TMI Blog2012 (10) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have taken the loan from Samajwadi Party through banking channel through cheque, it would have taken some time for process in clearing. Since the amount is deposited in the joint account of the assessee on 23.06.2005 and was withdrawn on the same day for making cash payment to the Nazul Authority, there can be no reason to doubt the bona fide of the assessee. Thus, the assessee has been able to prove that for bona fide reasons the assessee had taken cash loan from his own party (Samajwadi Party) and entered into the genuine transaction. Routing of the cash deposit through the bank account of the assessee without direct receipt and payment of the impugned cash would further endorse the bona fide of the assessee. Section 269SS did not prohibit taking of loan in cash from political party or otherwise. It simply provides mode of taking or accepting certain loans and deposits instead of cash. The prohibition is provided under these provisions for taking or accepting from any other person a loan or deposit otherwise than by account payee cheque or draft if it exceeded the prescribed limit. Therefore, whether Samajwadi Party had no provision in their Constitution for giving loan o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,604/- has been debited to the account of the assessee. The amount has subsequently been paid back to the Samajwadi Party on 24.08.2005. It was noted by the AO that the assessee has taken cash loan from Samajwadi Party in contravention of the provisions of section 269SS of the IT Act and as such, liable for penalty u/s. 271D of the IT Act. Accordingly, the matter was referred to the Addl. Commissioner of Income-tax, Firozabad. Proceedings u/s. 271D were, accordingly, initiated by issuing notice to the assessee. The assessee filed written submissions stating therein about his ignorance to the provisions of section 269SS and also stated that there is no doubt about the genuineness of the transaction. The AO quoted some part of his reply in the penalty order, in which the assessee explained that as the funds were urgently required and the assessee was not having requisite funds at that point of time, therefore, Samajwadi Party, of which the assessee is a Member, came forward by depositing the amount directly in their bank account maintained in State Bank of India, Lucknow. The assessee was in urgent need of funds for getting the property converted into free hold property and was unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was of the view that the above provision is inserted in the Income-tax Act with a view to countering cash transactions. In the case of assessee, there is no reasonable cause. The assessee's case neither falls in any exceptional clause of section 269SS nor he produced any evidence to prove the urgency of depositing cash directly avoiding the transaction through banking channel. Nothing was brought on record that Nazul Department has put any condition or limitation or date by which the amount was to be deposited. No exigency has been brought on record. Accordingly, it was held that the assessee has no reasonable cause to accept the deposits/loans in cash. It was, therefore, held that the assessee has violated the provisions of section 269SS and accordingly, penalty was levied u/s. 271D of the IT Act. 5. The penalty order was challenged before the ld. CIT(A) and the same submissions were reiterated and the decision of Hon'ble Supreme Court in the case of Addl. Director of Income-tax v. Kum. A.B. Shanthi v. ADI, 255 ITR 258 was relied. It was submitted that the assessee was in need of money, which was deposited by his party into his account, which was ultimately paid to Nazul Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn for the purpose of making payment to the Government Authority for conversion of land from lease hold to free hold. No bona fide has been shown by the assessee and there is a contradiction in the submissions of the assessee. There was no urgency of Nazul Department shown for deposit of amount in cash. Thus, the assessee failed to explain any reasonable cause for failure to comply with the provisions of the Act. No evidence showing urgency has been filed for taking cash loan and alternatively no urgency has been proved by the assessee. The ld. DR relied upon certain Tribunal decisions as were filed with letter of the Jr. DR dated 31.07.2012. 7. On the other hand, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the assessee was in need of money for getting the lease hold property converted into free hold. Genuineness of the transaction has not been disputed by the authorities below. There is no prohibition in the Constitution of Samajwadi Party to give loan/deposit to the assessee. Copy of the assessment order u/s. 143(3) dated 04.07.2008 for the assessment year under appeal is filed to show that the AO at the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if, (a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), Is twenty thousand rupees or more : Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by, (a) Government ; (b) any banking company, post office savings bank or co-operative bank ; (c) any corporation established by a Central, State or Provincial Act ; (d) any 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 Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act with a view to countering the various devices adopted by the tax evaders for explaining their unaccounted cash found during the course of search or for introducing their unaccounted income in the form of loans and deposits and it was introduced for countering the major economic evil of proliferation of black money etc. Hon'ble Supreme Court in the case of ADI v. Kum. A.B. Shanthi, 255 ITR 258, considering the constitutional validity of above provision held as under : "The object of introducing sec. 269SS is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money or if he makes some false entries, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relative or friends and it is easy for the so-called lender also to manipulate his records to suit the plea of the taxpayer. The main object of sec. 269SS was to curb the menace of making false entries in the account books and later giving an explanation for the same. The undue hardship of the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conceal money. Consequently, penalty imposed under section 271D merely on technical mistake committed by the assessee, which had not resulted in any loss of revenue, was harsh and could not be sustained in law." 8.9 Hon'ble Punjab Haryana High Court in the case of CIT v. Speedways Rubber Pvt. Limited, 326 ITR 31 held - "The Assessing Officer initiated proceedings for the violation of section 269SS of the Income-tax Act, 1961, inasmuch as the assessee accepted share application money of Rs.20,000 in cash. Thereafter, penalty was imposed. The Commissioner (Appeals) upheld the stand of the assessee that the amount received was not loan or deposit and no interest was payable that the transaction was bona fide, that the default was of technical nature and that in any case, the amount was received from the public and not from directors or shareholders. The Tribunal affirmed the view. On appeal : Held, dismissing the appeal, that in view of the finding to the effect that the transaction was bona fide and the default was of technical nature the cancellation of penalty was justified." 8.10 Hon'ble Gujrat High Court in the case of CIT v. Bombay Conductors and Electricals Ltd., 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of loan to Samajwadi Party. The AO did not dispute the genuineness of the transaction entered into between the assessee and Samajwadi Party and no addition has been made in this regard. The above facts would clearly reveal that on 23.06.2005 when Samajwadi Party deposited the amount in cash in the joint account of the assessee, the assessee was in dire need of (cash) money because on the same day the amount in cash was withdrawn from the joint account of the assessee and was deposited with the Nazul Department. It is supported by the challan of the treasury and the registered deed executed by the Nazul Officer on 23.06.2005 and 24.6.2005. If the assessee would have taken the loan from Samajwadi Party through banking channel through cheque, it would have taken some time for process in clearing. Since the amount is deposited in the joint account of the assessee on 23.06.2005 and was withdrawn on the same day for making cash payment to the Nazul Authority, there can be no reason to doubt the bona fide of the assessee. Thus, the assessee has been able to prove that for bona fide reasons the assessee had taken cash loan from his own party (Samajwadi Party) and entered into the genuine t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, we are of the view that the assessee has been able to explain reasonable cause for failure to comply with the provision of law. Therefore, the ld. CIT(A) rightly deleted the penalty in the matter. The decisions of the Tribunal cited by the ld. DR cannot be given preference against the decisions of Hon'ble High Court and Supreme Court referred to above. Similarly, the ld. Counsel for the assessee cited other decisions of the Tribunal and other High Courts, but in our opinion they are clearly distinguishable to the facts of the present case. They are not discussed here because it would only enhance the length of the order. 9. Before proceeding further, it is necessary to consider one more contention raised by the ld. DR that Samajwadi Party is not authorized to give any loan or advance to the assessee. Therefore, the genuineness of the transaction should be doubted in this case. The record reveals that earlier Bench of Tribunal after conclusion of the hearing re-fixed the case for hearing and directed the ld. Counsel for the assessee to file copy of Rules and Regulations of the Samajwadi Party along with relevant provision in the rule, which would permit advancing of loan to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained in section 269SS of the Act. The above provision did not prohibit taking of loan in cash from political party or otherwise. It simply provides mode of taking or accepting certain loans and deposits instead of cash. The prohibition is provided under these provisions for taking or accepting from any other person a loan or deposit otherwise than by account payee cheque or draft if it exceeded the prescribed limit. Therefore, whether Samajwadi Party had no provision in their Constitution for giving loan or advance to the assessee, would not be relevant criteria to decide the issue of levy of penalty u/s. 271D of the IT Act. Further, Samajwadi Party has filed their confirmation that the impugned loan was given to the assessee and his wife, which was repaid later on through banking channel. The AO in the regular assessment proceedings also did not doubt the genuineness of the transaction between the Samajwadi Party and the assessee his wife. Therefore, the objection of the ld. DR has no relevance to matter in issue and accordingly, the same is rejected. 10. Now, we come to a point raised by the ld. Counsel for the assessee about the immature age of the assessee and his ignoranc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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