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Hemendra Chandulal Shah Versus Addl. CIT, Range-2, Ahmedabad

ITA No. 1129/Ahd/2010 - Dated:- 6-8-2010 - Shri Mukul Kumar Shrawat, JM, And D.C.Agrawal, AM For the Assessee :- Shri Kaushik D. Shah, AR For the Revenue :- Shri K. Madhusudan, Sr.DR ORDER Per D. C. Agrawal, Accountant Member. This is an appeal filed by the assessee raising following grounds:- The ld. CIT(A) has erred on facts and in law in sustaining the penalty imposed u/s 271D of ₹ 1,18,000/- and thereby confirming the action of AO. In view of facts and circumstances as well as submissi .....

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18,000/- on 12.4.2004 in his current account maintained for the proprietary business in the name of M/s Adcom with Union Bank of India, Relief Road Branch having A/c No.11162. It was explained that a sum of ₹ 1,00,000 was borrowed from his son Shri Rahul H. Shah on 7.4.2004 and another sum of ₹ 18,000/- was borrowed by him on 12.4.2004 and was deposited in the bank account. According to the AO depositing money in cash in bank account is violation of section 269SS as assessee has take .....

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O accepted the credit as genuine and no addition was made. In the assessment order no mention of any violation of provision of section 269SS has been made. According to the assessee it was for the first time loan amount in excess of ₹ 20,000/- was taken from his son to clear the debit balance in the bank account so as to avoid bouncing of cheques. On legal side the assessee has made following submissions:- 1. It may kindly be noted that the provisions u/s 269SS providing for Mode of taking .....

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rtant to note that no Search action u/s 132 or Survey action u/s 133A of the IT Act has taken place in my case. Hence, it is not the case of introduction of cash to justify or establish the valid source of cash found during the course of such action. Thus, the object and the intent as contained under the said Chapter has no application in my case vis-à-vis it is not the case of levy of penalty u/s 271-D of the IT Act. 2. Where contravention alleged against assessee in accepting loans in c .....

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father & son would fall outside scope of Sec.269SS as held in the decision of Hon. Banglore ITAT in the case of G.D. Subraya Shenegar vs. ITO (2006) 10 SOT 378. 4. Where no proceedings for the alleged violation of sec.269SS was initiated in the assessment order which is the essence of penalty proceedings u/s 271-D of the Act and thus no proceedings were pending before the authorities till the date of levy of penalty u/s 271-D penalty proceedings having not been initiated during the course of .....

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levy of penalty on the ground that the cause shown by the assessee is not a reasonable cause. He observed as under :- 5. The matter has been considered but I am afraid I cannot agree with the Authorised Representative. Section 269SS imposes an obligation of an assessee to do transaction through banking channels, over a certain specified limit, and for not following this section penalty is leviable u/s 271D. Having committed a default u/s 269SS the only escape for non-levy of penalty is either t .....

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To start with firstly he would have known about the existence of debit balance and secondly there is no reason why such a debit balance needed to be cleared up only by a cash transaction. If one were to see the assessee s bank statement, which has been filed from 1/4/2004 it had a debit balance right from 1/4/2004 (it may have had it earlier also) and the transaction in question had been made on 7/4/2004. Therefore, there is no question of any urgency or a situation where banking transactions c .....

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l view is beyond the scope of CIT(A) s level and hence cannot be applied in the appellant s case. 5. Before us, ld. AR for the assessee submitted that - (1) There is a reasonable cause inasmuch as assessee was directed by the bank to clear the debit balance for honouring the cheques issued by the assessee. Accordingly assessee was compelled to make immediate deposit. The deposit in cash was accepted as genuine by the ld. AO as no addition under section 68 has been made. (2) The AO has not initia .....

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the tax. (5) The AO has not recorded any satisfaction before initiating penalty proceedings. (6) The AO and the ld. CIT(A) have not dealt with the authorities cited by the assessee. 6. Against this, the ld. DR on the other hand submitted that it is incorrect to say that provisions of section 269SS will not be applicable if loan is taken from son or close relative. 7. We have considered the rival submissions and perused the material on record. In our considered view there is a reasonable cause w .....

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derive support from the decision of the Tribunal SMC Bench in ITA No.2121/Ahd/2010 for Asst. Year 2006-07 in the case of Shri Bhupendrakumar Bhailalbhai Patel, Prop. Of M/s Silphochem Indus. Vs. Jt. CIT, Range-6, Ahmedabad pronounced on 7/7/2010 wherein a similar proposition of penalty under section 271-D was cancelled. The SMC Bench had held as under :- 6. I have heard the parties and carefully perused the material on record. In my considered view the assessee has furnished an explanation whic .....

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ansaction is not doubted, then explanation furnished by the assessee should have been considered satisfactory unless any material is collected by the AO to show that facts stated in the explanation are incorrect or false. The AO should have verified from the bank as to what is the OD limit and whether there is any contradiction in what is stated before him. Further genuineness of the transaction should have been verified and shown that it was in fact money of the assessee and not that of Mrs. Tr .....

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merely subjective rejecting out-rightly, even though there is no material to contradict the facts stated in the explanation. I accordingly hold under the circumstances the explanation furnished by the assessee as satisfactory and accordingly cancel the penalty. 8. In a similar case ITAT D Bench Ahmedabad in ITA No.1801/Ahd/2009 for Asst. Year 2005-06 in the case of ITO vs. Smt. Bhanuben R. Shah, Prop. Padmavati Trading Co., pronounced on 11.9.2009 held that when transaction is done treating sist .....

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es. In the case under consideration, admittedly transactions are between family members. Hon'ble Punjab & Haryana High Court in the case of Sunil Kumar Goel{supra} while relying upon their decision in the case of CIT Vs.Saini Medical Store,277 ITR 420(P&H) concluded that bonafide belief coupled with the genuineness of transactions would constitute reasonable cause within the meaning of provisions of sec, 273B of the Act It was held that a family transaction between two independent as .....

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