COMMISSIONER OF INCOME TAX Vs. MANOJ LALWANI

JUDGEMENT

(1.) FOLLOWING substantial questions of law arise for adjudication by this Court : -

(2.) HAVING heard the rival submissions of the parties the Tribunal came to the conclusion that the assessee is an exporter and in the urgent needs of the time bound supplies, the assessee took a loan of Rs. 2.50 lacs from his brother -in -law Mukesh Manwani. It was also observed that genuineness of the loan has not been doubted by the A.O. and the assessee immediately deposited a sum of Rs. 2.45 lacs out of Rs.2.50 lacs in the bank on the same day for making the payments to his suppliers which shows that there was no otherwise intention of the assessee to violate the provisions of law. It was also observed that since the assessee was not having sufficient time and funds, therefore, the cash loan was taken to avoid further delay in process of clearing the cheque and at the time of taking cash loan the assessee was not aware about the TT of 10000 US Dollar otherwise he would not have taken the cash loan from his brother -in -law Shri Mukesh Manwani. in view of these peculiar circumstances, the Tribunal held that the cash loan was taken by the assessee in the exceptional circumstances and it is a case of reasonable cause which was proved by the assessee. Consequently, the Tribunal deleted the penalty imposed by the Joint CIT and confirmed by the CIT (A).

(3.) AS per Section 269SS of the Act of 1961 after 30th day of June, 1984 no person is allowed to take of accept from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft, of amount of twenty thousand rupees or more. Section 271D of the Act of 1961 speaks of levy of penalty of a sum equal to the amount of loan or deposit so taken or accepted in contravention of the provisions of Section 269SS. A plain reading of Section 271D gives an impression that if there is a contravention of the provisions of Section 269SS, the assessee shall be liable to pay the penalty equal to the amount which has been taken as loan or deposit and there is no discretion left with the assessing authority to waive the penalty considering the facts and circumstances in which the loan or deposit was taken by the assessee. But when we read Section 271D with Section 273B of the Act of 1961 which begins with non - obstinate clause 'Notwithstanding anything contained in the provisions of Section 271D', it is clear that in spite of the provision of Section 271D, the enactment following, namely, 'no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.' will have its full operation. Section 273 -B permits the assessing authority not to impose a penalty provided under Section 271D of a sum equal to the amount of loan or deposit taken or accepted in spite of the breach of provisions of Section 269SS wherein the person has accept a loan or deposit or the aggregate amount of such loan or deposit by way of account payee cheque or account payee bank draft, if the assessee or the person proves before the assessing authority that there was a reasonable cause for not accepting the amount of loan or deposit by way of account payee cheque or account payee bank draft. Under Section 273B a judicial discretion is left with the assessing authority not to levy a penalty under Section 271D if the authority is satisfied that there was a reasonable cause for not complying with the provisions of Section 269SS of the Act of 1961.