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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: HON’BLE KUL BHARAT & HON’BLE MANISH BORAD, ACCOUNTANT
Smt. Saroj Thakur Ujjain dated 21.03.2018 which is arising out of the order u/s 271D of the Income Tax Act 1961(In short the ‘Act’) dated 28.07.2017 framed by JCIT, Range-2, Ujjain.
2. The sole grievance raised in this appeal is against the finding of Ld. CIT(A) deleting the penalty levied u/s 271D of the Act at Rs.85.98,257/- on account of accepting unsecured loan above Rs.20,000/- violating provisions of section 269SS of the Act for the Assessment Year 2014-15.
Brief facts of the case as culled out from the records are that the assessee is an individual and belongs to the agriculturist family.
She runs petrol pump. Income of Rs.3,65,750/- declared in the Income Tax Return filed on 01.04.2014. Case selected for scrutiny under CASS followed by serving of notices u/s 142(1) and 143(2) of the Act. Assessment u/s 143(3) of the Act was completed on 23.3.2016 assessing income at Rs.4,89,850/-. During the course of assessment proceedings Ld. A.O observed that the assessee has taken cash loan in excess of Rs.20,000/- from various persons totaling to Rs.85,98,257/- thereby violating the provisions of Smt. Saroj Thakur Section 269SS of the Income Tax Act giving raise to the levy of penalty u/s 271D of the Act.
4. During the penalty proceedings u/s 271D of the Act the contention of the assessee was that she belongs to a agriculturist family. She was granted permission by Indian Oil Corporation for setting up a petrol pump. In order to do so loan was required to purchase land at Gram Pawasa, Ujjain. She approached the seller Shri Ramesh Chand who owned the agriculture land in that area.
The seller put a condition to receive the sale consideration immediately in cash. In order to pay the sale consideration assessee took unsecured loans from various persons for the purpose of setting up her business of petrol pump. The identity, genuineness and creditworthiness of the cash loan has not been disputed by the Ld. A.O. The unsecured loans were taken for the purpose of business and there is a reasonable cause for paying the amount for purchase of land which is evidenced by the registered deed and thus penalty should not be levied. However Ld. A.O was not satisfied and he levied penalty of Rs.85,98,257/- u/s 271D r.w.s. 269SS of the Act.
5. Aggrieved assessee preferred appeal before Ld. CIT(A) and succeeded as Ld. CIT(A) placing reliance on various decisions came to a conclusion that since there is no adverse finding of Ld. A.O about the genuineness and identity of cash creditors nor there is a finding that the assessee attempted to conceal the income and also since the alleged transactions were carried out in the interest of business so as to purchase the land for setting up a petrol pump assessee deserves immunity for paying the penalty in terms of Section 273B of the Act as there was a reasonable cause which lead to taking cash loan in excess of Rs.20,000/-.
Now the revenue is in appeal before the Tribunal.
Ld. Departmental Representative supported the order of Ld. A.O.
Per contra Ld. Counsel for the assessee vehemently argued apart from supporting the finding of Ld. CIT(A) CIT findings and also referring to the written submissions throwing light on the legislative intent for insertion of provisions of section 269SS of the Act, business exigencies for acceptance of loan by the assessee no finding/doubt raised by the Ld. A.O about the genuineness of the Smt. Saroj Thakur transaction of loans taken by the assessee in cash and placing reliance of various decisions. Relevant extract of the written submissions of Ld. Counsel for the assessee is reproduced below:-
A. Legislative intent for insertion of provisions of section 269SS of the Act
Section 269SS was inserted by the Finance Act, 1984 with effect from 1-4-1984 and was made operative from 1-7-1984.
The Income-tax Department in course of search carried out by them from time to time recovered large amounts of unaccounted cash from certain tax- payers and often the taxpayers gave explanation for their unaccounted cash to the effect that they had borrowed loans or received deposits made by other persons. Sometimes, it was noticed that the unaccounted income was also brought into the books of account in the form of loans and deposits and later they would obtain confirmatory letters from other persons in support of their explanation. The department was not able to unearth the source of such unaccounted cash.
