I.T.O. WARD - 38(2), MIDNAPORE, PASCHIM MIDNAPORE vs. SHRI ARUP KUMAR HAZRA, PASCHIM MIDNAPORE

The Assessee is an individual and derives income from the business of running a petrol pump. Penalty u/s 271D of the Income Tax Act, 1961 (Act) was levied by an order passed on 30.09.2016 by the Joint Commissioner of Income Tax-Range-38, Midnapore for the reason that, the assessee had received cash of Rs.10,50,000/- from Shri Nikhil Laha and further a certain amount of Rs.6,15,000/- was the receipt as advance from four different customers in cash which, resulted in contravention of the provision of section 269SS of the Act. The ld. CIT(A) in the appellate proceedings deleted the penalty levied by holding that the provision of section 273B of the Act apply on the facts of this case as the assessee had reasonable cause for obtaining a loan in cash under exceptional circumstances from Shri Nikhil Laha and that an amount of Rs.6,15,000/- received from four different parties was not a loan and it was only an advance for supply of goods. Aggrieved the revenue is before me.

After hearing rival contentions, I find that the ld. CIT(A) has, on examination of books of records has come to the conclusion that the assessee had shortage of funds on the date on which loan was taken from Shri Nikhil Laha and that this amount was used for payment for purchase which was immediate necessity for the assessee. The ld. CIT(A) relied on the decision of the Hon’ble Madras High Court in the case of CIT vs.T.Perumal (2015) 370 ITR 313 (Mad) to the proposition that when there are exigencies, which force the borrower to accept cash as the borrowers, under the exceptional circumstances has reasonable cause and that penalty cannot be levied in accordance with the provision of section 273B of the Act. I also find that the ld. CIT(A) has relied on the decision of the Hon’ble Rajasthan High Court in the case of CIT vs Manoj Lalwni 260 ITR 590 (Raj). The ld. CIT(A) at page 13 concluded as follows :- "In the instant case, the Tribunal had found that the assessee was an exporter and was in urgent need of the money for complying with the time-bound supplies and, therefore, he took a loan of a specified sum from his relative, out of which a large portion was immediately deposited in the bank. It was only to meet the emergent need of time-bound supplies that the loan was taken as he did not have sufficient time and funds and there was no intention to violate the provisions of section 269SS. Thus, the Tribunal had arrived at the conclusion that cash loan was taken by the assessee in exceptional circumstances and that it was a case of reasonable cause, as a consequence thereof' it set aside the penalty imposed, by the revenue authorities. On a reasonable cause being shown, the assessing authority has jurisdiction not to impose the penalty and, therefore, the Tribunal had acted in accordance with the law in waiving the penalty imposed on the assessee by the revenue authorities.”

Coming to the penalty levied on amounts received as advance from four parties aggregating to Rs.6,15,000/-, the ld. CIT(A) has held that this was mere advance and not a loan. He relied on the decision of the Hon’ble Allahabad High Court in the case of CIT vs Kailash Chandra Deepak Kumar [2009] 317 ITR 351 (All) and held that penalty cannot be imposed when the amount is received as advance for purchase of goods. I find no infirmity in the findings of the ld. CIT(A). I uphold the order of the First Appellate Authority and dismiss this appeal of the revenue.

In the result the appeal by the revenue is dismissed.