Law:

Section:

Section 271D, read with section 269SS, of the Income-tax Act, 1961 - Penalty - For failure to comply with section 269SS - Whether in view of fact that assessee took cash loan in exceptional circumstances and it was a case of reasonable cause ,Tribunal had erred in law in deleting penalty under section 271D imposed - Held, no - Whether for imposing penalty under section 271D, assessing authority is required to look into genuineness of loan or deposit and it can waive penalty - Held, yes FACTS The assessee was a proprietor of a firm and engaged in the export business of garments. The assessment was completed under section 143(1)(a). Later on, the Assessing Officer noted that the assessee had taken a loan of Rs. 2.50 lakhs from a relative. On the basis of the information received from the Assessing Officer, the Joint Commissioner issued a show-cause notice requiring the assessee to show cause as to why an order imposing penalty should not be passed under section 271D. The assessee filed a reply showing the urgency of taking loan in cash for his 100 per cent export-oriented business which constituted a reasonable cause and requested him to drop the penalty proceedings, which was rejected by the Joint Commissioner as he was of the view that the assessee had without reasonable cause taken cash loan in contravention of the provisions of section 269SS and, therefore, the assessee was liable for penalty under section 271D. Accordingly, he imposed a penalty on the whole amount of loan so taken. On first appeal, the Commissioner (Appeals) rejected the assessee's plea of reasonable cause. The assessee went in appeal before the Tribunal. The Tribunal came to the conclusion that the assessee was an exporter and in the urgent need of the time-bound supplies, he took loan from his relative. The Assessing Officer did not doubt the genuineness of loan and the assessee immediately deposited the major portion of it with the bank on the same day for making payment to his suppliers which showed that there was no intention of the assessee to violate the provisions of law. It was observed that since the assessee was not having sufficient time and funds, the cash loan was taken to…

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