THE issue before the
Bench is - Whether when the assessee accepts loan in cash, exceeding the limit
u/s 269SS, and when the source of funds is not withdrawal from banks, such loan
may be construed as black money and the same attracts penalty u/s 271D. And the
answer goes against the assessee.
Facts of the
case
The assessee, an
individual, had filed its return of income for the AY 2007-2008 declaring total
income of Rs 2,59,830/-, which was scrutinized after issuing notice u/s 143(2)
and the assessment was completed u/s 143(3). By a notice, JCIT called upon the
assessee to furnish extract of the ledger account of six creditors in whose
names amount was due and payable. It was indicated that the assessee had
accepted loan exceeding the limits specified u/s 269SS from six creditors during
the FY 2006-2007. The assessee submitted his explanation. However, penalty was
imposed u/s 271D equal to the loan amount taken amounting to
Rs.29,47,500/-.
On
appeal before the CIT(A), it was found that the levy of penalty u/s 271D was not
justified. On further appeal, Tribunal reversed the order of the CIT(A) and
restored the order of penalty. Main contention urged by the assessee was that
the Tribunal should have followed the decision of HC in CIT v.
P.K.Shamsuddin (ITA No. 237/2010) wherein it was held that when the factual
position of the source of fund was accepted by the Department there was a
reasonable cause against levy of penalty since the violation became technical.
Tribunal also found that the failure in the case was not receiving the loan, but
the receipt or acceptance of amounts exceeding Rs. 20,000/- by way of account
payee cheques or demand drafts. If the assessee was capable of explaining to the
satisfaction of the concerned authority that there was a reasonable cause or
failure to receive the loan or deposit by way of account payee cheque or demand
draft, then the penalty shall not be levied. Therefore reasonable cause for
receiving the loan or deposit in cash had to be proved by the assessee.
It
was not in dispute that for exercising jurisdiction u/s 269SS read with S. 271D,
there should be receipt of loan or deposit by the assessee by way of cash. It
was an admitted fact that the assessee had received substantial amounts from his
creditors by way of cash. What was the reasonable cause for receiving such a
huge amount by way of cash or what was the reason for not receiving the loan or
deposit by way of account payee cheque or demand draft was a matter to be
explained by the assessee. It was contended that since the appellant had to put
up an industrial unit and he was not in a position to get loan from the bank he
had to collect cash from various agriculturists, who were residing in the State
of Tamil Nadu and since it was found that the transactions were genuine and bona
fide, there was no reason to impose penalty on the petitioner. As rightly
observed by the Tribunal setting up an industry/business was a long process and
it was for the assessee to demonstrate with sufficient material that he required
cash urgently to meet his requirements. It was open for him to prove that he had
applied for loan and he was awaiting for loan. No such materials were available.
In the absence of any proof to show that the transaction was a genuine
transaction and that there was a reasonable cause for receiving the amount in
cash, it may not be possible for HC to come to a conclusion that the assessee
was not liable for payment of penalty.
Held
that,
++
the burden is on the assessee to prove that there was reasonable cause for
receiving cash from various persons. In the absence of any such proof we are of
the view that the Tribunal was justified in rejecting the contentions of the
appellant;
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now, coming to P.K.Shamsuddin's case, the contention taken was ignorance of law.
That apart, it was found that the assessee took cash from relatives and friends
who had taken loan from Banks for helping the assessee and such persons could
not have issued cheques. It is in that circumstances, when the source of funds
were found to be acceptable by the Department, the Division Bench opined that
there is no tax evasion or black money introduced in the business;
++
that is not the situation here. The source of funds of the creditors was not
from the Bank and introduction of black money cannot be ruled out. There is a
clear finding by the assessing officer that no proof was furnished regarding
earnings of agricultural income by the creditors. Hence P.K.Shamsuddin's case
does not apply to the facts of this case. For that reason itself we do not think
that there is any perversity in the findings of the Tribunal and since no
question of law arises for consideration, the appeal is liable to be dismissed
and we dismiss the appeal.
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