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TMI Blog2014 (7) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... ere existed similar emergency for repaying the loan in cash, as the emergency which prompted them to take loans in cash. Therefore, this is a case where there is a reasonable cause for the assessees to repay the loans in cash. In such circumstances, it is to be seen that the violation of Section 269T is technical. - Decided in favour of assessee. - I.T.A. Nos. 2047, 2048, 2049, 2050 & 2051/Mds/2013, I.T.A. Nos. 2052, 2053, 2054 & 2055/Mds/2013 - - - Dated:- 22-7-2014 - Dr. O.K. Narayanan, Vice-President AND Shri V. Durga Rao, Judicial Member For the Appellant : Shri Guru Bhashyam, JCIT For the Respondent : Shri A.S. Sriraman, Advocate ORDER PER V. DURGA RAO, JUDICIAL MEMBER: These two batches of appeals filed by the Revenue pertains to two different assessees are directed against different orders of the ld. Commissioner of Income Tax (Appeals) III, Chennai for different assessment years. 2. The appeals of the Revenue in I.T.A. Nos. 2047 to 2051/Mds/2013 are found to have been filed late by five days and the Department filed petitions for condonation of delay in filing the appeal. By referring to the contents therein, the ld. DR has requested to cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in the books of the Creditor on the date on which it was transacted. The details of the person to whom the loan was given has also been clearly recorded in the books giving following details. Name, Name of the father, Name of the business concern, Complete Postal Address, Loan a/c No. The creditor is a man of means and is regularly assessed to Income Tax. The creditor is assessed to Income Tax in Ward 1(1), Pondicherry. The creditor has been regular in filing his returns of income. The creditor has accounted for the interest income earned on loans advanced. The creditor has been subject to scrutiny and no part of the loan transactions has been found to be doubtful or ingenuine. The creditor has been assessed to tax for more than two decades. His assessment has been scrutinized more than once. The officer who had carried out the scrutiny has never condemned the mode of transaction as all the loan transactions and the recovery thereof have been made by cash. The receiver has recorded all the loan transactions in the books of the firm in which he is a partner. The loan so received has been banked immediately. The identity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by you for the year of penalty. (iii) Your books of accounts for the year of penalty and extracts of entries in the books of accounts for the loans received in cash and repayment thereof. (iv) Books of account of the firm or any other person by whom the funds were utilized indicating receipts and repayments of loan. Please clearly indicate the opening and closing cash balance for each day of receipt of loan. (v) Date-wise receipt of cash loans taken by you from Shri A.Kannan and repayment thereof. (vi) Copies of your financial statements with schedules for the year of penalty. (vii) Utility of the loan taken in cash with extracts of your books of accounts. (viii) Please establish reasonable cause for non-compliance of Sec.269SS/269T in writing supported by evidences for such reasonable cause. 6. In the course of penal proceedings, Joint Commissioner of Income Tax, after considering the detailed submissions of the assessee, observed that the assessee has not denied having taken and repaid loan in cash. The JCIT further noted that assessee accepted the cash loan more than once and repaid the same in many instalments with an intentional motive to dishonour the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscretionary and penalty cannot be levied merely because it is lawful to do so, No penalty can be levied for technical or venial breach of the provisions. The transactions are bona fide in nature and have been accepted by the department both in hands of the lender and the appellant. The business exigency has been clearly narrated/ established with clinching supporting documents, which has been disregarded and brushed aside without any application of mind. The appellant had been transacting in cash and had been disclosing the fact in the returns of income filed since the first year of transaction. This apart the account copies of the partners have been enclosed along with the return of income of the firm, which clearly narrated the mode of each and every transaction, name of the lender, the date and the amount. Had the intention been mala fide / deliberate the disclosure would not have been made by the appellant, though there was no legal obligation on his part to do so, The return of income specified by the statute has no provision for disclosure of the loan transactions and the mode in which it has been transacted. The Hon'ble Madras High Court in Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and had taken place in an open manner. 