TaxTMI 
TaxTMI 
2014 (7) TMI 1329
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.... 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 had accepted the loans in cash exceeding Rs. .20....
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.... 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) Hindustan Steel Ltd. Vs. State of Orissa 83 ITR 26 (SC) Asst. Director of Inspection (Investigation) Vs. Kum. A.B. Shanthi (SC) CIT Vs Bhagwati Prasad Barjoria HUF 183 CTR (Gau) (HC) 484 Farrukhabad Invest....
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....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 manner. The appellant had borrowed additional funds from private parties and banks in his individual capacity, totalling to more than 30 in number for funding the business exigencies. All the other loan funds other than the loan from Vadamalayan Kannan have been transacted by cheque. This goes to prove the conduct of the appellant and that the violation was not will full and purel....
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....e 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 account with ICICI Bank, A/C No:17814, of M/S. Muthu Silk House, a partnership concern in which the appellant is a partner. M/S Muthu Silk House is a registered partnership firm the senior partners being blood brothers, Shri K. Muthukaruppan (Appellant's father), his brother Shri K. Perumal and their children. The firm had to honour its day to day business commitments and the funds were not readily available for the business as a major portion got blocked with the sister....
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....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 each and every transaction, the name of the lender, the date and amount given. The Joint Commissioner of Income Tax held that assessee has not furnished full facts on the urgency to take loan in cash and same was intentional to evade tax. On the other hand the AR of the assessee stated that entire details in the form of paper book furnished to the Joint Commissioner of Income Tax on 28.08.2012 with the details of the utilization of the, loan to fund the firm wherein the assessee is a partner which is evidenced in the....
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.... 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 Commissioner of Income Tax and Balaji Traders reported in 303 ITR 312 held that there exists reasonable cause for not levying penalty u/s 271D of the IT Act. In that case Hon'ble High Court of Madras held as under: "Both CIT(A) and Tribunal having found that there was business exigency forcing the assessee to take cash loans, the genuineness of the creditors and transactors were never doubted by the Department and there was no revenue loss to the State Exchequer. The assessee has shown reasonable cause. The finding recorded b....
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....n 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 details of the utilization of the loan to fund the firm wherein the assessee is a partner, which was duly accepted by the Assessing Officer. On appeal, the ld. CIT(Appeals) passed a detailed order by relying various case law and while accepting the explanations offered by the assessee, he has observed that there existed reasonable cause for acceptance of the loan in cash by the assessee for urgent business necessity. The ld. CIT(Appeals) observed that in the instant case, there exists urgent business exigency in acceptance of the loan in cash from the lender....