The Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) held that the burden shifts on the Assessing Officer ( AO ) to prove that cause lacks bonafide when taxpayer shows reasonable cause for accepting cash loan.
Since 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 of the Income Tax Act, the Assessing Officer initiated penalty proceedings under section 271D of the Income Tax Act. In accordance with the provisions of section 274 of the Income Tax Act, a show cause notice under section 271D of the Income Tax Act was issued and served on 12.10.2021 and called for explanation from the assessee.
The Assessing Officer was of the opinion that the assessee has availed cash loan in contravention of provision of section 269SS of the Income Tax Act, penalty under section 271D of the Income Tax Act of ₹.8,37,550/- has been levied. On appeal, the CIT(A) confirmed the penalty levied under section 271D of the Income Tax Act.
The counsel for the assessee has submitted that though the assessee has initially availed loans from close relatives, which were subsequently the loans, were treated as gift and credited to his capital account. Therefore, it was submitted that levy of penalty under section 271D of the Income Tax Act is unwarranted. By relying upon the decisions in the cast of CIT v. Smt. M. Yesodha and Ms. Nanda Kumar v. ITO dated 20.12.2018, the counsel prayed for deleting the penalty levied under section 271D of the Income Tax Act.
The Bench relied on the judgment in Nanda Kumari v. ITO, wherein it was held that “In the case on hand, 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.”
A Two-Member Bench comprising V. Durga Rao, Judicial Member and Manjunatha, G., Accountant Member observed that “The assessee furnished copies of the confirmation letters from the lender, which were filed before the authorities below and find that assessee’s father-in-law as well as assessee’s wife, who have confirmed that the loan amount shall be treated as gift. The assessee’s mother passed away and produced death certificate. Moreover, the assessee has shown reasonable cause for receiving money towards purchase of machineries. Thus, we are of the opinion that the explanation offered against show cause notice before the authorities below were reasonable and therefore, levy of penalty under section 271D of the Income Tax Act is untenable.”
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