CA Satish Garg
Brief of the Case
In a landmark judgement of Hon’ble Allahabad High Court in the case of CIT- V. Smt. Dimpal Yadav, it was held that where even through assesee had taken a loan in cash, since loan was routed through bank account of the assessee for the payment to Government for converting land into free hold property, no penalty could be imposed u/s 271D.
Fact of the case:-
a) In this case, Assesee has taken cash loan more than Rs. 20000/- from a political party.
b) Assessee along with her husband acquire lease hold right over a land on the payment of certain sum and same land was converted into free hold in favour of assessee.
c) Assessing officer noticed that 50% of the said amount was taken as cash loan from a political party.
d) Assessing officer has held that assessee had violated provision of section 269SS and therefore imposed a penalty u/s 271D of the Income Tax Act.
Contention of the Assessee:-
a) Assessee contended that since she did not have requisite funds at the point of time and the amount was urgently required for conversion of land, a loan was taken from a political party, which was deposited in the assesee account and subsequently, the loan was paid back.
b) It was further contended that the transaction of the loan was found to be genuine in the assessment proceedings and therefore, the assesee could not be subjected to penalty.
c) The transaction of the loan was found recorded in the books of accounts of both parties i.e assessee and lender.
d) It was further urged that assessee was not aware of the provision of section 269SS of the Act.
Contention of the Department:-
It was held that assessee’s case did not fall under the exceptional clause under Section 269SS of the Act nor provide any evidence to prove the urgency of taking a loan in cash and thereby avoiding the transaction through banking channel nor there are any limitation, which compelled the assessee to accept the amount in cash.
Even though the assessee had taken a loan in cash , nonetheless, the loan transaction was a genuine transaction and was routed through the bank account of the assessee which clearly shows the bonafides of the assessee. The cash given by the lender was not unaccounted money but was duly reflected in their books of account. The assessing officer also accepted the explanation and found the transaction to be genuine. The contention of the Department that since there was no urgency, the assessee could have taken the loan through cheque and should have processed the matter through banking channel is immaterial, inasmuch as the genuineness of the transaction has not been disputed by the assessing officer. Further, Court finds that cash was deposited in the bank account of the assesse and money thereafter, was routed the banking channel for payment to the Government for converting the land into free hold property.
In light of the above, it was held that reasonable cause had been shown by the assessee and the provision of section 273B is applicable and hence no penalty could be imposed.
(Author can be reached at email@example.com)