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TMI Blog2012 (7) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to the aforesaid contentions, the Tribunal is right in law in confirming the levy of penalty under Section 271D in respect of the opening balance of Rs. 45,475/-?" 2. The assessee is a firm engaged in the business of construction. Three of the partners are brothers and the fourth partner happens to be the mother of the three partners. It is seen from the facts that the appellant had secured certain contracts in Rajamundhry. Taking the stand that the contract executed at Rajamundhry required urgent cash for disbursal to labourers and suppliers from time to time, the assessee had taken cash from Mr. M.T. Nair, who happens to be the father of three partners and husband of one of the partners and he had also supervised the business of the firm. It is stated that because of the close relationship between the parties, M.T. Nair agreed to provide financial support, which was to the tune of Rs. 6,51,000/-. The said amount was paid in cash on various dates commencing from April, 1993. Considering the fact that the amount received was in contravention of Section 269 SS of the Income Tax Act, the Assessing Authority called upon the assessee to explain as to why penalty should not be levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances, the assessee sought for cancellation of the penalty levied. The assessee further pointed out that the Commissioner had not considered the fact that the site office of the assessee, where payments were made in cash was at a place where there was no sufficient or proper banking facility. 5. A perusal of the order of the Tribunal shows that in the course of hearing, the assessee produced an affidavit from Mr. M.T. Nair stating that he had given these amounts as gift and not intending it as loan. The affidavit was dated 01.04.2003. The assessee also produced certain letters purportedly written by Mr. M.T. Nair to the partners of the firm in support of the contention that what was given was not loan. In considering the submission, particularly as regards the claim that the transaction was a gift and not a loan, the Tribunal pointed out that the said plea was made for the first time and the document in connection therewith were not placed before any lower Authorities. The Tribunal pointed out that the diametrically opposite stand taken as to the nature of transaction between the parties was clearly an after thought and that there was no reasonable cause shown, which p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed with the Authorities concerned and the Assessing Authority had not understood to the totality of the circumstances before levying penalty. In any event, when the assessee had taken an alternate plea that the loan transaction be treated as a gift transaction, the Tribunal should have at least considered the case in a proper perspective to grant the relief. She submitted that in the event of this Court not accepting the plea on reasonable cause, the alternate plea taken that the transaction was only a loan transaction merited to be considered by the Authorities below. 8. We do not think that we could accept either the ground projected on the reasonable cause or on the alternate plea taken that the transaction be treated as a gift and not a loan transaction. The letter dated 24.9.1997 from the assessee to the Assessing Authority reads as under: "In reply to your letter referred to above, we wish to state as follows: During the accounting year ended 31.3.1994 corresponding to the assessment year 1994-95, we had to undergo great financial hardship to meet our commitments for wage payment, payment to suppliers etc, especially in connection with a work taken up at Rajamundry (A.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om friends and relatives. The said submission was made in the context of the explanation given in the letter that the assessee had no bank finance facility. While there could be no objection to the assessee raising funds from friends and relatives, the only requirement of law is that when the assessee goes for any finance facility from friends and relatives or from any quarters, the receipt has to be in the manner provided for under the Act. When such receipt crosses the particular sum, law does not frown on receipt of cash beyond a particular level subject to the fact that the assessee explains the reasonable cause for taking money in cash. 10. As far as the present case is concerned, except for stating that they had to make payments to the suppliers and the labours, there is hardly any material available on record to show any justification for receipt of cash over and above Rs. 20,000/- during the course of the year. The assessee admits that they are in the line of business of construction where day in and day out cash payments are made to labourers and to suppliers. Even herein, the justification for making payment in cash must necessarily satisfy Rule 6 DD of the Income Tax Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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