2015 (11) TMI 804 - HC - Income Tax

Penalty u/s 271D - whether there was reasonable cause to accept the said loan in cash, or some bonafide reason due to which the assessee did not obtain the loan in accordance with section 269SS? - ITAT delted the penalty - Held that - The assessee is a wholesale dealer of fast food goods, manufactured or marketed by various agencies and companies of national repute/Multi National Companies. For clearance of certain cheques, which stood issued in advance, as per market procedure, money had to be arranged to avoid prosecution under various statutes. It was also to save the reputation and goodwill. The cheques were deposited by the drawee as per his convenience. It stands established that after deposit of the amount, so borrowed in cash, the cheques issued in favour of the drawee stood cleared. Instead of availing the Cash Credit limit, for which the assessee was required to pay interest, he chose to borrow the amount from his near relation and deposit it in his account. There is nothing illegal or unusual about the same. Hence, findings of fact, cannot be said to be perverse or not borne out from the record. Statement made by the assessee cannot be said to be incorrect, for the authorities below, concurrently found the same to be plausible and correct - Decided in favour of assessee.

Summary

Issues:
1. Whether there was a 'reasonable cause' for accepting a loan in cash under Section 269SS?
2. Can a wrong statement made by the assessee be considered a 'reasonable cause' under Section 273B?

Issue 1: 'Reasonable Cause' for Accepting Cash Loan under Section 269SS:

The judgment involved a case where the assessee borrowed cash amounting to Rs. 13,15,000, breaching Section 269SS of the Income Tax Act, 1961. The Income Tax Officer imposed a penalty under Section 271D, which was later reversed by the Commissioner of Income Tax (Appeals) and affirmed by the Income Tax Appellate Tribunal. The court considered whether there was a 'reasonable cause' for accepting the cash loan. The fact-finding authorities found that the assessee had explained the emergent circumstances necessitating the cash borrowing, which was repaid promptly and not unaccounted for. The court emphasized that 'reasonable cause' is a question of fact, and the authorities found the explanation provided by the assessee plausible and correct.

Issue 2: Wrong Statement as 'Reasonable Cause' under Section 273B:

The judgment also addressed whether a wrong statement made by the assessee regarding the cash loan could be construed as a 'reasonable cause' under Section 273B. The court noted that the assessee, a wholesale dealer of fast food goods, borrowed cash to clear cheques issued in advance to avoid legal issues and protect reputation. The borrowed amount was promptly repaid, and the cheques were cleared. The court highlighted that the objective of Section 269SS is to prevent false information about unaccounted money, and in this case, the authorities found the explanation provided by the assessee to be genuine and free from doubt. The court emphasized that 'reasonable cause' is a subjective satisfaction based on objective material, and commercial exigency and prudence must be considered.

The judgment cited various decisions to support the view taken by the authorities below and emphasized that the findings of fact were not perverse. The court concluded that there was no reason to interfere in the appeal as the substantial questions of law were answered in favor of the assessee. The appeal was disposed of accordingly, along with any pending applications.