2014 (8) TMI 603 - HC - Income Tax

Penalty u/s 271D Cash loans received from creditors Reasonable cause for taking loans explained by assessee or not - Held that - The sundry loans have been extended by the agriculturists within the limits prescribed u/s 269SS of the Income Tax Act and the bonafides of the transactions is not doubted - The genuineness of the sundry creditors have also been verified - The assessee has also given reasonable explanation for availing such loan which has been accepted by the Authorities below - the CIT(A) and Tribunal are justified in holding that there was no case for invocation of Section 271D of the Income Tax Act on the alleged violation of Section 269SS because as the assessee has satisfied the test of reasonable cause as required u/s 273B of the Income Tax Act - Relying upon Asst. Director of Inspection (Investigation) Versus Kumari AB Shanthi 2002 (5) TMI 4 - SUPREME Court - the genuineness of the creditors have been verified and the transactions were never doubted by the Authorities below there was no reason to interfere with the order of the Tribunal as the reasonable cause is a finding of fact Decided against Revenue.

Summary

Issues:
1. Upholding deletion of penalty under Section 271D
2. Deletion of penalty for cash loans received from creditors
3. Reasonable cause for availing loans in cash

Analysis:

Issue 1: Upholding deletion of penalty under Section 271D
The case involved appeals by the Revenue against the order of the Income Tax Appellate Tribunal regarding the deletion of a penalty under Section 271D. The Commissioner of Income Tax (Appeals) accepted the contention of the assessee that the penalty proceedings were not sustainable on the ground of limitation and on merits. The Tribunal partly allowed the appeal, holding that the penalty imposed under Section 271D was not barred by limitation. The Tribunal upheld the findings that the loan transactions were genuine, and the loans received were below the prescribed limit. The genuineness of the loans was verified, and the Tribunal confirmed that there was no reason to doubt the credibility of the transactions. The Tribunal concluded that the assessee had successfully discharged the burden of proving the genuineness of the loans, and there was no concealment of facts. Therefore, the Tribunal upheld the order of the Commissioner of Income Tax (Appeals) regarding the deletion of the penalty under Section 271D.

Issue 2: Deletion of penalty for cash loans received from creditors
The case also dealt with the deletion of penalties for cash loans received from creditors. The assessee had taken cash loans from agriculturists below a specified amount, and the genuineness of the loans was verified through confirmation letters and ledger abstracts. The Commissioner of Income Tax (Appeals) accepted that the loans were genuine and that there was a reasonable cause for availing the loans in cash. The Tribunal concurred with these findings, emphasizing that the loans were below the prescribed limit and the creditors had provided explicit confirmation that the loans were given as hand loans due to the absence of banking facilities. The Tribunal found no reason to doubt the genuineness of the transactions and upheld the decision to delete the penalty imposed by the Additional Commissioner under Section 271D.

Issue 3: Reasonable cause for availing loans in cash
The Revenue contended that there was no reasonable cause shown for taking cash loans, especially since the assessee did not have agricultural income. However, the Authorities below accepted that the sundry loans were extended by agriculturists within the limits prescribed by the Income Tax Act. The genuineness of the transactions was verified, and the assessee provided a reasonable explanation for availing the loans in cash. The Tribunal held that the assessee had satisfied the test of reasonable cause under Section 273B of the Income Tax Act. The Tribunal cited previous judgments emphasizing the importance of proving reasonable cause for failures related to loan transactions. The Tribunal distinguished a previous case relied upon by the Revenue, where no reasonable cause was shown for taking cash loans. In this case, the Tribunal found that the assessee had demonstrated a reasonable cause for availing loans in cash from agriculturists, and the genuineness of the transactions was verified. Therefore, the Tribunal upheld the decision to dismiss the appeals, as there was no substantial question of law arising for consideration.

In conclusion, the High Court dismissed the Tax Case (Appeals) as the assessee had satisfied the test of reasonable cause for availing loans in cash, and the genuineness of the transactions was verified, leading to the deletion of penalties under Section 271D.