Case Law Details
Brief of the Case
ITAT Mumbai held In the case of Jayantilal Vaishnav HUF vs. JCIT that the reasonable cause u/s 273B need to be seen from the context of the situation where a person is reasonably and under bonafide belief of taking a action beyond his control i.e. cause which prevent a reasonable person in ordinary prudence acting under normal circumstances for taking such action. The reasonable cause has to be seen in the the judicious manner by stepping up in the shoes such person as to what were the circumstances under which he acted upon. In the given case the assessee has made repayments in cash for which he had given explanation and reasons that out of such payments substantial amount paid to legal heirs of deceased creditors who refused to accept cheque, which in our opinion falls within the coverage of reasonable cause u/s 273B.
Facts of the Case
The assessee is engaged in the business of manufacturing of chemical. There were some loans which were coming over from earlier years and were repaid during the year in cash amounting to Rs.13,72,233/- because the assessee was under financial problems and loan creditors refused to accept payment by cheque. The AO imposed penalty of Rs.13,72,233/- after initiating the penalty proceedings u/s 271E of for contravention of section 269T by rejecting the plea of assessee without doubting the genuineness of these loans.
Contention of the Assessee
The ld. counsel for the assessee submitted that the assessee was in severe financial crunch and the credibility of the assessee has gone down substantially. He also filed financial statement showing that 381 cheques were dishonoured by the bank. No creditor was willing to accept payment by cheque. He relied on various decisions in support of his contention.
He also submitted death certificates of two creditors which alone accounted for Rs. 12,83,174 whose legal heirs pressed hard for cash payment. He also submitted that the repayments were made out of the withdrawals from the bank accounts of the assessee and the AO did not dispute the genuineness of these transactions.
Contention of the Revenue
The ld counsel of the revenue relied upon the orders of AO & CIT (A).
Held by CIT (A)
The CIT (A) upheld the order of AO by dismissing the appeal of assessee that the reasons as put forth by the assessee did not constitute reasonable cause within the meaning of section 273B.
Held by ITAT
We find that the assessee has made repayments in cash for which he had given explanation and reasons for such repayments, which in our opinion falls within the coverage of reasonable cause u/s 273B which provides that where the assessee proves that there existed a reasonable cause for making payments in cash then the penal provision may not be invoked.
This is very much clear that during the year 318 cheques issued by the assessee were dishonored by the bank, the details of which are also submitted by the assessee. We also note that the substantial payments were made to legal heirs of deceased creditors who refused to accept payments by cheques and compelled the assessee to make payments in cash. We also note that the genuineness of these payments were also not disputed by the authorities below.
In the case of Suresh R. Solanki Vs. ACIT 2014(4) TMl 557-ITAT Mumbai, it has been held by the Tribunal that where urgency of making payment is shown, the penalty is not leviable. The Hon’ble Supreme Court in the case of ADIT Vs. Kumari A.R. Shanti (2008) 255 ITR 258 (SC), it has been held that the main object of section 269SS was to curb the menace of false entries in the books and where the transactions are genuine, the provisions of section 26955 and 269TT are not attracted. The reasonable cause as seen from the context of the situation where a person is reasonably and under bonafide belief of taking a action beyond his control i.e. cause which prevent a reasonable person in ordinary prudence acting under normal circumstances for taking such action. The reasonable cause has to be seen in the the judicious manner by stepping up in the shoes such person as to what were the circumstances under which he acted upon. In view of the above facts we exists reasonable and sufficient cause within the meaning of section 273B and order of CIT (A) cannot be sustained and the same is hereby reversed.
Accordingly appeal of the assessee allowed.
The Above Case was attended for Assessee by CA LALIT MUNOYAT, who has contributed many articles on Taxguru.in.
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