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TMI Blog2014 (7) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 7 Shri C R Shaji 150000 06.02.2009 Total 24,57,000 3.1 Before the AO, it was submitted by the assessee that the loans by way of cash were not for any business purpose and the amounts were taken by way of cash just for depositing in the bank account so as to get the visa on presentation of the copy of the bank accounts before the issuing authority to give them an impression that the assessee is having sufficient funds at his disposal. According to the assessee, the loans by way of cash were deposited in his bank accounts with South Indian Bank, Uzhavoor and Dhanalakshmi Bank, Pala and on the same day itself the loans were returned to the respective persons. On the basis of the above circumstances, it was pleaded before the AO that no penalty would be levied u/s 271D as there was reasonable cause as mentioned in sec. 273B of the I T Act. 3.2 The AO, without accepting the plea of the assessee levied the penalty u/s 271D of the Act to the tune of Rs. 24,57,000/-. On appeal, the CIT(A) deleted the penalty by observing that since the assessee has furnished source of funds and that was accepted by the department, then there is no reason to levy penalty as ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion has held as under: "Sec. 269SS of the IT Act, 1961, prescribing the mode of taking or accepting certain loans or deposits, is not discriminatory and is not violative of Art. 14 of the Constitution of India; nor was it enacted by Parliament without legislative competence. It cannot be said that s. 269SS deals with a subject outside the scope of the IT Act or that it relates to a topic not within the competence of Parliament. Nor are the provisions of s. 269SS or s. 27ID or s. 276DD unconstitutional on the ground that the provisions are draconian or expropriatory. The object of introducing s. 269SS is to ensure that a taxpayer 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 relatives 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 s. 269SS was to curb this menace of making false e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposition of penalty is a quasi-criminal proceeding. The satisfaction has to be reached by the AO objectively and on consideration of relevant materials only and to the total exclusion of extraneous and irrelevant considerations. 4.3 So from the aforesaid decisions of the Courts, the provision under s. 269SS has been held to be valid provision and while upholding such validity, at the same time, Hon'ble Supreme Court has held as under: "It is important to note that another provision, namely s. 273B was also incorporated which provides that notwithstanding anything contained in the provisions of s. 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of s. 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; "The principle that a fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions." 4.6. Therefore, subject to the existence of mitigating circumstances penalty cannot be deleted. The assessee must prove beyond the shadow of doubt that there existed a reasonable cause for not complying with the conditions contained in s. 269SS. Circumstances under which the cash was accepted must be explained. Unfortunately, no cogent material was produced in that direction. The exigency was stated to be the requirement for making payment to labour and for materials. How urgent that requirement was, is not known. The details were not furnished to establish as to what was immediate need/requirement on particular dates of taking loans and after taking of loan, how such need/requirement was met. The documents furnished do not indicate anything in this direction and are not relevant to establish any urgency. This indicates that the assessee could have complied with the requirements of s. 269SS of the Act, without much diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir bank accounts namely Cyriac Joseph, P K Stephen, V M Sunny, Shaji C.R Rajesh P T, K E Thomas, Justin Stephen. Thus, since the above persons are having bank accounts nothing prevented the assessee from taking or accepting the loans from the above persons by account payee cheques or bank draft. The assessee pleaded before the lower authorities that the assessee borrowed funds by way of cash; but there is no reasonable cause for accepting the money by the assessee by cash so as to get US Visa. The reason for returning the money immediately to the lenders cannot be a reason to delete the penalty. In our opinion, the assessee's case is not falling under the purview of section 273B of the IT Act so as to exonerate the assessee from the levy of penalty u/s 271D of the Act. More so, the judgment relied upon by the ld DR in the case of Shri K V George supports the view of the AO. Accordingly, we set aside the order of the CIT(A) and confirm the penalty levied by the AO. 6. Taking into consideration entirety of facts and circumstances, we are of the opinion that there existed no reasonable cause for accepting loans/deposits or aggregate of such loans/deposits of Rs. 20,000 or more fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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