Therefore, in order to plug the loopholes and to put an end to the practice of giving false and spurious explanation by taxpayers, a new provision was inserted in the Act debarring persons from taking or accepting from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft, if the amount of such loan or deposit or the aggregate amount of such loan or deposit is Rs. 10,000 or more. The amount of Rs. 10,000 was later revised as Rs. 20,000 with effect from 1.4.1989. '
3. From the above it is clear that provisions of section 269SS were inserted to identify and bring to tax the unaccounted income of the assessee.
Smt. Saroj Thakur Penalty provisions u/s 271D were also introduced.
4. In the instant case nothing has been brought on record by the revenue authorities to establish if assessee has earned any unaccounted income. The very basis on which provisions of section 269SS were inserted are not attracted in the instant case. No false explanation was given by the assessee. It was explained that the loan was accepted in cash for purchase of plot. The plot was required to be purchased within two months as the letter of intent issued by IOCL dated 01.11.2012. Imposition of penalty of Rs. 85,98,257 u/s 271D for violation of provisions of section 269SS is null and void.
Assessee submits that the penalty of Rs. 85,98,257 imposed u/s 271D ought to be deleted.
B. Business exigency for acceptance of cash has been established by assessee
During the assessment proceedings, assessee was asked to produce loan confirmation letters from the persons to whom loan was given and from whom unsecured loan was availed. Summons were also issued to these persons. Relevant documents were submitted by assessee. [AO page 2, PB-15 1st para]
Proceedings were completed u/s 143(3) wherein following two additions were made - [AO page 3 PB 16]
Bank interest Rs. 24,095
Low household expenses Rs. 1,00,000
During the impugned year, assessee had received a letter of intent for dealership at Ujjain of Indian Oil Corporation Limited (IOCL) dated 6 Smt. Saroj Thakur 01.11.2012. Through this letter, it has been very specifically mentioned by IOCL that assessee is required to procure the particular plot survey no. 168/3/1 and 177/1 in village Panwasa, Ujjain within two months from the date of the letter. [PB 31-32]
The sellers of the plot required that the payment be made in cash only then assessee. Pursuant to this, assessee arranged for the cash by way of taking loan from various relatives and friends. The plot was registered in the name of assessee on 02.01.2013 for a consideration of Rs. 1,50,00,000. [PB 19-24]
It was for the above mentioned business exigency as compelled by IDC through its Lol, that the loan was availed in cash during the impugned year.
In the assessment proceedings completed u/s 143(3), no addition has been made on account of the unsecured loan availed by the assessee. All these loans have been accepted as genuine transactions, duly accounted and confirmed.
Ld. CIT(A) deleted the penalty by holding that the AO did not find transactions to be not genuine and that identity of the payers was not provided. Also, there are no finding that there was attempt to conceal the income. There existed reasonable cause under section 2736 for the impugned transactions, duly supported by documents on record. [Para 4.1.1 Page 12]
Reliance is placed on the following judicial precedents wherein it is held that no penalty can be imposed u/s 271D as no doubt has been raised on the genuineness of the transaction – Smt. Saroj Thakur Hon'ble Apex Court in the case of Kum. A. B. Shanthi - (2002] 255 ITR 258 - order pronounced on 03.02.2002
Hon’ble Rajasthan High Court in the case of Maheshwari Nirman Udyog – (2008) 170 taxman 502 – order pronounced on 26.07.2007
Hon'ble Ahmedabad Bench of ITAT (TM) in the case of Jitu Builders Private Limited - [2010] 124 ITD 134 - order pronounced on 16.07.2009
Hon'ble Ahmedabad Bench of ITAT in the case of Kamen Jaswantlal Shah - [2012] 19 taxmann.com 99 - order pronounced on 10.02.2012
C. No finding/doubt on the genuineness of the transaction
As mentioned at Para B above, assessee explained the commercial expediency for acceptance of cash.
