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2015 (7) TMI 201 - ITAT HYDERABAD

2015 (7) TMI 201 - ITAT HYDERABAD - TMI - Penalty u/s 271D - violating the provisions of section 269SS - Held that:- The confirmation letter from the creditor has been produced. The assessee brought out the need for taking loan in cash by giving reason that financial loss would be incurred if the deal had not been concluded immediately and also the flat chosen by him could not be available later. The ld Counsel for the assessee explained as to what constituted reasonable cause and hence prayed f .....

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AO shall examine the entire issue after giving reasonable opportunity to the assessee and decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes. - ITA No. 1930 & 1931/Hyd/2014 - Dated:- 17-6-2015 - Shri B. Ramakotaiah & Smt.Asha Vijayaraghavan, JJ. For the Petitioner : Smt. K. Vijayalakshmi For the Respondent : Shri Rajat Mitra, DR ORDER Per Smt. Asha Vijayaraghavan, J.M. These are the appeals preferred by the assessee against the order of the CIT .....

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16-2-751/A, Flat No.404, BDR Towers, Karanbagh, Asmanghad, Saidabad, Hyderabad on 10.05.2009 thereby violating the provisions of section 269SS of the I.T. Act. Accordingly, on a reference made in this regard by the Income Tax Officer Ward 9(3) Hyderabad, penalty notice u/s 271D of the I.T. Act was issued to the assessee on 25.04.2013 which was duly served on the assessee. The assessee filed reply dated 17.05.2013 as under: During the course of assessment proceedings the AO required to prove the .....

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e said interest. The AO while completing the assessment accepted the cash credit as genuine. Therefore, the assessee humbly submits that it is a genuine cash credit. There is no doubt with regard to the genuineness of the transaction. It is further submitted that: (a) On 10.05.2009 the assessee was in urgent need of the said amount. The day 10.05.2009 happened to be a bank holiday being Sunday and there was no banking operations on the said day. (b) The amount was required for the immediate busi .....

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considering the reply of the assessee held that while making addition u/s 68 of the I.T. Act, the genuineness of the loan/transaction has to be established and in the present case the assessee has placed undue reliance on the fact that Shri E. Kotaiah has confirmed that he has given a loan of ₹ 30.00 lakhs in cash to the assessee on 10.05.2009. It was observed by the Add. CIT that the assessee has claimed that the loan in cash was taken to pay advance to M/s. Progressive Hotels Pvt Ltd as .....

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to make payment for purchase of apartment. As the sale deed was executed on 05.02.2010 after a gap of nearly 8 months, the assessee could have very well waited for one more day to allow the banking operations to run and should have obtained the loan by means of an account payee cheque/ account payee bank draft, so as not to contravene the provisions of law. Hence, the claim of the assessee that he was prevented by sufficient reason in not complying with the provisions of section 269SS of the I.T .....

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Act and observed that the reasons cited by the assessee did not suggest dire requirement of funds with no exceptional circumstances prevailed which made the assessee accept the cash loan. The Add. CIT levied penalty u/s 271D of the IT Act which is equal to the amount of loan accepted and hence levied a penalty of ₹ 30.00 lakhs u/s 271D of the I.T. Act. 7. Aggrieved, the assessee is in appeal before us. The ld Counsel of the assessee Smt. Vijayalakshmi submitted that assessee had entered in .....

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of ₹ 30.00 lakhs which was. obtained during the course of the day. It was argued that the assessee could not have waited for another day or for the next 3 days which would have been the normal time for encashment of a cheque. It was submitted that if the assessee had not given the payment immediately, the chosen flat could have been sold out or even if was not sold, it might not be available for purchase by the assessee at the amount negotiated on 10-5-2009. It was prayed that on these fa .....

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ed on by the Additional CIT. The ld Counsel submitted that the decision of the Hon'ble Supreme Court in the case of Gujarat Travancore Agency vs. CIT (177 ITR 455) is not applicable to the facts of the case. It was argued that penalty u/s.271 D is governed by the provisions of section 273B and this section provides that penalty u/s.27l D cannot be levied if it is proved that the failure was occasioned by a reasonable cause. It was submitted that if the assessee is able to establish the exist .....

