TMI Blog2006 (4) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... r Shri Chandrakanth P Sanu found that the assessee has borrowed a sum of Rs. 18,50,000 during assessment year 1992-93 and Rs. 9,50,000 during assessment year 1993-94 otherwise than by account payee cheques or bank drafts. He, accordingly, levied penalty under section 271D of the Act. Learned CIT(A), while confirming the penalty, held as under: "The most relevant aspect in this case, requiring necessary consideration would be with reference to a reasonable cause for contravention of the provisions contained in section 269SS of the Act by the appellant, within the meaning of section 273B of the Act. It is found from the details furnished before me that the cash loans received from Sri Chandrakanth P Sanu have been mostly utilized for dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a sum of Rs. 17,90,529 on 3-9-1991, the credit has been given in the account of Sri Chandrakanth P Sanu from M/s Alfareed Sons by passing a journal entry and all other amounts are apparently received in cash. Under the circumstances, I am constrained to hold that the Addl. Commissioner is justified in levying the penalty under section 271D of the Act". 3. Learned counsel for assessee Shri V Srinivasan explaining the fact submitted that the appellant is a closely held company and the amount received from the Managing Director of the appellant Sri Chandrakanth P Sanu cannot be considered as loan or deposit. The appellant has issued various cheques to various parties. Since the appellant was short of funds and there was no credit fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such circumstances as present one. In view of the reasonable cause, penalty under section 271D is not attracted. 4. Learned DR on the other hand strongly supported the appellate order. He submitted that no exceptional circumstances are demonstrated. The transactions were done several times during the year. Even if the amount taken is genuine transaction, it still amounts to violation of provision of section 269SS and unless there is reasonable cause, penalty under section 271D will be attracted. 5. We have carefully considered the relevant facts, arguments advanced and the decisions cited. Section 269SS provides that no person shall, after the 30th day of June, 1984, take or accept from any other person any loan or deposit otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s received in violation of provisions of section 269SS, it amounts to a reasonable cause. Section 273B provides that if the assessee is able to demonstrate a reasonable cause, no penalty shall be imposable for the said failure. We accordingly hold that in view of the reasonable cause existing at the relevant point of time, penalty under section 271D is not leviable. 5.1 The provision of section 269SS was brought on the statute to curb the practice whereby the assessee used to explain the cash found in the course of search by way of receiving loan taken or deposit accepted from various persons. Thus, it was to counter the device of tax evasion which enable the assessee to explain unaccounted cash or unaccounted deposits. Testing the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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