Case Law Details
RELEVANT PARAGRAPH
. The following point of difference has been referred to me u/s 255(4) of the IT Act for decision:
“Whether on the facts and in the circumstances of the case, penalty u/s.271D of the Income-tax Act, 1961 is leviable?
2. The facts leading up to the levy of penalty have been stated in the dissenting orders and there is no dispute regarding their accuracy. The only question is whether on these facts there was reasonable cause within the meaning of sec.273B preventing the assessee from accepting the sum of Rs. 15,00,000 from N.K. Chemist by account payee cheque or draft as required by sec.269SS. Whereas the learned AM has taken the view that there was no reasonable cause, the learned JM has opined that there was reasonable cause and hence no penalty was exigible. On a perusal of their orders and after hearing the arguments before me, I am inclined to agree with the learned JM that there was reasonable cause. The assessee-company is a builder and developer of lands. It is natural for it to look for purchase of lands which it can develop and make profits. When an opportunity presents itself, it was natural for the assessee to seize the same. One such opportunity presented itself in the form of lands owned by one Mukeshbhai Desai. The assessee no doubt had a cash balance of above Rs. 12,00,000 in its books on 1-3-2002, but apparently the market price of the lands was around Rs.15 to Rs.20 lakhs and therefore the assessee, instead of using up the cash balance in its books and restricting the borrowing to a much lesser amount, resorted to borrowing the sum of Rs.15 lakhs from N.K. Chemist in cash. The advantage of negotiating for the purchase of agricultural lands for development with ready cash-backing cannot be disputed. It was this advantage that obviously propelled the assessee to keep the cash ready and negotiate with Mukeshbhai Desai for the purchase of land. Unfortunately for the assessee the negotiations did not fructify and the deal fell through. All this is supported by the averments in the affidavit filed by Mukeshbhai Desai. These averments have not been impeached or discredited or found false. When the deal did not materialize, the assessee deposited the cash in the bank and issued a cheque in favour of N.K. Chemist and closed the borrowing. The learned JM has viewed the above circumstances as constituting reasonable cause and I have no strong reasons to disagree with him in his conclusion. The learned AM has observed that land deals can be closed by paying a token sum as advance and therefore there was no need to borrow monies equivalent to the entire price payable. Now there may be many ways in which a business deal can be put through and it is well-settled that essentially it is for the businessman to put a transaction through in the manner best suited to his interests. Possibly the transaction could have been put through in the manner suggested by the learned AM, but we have to test the reasonableness of the explanation that is offered by the assessee in the touchstone of normal course of human conduct and probabilities. Unless the explanation trotted out is so perverse or strange or unusual that it cannot conform to the normal course of human conduct or probabilities, the fact that the transaction can be put through in several other or different ways should not be an impediment in accepting the explanation as constituting reasonable cause. There is nothing to suggest that the assessee’s explanation is in any manner improbable or impossible. It is supported on material facts by the affidavit of Mukeshbhai Desai. In these circumstances it appears to me that the assessee resorted to cash borrowing in violation of sec.269SS only because of the advantages which the ready cash back-up would give. I agree with the view taken by the learned JM and answer the point of difference referred to me in the negative.