Not even an iota of doubt has been raised on the genuineness of the transaction.
In the assessment proceedings, no addition has been made on account of the unsecured loans availed by the assessee.
Ld. CIT(A) held in favor of the assessee as discussed in Para 4.1.1 at Page 12 of his appellate order. Ld. CIT(A) noted that "there is no finding of the AO that transactions were not genuine and identity of the payers was not provided. Also, there are no findings that there was an attempt to conceal the income. As discussed earlier, there was reasonable cause for entering into transactions. In view of above decisions no penalty under section 2710 is leviable in assessee's case." [emphasis supplied]
Reliance is placed on following judicial precedent wherein it is held that no penalty can be imposed if no doubt raised on the genuineness of the 8 Smt. Saroj Thakur transaction -
Hon'ble Jurisdictional Bench of Indore ITAT in the case of Tapasya Shiksha Samiti - [2011] 18 ITJ 863 - order pronounced on 15.09.2011
The transaction took place due to compelling situation as the Para 6 - " assessee samiti was short of fund and was to make the payment before 31.3.2007, being the last day of the financial year, it was not possible to receive the amount through account payee cheque. Even the Ld. Assessing Officer has neither disputed the source of amount nor contradicted the claim of the assessee. As there is no such finding in the assessment order as well as in the impugned order. In such a situation, if the scope of Section 273B is analyzed, then the Ld. Assessing Officer has discretion not to levy penalty, especially when the transaction was genuine and there was a reasonable cause of payment in cash. In such a situation, the decision of Hon'ble Gauhati High Court in the case of Shri Bhagwati pd. Bajoriya (HUF) comes to the rescue of the assessee, because President of the Society is a person, who is part and partial of the society and at the time of need, it is expected that the society is helped, especially when the transaction was not in genuine. A harmonious construction of Sections 269SS, 271D and 273B is that a construction, which preserve the exercise of power in favour of assessee Under the circumstances which warrant it is to be re erred to a construction which would result to non-denial of relief and vice versa is not the intention of the legislature, otherwise there was no need to bring section 273B on the statute, consequently, we direct the Ld. Assessing Officer to delete the penalty” (emphasis supplied)
In the instant case, not even an iota of doubt has been raised on the genuineness of the transaction. Reason for acceptance of cash is considered to be reasonable under the purview of section 273B. Penalty imposed u/s 271D ought to be deleted.
Smt. Saroj Thakur Considering the above facts, circumstances of the case, submissions made, documents on record and judicial precedents, penalty imposed u/s 271D of Rs. 85,98,257 ought to be deleted.
We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred and relied by the Ld. Counsel for the assessee. Revenue’s sole grievance of Ground No.1 of the instant appeal is against the finding of Ld. CIT(A) deleting the penalty u/s 271D of the Act at Rs.85,98,257/- levied by Ld. A.O for accepting unsecured loans above Rs.20,000/- in cash thereby making a clear violation of provisions of Section 269SS of the Act.
On the basis of the facts referred by the lower authorities and also apprised by the Ld. Counsel for the assessee we observe that the assessee who belongs to a agriculturist family was able to procure an approval of setting up a petrol pump by Indian Oil Corporation Ltd for which land was needed. She was able to locate a piece of land for setting up of the petrol pump. Sale consideration was agreed with both the parties which is not in dispute. The seller insisted for paying total sale consideration in cash. The deal materialized as the land was purchased and duly registered with Smt. Saroj Thakur the registering authority and the consideration has been paid in cash to the payer as mentioned in the registered document.
We further observe that the assessee in order to make the payment in cash to the seller of the land took cash loans of Rs.85,98,257/- from various persons. Each of such loan amount was in excess of Rs.20,000/-. Identity, genuineness and creditworthiness of the cash creditor has not been questioned by the Ld. A.O which shows that the same were out of the provisions of Section 68 of the Act. However since the loans were taken in cash penalty u/s 271D of the Act was initiated and subsequently levied for the contravention of provisions of section 269SS of the Act.
