2017 (1) TMI 1522 - AT - Income Tax

Tribunal upholds penalty for cash loans violating tax law, citing lack of valid reason

Shri Prodyut Dhar Versus J.C.I.T. Range-53, Kolkata

The Tribunal upheld the penalty imposed under section 271D of the Income Tax Act on an assessee running a medicine and wine shop for accepting cash loans ... Penalty u/s 271D - receipt of cash loans - reasonable cause for accepting the loans in cash - assessee contended cash loans in question were not accepted by him at one go but over a period of time in small amounts and he was facing shortage of capital and had to accept the cash loans in compelling circumstances - Held that:- Keeping in view the time gap between the relevant cash deposits and corresponding payments made by cheques, it appears that there was sufficient time available with the assessee to obtain the loans in question by cheques instead of cash. In our opinion, the assessee thus has failed to establish on evidence that the loans in question in cash were accepted by him in cash due to business exigencies and there were compelling circumstances to accept the said loans in contravention of section 269SS. Assessee is found to have failed to establish any reasonable cause on evidence for accepting the loans in question in cash in violation of section 269SS. - Decided against assessee. Issues:Penalty under section 271D for accepting cash loans in contravention of section 269SS.Analysis:Issue 1: Penalty under section 271DThe appeal was against the penalty imposed by the Assessing Officer (A.O.) under section 271D of the Income Tax Act, 1961, confirmed by the Ld. CIT (Appeals). The assessee, running a medicine and wine shop, received cash loans in violation of section 269SS. The A.O. imposed a penalty of Rs. 2,80,000 due to non-compliance. The Ld. CIT (A) upheld the penalty, stating that the loans were accepted in contravention of the law, despite the assessee's explanation of business exigencies. The Tribunal reviewed the case, where the assessee argued accepting cash loans due to compelling circumstances. However, the Tribunal found the evidence presented insufficient to prove business exigencies, as there was ample time to obtain loans by cheques. The Tribunal noted the failure to establish a reasonable cause for accepting cash loans, unlike cases where penalties were canceled due to showing a valid reason. Consequently, the Tribunal upheld the penalty, dismissing the appeal.This detailed analysis covers the issues involved in the legal judgment, highlighting the penalty under section 271D for accepting cash loans against the provisions of section 269SS. The Tribunal's decision was based on the failure to demonstrate valid reasons for non-compliance, despite the assessee's claims of business exigencies.