TaxTMI 
TaxTMI 
2019 (10) TMI 283
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.... to why the penalty should not be levied against him for accepting the cash loan in violation of section 269 SS of the Act. In response to the notice issued by the JCIT, the assessee filed explanation stating that he had accepted the loan from his wife Smt.Mallidi Radha on 22.03.2011 for purchase of machinery due to business expediency. Since the loan was received from his wife for business purposes, the assessee requested to drop the penalty proceedings as the loan was from closely related person and the source was explained in her hands. The JCIT, not being convinced with the explanation of the assessee levied the penalty u/s 271D r.w.s.296SS of the Act observing that the acceptance of loan in cash whether for the purpose of capital asset or revenue purpose attracts the provisions of section 269SS of the Act, accordingly levied penalty of Rs. 15.00 lakhs. 3. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the penalty stating that there was acceptance of loan in cash otherwise than by cheque, accordingly dismissed the appeal of the assessee. 4. Against the order of the Ld.CIT(A), the assessee is in appeal before this Tr....
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....nterest of family and it is the responsibility of both wife and husband to run the family and to share the responsibilities of the family. When the gift between the close relatives are not taxed under section 56(2) we are of the view that genuine loan transaction also needs to be considered in favour of the assessee. In similar facts and circumstance, the ITAT in the case of Penmetsa Venkata Soma Raju supra deleted the penalty levied by the AO. For the sake of clarity and convenience, we extract para No.10 to 13 of the order of this Tribunal cited supra. "10. Under similar circumstances, the coordinate bench of the tribunal in the case of Bh. Harshavardhana Raju (supra), has considered the scope of section 269SS and held as under:- "6. We have heard the rival contentions and carefully perused the record. The undisputed facts are that the assessee was a student at the relevant point of time and the year under consideration was his 2nd year's return of income. It is also not disputed that all the affairs of the assessee as well as other family members are looked after by his grandfather. The assessee has filed contra account copies of the impugned transactions and the same ar....
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....y of the facts and circumstances of the case, it can be said that there existed a reasonable cause on the part of the appellant in committing default in accepting cash loans exceeding the prescribed limit from his family members in contravention of the provisions of the section 269SS of the Act. Accordingly, the appellant deserved a lenient view on the issue and, consequently, penalty under section 271D of the Act in his case was not exigible. Hence, the order levying penalty of Rs. 9,39,000/- under section 271D of the Act is, hereby, cancelled". Thus, we notice that the Learned CIT(A) has taken into consideration the fact that the assessee, being a student studying outside his native place, had no direct role to play in the method and mode of transaction in augmenting funds for the purpose of investment in his name. Further the impugned amounts have been received only from the close relatives of the assessee. In these circumstances, the explanation of the assessee that these transactions have been entered into with a bonafide belief that there will be no violation of the provisions of sec. 269SS of the Act, can be taken as a reasonable cause. Hence we do not find any infirmity i....
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....isclosure thereof is contained in the compilation of accounts, and which has no tax effect, establishes "reasonable cause" under s. 273B. Since the assessee had satisfactorily established "reasonable cause" under s. 273B, he must be deemed to have established sufficient cause for not invoking the penal provisions (ss. 271D and 271E of the Act) against him." In the case of Star Electroplaters Vs. ITO (supra), the Tribunal has taken a view that the assessee having accepted loans in cash mainly from the party for whom it was doing job work to meet its business exigencies after making huge investment in fixed assets, there was no willful neglect of law on the part of assessee and therefore the penalty u/s 217D was not justified. In the case of Sharda Educational Trust Vs. ACIT (supra), the Tribunal has examined the circular no.387 dated 6.7.84 issued by the CBDT and has held that the object of introduction for provisions of section 269SSand 269T was to curb the transaction of black money. It should not be invoked for a venial breach or technical default. From a careful perusal of the aforesaid judgements, we are of the view that provisions of section 269SS and 269T were introduce....
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....ives. Accordingly, the penalties levied u/s 271D & E are not attracted. We therefore, set aside the order of the ld. CIT(A) and delete the penalty levied under section 271D & E of the I.T. Act. 13. Keeping in view of the facts and circumstances of the case and also by considering the case-laws as referred to above, we are of the opinion that section 269SS, has no application to the facts of the present case. Therefore, we find no infirmity in the order of the ld.CIT(A)." 6. Similar issue was considered by the coordinate bench of ITAT,Jaipur bench in Smt. Kusum Dhamani.v. Additional Commissioner of Income-tax, Range-5, Jaipur, [2014] 47 taxmann.com 143 (Jaipur - Trib.) and held that Where assessee running a proprietorship concern, took cash loans from her husband carrying on another proprietorship business on account of business exigencies for making payments to labourers and lenders, there being no violation of provisions of section 269SS, impugned penalty order passed under section 271D was to be set aside. For the sake of clarity we reproduce the relevant para of the order of the coordinate bench in Smt. Kusum Dhamani as under: "4. We have heard the rival submissions and per....