8. After considering the detailed submissions filed by the assessee, the ld. CIT(Appeals), deleted the penalty of .20,00,000/- by observing as under: I have considered the assessee's submission's as well as the findings given in the order of penalty. There is no dispute that assessee accepted cash loan of ₹ 20,00,000/- from Sri A.Kannan during the year under consideration. It is also not a dispute that Sri A.Kannan used to give cash loans to various persons and assessee is one of them. Sri Kannan used to charge 1% per month as interest and only net amount was given to the assessee in cash during the year under consideration. It is stated by the AR of the assessee that assessee borrowed loan to ensure clearance' of cheques by the partnership firm. Assessee borrowed loan funds from private parties and banks in his individual capacity totaling to more than 30 in number other than the loan from Vadamalayan Kannan and same was on the insistence of the lender. The AR of the assessee furnished an affidavit dated 13.12.2012 from A.Kannan stating that Mr. A.Kannan doing the business of finance has transacted all the loan tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 06-12-2006. The appellant had deposited the loan borrowed ₹ 18,60,000/- (Net of Interest) into the Current account with ICICI Bank, A/C No:17814, of M/S. Muthu Silk House, a partnership concern in which the appellant is a partner. M/S Muthu Silk House is a registered partnership firm the senior partners being blood brothers, Shri K.Muthukaruppan (Appellant's father), his brother Shri. K. Perumal and their children. The firm had to honour its day to day business commitments and the funds were not' readily available for the business as a major portion got blocked with the sister concern and the sister concern was not able to repay it on the appointed dates. The money was expected to be returned on call, as the sister had faulted, the appellant being the senior partner was duty bound, compelled, driven to make available the funds for the partnership firm. Under these circumstances he was driven to borrow funds by cash and deposit it in the bank to facilitate honouring of cheques issued. The deposit of ₹ 18,60,000/= on 06.12.2006 had facilitated to honour business exigencies. The cheques cleared the next few days ₹ 21,12,869.00. From the above facts, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the reasonable cause for contravention of the provisions of Sec. 269SS of the IT Act, the penalty levied by the Joint Commissioner of Income Tax u/s 271D of ₹ 20,00,000/- is deleted. Since the penalty levied u/s 271D is deleted, the other grounds raised by the assessee are of academic; discussion only. 9. Aggrieved, the Revenue is in appeal before the Tribunal. 10. The ld. DR has dutifully supported the order passed by the Assessing Officer. 11. On the other hand, the ld. Counsel for the assessee has strongly supported the order passed by the ld. CIT(Appeals). He also relied on the decision of the Coordinate Bench in assessees own case for the assessment year 2011-12 2012-13 in I.T.A. Nos. 1826 1827/Mds/2013, vide order dated 31.10.2013. 12. We have heard both sides, perused the materials on record and gone through the orders of authorities below. In this case, there is no dispute that the assessee had accepted cash loan of . 20,00,000/- from Sri A. Kannan. It is also not a dispute that Sri A.Kannan used to give cash loans to various persons and assessee is one of them. Sri Kannan used to charge 1% per month as interest and only net amount was given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated 31.10.2013 has observed as under: 23........ In the present case, all the transactions have been duly recorded in the books of the creditor as well as in the books of the assessees. The loans accepted by the assessees have been merged in the business finance of the assessees reflecting in their books of account. The funds required for repayment of loans were also generated out of the business as reflected in their books of account. The details of the parties are available on record. The assessees as well as lenders are all regularly assessed to income-tax. The identity of the parties are beyond doubt. The factum of loan and repayments are beyond doubt. The genuineness of the transactions is also not in doubt. It is also established by the assessees that there existed similar emergency for repaying the loan in cash, as the emergency which prompted them to take loans in cash. Therefore, this is a case where there is a reasonable cause for the assessees to repay the loans in cash. In such circumstances, it is to be seen that the violation of Section 269T is technical. Therefore, we find that the Commissioner of Income Tax (Appeals) ought have deleted the penalties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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