TaxTMI 
TaxTMI 
2013 (8) TMI 404
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....assessee has not filed any material before the lower authorities to establish the facts that he was cultivating agricultural land. Referring to section 269SS, the ld DR has pointed out that any loan or deposit accepted by an agriculturalist from a person having agricultural income and neither of them has any income chargeable to tax under Income Tax Act then, the provisions of section 269SS may not be applicable to the assessee. In this case, even though the assessee claimed that he was an agriculturalist and cultivating leased land, it is not the case of the assessee that he has no income chargeable to tax under the Income Tax Act. In fact, the assessee has taxable income under income tax act. Moreover, the details of the lender were not filed by the assessee before any of the authorities below. Therefore, according to the ld DR, 2nd proviso to section 269SS may not be applicable to the assessee. 2.1 Referring to the other contention of the assessee that the money was received prior to 2006 and it was only for the purpose of account, the same was brought in the books during the year under consideration; the ld DR has submitted that this explanation of the assessee is imaginary an....
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.... Court in the case of CIT vs P KShamsuddin (ITA No. 239 of 2011), a copy of which is available at page 26 of the paper book, the ld Sr counsel has submitted that when the department has accepted the source of the funds from which the loan or deposit was received as genuine, then there is a reasonable cause; therefore, penalty cannot be levied u/s 271D of the Act. According to ld Sr counsel, a similar view was taken by this Tribunal in the case of Mrs Rosary Prem in IT(SS) nos 53 to 43/Coch/05. The ld Sr counsel has also relied on the judgment of the Pubjab & Haryana High Court in the case of CIT vs Saini Medical Stores reported in 276 ITR 79 (P&H) and the judgment of the Rajasthan High Court in the case of CIT vs Manoj Lalwani reported in 260 ITR 590 (Raj); judgment of Madras High Court in the case of CIT vs Lakshmi Trust Co reported in 303 ITR 99 (Mad) and in the case of CIT vs Kundrathur Finance and Chit Co reported in 283 ITR 329 (Mad). 2.5 The ld Sr counsel has further pointed out that the assessee was an agriculturist when the loan was taken and loan was also taken from agriculturists; therefore, provisions of sec. 269SS is not applicable to the facts of the assessee's ca....
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....49) ; (iii) "loan or deposit" means loan or deposit of money.]" 271D. [(1)] If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted.] [(2) Any penalty imposable under sub-section (1) shall be imposed by the [Joint] Commissioner.] 3.1 After the 30th day of June 1984, no person shall accept or take loan or deposit from any person otherwise than an account payee cheque or account payee bank draft, in case such loan or deposit exceeds Rs. 20,000/-. In fact Rs. 20,000/- was substituted by the Direct Tax Laws (Amendment) Act, 1987 instead of Rs. 10,000/-. 3.2 For the year under consideration, the amended provision fixing the limit at Rs. 20,000/- would be applicable. We find that the constitutional validity of sec 269SS was challenged before the Madras High Court in the case of KRMV Poonuswamy Nadar Sons (Firm) & others vs Union of India & others reported in 196 ITR 432. The Madras High Court, after considering the provisions of sec. 269SS and 276DD as they existed at that point of time, found that the assessee will have to ....
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.... and even rates for taxation, if it does so reasonability. The Apex Court further found that the object sought to be achieved was to eradicate the evil practice of making of false entries in the account books and later giving explanation for the same. The Apex Court also found that sec 269SS could solve the problem to a great extent. The fact the Apex Court observed as follows at page 263 of ITR: "The contention of the appellant's counsel has no force. The object of introducing section 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizure, unaccounted money is unearthed and the tax payer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so called lender also to manipulate his records later to suit the plea of the taxpayer. The main object of section 269SS was to curb this menace. As regards the tax legislations, it is a policy mater, and it is for Parliament to decide in which manner the legislation should be....
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....e 266 of ITR as under: " It is important to note that another provision, namely section 273B was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B in the act. If there was a genuine transaction and bonafide transaction and if for any reason the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bonafide reasons, the authority vested with the power to impose penalty has got discretionary power." In that view of the mater, we do not think that section 269SS or 271D or the earlier section 276DD is unconstitutional one the ground that it was draconian or expropriatory in nature." 4.1 In view of the judgment of the Apex Court, i....
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....aid provisions if he proves that there was reasonable cause73 for the said failure.] 5.3 This section clearly shows that no penalty shall be imposable on the person or the assessee as the case may be for any failure referred to in the said provisions, if he proves that there was a reasonable cause for the said failure. The word 'for any failure referred to in the said provisions' assumes significance. 5.4 Now, the failure in this case is not receiving the loan by way of account payee cheque or account payee demand draft. The receipt or acceptance of loan is not prohibited in the Income Tax Act. The income tax provides for receipt or acceptance of loan which exceeds Rs. 20,000/- by way of account payee cheque or account payee demand draft. It also provides for penalty for failure to do so. Therefore, if the assessee explains to the satisfaction of the concerned authority that there was a reasonable cause for failure to receive the loan or deposit by way of account payee cheque or account payee demand draft, then penalty shall not be levied. Therefore, the reasonable cause should be for not receiving the loan or deposit by way of account payee cheque or account payee demand....
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....unts and gave the same to the assessee. The Kerala High Court found that there was a reasonable cause for not receiving the money by way of account payee cheque or account payee demand draft. The Kerala High Court further found that since the loan was taken from the bank, the same fund cannot be given to the assessee by way of cheque; therefore, there was a reasonable cause in withdrawing the money from the bank and the same was given to the assessee by cash and this cause was found reasonable for not levying penalty u/s 271D of the Act. 6.1 In the case before us, the facts were entirely different. The assessee claims that money was received from agriculturist. It is not the case of the assessee that the agriculturist from whom loan was borrowed, withdrawn funds from bank. Therefore, this Tribunal is of the opinion that the judgment of the Kerala High Court in the case of Shri P K Shamsudin (supra) may not be applicable to the facts of the present case. It is well settled principles of law that the judgment of the Court has to be understood with the facts before the Court. It is not permissible to pick and choose a sentence or word from the judgment, de-hors the facts on which the....
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....the Rajasthan High Court in the case of Manoj Lalwani (supra). In this case, the Rajasthan High Court found that the assessee took loan because he was in urgent need of money for complying with the time bound suppliers; therefore, receipt of cash was found to be reasonable. This judgment of the Rajasthan High Court is also may not be applicable to the facts of the present case. 11 In view of the above discussion, there should be a reasonable cause for receipt of money by way of cash. As observed by the Apex Court in Km A B Shanti (supra). (i) There shall be a genuine and bonafide transition and (ii) for some bonafide reasons, the assessee could not get the loan or deposit by account payee cheuqe or demand draft. 11.1 The above two conditions are simultaneously to be fulfilled for invoking the discretion u/s 273B and it is not mutually exclusive. In other words, in view of the judgment of the Apex Court in Km A B Shanti (supra), mere genuine and bonafideness of the transaction alone would not be sufficient for invoking the discretion vested u/s 273B. Apart from genuine and bonafideness of the transaction, the assessee shall demonstrate the reasonable and bonafide cause for not rec....