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Income Tax Appellate Tribunal, KOLKATA BENCH ‘D’, KOLKATA
Before: Shri P.M. Jagtap, AM & Shri S.S. Viswanethra Ravi, JM]
order : January 19, 2018 ORDER This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) – 33, Kolkata dated 09.06.2014 whereby he confirmed the penalty of Rs. 2,80,000/- imposed by the A.O. under section 271D of the Income Tax Act, 1961.
The assessee in the present case is an individual who is running a medicine and wine shop. During the course of assessment proceedings for the year under consideration, the assessee was found to have received cash loans of Rs. 90,000/-, Rs. 90,000/- and Rs. 1,00,000/- from Shri Dipak Chakraborty, Shri Mahadeb Das and Shri Janardan Pal respectively. Since the said loans were received by the assessee in contravention of the provisions of section 269SS of the 2 Assessment Year: 2009-10 Prodyut Dhar Act, penalty proceedings under section 271D were initiated by the A.O. In reply to the show cause notice issued during the course of the said proceedings by the A.O., it was explained by the assessee that he was compelled to accept the cash loans of Rs. 2,80,000/- from the concerned three parties due to business exigencies. This explanation of the assessee was not found acceptable by the A.O. and he proceeded to impose a penalty of Rs. 2,80,000/- on the assessee under section 271D of the Act.
The penalty imposed by the A.O. under section 271D was challenged by the assessee in the appeal filed before the Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), it was contended by the assessee that cash loans in question were not accepted by him at one go but over a period of time in small amounts. It was also contended by the assessee that he was facing shortage of capital and had to accept the cash loans in compelling circumstances. These contentions of the assessee were not found acceptable by the Ld. CIT(A) and he proceeded to confirm the penalty imposed by the A.O. under section 271D for the following reasons given in paragraph no 4.1 of his impugned order: “It is undisputed that the appellant had accepted cash loans of Rs. 90,000/-, Rs. 90,000/- and Rs. 1,00,000/- from Shri Dipak Chakraborty, Shri Mahadeb Das and Shri Janardan Pal respectively. The appellant's contention is that the loans had been taken in small amounts over the period of time. However, such small loans are also covered under the provisions of clause (c) of section 269SS of the Act which lays down that acceptance of cash loan or deposit is not allowed also if the amount of such loan or the aggregate of such amount and amount of any loan or deposit taken earlier and remaining unpaid is Rs. 20,000/- or more. The only contention of the appellant which needs to be examined is whether his brief contention that he was in dire need of funds justifies his violation of the provisions of section 269SS. The appellant's 3 Assessment Year: 2009-10 Prodyut Dhar explanation is very general in nature. He has not explained the business exigency which compelled him to accept the huge cash loans from the aforesaid three persons. The appellant has not cared to explain as to why loans could not be accepted by way of cheque when the clear provisions of section 269SS prohibit cash loans at a given point in time or aggregate of cash loans over a period of time where amounts or aggregate of such loans are Rs. 20,000/- or more. It is not as if the appellant or the lenders did not have access to banking facilities. Admittedly, the loans were accepted on various dates over a period of time. While acceptance of cash loans in an isolated instance can be attributed to a pressing and urgent need for funds, the same cannot be the case where cash loans are repeatedly taken in small amounts over a long period. On his part, the appellant has simply stated the grounds of appeal
which imply that he accepted cash loans because he needed funds. No other explanation or details have been furnished to make out a reasonable cause for his failure to comply with the provisions of section 269SS of the Act. The appellant is also not covered under any of the exceptions provided under section 269SS. I, therefore, hold that the Joint Commissioner of Income-tax, Range - 53, Kolkata was right in imposing penalty of Rs. 2,80,000/- under section 27lD of the Act. The penalty of Rs. 2,80,000/- is confirmed.” Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
4. The learned counsel for the assessee contended that there were business exigencies and the assessee, therefore, had to accept the loans in question in cash under compelling circumstances. In support of this contention, he invited our attention to the relevant copy of the bank statement of the assessee to show that the amounts of loans in cash were deposited by the assessee for clearing the cheques issued. He contended that the loans in question thus were accepted by the assessee in cash under the compelling circumstances and there was a reasonable cause for accepting the said loans in cash. Relying on the decision of Hon’ble Allahabad High Court in case of CIT vs Smt. Dimpal Yadav and Akhilesh Kumar Yadav 379 ITR 177 and the 4 Assessment Year: 2009-10 Prodyut Dhar decision of Hon’ble Madras High Court in the case of Director of Income Tax (Exemptions) vs Young Men Christian Association 227 Taxman 31, he contended that the case of the assessee is not a fit case to impose penalty under section 271D.
The learned DR, on the other hand, strongly relied on the impugned order of the Ld. CIT(A) in support of the revenue’s case that the assessee having failed to establish any reasonable cause on evidence for accepting the loans in question in cash in contravention of section 269SS, he is liable for penalty under section 271D. He contended that the explanation offered by the assessee in support of his case has already been rejected by the Ld. CIT(A) by giving cogent and convincing reasons in his impugned order and the same in absence of any supporting evidence cannot be accepted as reasonable cause for accepting the loans in question in cash in contravention of section 269SS. He also pointed out from the copy of the bank statement of the assessee that the cheques were issued by the assessee after depositing the cash. He contended that the assessee was thus in a position to take the loans in question by cheques and issue the cheques for payments after clearance of the said cheques. He contended that the relevant entries in the bank account of the assessee even otherwise are not sufficient to establish any business exigencies. As regards the case laws cited by the Ld. CIT(A) in support of the assessee’s case, he contended that the reasonable cause for accepting the loans in cash was duly establish by the assessee in the said case.