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2014 (7) TMI 522 - AT - Income TaxAcceptance of loan in Cash - violation of section 269SS - Penalty u/s 271D of the Act Purpose of loan Business or not - The claim of the assessee is that he has accepted loans from various persons by way of cash and returned the same to the persons from whom the loans were availed - Held that - On verification of the bank accounts of the assessee with South Indian Bank and Dhanalashmi Bank, the AO found that those persons have given loans to the assessee for clearing the account payee cheques issued by the assessee through their bank account - there existed no reasonable cause for accepting loans/deposits or aggregate of such loans/deposits of ₹ 20,000 or more from various persons otherwise than crossed cheques and drafts and as such committed contravention of the provisions of s. 269SS, therefore, the penalty under s. 271D is attracted in this case and has rightly been imposed by the AO and CIT(A) was not factually or legally correct in directing to delete the same thus, the order of the AO is restored Decided in favour of Revenue.
Issues Involved:
1. Deletion of penalty levied under Section 271D of the Income Tax Act. 2. Compliance with Section 269SS of the Income Tax Act. 3. Existence of reasonable cause under Section 273B of the Income Tax Act. 4. Validity and interpretation of Section 269SS and related provisions. Issue-wise Detailed Analysis: 1. Deletion of Penalty Levied under Section 271D of the Income Tax Act: The main grievance of the revenue is regarding the deletion of a penalty amounting to Rs. 24,57,000/- levied under Section 271D of the Income Tax Act. The penalty was imposed because the assessee accepted loans or deposits in cash exceeding Rs. 20,000 from various individuals. The CIT(A) deleted the penalty on the grounds that the source of funds was accepted by the department, and there was no tax evasion or introduction of black money. 2. Compliance with Section 269SS of the Income Tax Act: Section 269SS mandates that no person shall accept any loan or deposit of Rs. 20,000 or more otherwise than by an account payee cheque or bank draft. The assessee accepted cash loans from several individuals, which was a clear violation of this provision. The provision aims to prevent tax evasion and the introduction of unaccounted money into the system. 3. Existence of Reasonable Cause under Section 273B of the Income Tax Act: The assessee argued that the cash loans were taken to show sufficient funds in the bank account for obtaining a visa and were returned on the same day. Section 273B provides that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the failure to comply with Section 269SS. However, the AO and the Tribunal found that the assessee failed to establish a reasonable cause for accepting the cash loans. The urgency or immediate need for cash was not substantiated with relevant details or documentation. 4. Validity and Interpretation of Section 269SS and Related Provisions: The validity of Section 269SS was upheld by the Supreme Court in the case of Asstt. Director of Inspection (Inv.) vs. Kum. A.B. Shanthi, where it was held that the provision is not discriminatory and does not violate Article 14 of the Constitution. The provision aims to curb the menace of false entries and explanations for unaccounted money. The Supreme Court also emphasized that Section 273B mitigates undue hardship by allowing the authority to exercise discretion in genuine and bona fide cases. Conclusion: The Tribunal concluded that the assessee did not provide sufficient evidence to prove a reasonable cause for accepting cash loans in violation of Section 269SS. The CIT(A)'s decision to delete the penalty was reversed, and the AO's imposition of the penalty under Section 271D was restored. The appeal filed by the revenue was allowed, emphasizing the importance of complying with the statutory provisions to prevent tax evasion and maintain the integrity of the financial system. Order: The appeal filed by the revenue is allowed, and the penalty levied by the AO under Section 271D is confirmed. The order of the CIT(A) is set aside. The judgment was pronounced in the open court on July 4, 2014.
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