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ssessee was not reasonable and yet the Tribunal deleted the penalty on the ground that it was not a case of absolute default. The ld Counsel brought to our notice that the Addl. CIT also relied upon the decision in Chamundi Granites (P) Ltd. v. DCIT (239 ITR 694). It was submitted that question before the Court in the case of Chamundi Granite was whether the provisions of section 269SS and section 271 D were constitutionally valid or not and the Hon ble High Court held that the provisions are no .....

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or one more day. It was pointed out by the ld Counsel that such advice may not be apt considering that delay would have caused the assessee financial damage and loss of the chosen flat. The ld Counsel submitted that the day on which the cash loan was taken happened to be a bank holiday and as this was a financial transaction of some urgency and as there was dire need for money and the bank was closed being Sunday, the assessee, had no choice but to raise a loan from Shri E. Kotaiah. Therefore, i .....

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sonable and therefore penalty was not exigible. The ld Counsel relied on CIT v. Bombay Conductors and Electronics Ld. (2008) 301 ITR 328 (Guj.), the High Court held in this case that penalty u/s.271 D is not automatic and that since breach in the case was only technical, penalty not was not leviable. The ld Counsel also relied on CIT v. Triumph International Finance (1) Ltd. (2012) 345 ITR 270 (Born.), wherein the High Court held as below: The cause which is reasonable may not be sufficient. Thu .....

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this case, the High Court held that the explanation constituted a reasonable cause and the penalty was deleted. The ld Counsel further relied on the following decisions: a) CIT v. Saini Medical Stores (2006) 150 Taxmann 246 (P&H). b) Dillu Cine Enterprise (P) Ltd. v. CIT (2002) 80 ITD 484 (Hyd.Trib.) c) Hindustan Steel Ltd. v. State of Orissa (83 ITR 26), d) CIT (Addl) v. Durgapandarinath Tuljayya & Co (1977) 107 ITR 850 (AP) (FB), 13. The ld Counsel relied on in the case of CIT v. Balaj .....

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enuine and the identity of lenders was established and there was no intention to avoid tax. 15. The facts are that on 10.05.2009, the assessee stated that he was in urgent need of an amount of ₹ 30.00 lakhs for booking the flat and had borrowed ₹ 30.00 lakhs in cash from Shri E. Kotaiah. It was submitted that the payment of advance to the builder immediately on a Sunday was due to the financial gain which would be obtained in terms of discount and availability of flat of assessee s c .....

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t be available later. The ld Counsel for the assessee explained as to what constituted reasonable cause and hence prayed for the penalty to be deleted. 18. However, we also notice that there has been a long gap from the time of taking the cash loan i.e. 10.05.2009 and the Registration of the Sale Deed which was only on 5th day of February, 2010. 19. We are of the opinion that the issue needs further verification by the AO as to whether the amount has been received by M/s. Progressive Hotels Ltd .....

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om one Mr. E. Kotaiah on 10.05.2009 which was shown to have been repaid ₹ 10.00 lakhs on 09.08.2009 in cash and ₹ 20.00 lakhs through cheque on 20.02.2010. Though the genuineness of the loan were accepted by the AO, penalty proceedings were initiated u/s 271D and 271E for violations of provisions of section 269SS and 239T of the I.T. Act, separately for obtaining the cash loan of ₹ 30.00 lakhs and repayment of loan in cash to the tune of ₹ 10.00 lakhs respectively. In the .....

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cheque since it was a Sunday. Hence, assessee pleaded that there was a reasonable cause for delay in returning the cash. The assessee stated that the urgency of the need emphasized by Mr. Kotaiah was the reason that the cash was given on Sunday, instead of payment by cheque on subsequent day. Assessee relied on the judicial decision which laid down that the penalty can be deleted in case there appeared a reasonable cause for payment in cash. The CIT (A) held as follows: 5.2……&hell .....

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