TARUN SHARMA, YAMUNANAGAR,YAMUNANAGAR vs. JAO THE INCOME TAX OFFICER WARD-5, YAMUNANAGAR, YAMUNANAGAR

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, CHANDIGARH HYBRID HEARING HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकरअपीलसं./ ITA No.211/CHANDI/2026 (िनधा�रणवष� / Assessment Year: 2011-12) & 2. आयकरअपीलसं./ ITA No.212/CHANDI/2026 (िनधा�रणवष� / Assessment Year: 2012-13) Shri Tarun Sharma ITO Ward – 5 103, Nanda Colony, Farakpur Aaykar Bhawan, Sector – 17 बनाम/ Vs. Near Farakpur Thana, Yamunanagar Huda, Jagadhri Haryana – 135002 Haryana – 135003 �ायीलेखासं./जीआइआरसं./PAN/GIR No. BANPS-8856-E (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Sh. Sudhir Sehgal (Advocate) – Ld. AR ��थ�कीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) - Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 14-07-2026 घोषणाकीतारीख /Date of Pronouncement 08-03-2026 : आदेश / O R D E R 1. Aforesaid appeals by assessee assail confirmation of penalty u/s 271D & 271E. First, we take up ITA No.211/Chandi/2026 for Assessment Year (AY) 2011-12 which arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 21.11.2025 confirming penalty of Rs.7.90 Lacs as levied by Ld. AO u/s 271D vide order dated 17.09.2021. Having heard rival submissions, the appeal is disposed-off as under.

message sent by Shri Sachin Mittal was found to be a wrong message as is evident from the affidavit of Shri Sachin Mittal. Consequently, the cash was withdrawn within a span of 10 days during April, 2011 and returned back to the respective lenders. On these facts, the assessee made out a case of reasonable cause u/s 273B and pleaded for dropping of proposed penalty. However, Ld. AO rejected the explanation of the assessee and levied impugned penalty u/s 271D which was equivalent to the amount of loan i.e., Rs.7.90 Lacs. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before Tribunal. 3. Upon perusal of enumerated facts, I find that the assessee has sufficiently made out a case of reasonable cause u/s 273B. It is trite law that levy of penalty is not automatic. The Ld. AR has demonstrated that the assessee’s father was confronted with an unforeseen emergency situation requiring immediate funds. It has also been demonstrated that the amounts were received in cash solely to meet the urgent financial requirement. The transactions are found to be genuine, the identity and creditworthiness of the lender has not been doubted and there is no allegation that the transactions represent any unaccounted income or was intended to evade tax. I am of the opinion that the levy of penalty u/s 271D is not automatic. Section 273B specifically provides that no penalty shall be imposable if the assessee proves that there was reasonable cause for the failure to comply with the provisions of Section 269SS. The explanation furnished by the assessee is that the loan was accepted in an

emergency situation necessitating immediate availability of funds. The revenue has not brought any material on record to disprove this explanation. The authorities below have also not recorded any finding that the explanation lacks credibility or that the emergency pleaded by the assessee is fictitious or concocted. It is equally significant that the genuineness of the loan transaction has not been doubted. The identity of the lender stands established. There is no finding that the cash loan represents undisclosed income or that it was adopted as a device for tax evasion. The object of section 269SS is to curb the proliferation of unaccounted money and to prevent transactions intended to evade tax. Where the transaction is genuine and the assessee demonstrates a bona fide and compelling reason for accepting the loan in cash, the rigors of section 271D stand relaxed by virtue of section 273B. The expression "reasonable cause" occurring in Sec. 273B is required to receive a liberal and pragmatic interpretation having regard to the facts of each case. An unforeseen emergency requiring immediate funds constitutes a valid and bona fide explanation when it is supported by surrounding circumstances and remains uncontroverted by the revenue. In my considered opinion, penalty provisions, being quasi-criminal in nature, could not be invoked merely because a technical violation has occurred, particularly where there is no element of contumacious conduct, deliberate disregard of law or intention to defeat the statutory provisions. Considering the totality of the facts and circumstances, I am satisfied that the assessee has furnished a plausible and bona fide

explanation demonstrating reasonable cause for accepting the loan in cash. The revenue has not produced any material to show that the explanation is false or that the transaction was not genuine or motivated by an intention to evade tax. Therefore, the protection available u/s 273B squarely applies. Accordingly, I would hold that the impugned penalty as levied u/s 271D is unsustainable. By deleting the same, the appeal stand allowed. 4. ITA No.212/Chandi/2026 is penalty appeal u/s 271E on identical facts. Since the assessee repaid loan of Rs.7.20 Lacs to the lenders in cash, Ld. AO levied penalty u/s 271E for Rs.7.20 Lacs. The same was confirmed by Ld. CIT(A). Facts being pari-materia the same and in view of the fact that the assessee’s bona fide explanation for acceptance of loan in cash has been accepted, this penalty also stand deleted on similar logical and reasoning. 5. Both the appeals stand allowed. Order pronounced on 03rd August, 2026 -Sd- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER AS Dated: 03-08-2026 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH