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2016 (9) TMI 262 - ITAT PUNE

2016 (9) TMI 262 - ITAT PUNE - TMI - Levy of penalty u/s.271D - Held that:- Since in the instant case the assessee had taken cash loan from her husband and mother-in-law which has been repaid in cash and there is no repeated transactions and the assessee has explained the reasonable cause for accepting such loans and repayment thereof in cash, therefore, in our opinion, the expression “reasonable cause” in section 273B for non imposition of penalty u/s.271D and 271E would have to be construed li .....

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parate orders dated 27-06-2014 of the CIT-V, Pune relating to Assessment Year 2007-08. 2. In ITA No.2091/PN/2014 the assessee has challenged the order of the CIT(A) in confirming the levy of penalty of ₹ 2,35,000/- u/s.271E of the Act. ITA No.2092/PN/2014 the assessee has challenged the order of the CIT(A) in confirming the levy of penalty of ₹ 1,75,000/- u/s.271D of the Act. 3. There is a delay of 69 days in filing of the appeals for which the assessee has filed an application for c .....

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ous decisions he submitted that the delay in filing of the appeals should be condoned. 4. After hearing the Ld. Departmental Representative and after considering the contents of the affidavit as well as the arguments advanced by the Ld. Counsel for the assessee, we are of the considered opinion that there was a reasonable cause for delay in filing of these appeals. Therefore, we condone the delay in filing of the appeals and admit the appeals for adjudication. 5. Facts of the case, in brief, are .....

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violated the provisions of section 269T of the Act. In view of the above, the Addl.CIT issued show cause notices dated 06-01-2010 u/s.271D and 271E of the Act to the assessee. The assessee in his reply submitted that the transactions were made by the assessee with her close family members namely husband and mother-in-law and the assessee was not aware that the loans and advances given and taken by her with the family members are covered u/s.269SS and 269T of the I.T. Act. It was submitted that t .....

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ty of ₹ 1,75,000/- u/s.271D and ₹ 2,35,000/- u/s.271E of the Act by observing as under : I have considered the submission of the assessee which is made through her C.A. It is well settled law that the reasonable cause for violation of statutory provisions should be a cause beyond the control of the assessee. Here in this case, the assessee is having Bank A/c. and .all the family members with whom the assessee made transactions are also having the Bank A/c. and hence it was in the wel .....

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ome Tax Act is not acceptable. Further, Sections 269SS and 269T of the Income Tax Act do not exclude the transactions made between the family members. It is also settled that the acceptance and payment of any amount will either be a loan or advance. It cannot be said that a debt is not a loan or advance. Thus, the plea of the assessee is not acceptable at all. The Hon'ble Bombay High Court in the case of Dhanji R. Zalte Vs. ACIT (2004) 265 ITR 204 held that the penalty u/s.271D and 271E are .....

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and notice and challan accordingly. 7. Before CIT(A) the assessee challenged the levy of penalty under the aforementioned provisions. It was argued that the provisions of section 269SS/269T were introduced with a view to counter the evasion of tax. In the instant case the genuineness of the receipt of loan and repayment thereof has not been doubted. Relying on various decisions it was submitted that there was a reasonable cause on the part of the assessee in accepting such cash loans from close .....

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taken four grounds on the same issue but has filed general submission. In absence of groundwise submissions, it becomes difficult to adjudicate the grounds. However, ground No.1 is being adjudicated on the basis of statement of facts as well as submissions made by the appellant. In statement of facts, the appellant had submitted that family members of the appellant had helped her in setting up of business activity and since at the time of raising borrowed funds, the banks and financial institut .....

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erely because transaction is genuine it cannot be taken out of the ambit of Sec. 271E of Income-tax Act. This being so I do not find any merit in the submissions of the appellant that since the transaction was genuine, penalty u/s. 271D of Income-tax Act cannot be levied. In this case, it is clear from the facts and also held by the Assessing Officer that reasonable cause for taking and repaying cash loans has not been established. The appellant has relied upon the decision of Hon'ble Bombay .....

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High Court in the case of CIT Vs. M. Yeshodha, 55(1) ITCL 391. In this regard also, it is seen that the appellant has failed to substantiate that there was urgent necessity to borrow the amount. Accordingly, on the facts and circumstances of the case, penalty of ₹ 1,75,000/- levied by the Assessing Officer u/s. 271D of Income-tax Act is upheld. Thus, the ground is dismissed. 8.1 Identical observations have been given by the Ld.CIT(A) while upholding the penalty levied u/s.271E of the Act. .....