The penalty u/s 271D of the Act is attracted if the assessee fails to comply with the provisions of Section 269SS of the Act which reads as follows:-
No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,—
(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment 11 Smt. Saroj Thakur (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: The provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by, (i) Government (ii) Any banking company, post office saving bank or cooperative bank (iii) Any corporation established by a central, state or provincial act. (iv) Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (v) Such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act Analysis This section gets applicable in following situation as per clause a, b and c 1. Where a person accepts a two cash loan and/or depositany specified sum of Rs.10000 each from a single person 2. Where a person has taken a loan of Rs.20,000 by cheque and he wants to take another loan from the same person, say for Rs.3000 3. Where a person has taken a loan of Rs.14000 by cheque and he wants to take further a loan of Rs.6000 or 8000 The second proviso to this section shall not be applicable in case the either lender or borrower have any income other than agriculture income or any of them have income chargeable to tax. So in other words, both the lender and depositor should have agriculture income and neither of them should have any income chargeable to tax, then the second proviso shall apply. Explanation.—For the purposes of this section,— 12 Smt. Saroj Thakur (i) “banking company” means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (ii) “co-operative bank” shall have the same meaning as assigned to it in Part of the Banking Regulation Act, 1949 (10 of 1949) ; (iii) “loan or deposit” means loan or deposit of money; (iv) “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.
In the instant case the alleged loans have been taken in cash and there is no dispute with regard to this fact at the end of both the parties. So when the loans have been taken in cash and the assessee has failed to comply with the provisions of Section 269SS of the Act then Section 271D comes into picture which provides for a levy of penalty for a sum equal to the amount of loan or deposit or to specified sum so taken or accepted.
Now the question comes that under what circumstances the penalty cannot be imposed and for this, case of the assessee should falls under the provisions of Section 273B of the Act which reads as follows:-
273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, 99[section 271FAB,] section 271FB, section 271G, 1[section 271GA,] 2[section 271GB,] section 271H, 3[section 271-I], 4[section 271J,] clause (c) or clause (d) of sub- section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 13 Smt. Saroj Thakur 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, 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 reasonable cause for the said failure.
From going through the above Section of 273B of the Act, we find that the penalty u/s 271D of the Act cannot be imposed in case the assessee proves that there was a reasonable cause for the said failure. In the instant case the reason given by the assessee is that for business expediency the cash loan were taken to purchase the land in order to set up the petrol pump allotted by Indian Oil Corporation. It is also contended that the genuineness of loan is not disputed.
We however find that Ld. Counsel for the assessee has failed to prove the business expediency to the extent to show that there was a reasonable cause, leading to failure of complying the provisions of Section 269SS of the Act. It is not the case that the place where the assessee is residing has no banking facility nor it is demonstrated that all the cash creditors are agriculturists having no banking facility in the area of their residence. The assessee in the instant case has set up a petrol pump allotted by Indian Oil Smt. Saroj Thakur Corporation (In short ‘IOC’). All the transactions with IOC are to be carried out through banking channel. In the present times the bank transfers are quick through National Electronic Funds Transfer (In short ‘NEFT’) which hardly takes a day to transfer the amount. Ld. Counsel for the assessee failed to controvert this fact and the general submission that the cash loans were taken to purchase the land for setting up a petrol pump and is in the nature of business expediency fails to find any merit. In our view it was not a reasonable cause for the said failure of taking cash loan exceeding Rs.20,000/-.
Under these given facts and circumstances of the case we are of the considered view that assessee do not deserve any immunity from paying the penalty u/s 271D of the Act by taking the shield/cover of Section 273B of the Act claiming it to be a reasonable cause for the said failure. We accordingly set aside the finding of Ld. CIT(A) and confirm the action of the Ld. A.O levying the penalty u/s 271D of the Act at Rs.85,98,257/-. Accordingly the sole ground raised by the revenue stands allowed.
In the result appeal of the revenue is allowed.
The order pronounced in the open Court on 16.02.2021.