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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri Mahavir Singh & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is arising out of order of Commissioner of Income Tax (Appeals)-XII, Kolkata in appeal No.443/XI/Cir-11/09-10 dated 21.12.2012. Assessment was framed by ACIT, Circle-11, Kolkata u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.12.2005 for assessment year 2000-01. Penalty was levied by the Addl. Commissioner of Income-tax u/s 271D of the Act vide his order dated 30.08.2006.
The Premier Medical Supplies & Stores v. ACIT, Cir-11, Kol. Page 2 2. Only issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the penalty imposed by Assessing Officer u/s 271D of the Act.
Briefly stated facts are that assessee-company has taken a loan from Smt.Laxmi Parui for an amount of Rs.60,000/- in cash and this transaction accepting the loan in cash is against the provision of Sec. 269SS of the Act. The AO while framing the assessment has initiated the penalty proceedings u/s. 271D of the Act which was subsequently confirmed vide order dated 30.08.2006 for levying the penalty of ₹60,000/-. However the assessee has demonstrated that person who had given the loan have no bank account and there was an urgent need of money to meet the business requirement of assessee. Assessee also explained that the party got the fund of ₹ 60,000/- by encashment of NSC. However, the AO has disregarded the claim of assessee stating that the intention of the law is to see that the money has been accepted in cash or not. In the instant case, assessee took the loan in cash and AO also found no direct evidence that loan money was received by the assessee out of NSC encashment. In view of the above, the penalty was confirmed u/s 271D of the Act. Aggrieved, assessee preferred appeal before Ld. CIT(A) who has confirmed the action of AO by observing as under:- “3. I have considered the finding of the A.O in his order dt. 30.06.2008 and the written submission made by the AR during the appellate proceedings. Appeal on ground no. 1 is against the imposition of penalty of Rs.60000/- u/s 271D of the IT Act 1961. The fact of the case is that the assessee company took loan from one Smt. Laxmi parui of Rs.60,000/- in cash. The AO detected this fact during the assessment proceeding and as he was not satisfied with the explanation offered by the assessee he initiated the penalty proceeding. During the penalty proceeding the AR submitted that the person from who loan was taken had no bank account. It was further submitted that the loan was taken in cash as the assessee company required the money urgently for its business purposes. During the penalty proceeding before the Addl. CIT, although the AR had submitted that the money was required very urgently but no such urgency was brought to the notice of the Addl. CIT, Range-II, Kolkata. Further, it was pointed out before the Addl. CIT, Range-II, Kolkata that the money with the lady was that which she had received as encashment of her NSC. The Addl CIT has given the finding that since the lady did not have any bank account so it could not be proved beyond doubt nor there was any evidence that the money Mrs. Laxi parui had given as loan was of NSC encashment. Therefore, the Addl. CIT, Range-II, Kolkata levied penalty of Rs.60,000/- u/s. 271D of the I.T. Act, 961. During the appellate proceeding the AR submitted the same set of facts that he had submitted before the Addl. CIT, Range-II, Kolkata. The AR also relied on the Hon'ble Andra Pradesh High Court’s order in the case of national Surgical Corp. Vs. CIT [42 ITR 1667) (AP). In my The Premier Medical Supplies & Stores v. ACIT, Cir-11, Kol. Page 3 opinion the ratio decided by the Hon'ble High Court in this case is not applicable here. Although the AR has submitted that the money was urgently required for the business but neither before the Addl. CIT, Range-II, Kolkata nor before me during the appellate proceeding. The AR could bring anything on record showing the nature of urgency of the business. By simply saying that money was urgently required for the business is not sufficient without bringing anything in support of this argument showing urgency for the same. Hence, assessee’s argument of this urgency element is not acceptable, thus, assessee’s appeal on ground no. 1 is dismissed.”
Aggrieved, assessee preferred second appeal before us on the following ground of appeal:- “1) That on the facts and in the circumstances of the case, the ld. CIT(A) erred in confirming the penalty imposed by the ld. AO u/s 271D
2) That on the facts and in the circumstances of the case, the ld. CIT(A) erred in not accepting and not appreciating the facts of the instant case and failed to give credence to the submissions made by the assessee before him.”
Shri Sanjib Kr. Dassarma, Ld. Authorized Representative appearing on behalf of assessee and Shri Debashish Roy, Ld. Departmental Representative appearing on behalf of Revenue.
We have heard rival contentions of both the parties and perused the materials available on record. Ld. DR relied on the orders of authorities below. Before us Ld. AR submitted that there was urgent need of fund in its day-to- day working of business and the party from whom the loan was accepted in cash had no bank account. Therefore, there was no option available to the assessee except to take loan in cash. Finally, Ld. AR prayed to drop the penalty proceedings imposed by AO and confirmed by Ld. CIT(A). From the above discussion, we find that assessee took a loan of ₹60,000/- and there is a clear-cut violation of provisions of Sec. 269SS of the Act. However, we find the purpose of legislature to incorporate the provisions of Sec.269SS under the Act that the Revenue had faced genuine difficulty in bringing to the tax net unaccounted cash found in the course of searches carried out as it is invariably explained by the taxpayers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought into The Premier Medical Supplies & Stores v. ACIT, Cir-11, Kol. Page 4 the books of accounts in the form of such loans or deposits, and taxpayers are also able to get confirmatory letters from such persons in support of their explanation. In order to counter this device, this prohibition was sought to be introduced.
Now in the instant case we find from the orders of authorities below that none of the authorities below has questioned/doubted about the sources of fund and in this case, the party claimed to have paid this loan amount out of the encashment of NSC. The orders of authorities below do not speak anything adverse about the encashment of NSC. Therefore, we are in the opinion that the source of loan taken by assessee is from the genuine source. In view of the above, we are inclined to delete the penalty imposed by AO and confirmed by Ld. CIT(A).