M/S. ARUN PULVARISING INDUSTRIES ,PRATAPGARH vs. ADDL. CIT, , CHITTORGARH.

This is an appeal filed by the Assessee directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Udaipur dated 28th June, 2018 emanating from the penalty order under section 271E of the Act for assessment year 2011-12. The assessee raised the following grounds of appeal:- “01. That on the facts and in the circumstances of the case learned Addl. Commissioner of Income Tax and CIT(A), Udaipur erred in facts as well as in law confirming the penalty u/s. 271E of Rs. 3,90,000/- on the assessee firm without considering the M/s Arun Pulvarising Industries item of payment and assumed payment made to HUF (Arun Kumar Gandhi) as repayment of loan.

From the perusal of the said account, one can understand that there were various transactions in the said account. One of the transaction was on 30.04.2010 of cash payment of Rs. 3,90,000/-.

We have observed that there was reasonable cause for said cash payment. Arun Kumar Gandhi (HUF) had purchased an M/s Arun Pulvarising Industries agricultural land on 30.04.2010 situated at Pratapgarh, Rajasthan. Copy of the registered sale deed was filed by the assessee during the proceedings. The land was purchased in rural area. There was public holiday on 28th March. Banks were over worked being end of financial year. Therefore, in our opinion, there was reasonable cause for cash payment to HUF. 8. The Hon'ble Rajasthan High Court in the case of Commissioner of Income tax vs. Manoj Lalwani 260 ITR 590 (Rajasthan) has held as under:- “4. As per section 269SS of the Act of 1961 after 30th day of June, 1984 no person is allowed to take or accept from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft, of amount of twenty thousand rupees or more. Section 271D of the Act of 1961 speaks of levy of penalty of a sum equal to the amount of loan or deposit so taken or accepted in ontravention of the provisions of section 269SS. A plain reading of section 271D gives an impression that if there is a contravention of the provisions of section 269SS, the assessee shall be liable to pay the penalty equal to the amount which has been taken as loan or deposit and there is no discretion left with the assessing authority to waive the penalty considering the facts and circumstances in which the loan or deposit was taken by the assessee. But when we read section 271D with section 273B of the Act of 1961 which begins with non obstante clause "Notwithstanding anything contained in the provisions of section 271D", it is clear that in spite of the provision of section 271D, the enactment following, namely, "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", will have its full operation. Section 273B permits the assessing authority not to impose a penalty M/s Arun Pulvarising Industries provided under section 271D of a sum equal to the amount of loan or deposit taken or accepted in spite of the breach of provisions of section 269SS wherein the person has to accept a loan or deposit or the aggregate amount of such loan or deposit by way of account payee cheque or account payee bank draft, if the assessee or the person proves before the assessing authority that there was a reasonable cause for not accepting the amount of loan or deposit by way of account payee cheque or account payee bank draft. Under section 273B a judicial discretion is left with the assessing authority not to levy a penalty under section 271D if the authority is satisfied that there was a reasonable cause for not complying with the provisions of section 269SS of the Act of 1961.

In the present case the Tribunal has found that the assessee is an exporter and was in urgent need of the money for complying with the time bound supplies and, therefore, he took a loan of Rs. 2,50,000 (Rs. two lac fifty thousand) from his brother-in-law Mukesh Manwani. Out of the loan so taken, an amount of Rs. 2,45,000 (Rs. two lac forty-five thousand) was immediately deposited in the Bank, which indicates that the amount of loan, in fact, was received by him from Mukesh Manwani. It was only to meet the emergent need of time bound supplies; the loan was taken as he did not have sufficient time and funds and, that there was no intention to violate the provision of section 269SS of the Act of 1961. The Tribunal, in these circumstances, has arrived at a conclusion that the cash loan was taken by the assessee in the exceptional circumstances and that it is a case of reasonable cause, as a consequence thereof set aside the penalty imposed by the revenue authorities. As we have already held that on a reasonable cause being shown, the assessing authority has jurisdiction not to impose the penalty and, therefore, in our opinion, the Tribunal has acted in accordance with the law in waiving the penalty imposed on the assessee by the revenue authorities.”

The facts & circumstances of the case of Manoj Lalwani and assessee are identical. In the case of assessee also HUF on the same day i.e. on 30.04.2010 had purchased agricultural land.