Reasonable cause for cash loans accepted in business exigency defeats penalty under sections 271D and 271E.

Cash acceptance and repayment of small loans from relatives and friends for urgent business needs were treated as genuine transactions made out of commercial expediency. Applying section 273B, the ITAT held that reasonable cause existed because the cash arrangements met immediate expenditure connected with the assessee's vehicle-hire business. Penalty under sections 271D and 271E was therefore not leviable for the contravention of sections 269SS and 269T, and the penalties were cancelled.

---

---

Issues: Whether penalty under sections 271D and 271E of the Income-tax Act, 1961 was leviable for cash acceptance and repayment of loans when the assessee claimed reasonable cause under section 273B.

Analysis: The assessee had accepted and repaid small cash loans from relatives and friends for immediate business needs. The transactions were held to be genuine, and the cash arrangements were found to have been made to meet urgent expenditure connected with the assessee's business of running vehicles on hire. The statutory scheme of sections 269SS and 269T, read with sections 271D and 271E, was considered along with section 273B, which protects an assessee from penalty where reasonable cause is shown. On the facts, the cash transactions were treated as arising from commercial expediency and business necessity, and therefore constituted reasonable cause.

Conclusion: Penalty under sections 271D and 271E was not leviable, and the penalties were cancelled in favour of the assessee.

Ratio Decidendi: Where an assessee proves reasonable cause based on genuine business exigency and commercial expediency, penalty for contravention of sections 269SS and 269T is not attracted by virtue of section 273B.

---