M/S. P.R. ASSOCIATES,,PUNE vs. ADDITIONAL COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER PER R.S.SYAL, VP : This appeal by the assessee arises out of the order passed by the CIT(A)-II, Pune on 12-12-2013 in relation to the Assessment Year 1999-2000 confirming penalty under section 271D of the Income-tax Act, 1961 (hereinafter also called `the Act’).

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ld. CIT(A) for disposal of the assessee’s ground of limitation

as well as the merits. In the second round of proceedings, the

ld. CIT(A) dismissed the appeal of the assessee against which

the assessee has come up in appeal before the Tribunal.

book, it was observed by the Assessing Officer during the

course of assessment proceedings that the assessee accepted

certain loans in cash on various dates from Shah group

amounting to Rs.79,18,000/-. The AO initiated penalty

proceedings in the assessment order passed u/s.143(3) r.w.s.

147 on 08-12-2006. In the course of penalty proceedings, the

AO opined that there was a violation of the provisions of

section 269SS in respect of cash loans received by the assessee

amounting to Rs.79,18,000/-. On being show caused as to

why penalty u/s.271D of the Act be not imposed in this regard,

the assessee submitted that its business activities were close

and inoperative for about last 7 years and the assessee firm had

borrowed money from many private money lenders and Shree

Suvarna Sahakari Bank Ltd. since last 10 years. To meet the

financial crunch of the firm, the assessee raised certain loans

3 ITA No.914/PUN/2014 M/s. P.R. Associates

in cash from unorganized finance sector for disposing off its

existing liabilities. The AO imposed penalty of the equal sum

of Rs.79,18,000/-. The assessee approached the ld. CIT(A)

who noticed that the correct amount of loans was to the tune of

Rs.88,18,000/- and not Rs.79,18,000/- for which the penalty

was imposed by the AO. After entertaining objections from

the assessee, the ld. CIT(A) enhanced the penalty to

Rs.88,18,000/-. The Tribunal remitted the matter to the ld.

CIT(A). In the fresh round of proceedings before the ld.

CIT(A), no relief was allowed.

the relevant material on record. There is no denial of fact that

the assessee, in fact, raised loans in cash amounting to

Rs.88,18,000/- which is in violation of the provisions of

section 269SS of the Act. Once there is violation of the

provisions of section 269SS, penalty is triggered u/s.271D of

the Act. However, it is relevant to note that section 273B

deals with certain penal provisions, including section 271D,

and provides that no penalty shall be imposed if the assessee

succeeds in proving that the failure resulting in imposition of

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penalty was for a reasonable cause. Thus, it is evident that

escape from the clutches of penalty u/s 271D for violation of

the provisions of section 269SS is possible when the assessee

succeeds in proving that a reasonable cause existed in terms of

section 273B for violation of section 269SS.

assessee specifically submitted before the AO during the

course of penalty proceedings, which fact has also been

captured in the penalty order, that its business was inoperative

for the last 7 years and it had already borrowed loans from

Shree Suvarna Sahakari Bank Ltd. and many private money

lenders since last 10 years. To meet the financial requirements

of repayment, for which the lenders were hard pressing, the

assessee had to borrow money from unorganized finance

sector in cash, which led to the imposition of the instant

penalty. Further, the assessee had a bank liability of about

Rs.50 crore against mortgage of assets of about Rs.5 crore

only, which fact has not been falsified. The submissions made

by the assessee in this regard have not been controverted by

the AO or the ld. CIT(A) in any manner. When this fact is

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seen in the light of return filed by the assessee declaring loss

of Rs.4.35 lakhs, it clearly emerges that the loans were taken

by the assessee in cash in violation of provisions of section

269SS to meet the financial liabilities. This in our considered

opinion constitutes a reasonable cause warranting non-

imposition of penalty u/s.271D of the Act in terms of section

273B of the Act. We, therefore, order to delete the penalty of

Rs.88,18,000/- imposed/enhanced by the AO/ld. CIT(A).

merits, there is no need to espouse and adjudicate the

limitation issue taken up by the assessee in its appeal.

Order pronounced in the Open Court on 15th January, 2019.

Sd/- Sd/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 15th January, 2019 सतीश

6 ITA No.914/PUN/2014 M/s. P.R. Associates

आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत आदेश आदेश आदेश 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. आयकर आयु�(अपील) / The CIT (Appeals)-II, Pune The CIT-II, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय 5. अिधकरण, पुणे “A” / DR ‘A’, ITAT, Pune; 6. गाड" फाईल / Guard file. // True copy //

आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

ITA No.914/PUN/2014 M/s. P.R. Associates

Date 1. Draft dictated on 14-01-2019 Sr.PS 2. Draft placed before author 14-01-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *