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TMI Blog2016 (3) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of S.269SS of the Act. Penalty, being punitive in nature, warrants a liberal approach, while examining the existence or otherwise of a reasonable cause for the borrowals made in cash. Moreover as seen from the assessment order AO accepted borrowal at ₹ 9,60,000 only. The balance of the amount was considered for estimation of income. How the amount could be taken at ₹ 10.10,000 was not explained. Part of the amount was already been taxed separately. In addition assessee has purchased property along with his brother the fact of which was accepted in assessment itself. It was the explanation that the family transactions (HUF) were accounted in assessee bank account as he did not have any other bank account. This explanation was reasonable considering the fact that property for which monies were borrowed was registered in joint names. At best, assessee liability can only be half the amount. This aspect was also ignored by Revenue. Considering the totality of facts and circumstances of the case, and also the fact that the issue involved in these proceedings is not of a quantum but of a penalty, we are of the considered opinion that it is not a fit case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the file of the CIT(A), with a direction to admit the additional evidence in question and dispose of the appeal afresh in accordance with law. 3. In the second round of proceedings before him, the CIT(A) noted in the first place reasonable causes shown by the assessee before the Assessing Officer, for violation of the provisions of S.269SS in the following manner- i) Appellant made cash borrowings from near relatives who are staying in village, having agricultural incomes and not having bank accounts; ii) Appellant purchased a house property, jointly with his brother for a total consideration of ₹ 10,01,000 for which cash loans were obtained under pressure from the vendor to complete the registration in time, failing which the advance of ₹ 1,50,000 would be forfeited. The CIT(A) noted that the plea of the assessee for not filing the evidence/information in relation to the above reasonable causes before the Assessing Officer was that the agreement for sale was not available with him at that time. Considering the directions of the Tribunal for admitting the additional evidence, the CIT(A) referred the additional evidence, furnished by the assessee, to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove that they have taxable income from other sources and are having bank accounts. There is no dispute on this issue. As regard to the loan of ₹ 3,60,000 obtained from Mr.K.Nageswara Rao, there is no proof that the lender is having only agricultural income, since he is a teacher. There is no dispute on this i':;SIJ'= as well. As such the submission of the appellant that lenders are agriculturists; is only an half truth. Regarding the appellant himself being an agriculturist, it was not explained before the A.O that he possessed agricultural lands, and it is not an acceptable fact that agricultural land belonged to appellant, but agricultural income to his family. Even otherwise, the appellant cannot fit into the scheme of exception to Sec. 26955, since the appellant himself has known sources of taxable income in the form of business income, for which the return of income was filed for the year under reference. Further, one of the lender proved to be non-agriculturist. Thus, the exception given to a situation where both the loan/deposit lender and lendee are agriculturist and neither of them have any income that is chargeable to tax, is not applicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the decision of Hon'ble High Court of Karnataka in the case of Chamundi Granite Pvt. Ltd. Vs. DCIT (239 ITR 694), is directly on the subject matter and support the view taken by the A.O, wherein it was held that the loan may be genuine and in a particular case reasonable hardship might be created to the borrower by such provision, but the ultimate aim of the section is to prevent evasion of tax.. . Further, in this case, as emanated through the facts as illustrated in this order, there is no reasonable cause for the appellant to explain that, the provisions of Sec. 269SS are not applicable to appellant for the following reasons: i) The appellant failed to prove that all the lenders are pure agriculturists and do not have any taxable incomes. ii) It has been proved that the appellant has taxable incomes and as such the loans obtained from other agriculturists will not help him for exempting himself from the application of provisions of Sec. 269SS, by virtue of the proviso thereto. iii) Appellant failed to prove that obtaining cash loans for paying the balance of consideration for house property purchased that too within the time as stipulated in the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to complete the transaction of purchase of property in time, so as to save the advance of ₹ 1,50,000 paid earlier which would stand forfeited in terms of the sale agreement if the balance amount is not paid in time. This, being a plausible explanation, evidencing only the urgent need of the assessee for money, which he had to raise by resorting to borrowals, it has to be accepted as reasonable. Now turning to the circumstances under which loans had to be obtained in cash, we find that as far as Shri Kondiah and Smt.Venkata Subbamma are concerned, in the absence of any evidence brought on record to controvert the claim of the assessee that they are agriculturists living in a village, having no banking facilities, the cause shown by the assessee for making the borrowals in question from them in cash, has to be accepted as reasonable. Similarly, merely because the third lender, Shri Nageswara Rao is also a teacher, the factum of he, being also an agriculturist and living in a village, cannot be ignored. It may be noted, at this juncture, that we are not concerned here with any addition made in the quantum proceedings on account of violation of provisions of S.269SS of the Act, b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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