The assessee is in appeal against the order of Commissioner (Appeals), Patiala, dated 12-11-1997, for the assessment year 1993-94, for sustaining the penalty of Rs. 21,000 imposed by the assessing officer since the assessee has violated the provisions of section 269SS of the Income Tax Act.
Briefly stated, the facts of the case are that the assessee is alleged to have raised loans/deposits front Smt. Maya Rani Mittal in cash as under : According to the assessing officer, since the amount exceeded Rs. 20,000, so, he referred the matter to Dy. CIT who levied penalty of Rs. 21,000 after rejecting the explanation of the assessee that Smt. Maya Rani Mittal was a retired Government Employee and the assessing officer had accepted the genuineness of the credits. So, the black money was not involved and no penalty was called for, and that the last cash payment made on 6-6-1992, to the assessee was on account of the fact that the assessee had to make this payment t o M/s. Amar Chand Ravinder Kumar because they had approached the assessee for making the payment after the close of the banking hours and the assessee had to pay this amount to them immediately in order to maintain good business relations.
Similar submissions, on appeal before the Commissioner (Appeals), were also made before the Commissioner (Appeals) but the Commissioner (Appeals) also rejected these submissions of the assessee firstly on the reasoning that the assessee has not filed any evidence to show that he had to make the payment on 6-6-1992, and secondly, it was not mandatory on the part of the assessee to make the payment of Rs. 8,000 to the representative of the party because he could have made the payment of Rs. 3,000 or so from the funds which were available with him. In this manner, the Commissioner (Appeals) rejected the plea of the assessee that he had borrowed this money in cash from Smt. Maya Rani Mittal because the same was urgently required by the assessee, and sustained the impugned penalty amount levied by the assessing officer.
Before us, learned authorised representative for the assessee made the same submissions which he made before the tax authorities below and in addition thereto, relied on p. 14 of the paper book which is an excerpt from the cash book indicating that he has borrowed the money of Rs. 8,000 in cash and paid the same to M/s. Amar Chand Ravinder Kumar on 6-6-1992, otherwise prior to that, the amount taken in cash from Smt.
Maya Rani Mittal was within the prescribed limit of Rs. 20,000 under section 269SS of the Income Tax Act. He also contended that as the total amount exceeded the limit of Rs. 20,000 just by Rs. 1,000 only on account of the fact that the assessee was ignorant about the provisions of law, so, in these facts, the penalty should not have been imposed upon the assessee. In this regard, he relied upon the decision of this Tribunal in the case of Assistant Commissioner v. Shri Lakhmir Singh in ITA Nos. 222 and 230/Chd/1996; assessment year 1993-94.
An other argument advanced by the assessee was that in the circumstances explained by the assessee, it was constrained to go in for cash loan which resulted in violation of section 269SS otherwise the tax authorities below have neither doubted the genuineness of the borrowings nor they have doubted the nature and source of the amount.
Hence, in the existing facts and circumstances, no penalty was exigible in the case of the assessee. In support of his contention, the assessee has relied upon the following cases :Asstt. Director of Inspection (Investigation) v.Kum. A.B. Shanthi (ii) In the case of Dillu Cine Enterprises (P) Ltd. v. Assistant Commissioner (2002) 80 ITD 484 (Hyd).
(iii) In the case of Industrial Enterprises v. Dy. CIT (2000) 73 ITD 252 (Hyd).
(iv) In the case of Karnataka Ginning & Pressing Factory v. Jt. CIT (2001) 77 ITD 478 (Mumbai).
(v) In the case of Dr. Deepak Muchala v. Income Tax Officer (1997) 58 TTJ (Mumbai) 524.
(vi) In the case of Shreenathji Corpn. v. Assistant Commissioner (1997) 58 TTJ (Ahd) 611.Shreenath Builders v. Dy. CIT Learned Departmental Representative for the revenue, on the other hand, placed strong reliance on the reasoning given in the orders of the tax authorities below and contended that in the existing facts and circumstances of the case, the penalty has been rightly imposed/sustained by the tax authorities below.
We have considered the rival submissions of both the parties, perused the records and carefully gone through the orders of the tax authorities below and also taken into consideration the case laws cited by learned authorised representative for the assessee.
The undisputed facts in this case are that the genuineness of the loan transaction is not in dispute; there is no such case against the assessee that the transaction in question had anything to do with evasion of tax or concealment of income. Before 6-6-1992, the assessee in the year under consideration, has accepted only a sum of Rs. 13,000 in cash on two different dates and till then, he has not violated the provisions of section 269SS of the Income Tax Act. It was only the amount of Rs. 8,000 raised as loan by the assessee on 6-6-1992, on account of which the total cash loan accepted by the assessee amounted to Rs. 21,000 whereafter the assessee became guilty of violating the provisions of section 269SS of the Income Tax Act.
Regarding the transaction of Rs. 8,000, the assessee submitted that he had to take this amount in cash because the representative of M/s. Amar Chand Ravinder Kumar approached the assessee in the afternoon for repaying its money and so, in order to maintain good business relations, the assessee took the cash from Smt. Maya Rani Mittal and paid the same to the party. This fact is also supported from the cash book of the assessee. The tax authorities below, rejected this explanation of the assessee on various reasons, as mentioned in their orders, but we are of the opinion that in case during the assessment proceedings, the assessing officer has accepted the genuineness of loan transactions, there could be no other reason with the assessee for accepting this amount in cash except for repayment of the same to the party. Moreso, because this transaction had nothing to do with evasion of tax or concealment of income, hence we are of the opinion that the transaction of accepting Rs. 8,000, in cash by the assessee constituted a reasonable cause within the meaning of section 273B as it was done to maintain good business relations with that party.Asstt. Director Inspections (Investigation) v. Kum. A.B.Shanthi (supra), the Hon'ble Apex Court narrated the object of introduction of section 269SS in the Income Tax Act as under : "The object of introducing section 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money or if he makes some false entries, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records to suit the plea of the taxpayer. The main object of section 269SS was to curb this menace of making false entries in the account books and later giving an explanation for the same." "The undue hardship of the provisions of section 276DD which replaced section 276DD providing for a penalty, is substantially mitigated by the inclusion of section 273B providing that if there was a 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 discretionary power not to levy the penalty." Similarly, in the cases decided by the various Tribunal Benches, referred to hereinabove, it was held that in case the assessee is able to show reasonable cause for accepting the cash loan in violation of provisions of section 269SS, then no penalty should be imposed under section 271D in case the loan transaction is genuine and that the transaction had nothing to do with evasion of tax or concealment of income.
In the instant case of the assessee also, the genuineness of loan transaction has not been doubted and the loan transaction had nothing to do with evasion of tax or concealment of income of the assessee.
Hence, we are of the opinion that the assessee has been able to show a reasonable cause for accepting Rs. 8,000 in cash, i.e., for making the payment to the party in order to maintain good business relations., So, it is a fit case where penalty under section 271D should not have been imposed against the assessee. For the reasons stated above, the impugned penalty sustained by the Commissioner (Appeals) is deleted and the order of the Commissioner (Appeals) in this regard, is set aside.