2017 (5) TMI 207 - AT - Income Tax

Penalty proceedings u/s. 271D - assessee had received loans from various individual- Directors in cash in excess of the limits prescribed u/s. 269SS - Held that - The company has accepted amounts from the directors and the explanations from the directors was considered in the assessment proceedings and accepted. There is truth in the contention of the assessee that on the same explanation given in the assessment proceeding, the penalty proceedings cannot be initiated. Further, assessee has given a reasonable explanation that the amounts were taken in cash for i) for payment to the court in lieu of directions given by the court to pay the amount in Bengaluru. Assessee in fact has purchased a DD in Andhra Bank Bengaluru and paid to the creditor as per the directions of the court, ii) an amount of ₹ 80,024/- was paid to ICICI Bank for car instalments in small amounts, iii) an amount of ₹ 6,90,000/- was spent for day to day running expenses of the office as the company is having financial difficulties. Further substantial amount was deposit in Bank Account directly. Explanation given was accepted in assessment proceedings, so the same can be considered as reasonable for accepting cash for the purpose of section 271D read with section 273B. Thus it is of the view that the assessee has shown reasonable cause within the meaning of section 273B, therefore, the penalty order is to be set aside. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty order under section 271D of the Income Tax Act for accepting cash loans exceeding prescribed limits.

Analysis:
1. Issue of Penalty under Section 271D:
- The appellant, a construction company, filed its return for AY 2012-13 admitting losses and book profits. The AO observed cash loans from directors exceeding limits under section 269SS, leading to a penalty under section 271D of ?18,95,024.
- The appellant argued that a portion of the cash was used to pay creditors based on court orders and for office expenses, justifying the cash transactions. The directors' financial support during a crisis was highlighted.
- The CIT(A) upheld the penalty, stating the appellant failed to substantiate grounds and provided irrelevant case laws. The appellant then appealed to the ITAT.
- The ITAT considered the explanations accepted in assessment proceedings, finding reasonable cause for accepting cash. Citing case laws, including CIT Vs. Dimple Yadav, the ITAT set aside the penalty, emphasizing reasonable cause under section 273B.

2. Relevant Case Laws and Precedents:
- The appellant cited various case laws before the CIT(A) and the ITAT, emphasizing the acceptance of explanations and the presence of reasonable cause in similar situations.
- Case laws such as CIT Vs. Dimple Yadav and MS Lokaiah Vs. Addl. CIT were crucial in demonstrating the acceptance of explanations and the absence of mandatory penalties under section 271D.

3. Decision and Conclusion:
- The ITAT allowed the appeal, setting aside the penalty imposed under section 271D. Emphasizing reasonable cause and the acceptance of explanations provided by the appellant, the ITAT relied on precedents to support its decision.
- The judgment highlighted the importance of assessing each case individually, considering the circumstances and justifications provided by the appellant to determine the applicability of penalties under the Income Tax Act.