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s not in doubt. There was no attempt of the assessee to avoid or evade any tax. The penalty levied by A. O. and confirmed by Ld. CIT(A) is illegal and without jurisdiction. The penalty be deleted. 2. On the facts and circumstances of the case and in law this is the first year of business of the assessee. The assessee was not conversant with complex provisions of I.T. Act, 1961. This Hon'ble Tribunal has taken conscious decision so confirmed by Hon'ble Bombay High Court that if the assess .....

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ce to each other 1. On the facts and circumstances of the case and in law the Ld. CIT(A)-V was not justified in confirming the penalty levied of ₹ 2,35,000/- by the A.O. under S. 271-E of the Act. The transaction between the mother-in-law of the assessee and the assessee was a 'reasonable transaction' the genuinity of which was not in doubt. There was no attempt of the assessee to avoid or evade any tax. The penalty levied by A.O. and confirmed by Ld. CIT(A) is illegal and without .....

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ed. In view of this the penalty be deleted. 3. On the facts and circumstances of the case and in law the delay occurred in filing the appeal of 69 days be condoned. The detailed application will be filed. 4. The appellant craves/leave to add, amend or alter any of the above grounds of appeal. 10. The Ld. Counsel for the assessee strongly opposed the levy of penalty u/s.271D and 271E by the Addl.CIT as well as the order of the CIT(A) in confirming the same. He submitted that the transactions in t .....

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ially in a case where the disclosure thereof is contained in the compilation of accounts and which has no tax effect establishes reasonable cause u/s.273B for invoking the penal provisions of section 271D and 271E of the Act. 11. Referring to another decision of the Hon ble Punjab & Haryana High Court in the case of CIT Vs. Saini Medical Store reported in 277 ITR 420 he submitted that the Hon ble High Court in the said decision has upheld the decision of the Tribunal where the Tribunal has a .....

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o was running a business of contractor, had accepted loan of ₹ 4,18,000/- in cash from his wife. The Tribunal in the said decision has held that there is merit in the claim of the assessee as the intention of introducing the provisions of section 269SS of the Act was to prevent the adjustment of entries by way of cash loans. Since the assessee has received the said cash from his wife and in such circumstances there is no merit in holding the assessee to have defaulted and being liable for .....

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pression "reasonable cause" in section 273B of the Act. A cause which is reasonable may not be a sufficient cause. Thus, the expression "reasonable cause" would have wider connotation than the expression sufficient cause". Therefore, the expression "reasonable cause" in section 273B for non-imposition of penalty under section 271E would have to be construed liberally depending upon the facts of each case. 12. So far as the decision relied on by the AO is concer .....

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t there is no reasonable cause on the part of the assessee for accepting such cash loans and repaying them also in cash. 14. Referring to the decision of Hon ble Madras High Court in the case of P. Muthukaruppan Vs. JCIT reported in 375 ITR 243 he submitted that the Hon ble High Court in the said decision has held that where assessee accepted and repaid loan exceeding ₹ 20,000/- in cash from/ to money lender repeatedly, even when transaction took place in a major city and offered no explan .....

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mitted that since the assessee has failed to establish a reasonable cause in accepting such cash loans and repaying thereof in cash, therefore, the order of the CIT(A) be upheld. 15. The Ld. Counsel for the assessee in his rejoinder submitted that both the decisions relied on by the Ld. Departmental Representative are distinguishable and not applicable to the facts of the present case. In the case of P. Muthukaruppan Vs. JCIT (Supra) there was repeated cash transactions with the money lender tha .....

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between close family members and the assessee was under bonafide belief that transaction with family members do not attract provisions of section 269SS/269T, therefore, the Ld.CIT(A) was not justified in upholding the penalty levied by the Addl.CIT. 16. We have considered the rival arguments made by both the sides, perused the orders of the AO, Addl.CIT and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Ad .....

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s under a bonafide belief that taking money in cash and repaying thereof in cash from the husband and mother-in-law is not in violation of provisions of section 269SS and 269T. The genuineness of the transactions have not been doubted by the revenue authorities and therefore there was a reasonable cause within the meaning of section 273B. Therefore, no penalty is leviable u/s.271D and 271E for violation of the provisions of section 269SS and 269T respectively. 17. We find some force in the above .....

