SRI. BOREGOWDA,MYSORE vs. ADDL.C.I.T., MYSORE

Facts apropos are that assessee engaged in the business of doing job work in engineering had filed return of income declaring income of Rs.1,96,900/-. Total turnover of the assessee was Rs.16,58,098/-. During ITA.825/Bang/2015 Page - 2 the course of assessment proceedings it was noted by the AO that assessee had taken cash loan of Rs.2 lakhs. Rs.1.25 lakhs from one Shri. Panchalinga and Rs.75,000/- from Shri. T. V. Narasimha Murthy. Assessee furnished confirmation letters and evidences supporting the agricultural income of the creditors. AO accepted the loans and completed the assessments. However, he chose to proceed u/s.271D of the Act for, according to him, there was contravention of Section 269SS of the Act. In reply to the notice issued by the AO, assessee submitted that cash was urgently required by him to make payments for entering into a lease. As per the assessee, loans were taken on a Sunday and lease agreement was entered on Monday. However, the AO found that the mortgage paper submitted by the assessee did not specify the nature of the lease. According to the AO assessee himself was not an agriculturist, but only the creditors were agriculturists. He was of the opinion that none of the exceptions to Section 269SS of the Act was applicable. He levied a penalty of Rs.2 lakhs.

Appeal before the CIT (A) was not successful.

Now before us, Ld. AR submitted a copy of the lease deed dt.06.08.2007, for arguing that assessee had to pay a sum of Rs.2 lakhs to ITA.825/Bang/2015 Page - 3 one Smt. Mahalakshmi for letting out a property by her. As per the Ld. AR lease deed was entered on 06.08.2007. Since assessee had urgently needed the money, he was constrained to take loans from Shri. Panchalinga and Shri.T. V. Narasimha Murthy in cash on 05.08.2007. Thus according to him, exceptional circumstances were there for the assessee to take loan in cash.

Per contra, Ld. DR submitted that the lease deed was a document which could not be believed since it did not specify the rent nor the details of the property which was rented. According to him, assessee could not show any reasonable cause for not complying with Section 269SS of the Act.

We have perused the orders and heard the rival contentions. What we find is that the AO in the assessment order dt.15.12.2010 had accepted the loans as genuine. Assessee had filed confirmation letters from the creditors and also evidence in support of their agricultural income. It is not disputed by the Revenue that loans were received by the assessee on 05.08.2007 which happened to be a Sunday. Case of the assessee is that there was an urgent requirement of funds on 06.08.2007 for taking a property on lease, and he had therefore taken the loans in cash. Assessee ITA.825/Bang/2015 Page - 4 was a small time businessman with turnover of Rs.16.58 lakhs. So the preponderance of probability was that assessee was not having cash with him to meet the urgent requirement on 06.08.2007. In our opinion assessee had a reasonable cause for failing to comply with Section 269SS of the Act. Vide Section 273B of the Act, no penalty can be imposed u/s.271D of the Act, if the failure was due to a reasonable cause. In our opinion, this is the right case where alleviating section u/s.273B could be applied. Penalty levied u/s.271D of the Act is quashed.

In the result, appeal of the assessee is allowed.