Failure to show a justifiable purpose for taking out cash loans may result in a penalty under Section 271D
Fact and issue of the case
Present appeal has been filed by the assessee against order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)” for short] dated 26.08.2021 passed under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short], confirming the levy of penalty under Section 271D of the Act, for the Assessment Year (AY) 2016-17.
The assessee has challenged the levy of penalty raising the following grounds:-
The Ld. CIT(A) has erred in law and on facts in confirming the penalty of Rs.13,25,000/- u/s 271D of the Act for the alleged contravention of the provisions of Section 269SS of the Act without proper consideration and appreciation of the facts and the submissions. In view of the elaborate submission coupled with the legal decisions relied upon in support thereof, the penalty of Rs.13,25,000/- u/s 271D of the Act is required to be deleted.
The Ld. CIT(A) has erred in law and on facts in not following the legal ratio laid down in various legal decisions relied upon, which is squarely applicable to the case of the assessee company. The Ld. CIT(A) ought to have allowed the appeal of the assessee based on the legal decisions relied upon.
As transpires from the orders of the authorities below, the penalty in the present case has been levied by the Assessing Officer under Section 271D of the Act for contravention of the provisions of Section 269SS of the Act, accepting loans and advances beyond the prescribed limit through modes other than by way of account payee cheques
Observation of the court
The literal reading of the above shows that any amount received by modes other than cheques, as loans or advances, results in violation of the provisions of Section 269SS of the Act. There is no question of genuineness or bona fides of the transactions coming into picture. Therefore, this pleading of learned Counsel for the assessee is bereft of any merit. Our view is supported by the various decisions cited by the learned DR before us as above – by the ITAT Mumbai Bench in the case of Deepak Sales & Properties (P) Ltd. (supra) categorically holding that for escaping from the rigors from the Section 269SS of the Act, establishing genuineness or bona fides of the transactions is not sufficient. Similar decision was rendered by the Hon’ble Kerala High Court in the case of Listin Stephen (supra) and also by the Hon’ble Apex Court in the case of Vasan Healthcare (P) Ltd. (supra) and Al Ameen Educational Trust (supra).
The pleading of the learned Counsel for the assessee that the cash was required to meet urgent business requirements is also negated by the findings of fact by the Assessing Officer that the assessee had sufficient funds in its banks accounts on the day it took cash loans from the directors and the days on which the expenses were made were bank working days; so the plea of the assessee that the cash loans were taken to meet the shortage of funds stands negated by this finding of fact by the Assessing Officer which has remained uncontroverted before us. Clearly, therefore, the assessee was unable to establish any reasonable cause for taking cash loans also so as to escape from the levy of penalty under Section 271D of the Act in view of Section 273B of the Act. All the case laws relied upon by the Ld. Counsel for the assessee deleting penalty levied u/s 271D of the Act finding reasonable cause adduced by the assessee for accepting cash loans. In the absence of any reasonable cause in the present case, the said case laws are of no assistance to the assessee.
In view of the above, in the absence of any case made out by the learned Counsel for the assessee to escape from the rigors of Section 269SS/271D of the Act, we dismiss the appeal of the assessee and uphold the order of the learned CIT(A) confirming levy of penalty under Section 271D of the Act of Rs.13,25,000/-.
In effect, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 19/05/2023 at Ahmedabad
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Love-Shoppers-Ltd-Vs-ACIT-ITAT-Ahmedabad-2
