Once Taxpayer Shows Reasonable Cause For Accepting Cash Loan, Burden Shifts On AO To Prove That Such Cause Lacks Bonafide: Chennai ITAT
On finding that the explanation against cash receipts offered against show cause notice before the authorities were reasonable, the Chennai ITAT held that levy of penalty u/s 271D of the Income Tax Act, is untenable.The Bench of the ITAT comprising of V. Durga Rao (Judicial Member) and Manjunatha, G (Accountant Member) reiterated while referring the case of Ms. Nanda Kumari v. ITO that,...
On finding that the explanation against cash receipts offered against show cause notice before the authorities were reasonable, the Chennai ITAT held that levy of penalty u/s 271D of the Income Tax Act, is untenable.
The Bench of the ITAT comprising of V. Durga Rao (Judicial Member) and Manjunatha, G (Accountant Member) reiterated while referring the case of Ms. Nanda Kumari v. ITO that, “the assessee had shown a cause for having received the amount in cash. Therefore, if the assessee had shown a cause, the burden shifts on the Assessing Officer to establish that the cause shown is not a reasonable cause by examining the cause shown and establish that it lacks bona fides.” (Para 6)
As per the brief facts of the case, the assessee's return was selected for scrutiny, wherein AO observed that the assessee has accepted cash for the consideration of the sale of immovable property and the amount was more than ₹.20,000/-, in contravention of the provisions of section 269SS, the AO initiated penalty proceedings u/s 271D. In accordance with the provisions of section 274 a show cause notice u/s 271D was issued and served, the assessee has filed his submission. However, after considering the submissions of the assessee, the AO has observed that the assessee has availed multiple loans in cash. Since the AO was of the opinion that the assessee has availed cash loan in contravention of provision of section 269SS, penalty u/s 271D was levied.
The Bench noted that the assessee has received the cash loan from the close relatives, however, the AO has ignored this fact and levied penalty u/s 271D.
The Bench observed that the assessee has shown copies of the confirmation letters from the lender and reasonable cause for receiving money towards purchase of machineries.
The Bench reiterated while referring the case of CIT Vs. Smt.M.Yesodha [reported in (2013) 351 ITR 265] that, “the transaction between the father in law and the daughter in law was a genuine transaction and this was not in dispute because the amount was paid for purchase of a property.”
the Bench further added while referring to the case of CIT Vs. Smt.M.Yesodha [reported in (2013) 351 ITR 265] that, “even though the assessee had not taken a specific plea of reasonable cause, it must be considered as applied to human action and where transactions were bona fide, penalty could not be imposed.”
Therefore, on finding a leavy of penalty untenable, ITAT allowed the assessee's appeal.
Counsel for Appellant/Taxpayer: T. Vasudevan
Counsel for Respondent/Department: AR V Sreenivasan
Case Title: Mani Sundaram verses Income Tax Officer
Case Number: I.T.A. No.899/Chny/2023