TMI Blog2013 (8) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... i T. M. Sreedharan For the Respondent : Smt Susan George/Sh M. Anil Kumar CIT-DR ORDER Per N. R. S Ganesan, JM:- This appeal by the revenue is directed against the order dated 1.12.2011 of the CIT(A)-IV and pertains to AY 2007-08 confirming the penalty levied under sec. 271 D of the I T Act. 2 Shri Anil Kumar, ld DR appeared for the department. During the year under consideration the tax audit report filed by the assessee discloses receipt of loan by cash exceeding ₹ 20,000/- to the extent of ₹ 29,47,500/-. Referring to section 269SS, the ld DR has submitted that no loan or deposit exceeding ₹ 20,000/- can be accepted otherwise than by crossed cheque or demand draft. The assessee violated the provisions of section 269SS; therefore, the AO levied penalty u/s 271D. Referring to the explanation of the assessee that he was carrying out agricultural operation on leased land in Tamilnadu, the ld DR submitted that the assessee has not filed any material before the lower authorities to establish the facts that he was cultivating agricultural land. Referring to section 269SS, the ld DR has pointed out that any loan or deposit accepted by an agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceeding ₹ 20,000/-, either as loan or deposit, penalty u/s 271D cannot be levied. In case it was found that the claim of receipt of loan or deposit is not genuine and in fact the assessee has introduced his own money in the name of a third party in the books of accounts, then no question of levying penalty u/s 271D. In that case, the assessee will be construed as if he has furnished inaccurate particulars of income and penalty would be levied u/s 271(1) ( c) of the Act for furnishing inaccurate particulars or concealing the particulars of income of the assessee. Therefore, according to the ld DR, the ld CIT(A) is not justified in deleting the addition. 2.4 On the contrary, Shri T M Sreedharan, ld Sr counsel for the assessee has submitted that when the loan or deposit taken by the assessee was accepted as genuine in the assessment proceedings, then there cannot be any levy of penalty u/s 271D. Referring to the unreported judgment of the Kerala High Court in the case of CIT vs P KShamsuddin (ITA No. 239 of 2011), a copy of which is available at page 26 of the paper book, the ld Sr counsel has submitted that when the department has accepted the source of the funds from whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ; (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette : [Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.] Explanation.--For the purposes of this section,-- [(i) banking company means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act ;] (ii) co-operative bank shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ; (iii) loan or deposit means loan or deposit of money.] 271D. [(1)] If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 269SS, one is left out for obvious reason; therefore, the ld Single Judge found that sec 269SS is violatile of article 14 of the Constitution of India . Accordingly, the criminal proceedings initiated against the assessee before the Madras High Court were quashed by the ld Single Judge. 3.4 This judgment of the ld Single Judge of the Madras High Court was challenged before the Apex Court in the case of Asst Director of Inspection (Investigation) vs Km A B Shanthi reported in 255 ITR 258. The Apex Court, after considering the objects behind the introduction of section 269SS and the judgment of the Constitution Bench of Apex Court in the case of S K Dutta, ITO vs Lawrence Singh Ingty reported in 68 ITR 272 (SC) found that taxation law is not open to attack on the ground that it taxes some persons or objects and not others. The Apex Court further found that a State does not have to tax everything in order to tax something. It was also found that the State can be allowed to pick and choose districts, objects, persons, methods and even rates for taxation, if it does so reasonability. The Apex Court further found that the object sought to be achieved was to eradicate the evil pract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation for the same. To a great extent, the problem could be solved by the impugned provision. 3.5 Ultimately, the Apex Court found that Sec 269SS does not in any way violative of Article 14 of Constitution of India and consequently, the judgment of the ld Single Judge of the Madras High Court in Km A B Shanti's case was set aside. 