LOAN TAKEN IN CASH MORE THAN RS. 20,000 TAKEN BY BUILDER TO MEET IMMEDIATE REQUIREMENT OF BUSINESS WON’T ATTRACT PENALTY
LOAN TAKEN IN CASH MORE THAN RS. 20,000 TAKEN BY BUILDER TO MEET IMMEDIATE REQUIREMENT OF BUSINESS WON’T ATTRACT PENALTY
Section 269SS, read with sections 273B and 271D, of the Income-tax Act, 1961 – Deposits – Mode of taking/accepting Circulars and Notifications: Circular Nos. 387 dated 6-7-1984 and 572, dated 3-8-1990:-
Penalty under section 271D could not be levied when assessee sufficiently process that loan was taken in excess of Rs. 20,000 to meet urgent and immediate requirement of Business[2015] –High Court of Gujarat –CIT v. ShreenathjiCorpn.
Facts:-
The assessee firm accepted loans/deposits of Rs. 20,000 each from 13 parties in cash, which was in contravention of the provisions of section 269SS. The assessee explained that said deposits were taken in cash for business expediency.
The Assessing Officer accepted the assessee’s explanation and found deposits to be genuine and bona fide. However, DCIT did not accept the explanation given by the assessee and imposed penalty under section 271D.
On appeal, the Commissioner (Appeals) confirmed order of penalty and dismissed assessee’s appeal.
The Tribunal allowed the second appeal and cancelled penalty imposed on the assessee.
On reference it was held by the High Court that:-
The Tribunal held that the assessee received the said loans/deposits from the various parties in cash in contravention of provisions of section 269SS. These loans/deposits have been accepted by the revenue as genuine. The assessee during the course of penalty proceedings in written submissions filed claimed that the assessee carries on business of construction of building and in the course of such business large amount of labour charges and payments for raw material purchased from unorganized trading sectors and bricks etc. are required to be made after banking hours particularly on the festival days. If their demand for cash payment is not met they would cancel the contract work and refused to complete the work and would also prevent the other contractors from undertaking the work till their dues are settled. Raw material would also not be made available for construction on time if the payment is not made in cash on such occasions. According to the assessee the loans were raised from various parties to meet exigencies of construction work.
The Deputy Commissioner was not satisfied with the explanation had not given and required details or evidence in support of the submissions made in written reply. He should have given an opportunity to the assesseeproduce required details and evidence.
The loan/deposits taken in excess of Rs. 20,000 to meet urgent and immediate requirements of business and the impression gathered as taxpayers from the aforesaid circular and the advertisement did constitute a reasonable cause for accepting the said loans/deposits of Rs. 20,000 from each party in cash within the meaning of section 273B of the Act.
The Tribunal further rightly concluded that the loan/deposits was taken to meet urgent and immediate requirements of business and the impression gathered as taxpayers from the aforesaid circular and the advertisement constituted a reasonable cause for accepting the said loans/deposits of Rs.20,000 from each party in cash within the meaning of section 273B of the Act.
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