Penalty for Accepting Cash Loans Canceled Due to Urgent Compliance Needs; Tribunal Finds Reasonable Cause.

The Tribunal determined that the assessee had a reasonable cause for accepting cash loans in contravention of section 269SS due to the urgent requirement to comply with AAIFR's directive. Consequently, the penalty imposed under section 271D was deemed unjustified. The Tribunal allowed the assessee's appeal and canceled the penalty.

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Issues Involved:
1. Whether the penalty u/s 271D is leviable for contravention of section 269SS.
2. Whether the assessee had reasonable cause for accepting cash loans in violation of section 269SS.

Summary:

Issue 1: Penalty u/s 271D for Contravention of Section 269SS
The assessee appealed against the penalty of Rs. 41,50,000 levied by the Assessing Officer (AO) u/s 271D for contravening section 269SS by accepting cash loans from M/s. Tensile Steels Ltd. The AO found that the assessee received cash loans totaling Rs. 41,50,000 and deposited the same in her bank account, which was later used to purchase fixed deposit receipts (FDRs). The AO initiated penalty proceedings, stating that section 269SS does not exempt genuine transactions or loans taken under compelling circumstances. The Commissioner of Income-tax (Appeals) upheld the AO's order, stating there was no reasonable cause within the meaning of section 273B. The Tribunal noted that section 269SS aims to counter tax evasion by prohibiting cash transactions above a certain limit. However, the Tribunal found that the transactions were genuine and the loans were returned by cheque, indicating no intention of tax evasion.

Issue 2: Reasonable Cause for Accepting Cash Loans
The assessee argued that the cash loans were taken under compelling circumstances to comply with the directions of the AAIFR for reviving the sick company, M/s. Tensile Steels Ltd. The Tribunal observed that the assessee had to deposit Rs. 1 crore in a no-lien account as per AAIFR's order, and the urgency justified accepting cash loans. The Tribunal found that the assessee had a reasonable cause for the violation, as the transactions were genuine and there was no intention to evade tax. The Tribunal referred to various judicial decisions supporting the view that penalties should not be imposed for technical or venial breaches when there is a reasonable cause.

Conclusion:
The Tribunal concluded that the assessee had a reasonable cause for accepting cash loans in violation of section 269SS, and therefore, the penalty u/s 271D should not be imposed. The appeal of the assessee was allowed, and the penalty was canceled.

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