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2015 (8) TMI 992 - ALLAHABAD HIGH COURT

2015 (8) TMI 992 - ALLAHABAD HIGH COURT - [2015] 379 ITR 177 (All) - Penalty under Section 271D - violation of provisions of Section 269SS - assessee filed her reply stating that since she did not had the requisite funds at that point of time and the funds were urgently required for conversion of the property, a loan was taken from the Samajwadi Party, which was deposited in her account and, subsequently, the loan was paid back to the Samajwadi Party - ITAT deleted penalty - Held that:- Even tho .....

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assessee could have taken the loan through cheque and should have processed the matter through regular banking channels is immaterial, inasmuch as the genuineness of the transaction has not been disputed by the Assessing Officer. Further, we find that the cash was deposited in the bank account of the assessee and the money was thereafter, routed through the banking channel for payment to the government for converting the land into free hold property.

Thus as reasonable cause had been .....

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ing decided together. For facility, the facts of Income Tax Appeal No.174 of 2015 is being taken into consideration. The present dispute relates to the assessment year 2006-07. The assessee claims to be deriving income from companies for her services as a Director, income from house property and income from business of purchase and sale of foodgrains. The return was processed under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) but subsequently, the case was sele .....

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ssee and her husband vide deed executed on 24th June, 2005 on a total cost of ₹ 44,67,208/-. The Assessing Officer noticed that 50% of the amount i.e. ₹ 22,33,604/- was taken in cash as an unsecured loan from Samajwadi Party for the purpose of converting lease hold land into free hold land. The cash amount taken from Samajwadi Party was deposited in the joint account of the assessee along with her husband. The amount was subsequently, paid back to the Samajwadi Party on 24th August, .....

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which was deposited in her account and, subsequently, the loan was paid back to the Samajwadi Party. It was contended that the transaction of loan was found to be genuine in assessment proceedings and, therefore, the assessee could not be subjected to penalty. It was further urged that the assessee was not aware of the provisions of Section 269SS of the Act. The Additional Commissioner of Income Tax, after considering the matter, held that the assessee's case did not fall under the exception .....

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ed and the order of penalty was set aside. The department, being aggrieved by the appellate order, filed an appeal before the Tribunal, which was dismissed. Consequently, the present appeal has been filed by the department under Section 260A of the Act. In this background, we have heard Sri Ashok Kumar, the learned counsel for the appellant and Sri Vijay Bahadur Singh, the learned Senior Counsel assisted by Sri Udai Pratap Singh and Sri Shivam Yadav, the learned counsel for the assessee. The sho .....

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onsequently, by operation of law, the penalty was rightly imposed, which had wrongly been deleted by the appellate authorities. The learned counsel contended that there was no urgency for the assessee to receive the entire amount in cash nor any dire need was shown for taking such huge amount in cash. In support of his submission, the learned counsel has placed reliance upon a decision of the Punjab and Haryana High Court, Charan Dass Ashok Kumar Vs. Commissioner of Income Tax, 365 ITR 367 and A .....

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an was genuine. The learned counsel submitted that in the absence of any finding that the transaction of loan was not genuine or it was a sham transaction to cover unaccounted money, no penalty could be imposed. In support of his submission, the learned Senior Counsel relied upon a decision of Gauhati High Court in Commissioner of Income Tax Vs. Bhagwati Prasad Bajoria (HUF), 263 ITR 487, Chamundi Granites Pvt. Ltd. Vs. Deputy Commissioner of Income Tax, 255 ITR 258 and M. Janardhana Rao Vs. Joi .....

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ecified sum, otherwise than by account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if - (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due o .....

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r co-operative bank; (c) any corporation established by a Central, State or Provincial Act; (d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: Provided further that the provisions of this section shall not apply to any loan or .....

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or banking institution referred to in section 51 of that Act; (ii) "co-operative bank" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (iii) "loan or deposit" means loan or deposit of money; (iv) "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property whether or not the transfer takes place. 271D.(1) If a person takes or accepts any .....

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A, section 271D, section 271E, section 271F, section 271FA, section 271FAB, section 271FB, section 271G, section 271GA, section 271H, section 271-I, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA, or section 272B or sub-section (1) or sub-section (1A) of section 272BB or clause (b) of sub-section (1) of section or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assesse .....

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sually gave an explanation that he had borrowed or received deposits from his relatives or friends and, consequently, it became easy for the so called lender to manipulate his record to suit the plea of the tax payer. In order to curb this menace, Section 269SS of the Act was introduced to do away with the menace of making false entries in the account books and later give an explanation for the same. Section 269SS of the Act consequently, required that no person shall take or accept any loan or .....

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transaction. The legislature accordingly, introduced Section 273B of the Act, which provided that if there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by an account payee cheque or demand transaction for some bonafide reason, the authority vested with the power to impose penalty had a discretion not to levy the penalty. In Chamundi Granites (supra) the Supreme Court considered the provision of Section 271D and 273B of the Act and held:- "It is i .....

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t-payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account-payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power." In Bhagwati Prasad Bajoria's (supra) the Gauhati High Court held: " .....

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r of the lender. When there is an immediate need of money the person cannot get such money from the nationalised bank to satisfy the immediate requirement....." In the instant case, we find that the Tribunal has given a categorical finding that the assessee had established a reasonable cause for failure to comply with the provision of Section 269SS of the Act. The Tribunal further found that the loan given by the Samajwadi Party was a genuine loan, which was reflected in the books of accoun .....

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