Tribunal deletes penalty under Section 271D citing genuine transactions and reasonable cause

The tribunal allowed the appeal of the assessee and directed the deletion of the penalty of Rs. 2,83,500/- imposed under Section 271D of the Income Tax Act, which was sustained by the CIT(A). The tribunal considered the genuineness of the transactions, the loans being from close relatives and family members for business purposes, and the repayment made in parts. Citing similar precedents, the tribunal found reasonable cause under Section 273B and deleted the penalty, respecting the decision in a comparable case.

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Issues Involved:
1. Validity of the order passed under Section 271D of the Income Tax Act, 1961.
2. Sustaining the penalty of Rs. 2,83,500/- under Section 271D of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the Order Passed under Section 271D:
The assessee challenged the validity of the order passed by the JCIT, Range-1, Ajmer, under Section 271D of the Income Tax Act, 1961. The assessment for the year 2010-11 was completed under Section 143(3) on 18-03-2013. During the assessment, it was observed that the assessee accepted loans in cash totaling Rs. 2,83,500/- from various persons, which was considered a contravention of Section 269SS of the Income Tax Act, 1961, thus attracting penalty under Section 271D. The JCIT, Range-2, Ajmer, imposed the penalty, stating that the assessee admitted to accepting loans in cash and argued ignorance of the law, which was not accepted as a valid excuse.

2. Sustaining the Penalty of Rs. 2,83,500/-:
The CIT(A) confirmed the penalty imposed by the AO, rejecting the assessee's arguments that the loans were taken due to compelling business needs and were genuine. The CIT(A) emphasized that penalty under Section 271D is for the contravention of Section 269SS, not for unexplained credit under Section 68. The CIT(A) also dismissed the argument of ignorance of the law, citing that ignorance is no excuse for legal infractions.

During the hearing, the assessee contended that the deposits were less than Rs. 20,000/- and were taken from close relatives and family members under the bona fide belief that such transactions were permissible. The assessee cited the decision of the Hon'ble Jurisdictional High Court in CIT vs. Raj Kumar Sharma, where the court accepted the bona fide belief of the assessee and found reasonable cause under Section 273B, thus deleting the penalty.

The tribunal noted that the assessee received loans from close relatives and family members, each not exceeding Rs. 20,000/- at one time, totaling Rs. 2,83,500/-. The loans were taken for business purposes and were repaid in parts, with the genuineness of the transactions not doubted by the AO. The tribunal referenced a similar case, Smt. Kusum Dhamani vs. Addl. CIT, where the ITAT deleted the penalty under Section 271D, considering the genuineness of the transactions and reasonable business exigencies.

Conclusion:
The tribunal, respecting the decision in the case of Smt. Kusum Dhamani and considering the similar facts and circumstances, directed the deletion of the penalty of Rs. 2,83,500/- under Section 271D sustained by the CIT(A). The appeal of the assessee was allowed.

Result:
The appeal of the assessee was allowed, and the penalty under Section 271D was deleted. The order was pronounced in the open court on 7/11/2016.

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