2019 (10) TMI 1063 - AT - Income Tax

Penalty u/s 271E and 271D - receipt and repayment of loan in cash - contravention of provisions of section 269SS and 269T - A/R submitted that even the said sum taken by the assessee from his close relatives is exempt under section 56 of the Act - HELD THAT - AO has not disputed the fact that the assessee has received these amounts from these agriculturists and also repaid the same to them in cash. The assessee has filed the affidavits of these three persons wherein they have affirmed on oath that they are not having any PAN or any bank account in their names. Once this fact of not having any PAN and bank account by these three close relatives of the assessee is not in dispute, then the receipt of the amount and repayment of the same in cash falls in the exception as the transaction cannot be completed through banking channel, as well as in the category of reasonable and bonafide explanation under section 273B When the three persons who are close family members of the assessee were not having any bank account in their names, then the provisions of section 271D and 271E cannot be attracted. - Decided in favour of assessee.

Issues Involved:
1. Legality and limitation of penalty imposed under section 271E of the IT Act.
2. Genuineness of cash transactions and their treatment under section 269T of the IT Act.
3. Consideration of reasonable cause and urgency for cash transactions under section 273B of the IT Act.
4. Relevance of joint venture agreement and its impact on penalty.
5. Evaluation of fresh evidence submitted under Rule 46A of IT Rules during appeal proceedings.

Detailed Analysis:

1. Legality and Limitation of Penalty Imposed under Section 271E of the IT Act:
The assessee contested the penalty order dated 02.05.2019, asserting it was barred by limitation and lacked the necessary satisfaction recorded by the Assessing Officer (AO) in the assessment order. The Tribunal did not find merit in this argument, focusing instead on the substantive issues of the case.

2. Genuineness of Cash Transactions and Their Treatment under Section 269T of the IT Act:
The assessee received ?7,50,000 in cash from three family members, each contributing ?2,50,000, for the purpose of applying for a liquor shop license. The transactions were genuine, as confirmed by the AO during the assessment. However, the AO imposed penalties under sections 271D and 271E for violating sections 269SS and 269T, which prohibit cash transactions above certain limits.

3. Consideration of Reasonable Cause and Urgency for Cash Transactions under Section 273B of the IT Act:
The assessee argued that the cash was collected urgently from family members, who were agriculturists without bank accounts, and later refunded when the liquor license was not obtained. The Tribunal accepted this explanation, noting the affidavits confirming the family members' lack of PAN and bank accounts. The Tribunal referenced the case of *CIT vs. Sunil Kumar Goel*, where it was held that bona fide transactions and lack of tax evasion constitute a "reasonable cause" under section 273B, thereby exempting the assessee from penalties under sections 271D and 271E.

4. Relevance of Joint Venture Agreement and Its Impact on Penalty:
The assessee presented a joint venture agreement dated 04.01.2011 to support the claim that the cash transactions were capital contributions for a business venture, not loans or advances. The Tribunal found this argument credible and relevant, further supporting the assessee's case that the transactions were genuine and for a specific purpose.

5. Evaluation of Fresh Evidence Submitted under Rule 46A of IT Rules During Appeal Proceedings:
The assessee submitted fresh evidence, including the joint venture agreement, during the appeal. The CIT (A) had called for a remand report, which did not question the genuineness of the document. The Tribunal criticized the CIT (A) for ignoring this evidence and failing to properly consider the reasonable cause and urgency of the transactions.

Conclusion:
The Tribunal concluded that the assessee had demonstrated a reasonable cause for the cash transactions, as the family members involved were agriculturists without bank accounts, and the transactions were for a specific, urgent purpose. Consequently, the penalties under sections 271D and 271E were not applicable, and the appeals were allowed. The Tribunal's decision emphasized the importance of considering the context and genuine nature of transactions when applying penal provisions.

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