Court Upholds 'Reasonable Cause' for Cash Loan under Income Tax Act

Commissioner of Income Tax, Shimla Versus Amar Nath

Commissioner of Income Tax, Shimla Versus Amar Nath - TMI Issues:
1. Whether there was a 'reasonable cause' for accepting a loan in cash under Section 269SSRs.
2. Can a wrong statement made by the assessee be considered a 'reasonable cause' under Section 273BRs.

Issue 1: 'Reasonable Cause' for Accepting Cash Loan under Section 269SS:

The judgment involved a case where the assessee borrowed cash amounting to Rs. 13,15,000, breaching Section 269SS of the Income Tax Act, 1961. The Income Tax Officer imposed a penalty under Section 271D, which was later reversed by the Commissioner of Income Tax (Appeals) and affirmed by the Income Tax Appellate Tribunal. The court considered whether there was a 'reasonable cause' for accepting the cash loan. The fact-finding authorities found that the assessee had explained the emergent circumstances necessitating the cash borrowing, which was repaid promptly and not unaccounted for. The court emphasized that 'reasonable cause' is a question of fact, and the authorities found the explanation provided by the assessee plausible and correct.

Issue 2: Wrong Statement as 'Reasonable Cause' under Section 273B:

The judgment also addressed whether a wrong statement made by the assessee regarding the cash loan could be construed as a 'reasonable cause' under Section 273B. The court noted that the assessee, a wholesale dealer of fast food goods, borrowed cash to clear cheques issued in advance to avoid legal issues and protect reputation. The borrowed amount was promptly repaid, and the cheques were cleared. The court highlighted that the objective of Section 269SS is to prevent false information about unaccounted money, and in this case, the authorities found the explanation provided by the assessee to be genuine and free from doubt. The court emphasized that 'reasonable cause' is a subjective satisfaction based on objective material, and commercial exigency and prudence must be considered.

The judgment cited various decisions to support the view taken by the authorities below and emphasized that the findings of fact were not perverse. The court concluded that there was no reason to interfere in the appeal as the substantial questions of law were answered in favor of the assessee. The appeal was disposed of accordingly, along with any pending applications.