2012 (5) TMI 139 - AT - Income Tax

Penalty imposed u/s. 271D as the assessee receiving loans in cash in contravention of the provisions of section 269SS Held that - CBDT Circular No.572 dated 03.08.1990 has clearly brought out the provision of section 269SS explaining that for taking or accepting any loan or deposit in excess of Rs. 20,000 - As cash loan is not exceeding Rs. 20,000 rather it is exactly Rs. 20,000 no contravention of Sec 269SS arises Secs 271D inserted in the IT Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, as penalty under s. 271D may be levied for failure to comply with the provisions of s. 269SS i.e. for taking or accepting any loan or deposit in excess of Rs. 20,000 otherwise than by an account payee cheque or bank draft in favour of assessee.

Summary

Issues:
- Appeal against the penalty imposed under section 271D of the Income-tax Act, 1961.
- Condonation of delay in filing the appeal.

Analysis:
1. Condonation of Delay:
The appeal by the assessee was initially barred by a delay of 298 days, which the assessee attributed to chronic illness. The Appellate Tribunal considered the medical certificate provided by the assessee, indicating high diabetes and hypertension, as reasons for the delay. Additionally, the Tribunal acknowledged the merits of the case, emphasizing that the substantial justice would be compromised by a technical delay. Consequently, the Tribunal decided to condone the delay and admitted the appeal for adjudication.

2. Penalty Imposed under Section 271D:
The core issue in the appeal pertained to the penalty imposed under section 271D of the Income-tax Act, 1961. The penalty was levied due to the assessee accepting loans in cash from six individuals, each amounting to Rs. 20,000, totaling Rs. 1,20,000. The Assessing Officer observed this during the assessment and penalized the assessee for contravening the provisions of section 269SS of the Act. The Addl. CIT upheld the penalty, stating that the assessee did not dispute receiving the cash loans in violation of the law. However, the assessee contended that the loans were necessary for purchasing a car and were received from relatives who were not income tax assesses and lacked bank accounts.

3. Legal Arguments and Precedents:
The assessee's counsel relied on CBDT Circular No.572 dated 03.08.1990 and a decision by the Hon'ble Bombay High Court to argue that the circular clarified the provision of section 269SS regarding loans exceeding Rs. 20,000. The circular's binding nature on departmental authorities was emphasized, citing various judicial precedents supporting this principle. The Tribunal noted that the facts of the case mirrored those considered by the Hon'ble Bombay High Court, where the cash loan amount did not exceed Rs. 20,000. Given the beneficial nature of the circular and the court's interpretation, the Tribunal concluded that the penalty imposed by the Addl. CIT, upheld by the CIT(A), should be deleted.

4. Decision:
Based on the above analysis and the legal arguments presented, the Appellate Tribunal allowed the assessee's appeal, thereby overturning the penalty imposed under section 271D of the Income-tax Act, 1961. The Tribunal's decision was influenced by the beneficial circular under section 269SS and the interpretation provided by the Hon'ble Bombay High Court, leading to the deletion of the penalty upheld by the lower authorities.