COMISSIONER OF INCOME TAX V. AMAR NATH

ITA/4014/2013

AI Insights

The case revolves around the appellant, Commissioner of Income Tax, Shimla, contesting the respondent, Amar Nath's, acceptance of a cash loan amounting to 13,15,000 from Shri Rajesh Anand, which was deemed a violation of Section 269SS of the Income Tax Act, 1961. The Income Tax Officer imposed a penalty under Section 271D, which was later reversed by the Commissioner of Income Tax (Appeals) and upheld by the Income Tax Appellate Tribunal. The High Court of Himachal Pradesh examined whether there was a 'reasonable cause' for the cash transaction and if the respondent's explanation of needing the cash to prevent cheque bouncing constituted a valid defense under Section 273B. The court found that the respondent's actions were driven by commercial exigency and were thus reasonable.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 718814 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 05-10-2015
• Assessment Year: misc
• Other Referred Cases: Asstt. Director of Inspection Investigation v. A.B. Shanthi, Hindustan Steel Ltd. V. State of Orissa, CIT v. Kharaiti Lal and Co., CIT v. Maheshwari Nirman Udyog, CIT v. Lakshmi Trust Co., CIT v. Indore Plastics P. Ltd., CIT v. Idhayam Publications Ltd., CIT v. Bazpur Co-operative Sugar Factory Ltd., CIT v. Balaji Traders, CIT v. Kundrathur Finance and Chit Co., CIT v. Ratna Agencies, The Commissioner of Income Tax v. M/s Samora Hotels P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VISHAL MOHAN
• Assessee Lawyers: VINAY KUTHIALA; DIWAN SINGH NEGI
• Keywords: Assessment Year; Cash transaction; Loan; Penalty; Reasonable cause
• Section: 271D; 273B; 269SS

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No.4014 of 2013 Decided on : 5.10.2015 Commissioner of Income Tax, Shimla ...Appellant. Versus Amar Nath ...Respondent. Coram: The Hon’ble Mr. Justice Sanjay Karol, Judge. The Hon’ble Mr. Justice P.S. Rana, Judge. Whether approved for reporting?1 For the Appellant : Mr. Vinay Kuthiala, Senior Advocate, with Mr. Diwan Singh Negi, Advocate. For the Respondent : Mr. Vishal Mohan, Advocate. Sanjay Karol, Judge Conjoint reading of provisions of Sections 269SS and 273B of the Income Tax Act, 1961 (hereinafter referred to as the Act) enables the assessee to substantiate and explain the reasonable cause, leading to failure in complying with the provisions and receiving payments in cash, in excess of the prescribed limit. 2. Undisputedly, with respect to the Assessment Year 2008-2009, assessee borrowed money, in cash, Whether reporters of the local papers may be allowed to see the judgment? …2… amounting to `13,15,000/-, from one Shri Rajesh Anand. Finding the assessee to have breached, rather willfully, provisions of Section 269SS, the Income Tax Officer, by virtue of his power, under the provisions of Section 271D of the Act, imposed penalty of the like amount. In an appeal filed by the assessee, such order stood reversed by the Commissioner of Income Tax (Appeals), Shimla, Himachal Pradesh and such action affirmed, in terms of the impugned order dated 31.1.2013, rendered by the Income Tax Appellate Tribunal. 3. Present petition stands admitted on the following substantial questions of law: 1. Whether in the facts and circumstances of the case there was ‘reasonable cause’ to accept the said loan in cash, or some bonafide reason due to which the assessee did not obtain the loan in accordance with section 269SS? 2. Whether a wrong statement made by assessee that the cash was required to be deposited in the bank account to avoid bouncing of cheques can be construed as ‘reasonable cause’ within the meaning of Section 273B of the Act? 4. What is the ‘reasonable cause’ is a question of fact. In the instant case, the fact finding authorities have found the assessee to have explained the …3… circumstances, under which, being emergent in nature, he had to borrow money in cash. It is also a matter of record that the amount stood repaid within one month and much prior to the date of initiation of the impugned action. It is also not the case of the Revenue that the money so borrowed was unaccounted. 5. The assessee is a wholesale dealer of fast food goods, manufactured or marketed by various agencies and companies of national repute/Multi National Companies. For clearance of certain cheques, which stood issued in advance, as per market procedure, money had to be arranged to avoid prosecution under various statutes. It was also to save the reputation and goodwill. The cheques were deposited by the drawee as per his convenience. It stands established that after deposit of the amount, so borrowed in cash, the cheques issued in favour of the drawee stood cleared. Instead of availing the Cash Credit limit, for which the assessee was required to pay interest, he chose to borrow the amount from his near relation and deposit it in his account. There is nothing illegal or unusual about the same. Hence, findings of fact, cannot be said to be perverse or not …4… borne out from the record. Statement made by the assessee cannot be said to be incorrect, for the authorities below, concurrently found the same to be plausible and correct. 6. The object of introducing Section 269SS was to ensure that the tax payer does not furnish false information about his unaccounted money or if entries, reflecting in his record, are false, he should not be allowed to escape by giving false explanation with regard thereto. [Asstt. Director of Inspection Investigation v. A.B. Shanthi, (2002) 6 SCC 259] 7. ‘Reasonable cause’, which remains undefined, would be subjective satisfaction, based on objective material, of the adjudicatory authorities. The authorities are required to see as to whether the transaction is free from doubt and/or is genuine. Commercial exigency and prudence is certainly required to be kept in mind. 8. Reliance can be sought on the following decisions to support the view taken by the authorities below: Hindustan Steel Ltd. V. State of Orissa, (1972) 83 ITR 26 (SC); CIT v. Kharaiti Lal and Co., (2004) 270 ITR …5… 445 (P&H); CIT v. Maheshwari Nirman Udyog, (2008) 302 ITR 201 (Raj); CIT v. Lakshmi Trust Co., (2008) 303 ITR 99 (Mad); CIT v. Indore Plastics P. Ltd., (2003) 262 ITR 163(MP); CIT v. Idhayam Publications Ltd., (2006) 285 ITR 221 (Mad); CIT v. Bazpur Co-operative Sugar Factory Ltd., (1988) 172 ITR 321 (SC); CIT v. Balaji Traders, (2008) 303 ITR 312 (Mad); CIT v. Kundrathur Finance and Chit Co., (2006) 283 ITR 329 (Mad); and CIT v. Ratna Agencies, (2006) 284 ITR 609 (Mad). 9. Reliance on the decision, rendered by the Delhi High Court in ITA No.313/2006, titled as The Commissioner of Income Tax v. M/s Samora Hotels P. Ltd., decided on 23.2.2012, is misplaced, in view of the aforesaid discussion. 2. Thus, findings of fact recorded by the authorities below, by no means, can be said to be perverse or not borne out from the record. The authorities below, being final fact finding authorities, have answered the issue in favour of the assessee. As such, there is no reason for us to interfere in the appeal. Substantial questions of law are answered accordingly. …6… Appeal stands disposed of, so also pending application(s), if any. ( Sanjay Karol ), Judge. ( P.S. Rana ), October 5, 2015(sd) Judge. "