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unsel for the respondent-assessee. We are satisfied that section 273B of the Act envisages a non-obstante clause as against sections 271D and 271E of the Act (which have been sought to be invoked for penalising the respondent- assessee). In the exceptional situation envisaged in section 273B of the Act, it is permissible for an assessee to substantiate reasonable cause for his failure to comply with the provisions on the basis whereof, penalty is sought to be imposed upon him. Taken to the logic .....

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al effect. 11. The explanation tendered by the respondent-assessee which has been taken into consideration by the Income-tax Appellate Tribunal was that the action of the respondent-assessee was bona fide and not aimed at avoiding any tax liability. So far as the instant issue is concerned, the Income-tax Appellate Tribunal arrived at the conclusion that the action of the respondent-assessee had not resulted in the infraction of any law, inasmuch as, the default committed by him was technical an .....

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e Tribunal arrived at the conclusion that the respondent-assessee has been successful to show reasonable cause . And accordingly the Income-tax Appellate Tribunal returned a finding that acceptance of the return of payments received by the respondent-assessee, by way of cash, at the hands of the respondent- assessee, ought to be overlooked, in the facts and circumstances of this case. 12. As against the aforesaid conclusion drawn by the Income-tax Appellate Tribunal, it was submitted by the lear .....

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enue, that it had not been argued at the hands of the respondent-assessee, that action of the respondent-assessee was not deliberate, or that, the same was under a bona fide belief that he could not accept or return a loan(s) in excess of ₹ 20,000 by way of cash. It is, therefore, the submission of the learned counsel for the appellant-Revenue, that the onus to establish bona fides at the hands of the respondent-assessee, squarely rests on the shoulder of the respondent- assessee. In addit .....

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r thoughtful consideration to the submissions advanced by the learned counsel for the rival parties, we are of the view that the finding that there was reasonable cause shown by the respondent-assessee, is a finding of fact. This emerges from the decision rendered by this court in Saini Medical Store's case [2005] 277 ITR 420, wherein, this court has, inter alia, held as under (page 425) : As pointed out earlier, there is no doubt about the genuineness of the transactions which have been ful .....

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is cancelled. The findings of the Commissioner of Income-tax (Appeals) have been confirmed in appeal by the Tribunal. Therefore, the findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal that the assessee had shown reasonable cause for the failure to comply with the provisions of section 269T of the Act is a finding of fact based on appreciation of material on record. It does not give rise to any question of law, much less substantial question of law. Accordingly, the a .....

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as the respondent-assessee did not attempt by the impugned act to avoid any tax liability. Furthermore, there is no dispute about the fact that the instant cash transactions of the respondent- assessee were with the sister concern and that these transactions were between the family and due to business exigency. A family transaction, between two independent assessees, based on an act of casualness, specially in a case where the disclosure thereof is contained in the compilation of accounts and wh .....

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8 of 2008, and accordingly, the said appeals are hereby dismissed. 18. We find the Hon ble Punjab & Haryana High Court in the case of Saini Medical Store (Supra) while dealing with an identical issue has observed as under : 10. Section 273B of the Act provides that no penalty is imposable for any failure referred to in the said provisions, if the assessee proves that there was "reasonable cause" for the said failure. 11. Therefore, a combined reading of the provisions of sections 2 .....

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he same was not with any intention to avoid or evade the tax. The observations of the Commissioner of Income-tax (Appeals) in paras. 6 and 6.1 are relevant and are reproduced as under : "6. I have carefully considered the conspectus of this matter and facts on record. No loss of revenue has occurred in this case and the genuineness of the transaction has not been doubted. The apex court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 had long ago settled the law that penalty is .....

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impose the penalty will be justified in refusing to do so, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. 6.1 As pointed out earlier, there is no doubt about the genuineness of the transactions which have been fully accepted in the assessment made for the year under consideration. Even if, there is any ignorance, which resulted in the infract .....

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. Therefore, the findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal that the assessee had shown reasonable cause for the failure to comply with the provisions of section 269T of the Act is a finding of fact based on appreciation of material on record. It does not give rise to any question of law, much less substantial question of law. 15. Accordingly, the appeal is dismissed. 19. So far as the decisions relied on by the Ld. Departmental Representative are concerned th .....

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