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2016 (8) TMI 655 - AT - Income TaxLevy of penalty u/s. 271D - accepting cash loan - Held that - In the case under appeal the assessee had taken loan from one of its share holder and that share holder had withdrawn the money from its bank account. Thus, there was no introduction of cash on part of the shareholder. The assessee had to make the EMI payment and for that purpose it had taken a cash loan. In our opinion, it can be considered a reasonable cause looking in to the facts and circumstances. Section 269SS were introduced with specific purpose. The transaction in question does not fall in the mischief for which the section was brought on statute. It is clearly covered by the exceptions provided in the section 273B of the Act. There existed the a reasonable cause for accepting cash in loan in the month of July, 2007. So, reversing the order of the FAA, we decide the effective ground of appeal in favour of the assessee.
Issues:
1. Levy of penalty u/s. 271D of the Income Tax Act. 2. Whether the assessee contravened the provisions of section 269SS of the Act by taking a cash loan? 3. Whether there was a reasonable cause for accepting the cash loan from a shareholder? Analysis: Issue 1: Levy of penalty u/s. 271D of the Income Tax Act The Appellate Tribunal ITAT Mumbai heard the appeal challenging the order of the CIT(A)-8 regarding the levy of penalty under section 271D of the Income Tax Act. The assessee, engaged in renting commercial properties, had taken a loan from a bank but faced a shortfall in paying the EMI, leading to taking a cash loan from a shareholder. The AO initiated penalty proceedings under section 271D, which the assessee contested, arguing it was a one-time transaction due to financial crisis. The FAA and AO upheld the penalty, citing violation of section 269SS and lack of reasonable cause. However, the AR argued before the Tribunal that the loan was taken due to compelling circumstances, supported by case laws. The Tribunal, considering the facts and circumstances, reversed the order, finding a reasonable cause for accepting the cash loan, thus allowing the appeal. Issue 2: Contravention of section 269SS by taking a cash loan The AO held that the assessee contravened section 269SS by accepting a cash loan from a shareholder to pay the EMI, despite the company's argument that it was to avoid default and safeguard credit rating. The FAA upheld this view, emphasizing the awareness of the law and lack of compelling circumstances. The AR contended that the loan was a solitary transaction, accepted as genuine, and not involving unexplained money circulation. The Tribunal considered the specific facts, including the shareholder withdrawing money from the bank account, and found a reasonable cause for accepting the cash loan, differing from the lower authorities' interpretation, ultimately deciding in favor of the assessee. Issue 3: Reasonable cause for accepting the cash loan The Tribunal referred to the Hon'ble Bombay High Court's interpretation of "reasonable cause" in section 273B, highlighting its broader scope compared to "sufficient cause." It analyzed the circumstances of the case, where the shareholder withdrew money to provide the loan, concluding that a reasonable cause existed for accepting the cash loan to make the EMI payment. By invoking the exceptions in section 273B and considering the specific situation, the Tribunal reversed the penalty decision, allowing the appeal and ruling in favor of the assessee. In conclusion, the Appellate Tribunal ITAT Mumbai, in the cited judgment, addressed the issues of penalty under section 271D, contravention of section 269SS, and the presence of a reasonable cause for accepting a cash loan, ultimately deciding in favor of the assessee based on the specific facts and circumstances presented during the proceedings.
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