2019 (1) TMI 413 - HC - Income Tax

Levy of penalty u/s 271D - loan in cash was taken from near relatives and the same was accounted in the appellant s and relatives books of accounts - Held that - In the case on hand, the assessee had shown a cause for having received the amount in cash. Therefore, if the assessee had shown a cause, the burden shifts on the AO to establish that the cause shown is not a reasonable cause by examining the cause shown and establish that it lacks bonafides. In the instant case, there is no such finding recorded by the Authorities below or for that matter by the Tribunal. Admittedly, the transaction in the instant case is between the assessee and her maternal uncle and aunt and there is nothing on record to show that the transaction lacks bona fides or the assessee came forward with a false case. The case on hand does not warrant levy of penalty under Section 271D - Appeal filed by the assessee is allowed

Summary

Issues:
Levy of penalty under Section 271D of the Income Tax Act for accepting cash loan from relatives, Reasonable cause for accepting cash loan, Interpretation of Section 273B of the Act regarding penalty imposition.

Analysis:
1. The appeal questions the validity of the penalty imposed under Section 271D of the Income Tax Act for accepting a cash loan from relatives. The key issue is whether the Assessing Officer was justified in levying the penalty for contravention of Section 269SS of the Act.

2. The crux of the matter revolves around the assessee's explanation for receiving a cash loan of ?3 lakhs. The appellant argued that the loan was taken from close family relatives for emergency purposes and to repay an advance for the sale of land. The Assessing Officer initiated penalty proceedings despite the explanation provided by the assessee.

3. Section 273B of the Act provides a safeguard against penalty imposition if a reasonable cause is established for the failure that led to the penalty. The court emphasized the importance of determining whether the assessee demonstrated a reasonable cause for accepting the cash loan, shifting the burden to the Assessing Officer to prove otherwise.

4. The court examined the facts of the case, highlighting that the transaction was between the assessee and her maternal uncle and aunt. The absence of evidence indicating mala fide intent or false representation by the assessee supported the conclusion that the penalty under Section 271D was unwarranted.

5. Drawing parallels from a previous case, the court referenced a Division Bench decision where a similar scenario led to the dismissal of penalty imposition. The court stressed that even without a specific plea of reasonable cause, penalties should not be imposed if transactions are genuine and bona fide.

6. Ultimately, the court ruled in favor of the assessee, allowing the appeal and setting aside the Tribunal's order. The substantial questions of law were answered in favor of the assessee, emphasizing the lack of justification for the penalty under Section 271D of the Act.