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Facts
The assessee, a charitable trust, took unsecured loans amounting to Rs. 50,97,813/- from trust members and their relatives during the impugned assessment year, which was its first year of operation. The genuineness of the transactions and the identity of the lenders were not disputed.
Held
The Tribunal held that the loans were taken to meet urgent expenses during the initial operational year, and given the compelling circumstances and undisputed genuineness, the penalty levied under Section 271D was not justified.
Key Issues
Whether penalty under Section 271D for accepting loans otherwise than by account payee cheque is leviable when the assessee demonstrates reasonable cause under Section 273B.
Sections Cited
271D, 269SS, 273B
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MADHUSUDAN SAWDIA
Assessee represented by Shri S.K.Sarangi, CA Department represented by Shri Sanjib Banerjee, Sr.DR Date of hearing 26/02/2026 Date of pronouncement 26/02/2026 O R D E R PER: BENCH This is an appeal filed by the assessee against the order of the ld. CIT(A), NFAC, Delhi in Appeal No.NFAC/2022-23/10517685 dated 20/01/2026 for the A.Y. 2023-24 confirming the levy of penalty of Rs.50,97,813/- u/s.271D of the Act.
Shri S.K.Sarangi, ld. A.R. appeared on behalf of the assessee and Shri Sanjib Banerjee, ld. Sr.DR represented on behalf of the revenue.
It was submitted by ld AR that the assessee has taken unsecured loan of Rs.50,97,813/- from the members of the Trust and their relatives during the impugned assessment year. It was the submission that this is the first year of operation of the assessee and the Assessing Officer does not dispute the genuineness of the transaction nor the identity of persons who had given the loans. It was the submission that the loans were taken to meet the urgent requirement of expenses. It was the further submission that the loans are still outstanding. It was the further submission that the assessee had also not taken any bank loan as it was the first year of operation. It was the submission that the loans having been taken under compelling circumstances and the genuineness of the loans being not in dispute, the penalty levied u/s. 271D may be deleted.
In reply, ld Sr DR vehemently supported the orders of the AO and ld CIT(A). It was the submission that the assessee has violated the provisions of section 269SS of the Act.
We have considered the rival submissions. A perusal of the assessment order shows that in para 5.7, the Assessing Officer agrees that the assessee has received the said loans from the members of the trust and its relatives and the assessee has furnished the list of unsecured loans, confirmation letters & copy of ITR-V of the concerned persons and copy of their ledger account in its books of account. The Assessing Officer also recognizes that this is the first year of operation of the assessee and the amounts have been taken for meeting the urgent requirement of expenses. A perusal of the penalty order u/s.271D of the Act also shows that the Assessing Officer recognizes that this is the first year of operation and loans have been taken to meet the urgent requirement of expenses and the loans were recorded in the books of the assessee. It is noticed that the impugned assessment year is the first year of activities of the assessee. It is also noticed that the assessee does not have any bank loans and the loans have been taken for meeting the urgent requirement of funds during the impugned assessment year, therefore, in view of the provisions of section 273B of the Act, same is considered as reasonable cause and penalty of Rs.50,97,813/- levied by the AO and confirmed by the ld CIT(A) u/s.271D of the Act stands deleted.