TaxTMI 
TaxTMI 
2014 (7) TMI 1329
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....erusal of the petitions filed for condonation of delay, we are satisfied that the Department was prevented by sufficient cause from not filing the appeal within the stipulated time. Accordingly, we condone the delay of five days in filing the appeals and admit the same for hearing. 3. Brief facts of the case are that a survey under section 133A was conducted in the case of Shri A. Kannan, Prop. Vadamalayan Finance, No. C-4, II Floor, Thiyagaraja Apartment, First Main Road, Thanthai Periyar Nagar, Pondicherry on 08.09.2011. It was found in the course of survey that Shri A. Kannan was doing money lending business. He chose to give loans to only selected group of persons. He gave monies to persons after deducting interest for ten months. The amount is divided into ten monthly instalments. Once the repayments of ten instalments are over, again the same persons took further loan. He charged interest on the loan at one percent per month. The whole transaction was done by cash only i.e. no cheques or drafts came into play. The ITO found during the survey proceedings that the assessee had violated the provisions of both the sections 269SS and 269T of the Income Tax Act as the assessee h....
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....faction of the department. * The creditor has not denied or repudiated the transaction. * The receiver has been a tax payer since 1961. He has recorded all the loan transactions through the books of the firm in which he is a partner. The repayments thereof have also been recorded in the books of the firm in which he is a partner. * The receiver has not been visited with any penalty under the Income Tax Act or any other applicable law in force. * The receiver is a senior citizen and businessman with an impeccable track record. * The transactions have taken place in an open manner. * There is no black money involved in the transactions. * The transactions have been made in as the lender had insisted on the same. * The said fact has been confirmed by the lender. * The returns of income have all been filed voluntarily before the initiation of any proceeding by the department. In support of his argument, the assessee has relied upon the following case laws:- Industrial Enterprises Vs DCIT (2000) 68 TTJ (Hyd) (ITA D 373 Azadi Bachao Andolan Vs. Union of India (2001) 252 ITR 471 (Delhi) ....
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....ed that assessee accepted the cash loan more than once and repaid the same in many instalments with an intentional motive to dishonour the law. It is stated by the JCIT that the lender of the loan Sri A.Kannan admitted the gift shown in the return of income as unaccounted income in his hand for the A. Ys. 2008-09 & 2011-12 and offered the same for tax purposes. JCIT further held that the assessee has not come out with full facts on urgency to take loan in cash and violation is intentional and purposeful and by relying various decisions, levied penalty u/s 271D of the IT Act of Rs. 20,00,000/-. 7. The assessee carried the matter in appeal before the ld. CIT(Appeals) and before the ld. CIT(Appeals), the assessee has filed a detailed written submissions on 27.08.2013 and are reproduced as under: " Funds have been borrowed by cash to ensure clearance of cheques issued by the partnership firm and therefore, the necessity of borrowing otherwise than by account payee cheque is proved. Also the fact that violation is not a solitary transaction but a series of transaction does not show guilty mind as each of the borrowing was for business necessity and had taken place in an open....
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....The return of income specified by the statute has no provision for disclosure of the loan transactions and the mode in which it has been transacted. The Hon'ble Madras High Court in Commissioner of Income Tax vs Kundrathur Finance and chit co (2006) 283 ITR 329 (Mad) following the decision of the Hon'ble Supreme court in Assistant Director of Inspection(Investigation) Vs Kum A.B. Shanthi (2002) 255 ITR 258 (SC) held that " if there was genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bonafide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty". This has been reiterated in a recent decision of the Madras High Court in The Commissioner of Income Tax Vs V. Sivakumar, Reliance Finance & Investments Tax Case (Appeal) No:279 of 2010. Reasonable cause for the loan of Rs. 20,00,000/- obtained on 06.12.2006 The appellant had borrowed a sum of Rs. 20,00,000/- from A. Kannan Prop: Vadamalayan Finance, Pondicherry on 06-12-2006. The appellant had deposited the loan borrowed Rs. 18,60,000/- (Net of Interest) into the Current accoun....
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....from Vadamalayan Kannan and same was on the insistence of the lender. The AR of the assessee furnished an affidavit dated 13.12.2012 from A.Kannan stating that Mr. A.Kannan doing the business of finance has transacted all the loan transactions only by cash since past 4 decades. It is stated in the affidavit that all the loan transactions were recorded in his books of accounts narrating the details of the borrower, father name, name of the business concern, residential address and loan amount. The AR of the assessee also filed affidavit dated 13th December, 2012 from M.Pajani Adaicalam, son of Late Sri K.Muthukaruppan, partner M/s Muthu Gold House declaring that lender had insisted the loan transactions in cash for both acceptance and repayment of loans. It is stated by the AR of the assessee that though the affidavits were not available before the AO, the contents of the same has very much available with the AO and the Joint Commissioner of Income Tax, Puducherry. The loan transactions were disclosed in the return of income filed with the department. This apart, the account copies of the partners have been enclosed alongwith the return of income which clearly narrated the mode of e....
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....nk to facilitate honouring of cheques issued. The deposit of Rs. 18,60,000/= on 06.12.2006 had facilitated to honour business exigencies. The cheques cleared the next few days Rs. 21,12,869.00. From the above facts, it is clear that funds have been borrowed by cash to ensure clearance of cheques issued by the partnership firm wherein the assessee is a partner. In the cases cited by the Joint Commissioner of Income Tax, the Courts have taken the view that the penalties u/s 271D & 271E are leviable for contravention of the provisions of Sec. 269SS & 269T of the IT Act provided there was no reasonable cause for such contraventions. In the instant case, there exists urgent business exigency in acceptance of the loan in cash from A.Kannan on the relevant date. The genuineness of the loan creditors and the loan transactions were never doubted by the department. The department has not taxed these amounts in the hand of the lender i.e. A.Kannan. As per the findings of the AO, certain amounts of gifts shown in the capital account of Sri A.Kannan was offered for tax and not the loan amounts. On the question of business exigency, the Hon'ble High Court of Madras in the case of Co....
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....sh loan of . 20,00,000/- from Sri A. Kannan. It is also not a dispute that Sri A.Kannan used to give cash loans to various persons and assessee is one of them. Sri Kannan used to charge 1% per month as interest and only net amount was given to the assessee in cash during the year under consideration. It is stated that the assessee borrowed loan to ensure clearance of cheques by the partnership firm. The assessee borrowed loan funds from private parties and banks in his individual capacity totaling to more than 30 in number other than the loan from Vadamalayan Kannan and same was on the insistence of the lender. The assessee disclosed the loan transactions in the return of income at the time of filing of returns. The accounts copies of the partners have also been enclosed along with the return of income which clearly shows the mode of each and every transaction, the name of the lender, the date and amount given. In the penalty order, the JCIT held that the assessee has not furnished full facts on the urgency to take loan in cash and same was intentional to evade tax and imposed penalty under section 271D of the Act without appreciating the explanation offered by the assessee giving ....