ITAT upholds Penalty Levied u/s 271D of IT Act for Contravention of Section 269SS for Accepting Loan and Advances other than by way of Account Payee Cheques

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has recently upheld that penalty levied under section 271D of the Income Tax Act 1961 for contravention of Section 269SS of Income Tax Act 1961 for accepting a loan and advances other than by way of account payee cheques.

Assessee  Love Shoppers Ltd. filed the appeal against the order of the Commissioner of Income-tax (Appeals), confirming the levy of penalty under Section 271D of the Act, for the Assessment Year 2016-17.

The penalty in the present case has been levied by the Assessing Officer under Section 271D of the Act for contravention of the provisions of Section 269SS of the Income Tax Act, accepting loans and advances beyond the prescribed limit through modes other than by way of account payee cheques.

The contravention of the provisions of Section 269SS of the Income Tax Act took place on account of accepting cash loans from the director of the assessee-company Shri Kamal Sonwani.

Suresh Gandhi counsel for the assessee submitted that the cash was taken for meeting business exigencies of paying salaries to employees. Also, the genuineness of loans taken in cash was not doubted and sufficient cause was adduced for so taking the loan, there was no violation of the provisions of Section 269SS of the Income Tax Act and, therefore, no penalty could be levied under Section 271D of the Income Tax Act.

Atul Pandey, counsel for the revenue submitted that genuineness was not a material consideration and the moment any loan or advance was accepted in cash, is tantamount to the violation of the provisions of Section 269SS of the Income Tax Act.

The tribunal after hearing both sides  relied upon the decision of the Mumbai Bench in the case of Deepak Sales & Properties (P) Ltd. observed that “for escaping from the rigours from the Section 269SS of the Act, establishing genuineness or bona fides of the transactions is not sufficient”

Further, any amount received by modes other than cheques, as loans or advances, results in a violation of the provisions of Section 269SS of the Act. There is no question of genuineness or bona fides of the transactions coming into the picture.

After considering the precedents laid down in the Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit case the two-member bench of

Accountant Member Annapurna Gupta and Judicial Member Siddhartha Nautiyal dismissed the appeal filed by the assessee and held that the assessee was unable to establish any reasonable cause for taking cash loans also so as to escape from the levy of penalty under Section 271D of the Income Tax Act in view of Section 273B of the Income Tax Act.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates