Case Law Details
M/s. P.R. Associates Vs ACIT (ITAT Pune)
We find that the assessee specifically submitted before the AO during the course of penalty proceedings, which fact has also been captured in the penalty order, that its business was inoperative for the last 7 years and it had already borrowed loans from Shree Suvarna Sahakari Bank Ltd. and many private money lenders since last 10 years.
To meet the financial requirements of repayment, for which the lenders were hard pressing, the assessee had to borrow money from unorganized finance sector in cash, which led to the imposition of the instant penalty. Further, the assessee had a bank liability of about Rs.50 crore against mortgage of assets of about Rs.5 crore only, which fact has not been falsified.
The submissions made by the assessee in this regard have not been controverted by the AO or the ld. CIT(A) in any manner. When this fact is seen in the light of return filed by the assessee declaring loss of Rs.4.35 lakhs, it clearly emerges that the loans were taken by the assessee in cash in violation of provisions of section 269SS to meet the financial liabilities.
This in our considered opinion constitutes a reasonable cause warranting non-imposition of penalty u/s.271D of the Act in terms of section 273B of the Act. We, therefore, order to delete the penalty of Rs.88,18,000/- imposed/enhanced by the AO/ld. CIT(A).
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee arises out of the order passed by the CIT(A)-II, Pune on 12-12-2013 in relation to the Assessment Year 1999-2000 confirming penalty under section 271D of the Income-tax Act, 1961 (hereinafter also called `the Act’).
2. It is a second round of proceedings before the Tribunal. In the first round, the Tribunal remitted the matter to the file of CIT(A) for disposal of the assessee’s ground of limitation as well as the merits. In the second round of proceedings, the ld. CIT(A) dismissed the appeal of the assessee against which the assessee has come up in appeal before the Tribunal.
3. The facts of the case are that, on verification of cash book, it was observed by the Assessing Officer during the course of assessment proceedings that the assessee accepted certain loans in cash on various dates from Shah group amounting to Rs.79,18,000/-. The AO initiated penalty proceedings in the assessment order passed u/s.143(3) r.w.s. 147 on 08-12-2006. In the course of penalty proceedings, the AO opined that there was a violation of the provisions of section 269SS in respect of cash loans received by the assessee amounting to Rs.79,18,000/-. On being show caused as to why penalty u/s.271D of the Act be not imposed in this regard, the assessee submitted that its business activities were close and inoperative for about last 7 years and the assessee firm had borrowed money from many private money lenders and Shree Suvarna Sahakari Bank Ltd. since last 10 years. To meet the financial crunch of the firm, the assessee raised certain loans in cash from unorganized finance sector for disposing off its existing liabilities. The AO imposed penalty of the equal sum of Rs.79,18,000/-. The assessee approached the ld. CIT(A) who noticed that the correct amount of loans was to the tune of Rs.88,18,000/- and not Rs.79,18,000/- for which the penalty was imposed by the AO. After entertaining objections from the assessee, the ld. CIT(A) enhanced the penalty to Rs.88,18,000/-. The Tribunal remitted the matter to the ld. CIT(A). In the fresh round of proceedings before the ld. CIT(A), no relief was allowed.
4. We have heard the rival submissions and gone through the relevant material on record. There is no denial of fact that the assessee, in fact, raised loans in cash amounting to Rs.88,18,000/- which is in violation of the provisions of section 269SS of the Act. Once there is violation of the provisions of section 269SS, penalty is triggered u/s.271D of the Act. However, it is relevant to note that section 273B deals with certain penal provisions, including section 271D, and provides that no penalty shall be imposed if the assessee succeeds in proving that the failure resulting in imposition of penalty was for a reasonable cause. Thus, it is evident that escape from the clutches of penalty u/s 271D for violation of the provisions of section 269SS is possible when the assessee succeeds in proving that a reasonable cause existed in terms of section 273B for violation of section 269SS.
5. Adverting to the facts of the instant case, we find that the assessee specifically submitted before the AO during the course of penalty proceedings, which fact has also been captured in the penalty order, that its business was inoperative for the last 7 years and it had already borrowed loans from Shree Suvarna Sahakari Bank Ltd. and many private money lenders since last 10 years. To meet the financial requirements of repayment, for which the lenders were hard pressing, the assessee had to borrow money from unorganized finance sector in cash, which led to the imposition of the instant penalty. Further, the assessee had a bank liability of about Rs.50 crore against mortgage of assets of about Rs.5 crore only, which fact has not been falsified. The submissions made by the assessee in this regard have not been controverted by the AO or the ld. CIT(A) in any manner. When this fact is seen in the light of return filed by the assessee declaring loss of Rs.4.35 lakhs, it clearly emerges that the loans were taken by the assessee in cash in violation of provisions of section 269SS to meet the financial liabilities. This in our considered opinion constitutes a reasonable cause warranting non-imposition of penalty u/s.271D of the Act in terms of section 273B of the Act. We, therefore, order to delete the penalty of Rs.88,18,000/- imposed/enhanced by the AO/ld. CIT(A).
6. In view of our decision on the deletion of penalty on merits, there is no need to espouse and adjudicate the limitation issue taken up by the assessee in its appeal.
7. In the result, the appeal is allowed to this extent.
