. Levy of penalty - As undisputed fact that the assessee is in the business of construction of resorts apartments at Courtallam whereas the assessee is located at Chennai. Both the places are at substantial distance. The nature of assessee s business is such that it would require frequent / regular labor payment and other expenditure at project sites. Though the assessee may be having sufficient bank balances, it may not have been always possible to arrange funds through banking channels at the project site. In such a case, it was quite possible that cash loans were taken from directors and the same were repaid as and when the funds were made available with the assessee. All these loans are not from any third-party but are only from the directors and related concerns which lend credence to the argument of business exigency as taken by the assessee before lower authorities. Therefore, this is not a fit case for levy of impugned penalties. By deleing both the penalties, we allow the appeals of the assessee.

Summary

Issues:
- Confirmation of penalty u/s 271D & 271E for AY 2017-18
- Legal arguments on merits and grounds for penalty proceedings
- Initiation of penalty, rejection of legal grounds, and imposition of penalties
- Appellate proceedings, rejection of grounds, confirmation of penalty by CIT(A)
- Arguments on statutory provisions, limitation, and business exigency
- Tribunal's findings and adjudication, allowance of appeals

Confirmation of Penalty u/s 271D & 271E:
The judgment revolves around the confirmation of penalties under sections 271D and 271E for the Assessment Year 2017-18. The appellant contested the penalties levied under these sections, leading to further appeal. The penalties were imposed due to cash loans received from directors and related concerns, with the appellant arguing that the loans were necessary for immediate business needs. The initiation of penalties, rejection of legal grounds, and imposition of penalties were thoroughly discussed in the judgment.

Appellate Proceedings and Confirmation of Penalty:
During the appellate proceedings, the appellant raised various factual errors and grounds to contest the penalties. Arguments included the lack of banking facilities at remote construction sites, immediate fund requirements for labor payments, and expenses at project sites. However, the CIT(A) confirmed the penalties, citing the appellant's failure to establish a reasonable cause for breach. The CIT(A) rejected the limitation argument and confirmed the penalties, except for one loan received through a bank account.

Tribunal's Findings and Adjudication:
The Tribunal analyzed the arguments presented by the appellant and rejected the claim that cash loans from directors were not covered under sections 269SS and 269T. The Tribunal also addressed the limitation argument, noting that the penalty proceedings were completed within the statutory limit. Regarding the merits of the case, the Tribunal considered the business exigency faced by the appellant in making cash transactions due to the nature of their construction business. Ultimately, the Tribunal found in favor of the appellant, deeming the penalties unjustified and allowing the appeals.

In conclusion, the Tribunal partially allowed both appeals, emphasizing the business exigency faced by the appellant in resorting to cash loans from directors for immediate project needs. The judgment highlighted the importance of considering the practical challenges faced by businesses in certain circumstances, ultimately leading to the decision to overturn the penalties imposed under sections 271D and 271E.