RAJESH GALA,MUMBAI vs. COMMISSIONER OF INCOME-TAX (APPEALS), DELHI

The Learned Addl. Commissioner and National Faceless Appeal Centre, further erred on facts, in law and under the circumstances in levying penalty u/s 271D of Income Tax Act, 1961 because the transaction does not attract the provision of Sec.269SS of Income Tax Act, 1961 and even otherwise it is covered by Sec.273B of Income Tax Act, 1961. 3. The appellant respectfully submits that due to prevalence of reasonable cause, the funds were given to him in cash, and the nature of transaction between parties is not of loans because the relation between the parties is not of a lender and a borrower as understood in a loan transaction and that arrangements were required to be made between the parties in this way so as to meet business exigencies of the appellants group. Hence the provision of Sec.269SS is not attracted to this transaction.

Without prejudice, if it is held that the transaction between parties is loan transaction, then the transacting parties were prevented by reasonable cause as provided in Sec.273B of Income Tax Act, 1961. 5. Without prejudice, the amount given as loan has already been offered to tax by the by the giver group entity hence should not be subject to tax or penalty again.

The Learned Addl. Commissioner and National Faceless Appeal Centre has not appreciated the fact that the assessee is entitled for beneficial legislature.

The Learned Addl. Commissioner and National Faceless Appeal Centre has not followed hierarchy of jurisprudence.

The Learned Addl. Commissioner and National Faceless Appeal Centre has passed the order in violation of principles of natural justice.

The ground of appeal is without prejudice to the other.

The appellant craves, leave to add, alter, amend or vary and/or withdraw any or all of the aforesaid grounds of Appeal or at time of hearing of the above appeal.” 2 Assessment Year: 2016-17

All the grounds raised in the present appeal pertain to levy of penalty of INR 2,96,60,000/- under Section 271D of the Act on account of failure on the part of the Appellant to comply with the requirements of the Section 269SS of the Act while undertaking transaction in cash. The Appellant herein is an individual holding the position of director/partner/proprietor in the following entities:

It is the case of the Appellant that the various entities in which the Appellant was holding position as director/partner were going through financial crisis and therefore, the same proceeds of M/s. Pramanik Retail Pvt. Ltd. were utilize for the business for the Appellant and his group entities. In order to facilitate same sale proceeds of M/s. Pramanik Retail Pvt. Ltd. were shown loan to the director as otherwise it would not have been possible for the Appellant to make payments to creditors, repay outstanding loan, service debt liabilities and also to make available cash for day to day operation of said group. In the aforesaid peculiar facts and circumstances there was a technical default in complying with the provision Section 269SS of the Act. In view of the aforesaid, it was contended on behalf of the Appellant that the Appellant had reasonable cause for not complying with the provision of the 269SS of the Act and therefore, no penalty under section 271D of the Act could have been levied on the Appellant.

Both the sides agreed that identical issue had come up for consideration before the Tribunal in the case of the Appellant for 3 Assessment Year: 2016-17

We deem it appropriate to observe herein that the assessee had indeed availed cash loan(s) from the related party M/s. Pramanik Retail Pvt. Ltd. wherein he is a director. Learned DR vehemently supported both the lower authorities action that the above varying cash loans have violated corresponding statutory provision i.e. section 269SS of the Act thereby making it a fit case to impose the consequential section 271D penalty.

We find no reason to express our agreement with learned DR's foregoing vehement contentions. A combined perusal of these case files reveals that the assessee had indeed submitted during the course of penalty proceedings itself that the above entity M/s. Pramanik Retail Pvt. Ltd. and group concerns had been undergoing turbulent times and its sundry creditors had stopped supplying the corresponding raw material in regular business activities. The assessee explained before the Assessing Officer that this made M/s. Pramanik Retail Pvt. Ltd., to deposit its cash sales in the bank account so as to avoid adjustment(s) thereof against various outstanding dues. Learned counsel submits that all these developments only formed the main reason for the assessee to manage day-to- day affairs of Pramanik Retail Pvt. Ltd. by taking cash loans, which have resulted in levy of penalty(ies) forming subject matter of adjudication in the three assessment years before us.

We find merit in the assessee's arguments challenging the impugned section 271D penalties as neither the Assessing Officer nor the learned Commissioner herein could rebut foregoing factual averments indicating reasons of assessee

These assessee's three appeals are allowed in above terms.”

""थ" / The Respondent. 2. आयकर आयु"/ The CIT