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TMI Blog2013 (8) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and is hence distinguishable and inapplicable to the penalty under Section 271-D of the Act? ii) Whether imposition of penalty under Section 271-D of the Act can be mandatory and automatic for violation of Section 269SS of the Act in view of the judgment of Dharmendra Textile Processors when Section 273B provides for reasonable cause before imposition of penalty and has overriding effect over S.271D of the Act? iii) Whether the tribunal was justified in confirming the penalty under Section 271D of the Act merely on the technical mistake which has not resulted in any loss of revenue, and also in the absence of any finding that the transaction made by the assessee was not genuine or was malafide with the sole object of willful concealment. iv) Whether the tribunal was justified in confirming the penalty by giving the perverse finding and overlooking the evidences on record, which proves that the loan was taken by appellant in urgent need of money and hence there was reasonable cause as per Section 273B of the Act? v) Whether the tribunal was justified in confirming the penalty by overlooking the fact that the appellant has himself disclosed about the factum of taking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances forced the assessee to take quick action to save the property. The assessee collected the money from all sources/relatives in a hurry having no time for clearance of bank draft/cheques, as the money had to be paid to the bank to save the property. The evidence of agriculture income/land of the four persons was given in the reply to be treated as exception to the proceeding for penalty. 5. The AO did not accept the explanation and imposed penalty by an order against which the assessee filed an appeal. In appeal after considering the submissions and the explanation all over again the Appellate Authority held as follows:- "..Thus, in sum, I find that appellant, inspite of a detailed narration of circumstances including the emotional aspect, has utterly failed to convince me as to how these loan funds were urgently needed. Once the cause regarding urgent need has not been specified; the cause loses the character of "reasonableness". 4.1. It is to further clarify that genuineness of the transaction does not have to do anything with the statutory requirement of Section 271D. In other words, even if loan transactions are fully genuine; still the assessee has to discharge his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground of ignorance of law. It is clear to me that ignorance of legal provision has been mentioned by the appellant's counsel, as an alternative argument, in a passing manner and without being sincere about it. 4.4. It is high time that such cash loans are viewed adversely, otherwise the purpose of legal provisions like section 269SS and 271D of the Act would never be fulfilled. 4.5 In sum, I hold that as the assessee failed to explain any reasonable cause for raising the impugned cash loans; the Addl. CIT was justified in imposing penalty u/s 271D of the Act. 5. In the result, the appeal is dismissed." 6. The ITAT in the second appeal filed by the assessee once again considered the explanation and did not find it to be reasonable. The findings of the ITAT in paragraphs 13, 14 and 18 of the order dismissing the appeal are quoted as follows:- "13. On the contrary the assessing officer while imposing penalty under section 271-D of the Act has stated that the assessee purchased lands for Rs.6 lacs and sources of investment was explained from loans taken from relatives. This fact is evident from the return of income also. Sh. Mahak Singh, the assessee and Sh. Neeraj Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan has not been proved with the evidence. The bona fide reasons have not been demonstrated with evidence. The assessee after having been caught has taken a stand that he arranged the money in hurry to save the honour of the family and his father, which is contrary to the facts, as stated above. In our considered view, the assessee has not proved that there existed urgency constituting a reasonable cause for violation of provisions of section 269SS of the Act. All the four persons had bank accounts enjoying pension income or professional income and the assessee himself is a salaried person. The money could have been transferred to his account for which there was sufficient time. It is also a settled law as held by Hon'ble Supreme Court in the case of Union of India vs. Dharmendra Textiles Processors (supra) that mens rea is not an essential ingredient for attracting civil liability like penalty u/s 271D of the Act. In view of the above discussion, in our considered opinion, penalty under Section 271-D of the Act is exigible. Accordingly, we do not find any infirmity in the order passed by the ld. CIT (Appeals) confirming the penalty of Rs.8,00,000/-. 19. In the result, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such loan or deposit or the aggregate amount of such loan and deposit is Rs. 10,000 or more. This prohibition will also apply in cases where 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), and the amount or the aggregate amount remaining unpaid is Rs.10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken is Rs.10,000 or more." 8. Shri Shubham Agarwal has relied on Asst. Director of Inspection (Investigation) v. Kum. A.B. Shanthi 255 ITR 258, and Chamundi Granites Pvt. Ltd vs. Deputy Commissioner of Income Tax and another 2002 (255) ITR 258 and a judgment of Jharkhand High Court in Omec Engineers v. Commissioner of Income Tax (2007) 294 ITR 599 (Jharkhand). In Asst. Director of Inspection (Investigation) v. Kum. A.B. Shanthi (supra) the Supreme Court explained the object and purpose of inserting Section 269SS and the Scheme of the Act for levying penalty under Sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ITR 249, a Bench of the Calcutta High Court while considering the provisions of section 271 (1) (c) following the decision of the Supreme Court in case of Hindustan Steel Ltd's case (1972) 83 ITR 26, observed that it is not mandatory under section 271 that a penalty must be imposed in every case. The words "reasonable Cause" have not been defined under the Act but they could receive the same interpretation which is given to the expression "sufficient cause". Therefore, in the context of the penalty provisions, the words "reasonable cause" would mean a cause which is beyond the control of the assessee. "Reasonable cause" obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides. Before imposition of penalty under Section 271, the Assessing Officer must be satisfied, not arbitrarily but judiciously, that the assessee has without reasonable cause failed to comply with the provisions. In the instant case, as noticed above, there is no finding of the assessing authority, the appellate authority or the Tribunal that the transaction made by the assessee in breach of the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taken of the cash loans, but also to bring about a financial discipline in the business and trade for maintaining transparency and accountability in the transactions. He submits that penalty for non-compliance of provisions of Section 269SS can be avoided if it is proved under Section 273B that there was reasonable cause for failing to comply with Section 269SS. He has relied on Auto Piston Mfg. Co. (P) Ltd vs. Commissioner of Income Tax (2013) 355 ITR 414 ( P&H), in which the findings recorded by the Income Tax Authorities, that there were no such facts which would constitute 'reasonable cause' under Section 271D, were held to be findings of facts. 12. We have perused the findings and have examined the provisions of the Act as well as decisions cited at the bar. There is no dispute that in the present case the amount of loan was raised and was deposited in the bank to save the agricultural land from being sold in recovery proceedings. The assessee, however, could not satisfactorily give explanation for the alleged hurry in which he had to arrange the money to be deposited in bank for release of the property. The explanation given by the assessee was not accepted by either AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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