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2008 (4) TMI 360 - ITAT DELHI-IPenalty levied u/s 271D - Violation of section 269SS - amount was received otherwise than by account payee cheque - cash loans taken exceeding ₹ 20,000 from the both of person have a agriculture income - Another show-cause notice issued is time-barred as per provisions of s. 275(1)(c) - Failure to prove reasonable cause u/s 273B - Amount taken by the assessee from the grandfather was not loan or deposit but was a financial help - HELD THAT:- It is clear from Second proviso to s. 269SS, that if the person from whom the loan is taken or accepted and the person by whom the loan is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act, s. 269SS does not apply to them. Sec. 269SS is a transaction specific and not related to any assessment year. Thus, the provision is attracted if say only on the date of taking or accepting the loan, the subsequent events do not govern the applicability of s. 269SS. Thus, on the date of acceptance of loan, if both the persons, namely, lender and borrower are having agricultural income and do not have income chargeable to tax under the IT Act, s. 269SS is not applicable. There is logic behind this. Penalty under s. 271D is attracted under IT Act for alleged violation of certain provision contained in IT Act. According to s. 2(7), assessee means a person by whom any tax or any other sum of money is payable under this Act. Thus, if no tax is payable by a person, he cannot be treated as an assessee so as to subject him to the rigors of ss. 269SS and 271D. Admittedly, in the present case, the lender, namely, Shri Rodhu Singh, grandfather of appellants herein, has only income from agricultural operations. All the three assessees prior to taking up of the loan did not have any income chargeable to tax under this Act. Only after the loan was received and invested in a partnership firm, income in the form of remuneration and interest accrued to them. However, before setting up of said business and on date of taking the loan, they did not have any other income. We accordingly hold that as per second proviso to s. 269SS, the provisions of s. 269SS shall not apply. In that view of the situation, s. 271D cannot be invoked to levy penalty for alleged default of s. 269SS. Time Limitation - Another show-cause notice - Since the action for imposition of penalty has been initiated on 10th Jan., 2003, as per s. 275(1)(c). the limitation period will expire on 31st July, 2003. Thus, the order passed under s. 271D by Addl. CIT dt. 29th Dec., 2003/15th Jan., 2004 is beyond the limitation and hence, not sustainable in law. Similar view has been adopted by Tribunal in the case of Hissaria Bros.[2001 (8) TMI 295 - ITAT JODHPUR] and in the case of Dillu Cine Enterprises (P) Ltd. [2001 (9) TMI 248 - ITAT HYDERABAD-A]. Hon'ble Bombay High Court in the case of Chhajer Packaging & Plastics (P) Ltd. [2007 (9) TMI 213 - BOMBAY HIGH COURT], we hold that the order imposing penalty is beyond the limitation period prescribed and hence, penalty under s. 271D is cancelled. We also find that the assessees were required to purchase land and factory premises along with machinery, etc. as per sale deed dt. 24th Sept., 1996. Since they did not have their own funds, the assessees received the financial assistance from their grandfather and paid the sale consideration in cash. Though the amount was received by way of bearer cheque, this shows the urgency of funds and hence, were unable to route such transaction through bank. In a way, it can be considered as a reasonable cause within the meaning of s. 273B of the Act. Since the assessee has demonstrated reasonable cause in view of s. 273B, penalty under s. 271D is not attracted. After all, the transaction between the assessees and their grandfather is to be viewed as a financial help coming from elders in the family. Assessees cannot be presumed to have knowledge of the intricacies of the tax laws. For them it is a technical breach, if any, and hence, in view of the authoritative pronouncement of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. [1969 (8) TMI 31 - SUPREME COURT], penalty cannot be levied for such technical or venial breach. We, therefore, cancel the penalty under s. 271D on this count also. In the result, all the appeals are allowed.
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