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TMI Blog2017 (9) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be imposed on the assessee for contravention of Section 271D of the Act - Decided in favour of assessee. - ITA No. 803/JP/2016 - - - Dated:- 25-7-2017 - SHRI BHAGCHAND, ACCOUNTANT MEMBER For The Assessee : Shri Suresh Chand Khincha (CA) For The Revenue : Smt. Poonam Rai, (DCIT) ORDER PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-II, Jaipur dated 21/06/2016 for the A.Y. 2013-14, wherein the assessee has raised following grounds of appeal: 1. That the Authorities below were not justified /have erred in law and facts in imposing / Confirming the Penalty for under section 271D of Income tax Act 1961 for ₹ 576000.00. 2. That the Authorities below were not justified /have erred in law and facts in imposing / Confirming the Penalty for under section 271D of Income tax Act 1961 for ₹ 576000.00 without considering the contention of the assessee that the loans were received from directors and their close relatives in cash in urgent and extreme situation and without proving mens rea which is essential in all case where the penalty is imposable. 3. That the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which loans can be taken when exceeding a certain amount. The assessee as per records, is seen indulging in violation of provisions in the case of 5 persons and on different occasion. It has been held that in 27 Taxmann.com 307 (Hyd.). Rigour of penalty exonerated - Existence of reasonable cause The assessee may be exonerated from the rigour of penalty under the provision of section 27 ID provided it is established that there existed a reasonable cause for not complying with the prescription of section 269SS. It is clearly laid down in section 271D that no person shall after 30-06- 1984 taken or accept from any other person any loan or deposit otherwise that by account payee cheques or account payee DD, if the amount or loan or deposit or the aggregate amount of such loan or deposit is ₹ 20,000 or more. This provisions of the Act was brought on the statute book to counter tax evasion. Therefore, it is not sufficient to say that simply the transaction was genuine, so provisions of section 269SS of the Act, are not applicable. Once cannot accept such proposition of law. Therefore, subject to the existence of mitigating circumstances penalty cannot be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount which could not arranged to honour the cheques issued to Rajasthan Financial corporation installments of secured loans taken by the company. On perusal of all instance and the cheques issued thereon to financial institution which on non issue of cheque may lodged any financial offence against the company. Further all the money received was duly deposited in bank account. We are giving hereby all the events of cash deposit and against them the cheque honoured in chronological manner. 1. Sh. Amit Goval (SON OF DIRECRTOR SMT REKHA GOYAL) a. 28/7/2009 Cash deposited ₹ 40000/- Rajasthan Bank Cheque of ₹ 50000/- issued to Archana and balance in bank on 28/7/2009 was ₹ 10731/- hence to fulfil the shortage of fund to honour cheques. b. 4/3/2010 Cash deposited 70000/- Amount deposited in HDFC Bank Cheque issued to Rajasthan Financial Corporation of ₹ 2202000/- and balance in bank was only ₹ 2137644/-( Shortage of ₹ 64356.00). 2. Smt. Gunja Agarwal (WIFE OF DIRECRTOR RAHUL GOYAL) a) 3/9/2009 85000/- cash deposited in HDFC Bank 15000/- cash deposited in HDFC Bank Payment to RFC 2202000/- and balance in ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act 1961.Futher the TDS was also deducted on the amount paid as interest. Thus there was no malafide intention to violate the income tax provisions but it was happened due to financial crisis management of the company hence the no penalty is imposable. Hence the assessee has reasonable cause for accepting the loans in cash u/s 273B of Income tax Act 1961. Section 273B. Notwithstanding anything contained in the provisions of clause (b) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FAB, section 271FB, section 271G, section 271GA, section 271H, section 271-1, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA, or section 272B or subsection (1) or subsection (1A) of section 272BB or clause (b) of subsection (1) of section or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee, as the case may be, for any failure referred to in the said provision is he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or account- payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 213B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bonafide reasons, the authority vested with the power to impose penalty has got discretionary power. In Bhagzvati Prasad Bajoria's (supra) the Gauhati High Court held: The transaction of loan has found place in the books of account of the assessee as well as the lender of the loan. None of the authorities have reached the conclusion that the transaction of the loan was not genuine and it was a sham transaction to cover up the unaccounted money. It appears to us that the assessee felt need of money and thus he approached the money-lender for advancement of the money, the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illu cine Enterprises(P) Ltd v CIT (2002180ITD 484 (HYD) No penalty is could be levied where the inter se transactions between the assessee and its partners even if there is violation of section 269SS and 269TT CIT V/S MANOT LALWANI ( 20031 130 CTR 2 ( 2003) 260 ITR 590 RAT HIGH COURT In the present case the tribunal found that the assessee is an exporter and was in the urgent need of the money for complying with the time bound supplies and therefore took a loan of ₹ 250000.00 from his brother in law. The tribunal was justified in arriving at a conclusion that the cash loan was taken under the exceptional circumstances and that there was a reasonable cause in terms of section 273B and the penalty imposed U/s 271D was rightly set aside. In the recent decision of Allahabad High Court in case of Smt. Dimale Yadav and Shri Akhilesh Kumar Yadav dated 21.08.2015 it was held that if the transaction is genuine then no penalty is leviable. In case of RIDHI SIDHI INFRAPROTECTS P LTD ITAT JODHPUR BENCH A also held that if the transactions are between the sister concern no penalty u/s 271D is leviable. Looking to the judicial pronouncements mentioned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the amount as bogus cash credits and holding the amount as assessee s own. On the other hand, the Assessing Officer has also invoked the provisions of Section 269SS of the Act treating the amount as cash loans received. The relevant para in respect of Shri Ramniwas Chopra is as under:- Further, assessee has taken loan of ₹ 2,50,000/- in cash, hence violated the norms as per Section 269SS of I.T. Act, 1961. Further, as clear from statement of Sh. Ram Niwas Chopra that loan was also returned back in cash, hence assessee has violated provisions of Section 269T I.T. Act, 1961. Therefore, matter is being referred to Additional Commissioner of Income Tax, Range-2, for initiation of penalty proceedings U/s 271D and 271E of the IT Act, 1961. Similar findings have been also recorded in the case of Shr. Bheru Ram Choudhary and Shri Rajveer Singh. Thus, the Assessing Officer himself was not in belief whether the amount was a bogus cash credit or it was a loan received in cash in violation of Section 269SS of the Act. The ld AR of the assessee in his written submissions has stated that assessee s husband was an Army Officer, who was declared martyr during the Kargil w ..... 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