AMIT SINGH,CHANDIGARH V. ADDL.CIT-RANGE-5, CHANDIGARH

ITA 237/CHANDI/2024

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The case involves Shri Amit Singh, who appealed against the penalties imposed under sections 271D and 271E for accepting and repaying loans in cash, respectively, during the assessment year 2010-11. The penalties were initially levied by the Addl. CIT, Range-5, Chandigarh, based on the violation of sections 269SS and 269T, which regulate cash transactions. The assessee argued that both he and the lenders had agricultural incomes and were below the taxable income threshold, which should exempt them from these penalties. The Tribunal considered various precedents and the specific circumstances of the case, including the nature of the business and the relationships involved, and decided in favor of the assessee, leading to the cancellation of the penalties.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 829118 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Chandigarh
• Assessment Year: misc
• Appeal Filed On: 09-03-2024
• Other Referred Cases: Shri Ram Singh vs. Addl. CIT, Narinder Kumar Chunilal Soni vs. ACIT, Shri Mohanlal Savjibhai Tilva & Ors. vs. ACIT
• Laws Referred To: Section 271D, Section 271E, Section 269SS, Section 269T, Section 273B
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN LD.
• Assessee Lawyers: AJAY CHAUHAN SINGH LD
• Keywords: Business income; Reasonable cause; Business expenditure

