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Penalty upheld as assessee gave no reason for taking loan in cash

Assessee filed his return of income at Rs.1,24,460. AO imposed penalty u/s 271D for contravention of s 269SS for accepting loan of exceeding Rs.20,000 as the assessee had accepted cash loans of Rs 76,000 from a sister concern M/s Jay Mahalaxmi Textiles whose proprietor was assessee's brother. CIT(A) confirmed the penalty. On appeal, ITAT upheld the penalty as assessee had given no reasonable cause due to which the loan was taken in cash.-501096

1. Assessee was an individual and filed his return of income for Asst. Year 2008-09 on 5.1.2009 declaring total income at Rs.1,24,460/-. The case was selected for scrutiny assessment through CASS and notice u/s 143(2) of the Act was issued on 28.8.2009. During the assessment proceedings it was observed by the Assessing Officer from the details submitted by the assessee that cash loan of Rs.19,000/- each on 11.4.2007, 26.4.2007, 14.5.2007 and 25.5.2007 were taken from M/s Jay Mahalaxmi Textiles. In total assessee accepted cash loan of Rs.76,000/- from M/s Jay Mahalaxmi Textiles. Income of the assessee was assessed at the returned income. However, penalty u/s 271D of the Act was initiated for the contravention of provisions of section 269SS of the Act by the assessee by way of accepting loan of exceeding Rs.20,000/- during the year.

2. CIT(A) confirmed the penalty imposed u/s 271D.

3. On appeal, the ITAT held as under:

4. "From going through the above provisions of the section 269SS and sec.271D of the Act we find that the case of the assessee squarely falls under the provisions of section 269SS of the Act and a clear contravention has been made by the assessee of the provisions Asst. Year 2008-09 of section 269SS of the Act as the assessee has accepted loan and was deposited which exceeded Rs.20,000/- i.e. Rs.76,000/- otherwise by account payee cheque or draft or by electronic transfer through bankaccount during the year. It is pertinent to note that assessee is based at Surat and the sister concern from whom loan was taken is also based in Surat and there was no reason for taking loan in cash and as the assessee has made contravention of section 269SS of the Act then penalty proceedings u/s 271D has been rightly imposed because there was no reasonable cause put forward by the assessee before the lower authorities and before us which could have proved that there was a reasonable cause due to which the loan was taken in cash. We are of the view that penalty u/s 271D has been rightly imposed and confirmed by ld. CIT(A). Accordingly, we dismiss ground Nos.1 & 3 of assessee's appeal."

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Income Tax Appellate Tribunal - AhmedabadKalpesh K.Kinariwala, Surat vs Assessee on 2 March, 2016IN THE INCOME TAX APPELLATE TRIBUNALAHMEDABAD '' SMC " BENCH - AHMEDABADBefore S/Shri Rajpal Yadav, JM, & Manish Borad, AM.ITA No.316/Ahd/2013Asst. Year: 2008-09Kalpesh K. Kinariwala, Vs. Addl. CIT-Range-3, Surat85, GIDC,Khatodara,B/h Sub-Jail, Surat.Appellant RespondentPAN AOKPK3851PAppellant by Shri M. K. Patel, ARRespondent by Shri Vilas V. Shinde, DRDate of hearing: 3/12/2015Date of pronouncement: 2/03/2016ORDERPER Manish Borad, Accountant Member.This appeal of the assessee is directed against the order of ld. CIT(A)-IV, Surat dated 7.11.2012.Penalty order u/s 271D of the IT Act, 1961 (in short the Act) for Asst. Year 2008-09 was framed byAddl. CIT, Range-3, Surat on 25.8.2011.Grounds of appeal [1] On the facts and in the circumstances of the case as well as law on the subject,the penalty order passed by the learned ADDL. CIT Range - 3, Surat u/s.271D levying penalty to thetune of Rs.76,000/- is barred by limitation and hence bad-in law and without jurisdiction.[2] On the facts and in the circumstances of the case as well as law on the subject, the demand noticeissued u/s.156 on Asst. Year 2008-09 passing the penalty order ought to have been signed by theAddl. CIT Range -3 Surat.[3] On the facts and in the circumstances of the case as well as law on the subject, the A.O. ought tohave considered that the loan transaction in cash is with sister concerns (family members) only.[4] On the facts and circumstances of the case, the Learned CIT(A)-IV, Surat erred in confirming thepenalty without appreciating the facts of the case as well as without considering the judgment of theHon'ble High Court of Gujarat in the case of CIT vs Shree Ambica Flour Mills Corporation reportedin (2008) 6 DTR (Guj) 169 favourably.Your appellant therefore prays that looking to the facts and circumstances of the case, the penaltylevied by the learned assessing officer and confirmed by the CIT(A)-IV, Surat to the tune ofKalpesh K.Kinariwala, Surat vs Assessee on 2 March, 2016Indian Kanoon - http://indiankanoon.org/doc/185671148/ 1

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1. Assessee was an individual and filed his return of income for Asst. Year 2008-09 on 5.1.2009 declaring total income at Rs.1,24,460/-. The case was selected for scrutiny assessment through CASS and notice u/s 143(2) of the Act was issued on 28.8.2009. During the assessment proceedings it was observed by the Assessing Officer from the details submitted by the assessee that cash loan of Rs.19,000/- each on 11.4.2007, 26.4.2007, 14.5.2007 and 25.5.2007 were taken from M/s Jay Mahalaxmi Textiles. In total assessee accepted cash loan of Rs.76,000/- from M/s Jay Mahalaxmi Textiles. Income of the assessee was assessed at the returned income. However, penalty u/s 271D of the Act was initiated for the contravention of provisions of section 269SS of the Act by the assessee by way of accepting loan of exceeding Rs.20,000/- during the year.2. CIT(A) confirmed the penalty imposed u/s 271D.3. On appeal, the ITAT held as under:4. "From going through the above provisions of the section 269SS and sec.271D of the Act we find that the case of the assessee squarely falls under the provisions of section 269SS of the Act and a clear contravention has been made by the assessee of the provisions Asst. Year 2008-09 of section 269SS of the Act as the assessee has accepted loan and was deposited which exceeded Rs.20,000/- i.e. Rs.76,000/- otherwise by account payee cheque or draft or by electronic transfer through bankaccount during the year. It is pertinent to note that assessee is based at Surat and the sister concern from whom loan was taken is also based in Surat and there was no reason for taking loan in cash and as the assessee has made contravention of section 269SS of the Act then penalty proceedings u/s 271D has been rightly imposed because there was no reasonable cause put forward by the assessee before the lower authorities and before us which could have proved that there was a reasonable cause due to which the loan was taken in cash. We are of the view that penalty u/s 271D has been rightly imposed and confirmed by ld. CIT(A). Accordingly, we dismiss ground Nos.1 &amp; 3 of assessee's appeal."

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Penalty upheld as assessee gave no reason for taking loan in cash