Penalty for cash loans upheld where reasonable cause was not proved and factual findings under Section 269SS stood unrebutted.

Cash receipts treated as loans in the books were found, on the facts, to be accepted in contravention of Section 269SS because they were received otherwise than by account payee cheque or bank draft. The explanation that the sums were capital contributions from proposed partners was rejected as not genuine, and the assessee failed to establish reasonable cause to avoid penalty. On that factual foundation, the penalty under Section 271DD was sustained, and there was no basis to interfere with the concurrent findings as they were neither perverse nor illegal.

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Issues: Whether penalty under Section 271DD of the Income-tax Act, 1961 was exigible for receipt of cash treated as loans in violation of Section 269SS, and whether the assessee had shown reasonable cause to avoid penalty.

Analysis: The cash contributions received from 12 persons were recorded in the audit report and balance sheet as loans. The explanation that the amounts were capital contributions from proposed partners was not accepted on facts by the authorities below. Section 269SS prohibits acceptance of loans or deposits of Rs. 20,000 or more otherwise than by account payee cheque or account payee bank draft, and penalty may be avoided only if reasonable cause is established. The factual findings that the receipts were loans and that the explanation was not genuine were neither perverse nor illegal, and no basis was shown to reopen those findings in appeal.

Conclusion: The penalty under Section 271DD was upheld and the appeal was rejected.

Ratio Decidendi: Where cash receipts are found as a matter of fact to be loans received in contravention of Section 269SS and no reasonable cause is established, penalty under Section 271DD is sustainable.

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