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, CHANDIGARH PHYSICAL HEARING HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकर अपील सं. / ITA No.238/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2010-11) & 2. आयकर अपील सं. / ITA No.237/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2010-11) Shri Amit Singh 381, Labour Bureau, HSG Society Sector – 49A, Chandigarh - 160047 बनाम/ Vs. ACIT Range-5 Aaykar Bhawan, Sector-17, Chandigarh - 160017 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. BEKPS-6996-A (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Sh. Ajay Chauhan Singh (CA) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Sh. Vivek Vardhan (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 06-01-2026 घोषणाकीतारीख /Date of Pronouncement : 12-01-2026 आदेश / O R D E R 1. In these two appeals for Assessment Year (AY) 2010-11, the assessee is aggrieved by confirmation of levy of penalty u/s 271D and 271E. The impugned penalties have been levied on similar facts. The appeals arises out of separate orders of Learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] both dated 11-01-2024 in the matter of impugned penalties as levied by Ld. Addl. CIT, Range-5, Chandigarh vide orders dated 12-11-2018. Having heard rival Printed from counselvise.com 2 submissions and upon perusal of case records, the appeals are disposed-off as under. 2. It emerges that the assessee filed return of income declaring business income of Rs.1,17,930/- and other income of Rs.7,500/-. The assessee declared agricultural income of Rs.14 Lacs which was accepted by Ld. AO in the assessment proceedings. However, Ld. AO disallowed Architect Fees of Rs.1.75 Lacs which was claimed as business expenses. The matter reached up-to Tribunal wherein, vide ITA No.17/Chd/2022 order dated 30-06-2022, the issue was restored back to Ld. AO for fresh consideration. 3. The Ld. AO, while framing the assessment, made a reference to Ld. Addl. CIT, Range-5 for initiation of penalty u/s 271D and 271E on the ground that the assessee obtained as well as repaid loans in cash from four persons as tabulated below: - No. Name Amount Accepted (Rs.) Amount Repaid (Rs.) 1. Sh. Surjit Singh (family friend) Rs.10.12 Lacs Ra.9.82 Lacs 2. Sh. Rajpal Rs.16.45 Lacs Rs.14.05 Lacs 3. Sh. Sukhpal Singh Rs.8.90 Lacs --- 4. Sh. Sham Singh (father of the assessee) Rs.2 Lacs Rs.12.75 Lacs Total Rs.37.47 Lacs Rs.36.62 Lacs The acceptance as well as repayment is not in dispute. In recorded statement, Sh. Rajpal and Sh. Sukhpal Singh confirmed advance of loan in cash. The source of loans as granted by other two persons was also not disputed. The acceptance or repayment of loan from any of the above persons is not in dispute. However, since the loans were received / repaid in cash, Ld. AO alleged violation of Sec.269SS and Printed from counselvise.com 3 269T and made reference to specified authority for levy of impugned penalties for such violations. Though the assessee opposed levy of penalty by drawing attention to factual matrix, Ld. Addl. CIT, Range-5 Chandigarh levied penalty of Rs.37.47 Lacs u/s 271D for acceptance of loans. The repayment was for Rs.41.17 Lacs and accordingly, penalty was levied u/s 271E for Rs.41.17 Lacs. Apparently, the amount of repayment is Rs.36.62 Lacs only as tabulated above. 4. During first appeal, the assessee contended that the assessee as well as the lenders was having agricultural income and his income was also below taxable limit and therefore, such penalties were not leviable. Another contention was that the transactions were under bona-fide belief and the same were genuine. The assessee was new in construction business and prior to this year, the assessee was cultivating his ancestral land only. The assessee obtained loans to start the new business. Reference was made to various case laws to assail levy of penalties on these facts. However, Ld. CIT(A) rejected the contentions on the ground that no business exigency was shown by the assessee and the assessee earned business income. The assessee was to demonstrate bona-fide reasons for taking such loans in order to consider the applicability of Sec.273B (reasonable cause) while assailing impugned penalties. No such cause was established. Accordingly, both the penalties were upheld. Aggrieved, the assessee is in further appeal before Tribunal. 5. I find that though the provisions of Sec.269SS prohibit any person to accept loan or deposits etc. in cash beyond specified limit, Printed from counselvise.com 4 the second proviso provide an exception to this rule. The second proviso exclude application of these provisions to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act. The facts on record, would show that the assessee’s income is below taxable limit whereas the substantial income of the assessee constitute agricultural income of Rs.14 Lacs which has been accepted by Ld. AO. The Delhi Tribunal in the case of Shri Ram Singh vs. Addl. CIT (ITA No.1457/Del/2020 dated 11-08- 2022) held that when the income is below taxable income limit, it could be said that the assessee had no other income which is chargeable to tax under the Act and therefore, the penalty as levied by Ld. AO u/s 271D was deleted. It is also fact that all the lenders are agriculturists which is evident from affidavit of Shri Raj Pal and Shri Sukhpal Singh which was filed by the assessee before Ld. AO. The assessee had also filed copies of land revenue records (Fard) to Ld. AO which is not in dispute. Similar documents have been filed for Shri Surjit Singh. Therefore, the assessee, in my considered opinion, would be covered under second proviso. 6. Proceeding further, the assessee would succeed on the plea of reasonable cause also since it is the first year of start of business. The nature of business i.e., construction and building material would involve cash transactions. The lenders are agriculturists and close Printed from counselvise.com 5 family friends of the assessee residing in remote villages. The genuineness or the source of loan is not in dispute. The Ahmedabad Tribunal in the case of Narinder Kumar Chunilal Soni (ITA No.195/Ahd/2022 dated 17-05-2023) held that penalty u/s 271D is not leviable when cash was accepted under bona fide circumstances and without tax evasion motive. Sec.273B relief would be applicable if reasonable cause was shown. Another bench of Ahmedabad Tribunal in the case of Shri Mohanlal Savjibhai Tilva & Ors. vs. ACIT (ITA Nos.1024/Ahd/2019 &ors. dated 24-06-2022), following the decision of Hon’ble Bombay High Court in Triumph International Finance (I) Ltd. (22 Taxamnn.com 138) holding that the expression ‘reasonable cause’ in Sec.273B for non-imposition of penalty u/s 271E would have to be construed liberally, deleted penalty on similar facts. These case laws duly support the case of the assessee. Considering the facts and circumstances of the case, I order for cancellation of impugned penalties u/s 271D and 271E as levied by Ld. AO. 7. Both the appeal stand allowed. Order pronounced on 12thJanuary, 2026. -Sd- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER Dated: 12-01-2026 Printed from counselvise.com 6 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "