TMI Blog2017 (7) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... y, out of total penalty of ₹ 53,55,925/- a sum of ₹ 31,15,000/- is deleted and balance of ₹ 22,40,925/- is confirmed. In so far as assessment years 2007-08 is concerned, the assessee has accepted cash loans of ₹ 10 lakhs from 2 persons. Though, the assessee claims to have accepted cash loans from the persons and repaid within the same financial year, the facts remain that the assessee has accepted the loans in cash in contravention of the provisions of section 269SS of the Act. The reasons given by the assessee that there is a business exigency in as much he needs to make the payment for purchase of landed properties, the reasons given by the assessee is not coming within the purview of reasonable cause as defined u/s 273B of the Act. Therefore, we are of the view that the A.O. was right in levying penalty of ₹ 10 lakhs u/s 271D of the Act, for contravention of the provisions of section 269SS of the Act. Accordingly, confirmed penalty levied by the A.O. - I.T.A.No.50 And 51/Vizag/2015 - - - Dated:- 8-11-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri M. Madhusudhan, Shri D.L. Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liged to accept the loans in the form of cash/bearer cheques to meet the urgent financial needs which could not be avoided due to the pressure mounted by the seller. The A.R. further submitted that these loans were accepted from close relatives and friends and the genuineness of the loans were not doubted by the A.O. in the reassessment proceedings u/s 143(3) r.w.s. 147 of the Act, wherein the A.O. has accepted the loans as genuine except to the extent of ₹ 5,47,800/- was added as unexplained credits from 3 parties. Except these 3 parties, remaining amounts have been accepted as genuine, therefore, levy of penalty u/s 271D of the Act for contravention of the provisions of section 269SS of the Act for the genuine transaction is unwarranted. 4. The A.O. after considering the explanations of the assessee and also gone through the judicial decisions relied upon by the assessee, held that as per the provisions of section 269SS of the Act, no person shall accept any loan or deposit of ₹ 20,000/- or more from any other person otherwise than by an account payee cheque or bank draft. If the provisions of section 269SS of the Act are not complied with, penalty proceedings u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be no penalty on the additions sustained by the A.O. As regards remaining amount of ₹ 53,55,925/-, the assessee submitted that out of the total credits of ₹ 53,55,925/-, a sum of ₹ 31,51,000/- were routed through banking channel by means of bearer cheques and that too most of them were undertaken with close relatives and associates. The balance amount of ₹ 22,40,925/- were raised by means of cash, however, the facts remains that these loans were accepted as genuine by the assessing officer in the assessment proceedings, therefore, the A.O. was incorrect in levying penalty on the genuine transactions. 6. The CIT(A) after considering the explanations of the assessee, held that out of total credits of ₹ 59,03,725/-, the A.O. disallowed a sum of ₹ 5,47,800/- accepted from Shri E. Venkateswara Rao, Shri P. Easwar Reddy and V. Balaji, as the assessee has not discharged the burden as required u/s 68 of the Act. Once the loans are treated as not genuine and consequentially deemed as assessee s own income, there could not be any penalty for violation of section 269SS of the Act, accordingly, directed the A.O. to delete the penalty levied of ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have noticed that the case is covered by section 273B of the Act and hence the impugned penalty may be devoid of any merit and may not be in conformity with the provisions of law. Without prejudice to the prayer that impugned penalty of ₹ 53,55,925/- is not sustainable in law, the assessee prays that the penalty u/s 271D of the Act is not leviable to the extent of ₹ 31,15,000/- taking note of the fact that the transaction to this extent was routed through banking channels in the form of bearer cheques as per the details recorded in the relevant assessment order. The A.R. further submitted that the assessee has raised the loans for the purpose of acquisition of landed properties to be used in his business for the purpose of re-sale and as such the same would come within the ambit of adventure in the nature of trade and as such transactions would not attract the provisions of section 269SS of the Act and accordingly the A.O. was erred in levying penalty u/s 271D of the Act. On the other hand, the Ld. D.R. strongly supported the order of CIT(A). 8. We have heard both the parties, perused the materials available on record and gone through the orders of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of account payee cheque or demand draft, then he shall be liable to pay, by way of penalty a sum equal to the amount of loan or deposit so taken or accepted. The object behind the insertion of section 269SS of the Act is to prevent the assessees from explaining away the unaccounted cash fund in the course of search as repaying loans or deposits taken from various persons and also from bringing into the books of accounts unaccounted income in the form of loans or deposits. Therefore, it is clear from the provisions of section 269SS of the Act, that the objects of insertion of this section is to prohibit persons explaining the unaccounted cash or assets by way of purported loan or deposit accepted in cash. A careful study of the provisions of section 269SS r.w.s. 271D of the Act, makes it clear that genuine transactions are not hit by the provisions of section 271D of the Act. Therefore, all genuine transactions are kept one side of the purview of rigorous penal provisions of section 271D of the Act. But, it is for the assessee to explain the reasonable cause which prevents the assessee accepting the loans otherwise than by way of account payee cheques or demand drafts to the sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd relatives and also part of the amount has been accepted through banking channels by way of bearer cheques, we are of the view that the genuine transactions accepted from close friends and relatives through banking chennal are not coming within the rigors of the provisions of section 271D of the Act. Therefore, we are of the view that out of the total credits of ₹ 53,55,925/-, a sum of ₹ 31,15,000/- has been accepted from close relatives through banking channels are not hit by the provisions of section 271D of the Act. Accordingly, considering the total facts and circumstances of the case, we are of the view that the A.O. was erred in levying penalty u/s 271D of the Act, to the extent of ₹ 31,15,000/- loans accepted from close relatives through banking channel. Hence, we direct the A.O. to exclude a sum of ₹ 31,15,000/- out of the total credit of ₹ 53,55,925/- for the purpose of levy of penalty u/s 271D of the Act. Accordingly, out of total penalty of ₹ 53,55,925/- a sum of ₹ 31,15,000/- is deleted and balance of ₹ 22,40,925/- is confirmed. 12. In so far as assessment years 2007-08 is concerned, the assessee has accepted cash loa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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