4 Referring to the provisions of section 273B, the Apex Court found that no penalty shall be imposable on the assessee for receiving or accepting loan or deposit otherwise than by account payee cheque or by account payee demand draft. The Apex Court found that undue hardship is very much mitigated by inclusion of section 273B in the Act. Ultimately, the Apex Court observed that if there was genuine and bonafide transaction and the taxpayer could not get a loan or deposit by account payee cheque or account payee demand drat for some bonafide reason, the authority vested with the power to impose penalty has a discretionary power not to levy the penalty. In fact the Apex Court observed as follows in page 266 of ITR as under: It is important to note that another provision, namely section 273B was also incorporated which provides that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the transaction of receiving loan in cash was genuine and therefore, there was a reasonable cause in accepting the money exceeding ₹ 20,000/- by way of cash. 5.2 We have carefully gone through the provisions of sec. 273B of the Act, which reads as under:- 273B. Notwithstanding anything contained in the provisions of 59[clause (b) of sub-section (1) of] 60[section 271, section 271A, 61[section 271AA,] section 271B 61[, section 271BA], 62[section 271BB,] section 271C, 63[section 271CA,] section 271D, section 271E, 64[section 271F, 65[section 271FA,] 66[section 271FB,] 67[section 271G,]] 68[section 271H,] clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA] or 69[section 272B or] 70[sub- section (1) 71[or sub-section (1A)] of section 272BB or] 72[sub-section (1) of section 272BBB or] clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause73 for the said failure.] 5.3 This section clearly shows tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69SS in not receiving the loan by way of account payee cheque or account payee demand draft and the genuineness of receipt of loan by cash itself per-se cannot constitute reasonable cause. In view of plain and unambiguous language in section 273B of the I T Act, the reasonable cause shall be for failure of the procedure or method provided in section 269SS. Therefore, this Tribunal is of the considered opinion that the contention of the ld Sr counsel that the genuineness of the receipt of loan by cash itself constitute reasonable cause has no merit at all. 6. We have carefully gone through the judgment of the Kerala High Court in the case of Shri P K Shamsudin (supra). The assessee, before the Kerala High Court, used several persons probably close relatives and friends to take loan from bank for his business purpose. Therefore, the Kerala High Court found that the relative or friend who borrowed loan for assessee's business may not able to issue cheque to assessee. Accordingly, after availing the loan from bank, the creditors withdraw cash from their respective accounts and gave the same to the assessee. The Kerala High Court found that there was a reasonable cause for not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly and hence, cash was accepted from sister concern and it was repaid in cash. The Madras High Court by placing reliance in its earlier decision in the case of Ratna Agencies (2006) 284 ITR 609 found that there was a reasonable cause. In the case of Ratna Agencies (supra), the money received was meager and it was incurred for meeting the sudden demand of overdrafts account. This was found to be a reasonable cause by the Madras High Court. Therefore, the judgment of the Madras High Court also may not be of any assistance to the assessee. 9 Now, coming to the judgment of the Madras High Court in the case of Kundrathur Finance Chit Co (supra), it was found that there was no banking facility for the depositors. In the absence of any bank facility, the Madras High Court found that receipt of money by cash was not considered to be in violation of provisions of sec. 269SS. In fact non availability of the banking facility was considered as a reasonable cause for receipt of money by way of cash and not the receipt of cash itself. 10 We have also carefully gone though the judgment of the Rajasthan High Court in the case of Manoj Lalwani (supra). In this case, the Rajasthan High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money for setting up of industry in Kerala was accepted, then there is no question of receiving money prior to 2006. Therefore, the submissions/argument of the ld Sr counsel is contrary to the explanation of the assessee before the lower authorities. Therefore, this Tribunal do not find any merit in the argument of the ld Sr counsel. Setting up an industry/business is a long process. Therefore, it is for the assessee to demonstrate with sufficient material and the specific urgent situation to be met by receipt of cash. In the absence of any plea that the assessee has to meet any specific urgent needs, the Tribunal could not see any reasonable cause for receiving the loan by way of cash. 13 The next contention of the ld Sr counsel is that the assessee was an agriculturist and he has received money from agriculturist; therefore, section 269SS is not applicable. 13.1 We have carefully gone through the provisions of sect. 269SS more particularly 2nd proviso to sec. 269SS. If deposit of loan was taken by an agriculturist from an agriculturist and neither of them of have any income chargeable to tax, then provisions of sec. 269SS is not applicable. 13.2 In the case before us, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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