SHIV SHARAN TRADING P. LTD,MUMBAI vs. ADDL CIT RG 4(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 03.01.2013 of the CIT(A)-8,Mumbai, the assessee has filed the present appeal for the above mentioned assessment year.Assessee is engaged in renting out of various commercial properties.The Return of income was processed on 23-07-2009.Assessment u/s.143 (3)r.w.s. 147 of the Act,was completed on 30.09.2011,assessing its income at Rs.7,31, 501/-.

2.Solitary ground of appeal is about levy of penalty u/s.271D of the Act. The brief facts of the case are that the assessee had taken a loan of Rs.75 lakhs from Kotak Mahindra Bank Ltd.for purchase of a property,that it had to pay monthly installment (EMI) of Rs. 2,90,521/-,that it had already handed over post dated cheques for the EMI for the entire tenure of the loan to the bank which the bank was presenting on the due dates and collecting the EMIs.In July 2007,when the EMI cheque of Rs.2,90,521/-for the said month was presented in the bank account, there was balance of Rs.2,27,494.28 was only available in the account of the assessee.In view of the same, the Assessee Company took a cash loan of Rs. 85,000/- from Mohan B. Motwani HUF, a shareholder of the company. As per the assessee the said cash loan was taken by the Company to 2154/M/13-shivsharan trdg. tide over the crisis and to avoid default in the payment of EMI so as to avoid late payment interest and also penalty.It was further argued that on depositing the said cash in the bank account, the EMI cheque was honoured and total EMI for July,2007amount was paid.The AO held that it was contravention of the provisions of section 269SS of the Act.Accordingly,penalty proceedings u/s. 271D of the Act were initiated.The assessee made detailed submissions,vide its letter dated 07-11-2011 and argued that the assessee was forced to take cash loan of Rs. 85,000/- from the HUF to tide over the financial crisis to safeguard its credit rating, that the transaction was between the share -holder and the company,that while carrying out the transaction the accountant was unaware of the provisions of section 269SS. However.the AO did not accept the submission made by the assessee and held that it had clearly contravened the provisions of section 269SS of the Act, that ignorance of law was not an excuse for contravening the provisions of the section,that the credit -worthiness of the assessee was not at stake. Finally, he held that the assessee had contravened the provisions of section 269SS. He levied a penalty of Rs.85,000/-, invoking the provisions of section 271D of the Act.

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).Before him, it was contended that there was insufficient balance to the extent of Rs.85,000/- to pay the EMI, that it was forced to take a cash loan to meet the shortfall and to tide over the crisis and avoid defaulting loan instalment/late payment charges and penalty, that any default in loan instalment would have also dented the credit of the assessee and would have impacted its business prospects, that the cash loan was taken from the shareholder of the company who is regularly assessed to tax. The assessee relied upon certain case laws. After considering assumption of the assessee and the penalty order, the FAA held that the assessee had taken loan in cash of Rs. 85,000/-,that it had violated the provisions of section 269SS of the Act, that 2

2154/M/13-shivsharan trdg. assessee was a private company doing share broking business,that it was guided by experienced CA,that it could not be presumed that it was not aware of the law,that the argument of the assessee that breach was only technical could not be accepted,that there were no compelling circumstances in the case under consideration, that it was aware of the fact that it had to pay monthly EMI of Rs. 2.90 lakhs every month,that it was not the case of the assessee that it was required to pay unforeseen payments which it could not visualise, that it could not take the advantage of the circumstances which were of its own creation. Finally,he upheld the penalty levied by the AO.

4.During the course of hearing before us, the Authorised Representative(AR) argued that loan was taken from shareholder due to compelling circumstances, that it was a solitary transaction,that it was not aware that certain provisions of law would be violated if loans were accepted in cash from a shareholder, the loan transactions had been accepted as genuine by the AO,that there was no allegation that the assessee had circulated unexplained money in the form of loan,that penalty should not be levied only on the ground that the AO was authorised to levy the same,the default was technical in nature,that reasonable cause for accepting the loan in cash was explained during the assessment/appellate proceedings.He relied upon the cases of Triumph International Finance (I) Ltd.(345ITR270); Smt. Dimpal yadav Income tax appeal No.174 of 2015 dated 21.8.2015;Lodha Builders Pvt. Ltd.(ITA476/M/14 dated 27.06.2014;M/s. Shreepati Developers & Builder Ltd.(ITA No.7197 & 7198/M/2014,dt.15.04.2015;Zodiac Developers Pvt. Ltd. (ITA No.31/M/2011 dt.10.10.2014); Sanju Kothari (ITA No.3790/M/2013 dt.04.3.2016); M/s. R.K. & Co. Pvt. Ltd. (ITA 2218/M/12 dt.31.7.2013); Mrs. Rupali R. Desai (088ITD76);Bhagwati Prasad Bajoria(HUF) (263ITR487) and Kum A.B. Shanthi (255 ITR 258). The Departmental Representative(DR)supported the order of the FAA. 3

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5.We have heard the rival submissions and perused the material before us.We find that in the case of Triumph International Finance (I.) Ltd.(345 ITR 270),the Hon’ble Bombay High Court has discussed the issue and has held as under: 23. The expression "reasonable cause" used in section 273B is not defined under the Act. Unlike the expression "sufficient cause" used in section 249(3), 253(5) and 260A(2A) of the Act, the Legislature has used the expression "reasonable cause" in section 273B of the Act. A cause which is reasonable may not be a sufficient cause. Thus, the expression "reasonable cause" would have wider connotation than the expression "sufficient cause". Therefore, the expression "reasonable cause" in section 273B for non-imposition of penalty under section 271E would have to be construed liberally depending upon the facts of each case.” As held by the Hon’ble Court,reasonable cause has to be decided in each and every case. Considering the peculiar facts of that matter.In the case under appeal the assessee had taken loan from one of its share holder and that share holder had withdrawn the money from its bank account.Thus,there was no introduction of cash on part of the shareholder.The assessee had to make the EMI payment and for that purpose it had taken a cash loan.In our opinion,it can be considered a reasonable cause looking in to the facts and circumstances.Section 269SS were introduced with specific purpose.The transaction in question does not fall in the mischief for which the section was brought on statute.It is clearly covered by the exceptions provided in the section 273B of the Act.There existed the a reasonable cause for accepting cash in loan in the month of July,2007.So,reversing the order of the FAA,we decide the effective ground of appeal in favour of the assessee. As a result, appeal filed by the assessee stands allowed. फलतः िनधा�रती �ारा दािखल क� गई अपील मंजूर क� जाती है. Order pronounced in the open court on 12th August,2016. आदेश क� घोषणा खुले �यायालय म� �दनांक 12 अग�त, 2016 को क� गई । Sd/- Sd/- (सी. एन. �साद / C.N. Prasad ) (राजे�� / Rajendra) �याियक सद�य / JUDICIAL MEMBER लेखा लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य मुंबई Mumbai; �दनांकDated : 12 .08.2016. Jv.Sr.PS.