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TMI Blog2006 (12) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty is leviable under section 271D when there has been repeated violations of section 269SS on the ground that the creditors are genuine persons and there was no revenue loss to the exchequer? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that no penalty is leviable under section 271D, on the ground that taking a loan in cash for depositing into the assessee's bank to make necessary arrangements for honouring cheques is a reasonable cause for violating the provisions of section 269SS of the Income-tax Act?" 2. The respondent-assessee filed its return for the assessment year 1993-94 showing a total income of Rs. 11,710 which was initially taken up for assessment under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have obtained loans by cheques or demand drafts in its favour and deposited the same in current account, rendered a finding that loans were taken mostly to make payments to master weavers living in village and suburban areas where banking facility was very much less and that loans were taken to meet the immediate business need and hence, there existed reasonable cause. However, the Commissioner of Income-tax (Appeals) directed the Assessing Officer to levy penalty on certain transactions to the tune of Rs. 4,30,000. 5. On further appeal by the assessee, the Appellate Tribunal, by the impugned order dated June 12, 2002, in clear terms, rendered a finding that obtaining loans and making repayments into bank account are not denied by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to accept the conclusion drawn by the authorities below. For all these reasons and discussions and considering the facts and materials, we cancel the levy of penalty sustained by the Commissioner of Income-tax (Appeals). It is ordered accordingly." 6. Assailing the said order of the Appellate Tribunal, Mr. Nareshkumar, learned counsel appearing for the Revenue contends that section 269SS is intended to prevent evasion of tax by cash transactions involving more than Rs. 20,000. According to him, since there are 36 transactions attracting section 269SS, the same cannot be construed as bona fide and reasonable. It is further contended that the business exigency for cash transactions would arise in one or two transactions subject to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf in the Official Gazette. Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and that person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act." (emphasissupplied). 7. Since the transactions are not protected by the provisos to section 269SS of the Act, it is contended by learned counsel appearing for the Revenue that the Revenue is justified in imposing penalty under section 271D of the Act, which reads thus : "271D. Penalty for failure to comply with the provisions of section 269SS.—(1) If a person takes or accepts any loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ITR 258, held that if there was genuine and bona fide transaction and the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. 11. In the instant case, the Commissioner of Income-tax (Appeals) and the Appellate Tribunal found that (i) there was business exigency forcing the assessee to take cash loans for the purpose of honouring the commitment, viz., issuance of cheque on a particular date; (ii) the creditors were genuine persons and the transactions were never doubted by the authorities below; and (iii) there was no revenue loss to the State exchequer, and satisfied that the assessee has s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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