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TMI Blog2015 (11) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... that he is into the business of fertilizer and carrying his business in a remote village. There is nothing on record to disbelieve the explanation given by the assessee. In so far as usage of the funds are concerned, it is left to the assessee to decide to use the funds according to the business necessities/demands. In view of the above facts and circumstances of the case, we find that there is a reasonable cause for the assessee not strictly complied with the provisions of section 269SS of the Act. Therefore, the funds borrowed by the assessee for the business necessity more than the prescribed limit not amounting to violation u/s 269SS 269T of the Act. Therefore, consequently no penalty u/s 271D E of the Act can be imposed. - Decided in favour of assessee. - I.T.A.Nos.262&263/Vizag/2012 - - - Dated:- 30-9-2015 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri K. Gopalakrishna, DR ORDER PER V. DURGA RAO, Judicial Member: These appeals are directed against the order of CIT(A), Visakhapatnam dated 24.2.2012 relating to the assessment year 2004- 05. Both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the funds as well as repaid the funds for the purpose of business necessity. With the above observation, the Ld. Addl. Commissioner has imposed a penalty u/s 271D of the Act as well as 271E of the Act. The assessee carried the matter before the CIT(A). Ld. CIT(A) has observed that the assessee is already having a cash balance of ₹ 3,01,535/- as on 29.8.2003. The said loan amount along with the available cash was deposited in the bank account at Hyderabad. Therefore, the funds borrowed for the immediate business requirement is not acceptable. He further observed that subsequent to borrowal made by the assessee, he further deposited in the Vysya Bank account on 24.9.2003 and 3.10.2003. The withdrawal of money was only on 20.10.2003 i.e. after one month and 22 days. On the basis of above observation, the Ld. CIT(A) came to the conclusion that there is no reasonable cause for the assessee to accept loans in cash and representing in cash and confirm the order of the A.O. On being aggrieved, assessee carried the matter before the Tribunal. 4. The Ld. Counsel for the assessee has submitted that the assessee is in the business of sale of fertilizer which is an unorganized secto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,59,869/- 6. When the Addl. Commissioner issued a notice for reasons for acceptance of loans and repayment of the loans more than prescribed under the Act, it was submitted that because of business necessity, the amounts were borrowed and deposited immediately, thereafter repayments were made. 7. The Ld. Addl. Commissioner was not satisfied with the explanation given by the assessee for the reason that the assessee has not utilized the funds deposited in the bank immediately. Only he has utilized the funds after 52 days. Therefore, there is no business necessity for him to borrow the funds and repaid the same imposed a penalty u/s 271D E of the Act. In appeal, the Commissioner has confirmed the same. 8. After careful consideration of the orders of the authorities below, we find that the assessee is into the business of fertilizer in a remote place i.e. Jeelakarragudem. The explanation of the assessee is that funds are borrowed for the purpose of business necessity and borrowed funds are kept in the bank. So far as usage of the funds are concerned, it is the assessee who has to decide it has to be withdrawn immediately or thereafter according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural income. Not liable to tax which have exempted from such regor of law and yet, the cause advanced is then found to be sufficient reasonable and no interference could be desirable. Penalty will not ordinarily be imposed unless the party observed either acted deliberately or deficient of law or was guilty of conduct contumacious or dishonest or acting in conscious disregard to its application. Even if minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when they reject technically or venial breach of the provisions of the Act. Where the breach flows from bonafide belief that the offender is not liable to and in the manner prescribed by the statute . 9. In the case of CIT Vs. Parma Nand 266 ITR 256, the Hon ble Delhi High Court has considered the scope of the penalty u/s 271D of the Act and the Hon ble Delhi High Court after considering the order of the Tribunal has observed as under: While affirming the said order and holding that the assessee has been able to prove that there was a reasonable cause for receiving the money in cash, the Tribunal has held as follows: Further, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion. The findings recorded by the Tribunal are essentially factual giving rise to no question of law much less a substantial question of law. The appeal is accordingly dismissed. 10. In the case of CIT Vs. Ratna Agencies 284 ITR 609 the Hon ble Madras High Court has considered the scope of section 271D E of the Act by following the judgement of the Delhi High Court in the case of CIT Vs. Paramananda (supra) has observed as under: Whether, in the facts and under the circumstances of the case, the Appellate Tribunal was right in holding that penalty under sections 271D and 271E cannot be imposed for violation of sections 269SS and 269T? A similar question arose before the Delhi High Couirt and while answering the question by its judgement reported in CIT V. Parma Nand [2004] 266 ITR 255, after extracting the relevant portions from the order of the Tribunal, the court held as under (page 256): The afore-extracted portion of the Tribunal s order shows that the conclusion of the Tribunal that there was a reasonable cause in not strictly complying with the provisions of section 269SS of the Act is based on relevant factors. We find it difficult to hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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