Sri Shyam Jamadagni, Bangalore vs Department Of Income Tax

The Additional Commissioner of Vs. Shri Shyam Jamadagni, Income Tax, No.378, 16th "A" Main, Range 4, 4th 'T' Block, Jayanagar, Bangalore. Bangalore - 560 011. PAN: AANPJ 0750D

APPELLANT RESPONDENT

Appellant by : Dr. P.K. Srihari, Addl. CIT(DR) Respondent by : Shri Prasanna Adiga, C.A.

Date of hearing : 16.03.2015 Date of Pronouncement : 20.03.2015

ORDER

Per N.V. Vasudevan, Judicial Member

This appeal by the assessee is against the order dated 1.5.2014 of

the CIT(Appeals)-II, Bangalore relating to A.Y. 2009-10.

2. The assessee is an individual. In the course of assessment

proceedings, the Assessing Officer noticed that assessee had taken a loan

of Rs.5 lakhs from one Shankar Subramanyam, C.A. and another sum of

Rs.1,73,000 by cash from different friends. The AO was of the view that ITA No.1143/Bang/2014 Page 2 of 5

under the provisions of section 269SS of the Act, the assessee ought not to

have taken loans in cash in excess of Rs.20,000 and that such loans had to

be taken only by account payee cheque or draft. Since there was violation

of the provisions of sec. 269SS of the Act, the AO initiated penalty

proceedings u/s. 271D of the Act.

3. U/s. 273B of the Act, penalty u/s. 271D cannot be imposed if the

assessee proves that there was a reasonable cause for taking loans in

cash in excess of Rs.20,000. The assessee explained that he had issued a

cheque for Rs.5 lakhs to one Shri Sandeep Kumar in connection with a

property transaction. The said cheque was present by the payee to the

assessee's bankers for payment. Since there was no sufficient balance in

the assessee's bank account, the bankers called the assessee and asked

him to deposit funds in his account so that cheque could be honoured and

that in case funds are not arranged, the cheque would be dishonoured. It

was in these circumstances that the assessee took a cash loan of Rs.5

lakhs from Shankar Subramanyam and deposited the same into his bank

account.

4. With regard to cash loan of Rs.1,73,000, the assessee pointed out

that cash loans have been availed from 12 different persons and each of

the cash loan was less than Rs.20,000 and therefore there was no violation

of the provisions of section 269SS of the Act, insofar as borrowing of

Rs.1,73,000 is concerned.

ITA No.1143/Bang/2014 Page 3 of 5

5. The AO did not dispute the aforesaid facts as stated by the

assessee, but was of the view that the circumstances which prompted the

assessee to avail cash loans was not enough to prove that there was

reasonable cause for failure to comply with provisions of section 269SS.

6. On appeal by the assessee, the CIT(Appeals) was of the view that

the circumstances explained by the assessee was sufficient to hold that

there was reasonable cause for the assessee's failure to comply with the

provisions of section 269SS of the Act.

7. Aggrieved by the order of CIT(Appeals), the revenue is in appeal

before the Tribunal.

8. We have heard the submissions of the ld. DR, who relied on the

order of the AO. The ld. counsel for the assessee relied on the order of

CIT(Appeals).

9. We have considered the rival submissions. As already stated, the

factual position with regard to issue of a cheque for Rs.5 lakhs for a

property transaction and lack of funds in the bank account of the assessee

to honour the said cheque is not in dispute. The fact that assessee

borrowed Rs.5 lakhs from Shankar Subramanyam and deposited the same

in the bank account to honour the cheque of Rs.5 lakhs issued by him is

also not in dispute. In the circumstances, we are of the view that there was ITA No.1143/Bang/2014 Page 4 of 5

a reasonable cause for the assessee's failure to comply with the provisions

of section 269SS of the Act.

10. As far as cash loan of Rs.1,73,000 is concerned, each of the cash

loan is less than Rs.20,000. The details in this regard are given by the

assessee at page 7 of the assessee's paperbook filed before us.

Therefore, there cannot be any violation of the provisions of section 269SS,

as far as sum of Rs.1,73,000 is concerned.

11. We are of the view that the ld. CIT(Appeals) was fully justified in

cancelling the order of the Assessing Officer imposing penalty on the

assessee. We therefore confirm the order of CIT(Appeals).

12. In the result, the appeal by the Revenue is dismissed.

Pronounced in the open court on this 20th day of March, 2015.

Sd/- Sd/-

( JASON P. BOAZ ) ( N.V. VASUDEVAN ) Accountant Member Judicial Member

Bangalore, Dated, the 20th March, 2015.

/D S/ ITA No.1143/Bang/2014 Page 5 of 5

Copy to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file

By order

Assistant Registrar/ Senior Private Secretary ITAT, Bangalore.