2014 (7) TMI 1329 - AT - Income Tax

Tribunal Upholds Decision on Cash Loans with Reasonable Cause

The Tribunal upheld the CIT(A)'s decision, ruling that there was a reasonable cause for accepting cash loans due to urgent business needs. The Tribunal ... Penalty u/s 271D - loan in cash and violation is intentional and purposeful - contravention of the provisions of section 269SS - HELD THAT:- The genuineness of the loan creditors and the loan transactions were never doubted by the Department. Moreover, the Department has not taxed these amounts in the hand of the lender i.e. Shri A. Kannan. He also observed that the assessee satisfies the existence of the reasonable cause for contravention of the provisions of section 269SS. When the assessee had shown reasonable cause and the reasonable cause is essentially a finding of fact, no question of law much less substantial question of law would arise. The alleged contravention did not result in any unaccounted transaction and that said transactions were made only to meet the sudden demand in the business activities. As decided in own case [2013 (10) TMI 1327 - ITAT CHENNAI] the factum of loan and repayments are beyond doubt. The genuineness of the transactions is also not in doubt. It is also established by the assessees that there existed similar emergency for repaying the loan in cash, as the emergency which prompted them to take loans in cash. Therefore, this is a case where there is a reasonable cause for the assessees to repay the loans in cash. In such circumstances, it is to be seen that the violation of Section 269T is technical. - Decided in favour of assessee. Issues Involved:1. Condonation of delay in filing the appeals.2. Violation of sections 269SS and 269T of the Income Tax Act.3. Levy of penalty under section 271D of the Income Tax Act.4. Existence of reasonable cause for accepting cash loans.Detailed Analysis:Condonation of Delay:The appeals of the Revenue were filed late by five days. The Department filed petitions for condonation of delay, which were not objected to by the assessee. Upon review, the Tribunal was satisfied that the Department had sufficient cause for the delay and thus condoned it, admitting the appeals for hearing.Violation of Sections 269SS and 269T:A survey under section 133A revealed that the assessee was engaged in money lending, accepting and repaying loans in cash exceeding Rs. 20,000, thus violating sections 269SS and 269T. The transactions were recorded in the books, and the assessee had been regularly assessed to income tax.Levy of Penalty under Section 271D:The Joint Commissioner of Income Tax (JCIT) levied a penalty of Rs. 20,00,000 under section 271D, stating that the assessee intentionally violated the law by accepting and repaying loans in cash. The JCIT noted that the lender admitted to unaccounted income in his returns for certain assessment years, and the assessee failed to demonstrate urgency for taking cash loans.Existence of Reasonable Cause:The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that the cash loans were taken to meet urgent business needs, specifically to ensure the clearance of cheques issued by the partnership firm. The CIT(A) accepted the explanation, noting that the transactions were genuine, recorded in the books, and disclosed in the returns. The CIT(A) found that there was a reasonable cause for accepting the cash loans due to business exigency, and thus deleted the penalty.Tribunal's Decision:The Tribunal upheld the CIT(A)'s decision, agreeing that there existed an urgent business necessity for the cash loans. The Tribunal noted that the transactions were genuine and recorded in the books, and the Department did not doubt the genuineness of the loan creditors or the transactions. The Tribunal referenced previous case law supporting the view that penalties under sections 271D and 271E are not leviable if there is a reasonable cause for contravention of sections 269SS and 269T. Consequently, the Tribunal dismissed the Revenue's appeals.Conclusion:The Tribunal confirmed the CIT(A)'s order, finding no infirmity in the deletion of the penalty under section 271D. All appeals filed by the Revenue were dismissed, and the decision was pronounced in the open court.