SRI.YARABOLU SESHADRI REDDY,BANGALORE vs. JOINT COMMISSIONER OF INCOME-TAX, BANGALORE

The assessee has raised grounds in the appeals as under :

The assessee filed its return of income for the Assessment Year under consideration on 25.8.2006 declaring a total income of Rs.1,00,890. The whereby the Assessing Officer has made the addition of Rs.11,00,000 on account of unsecured loan outstanding by treating the same as unexplained in terms of Section 68 of the Act. Subsequently, the Assessing Officer initiating the proceedings under Section 271D by issuing a notice under Section 274 of the Act on 25.9.2014 in respect of accepting the loan amount of Rs.2,00,500 cash from Mr. Y. Venkatarami Reddy, father of assessee. The assessee vide his reply dt.13.10.2014 contended that provisions of Section 269 SS and 269T have been enacted to counter tax evasion and to ensure that large sums of money found in case of search are not explained as loan or deposit. The assessee has also submitted that he was prevented by reasonable cause from complying with the provisions of the Act and subsequently no penalty is leviable. The assessee also relied upon various decisions on this point however the Assessing Officer did not accept the explanation of the assessee and imposed the penalty of Rs.2,00,500 under Section 271D vide order dt.13.11.2014. The assessee challenged the action of the A.O. before the CIT(Appeals) but could not succeed.

Before the Tribunal, the learned Authorised Representative of the assessee has submitted that the said amount of Rs.2,00,500 received in cash by the same was received from close family member. Thus the learned Authorised Representative has submitted that in view of the various decisions the penalty under Section 271D or 271E is not attracted. He has further submitted that the assessee accepted the order of the CIT (Appeals) in quantum proceedings and has not filed any appeal against the order of CIT (Appeals) as the assessee did not want to linger on the litigation with the department. The assessee paid all the taxes on ultimate income assessed. He has further submitted that the penalty under Section 271D as well as 271E were not initiated by the Assessing Officer in the assessment order but it was only after the order passed by the CIT (Appeals) in the quantum proceedings. He has relied upon the decision dt.22.6.2007 of the co-ordinate bench of this Tribunal in the case of Sri R.

On the other hand, the learned Departmental Representative has submitted that the assessee has taken loan in cash in clear violation of provisions of section 269 SS r.w.s. 271D therefore acceptance of loan in contravention of provision of section 269 SS attracts the penalty under Section 271D. The assessee has failed to show any urgency to avail the loan in cash. In support of his contention, he has relied upon the decision of Hon'ble Madras High Court in the case of Nandi Dhall Mills Vs. CIT 373 ITR 510. He has also relied upon the decision of Hon'ble jurisdictional High Court in the case of Chamundi Granites (P) Ltd. Vs. DCIT 239 ITR 694 and submitted that the Assessing Officer is justified in levy of penalty in this case. record. The Assessing Officer has levied penalty under Section 271D of the Act in respect of an amount of Rs.2,00,500 received by the assessee from his father and half of the same was repaid. The assessee has explained that since this amount was taken from the father and it was convenient and easy for the assessee to receive this amount from the father for the urgent requirement at that point of time. Therefore this is not a case of avoidance of tax by indulting transaction in cash. It is pertinent to note that the assessee was in a urgent need of money and therefore accepted the amount from father in cash of Rs.2,00,500, part of which has been repaid by the assessee during the year under consideration. Therefore the reasons explained by the assessee are not found to be false by the authorities below but the Assessing Officer was not satisfied with the explanation that the assessee was prevented by any reason for taking the amount other than cash. The convenience of taking the money from the close relative may not be an acceptable explanation or cause however, if the assessee has shown that there was a reasonable cause for not adhering to the provisions of Section 269 SS then in view of the provisions of Section 273B no penalty shall be levied. The co-ordinate bench of this Tribunal issue has deleted the penalty as under : view of the Tribunal as held that when the assessee has explained the cause in accepting the loan in cash from his wife and his HUF then the penalty under Section 271D was not justified. Having regard to the facts and circumstances of the case when this loan of Rs.2,00,500 was taken by the assessee from his father for urgent need is a reasonable cause for not adhering to the provisions of section 269 SS of the Act and therefore in view of the provisions of Section 273B, no penalty can be levied under Section 271D of the Act. Accordingly, the penalty is deleted.

As regards the levy of penalty under Section 271E, since the assessee has repaid the loan of Rs.1 lakh during the year under consideration, the Assessing Officer has levied penalty of Rs.1 lakh under Section 271E of the Act.

I have heard the rival submissions as well as perused the material on record. The facts are identical as taking the loan as well as repayment of loan between the father and son is a transaction between the close family member and therefore the reason found to be reasonable for the purpose of Section 271D are also applicable for the purpose of penalty levied under Section 271E penalty levied under Section 271E is not sustainable and is deleted.

In the result, the appeals of assessee are allowed.