YV Murali Krishna., Gudivada V. The Addl.CIT, Vijayawada

ITA 50/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9735 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M MADHUSUDHAN; D L NARASIMHA RAO ARS
• Keywords: Unexplained cash credit; Income from undisclosed sources; Reasonable cause
• Section: 273B; 143(3); 147; 68

Judgement Text

ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.50&51/VIZAG/2015 ( / ASSESSMENT YEARS: 2006-07 & 2007-08) Y.V. MURALI KRISHNA GUDIVADA VS. ACIT, RANGE - 1, VIJAYAWADA [PAN: AARPY1415A ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M. MADHUSUDHAN, & SHRI D.L. NARASIMHA RAO, ARS / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR / DATE OF HEARING : 24.10.2016 / DATE OF PRONOUNCEMENT : 08.11.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST ORDER OF THE CIT(A), VIJAYAWADA DATED 24.11.2014, FOR THE AS SESSMENT YEAR 2006-07 & 2007-08. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 2 COMMON, THEY ARE HEARD TOGETHER AND DISPOSED OFF, B Y THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E AN INDIVIDUAL CARRYING ON BUSINESS IN PURCHASE AND SALE OF RADIOS , FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 30.10.200 6 DECLARING TOTAL INCOME OF RS.1,53,840/-. SUBSEQUENTLY, THE CASE WA S SELECTED FOR SCRUTINY AND THE ASSESSMENT U/S 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WAS COMPLETED ON 31.12.2008 DETERMINING TOTAL INCOME OF RS.2,03,840/-. THEREAF TER, THE ASSESSMENT PROCEEDINGS WERE RE-OPENED U/S 147 OF THE ACT, FOR THE REASON THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. T HE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 ON 18.3.2013 DE TERMINING TOTAL INCOME OF RS.7,51,640/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE WAS IN RECEIPT OF UNSECU RED LOANS IN CASH/BEARER CHEQUES IN VIOLATION OF PROVISIONS OF S ECTION 269SS OF THE ACT WHICH ATTRACTS LEVY OF PENALTY U/S 271D OF THE ACT. ON THE BASIS OF THE INFORMATION RECEIVED FROM THE A.O., THE ADDITIO NAL COMMISSIONER OF INCOME TAX ISSUED A SHOW CAUSE NOTICE DATED 22.11.2 013 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY AN ORDER IMPOSING PENALTY SHOULD NOT ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 3 BE PASSED U/S 271D OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT HE HAD ACCEPTED LOANS IN CA SH/BEARER CHEQUES FOR MAKING ADVANCE PAYMENTS TO M/S. SITA RAMA HOUSI NG PVT. LTD. SO AS TO FACILITATE ACQUISITION OF PROPERTY IN KOHEDA VIL LAGE OF R.R. DIST. AND ALSO PURCHASE OF LANDED PROPERTY IN THE SAME VILLAG E. THE ASSESSEE FURTHER SUBMITTED THAT DUE TO URGENCY INVOLVED AND BECAUSE OF PRESSURE MOUNTED BY THE SELLER, THE ASSESSEE APPROACHED THE CREDITORS WHO WERE KIND ENOUGH TO ADVANCE THE LOAN AMOUNTS. IT WAS FU RTHER SUBMITTED THAT THE AGREEMENT ENTERED INTO WITH THE COMPANY FO R PURCHASE OF LAND ULTIMATELY RESULTED IN A CIVIL LITIGATION TO THE MA JOR EXTENT WHICH IS STILL PENDING IN A COURT OF LAW IN THE ABOVE FACTUAL BACK GROUND, HE WAS OBLIGED TO ACCEPT THE LOANS IN THE FORM OF CASH/BEA RER CHEQUES TO MEET THE URGENT FINANCIAL NEEDS WHICH COULD NOT BE AVOID ED DUE TO THE PRESSURE MOUNTED BY THE SELLER. THE A.R. FURTHER S UBMITTED THAT THESE LOANS WERE ACCEPTED FROM CLOSE RELATIVES AND FRIEND S AND THE GENUINENESS OF THE LOANS WERE NOT DOUBTED BY THE A. O. IN THE RE- ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE ACT, WHEREIN THE A.O. HAS ACCEPTED THE LOANS AS GENUINE EXCEPT TO TH E EXTENT OF RS.5,47,800/- WAS ADDED AS UNEXPLAINED CREDITS FROM 3 PARTIES. EXCEPT THESE 3 PARTIES, REMAINING AMOUNTS HAVE BEEN ACCEPT ED AS GENUINE, THEREFORE, LEVY OF PENALTY U/S 271D OF THE ACT FOR CONTRAVENTION OF THE ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 4 PROVISIONS OF SECTION 269SS OF THE ACT FOR THE GENU INE TRANSACTION IS UNWARRANTED. 4. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE AND ALSO GONE THROUGH THE JUDICIAL DECISIONS RELIED UPO N BY THE ASSESSEE, HELD THAT AS PER THE PROVISIONS OF SECTION 269SS OF THE ACT, NO PERSON SHALL ACCEPT ANY LOAN OR DEPOSIT OF RS.20,000/- OR MORE FROM ANY OTHER PERSON OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR BANK DRAFT. IF THE PROVISIONS OF SECTION 269SS OF THE ACT ARE NOT COMP LIED WITH, PENALTY PROCEEDINGS U/S 271D OF THE ACT ARE TO BE INITIATED . IN THIS CASE, IT IS EVIDENT FROM THE RECORD THAT THE ASSESSEE HAS VIOLA TED THE PROVISIONS OF SECTION 269SS OF THE ACT BY ACCEPTING LOANS IN CASH /BEARER CHEQUES. THOUGH, THE ASSESSEE CLAIMS TO HAVE RECEIVED THE LO ANS FOR THE PURPOSE OF MEETING URGENT PAYMENT TO BE MADE TO M/S. SITA R AMA HOUSING PRIVATE LTD. FOR PURCHASE OF LANDED PROPERTY, THE R EASONS GIVEN BY THE ASSESSEE THAT IT NEEDS TO MAKE PAYMENT TO M/S. SITA RAMA HOUSING PRIVATE LTD. IS INCORRECT AS IT CAN BE SEEN FROM TH E RECORD THAT MOST OF THE CREDITORS ARE RESIDING IN AND AROUND GUDIVADA A ND THE TRANSACTION WITH COMPANY TOOK PLACE AT HYDERABAD WHICH IS FAR A WAY. THE A.O. FURTHER OBSERVED THAT U/S 269SS OF THE ACT, EVEN FO R GENUINE LOANS OR DEPOSITS, THE ASSESSEE HAS TO EXPLAIN WHY IT HAD OB TAINED THE SAME IN ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 5 CASH AND IF HE IS ABLE TO EXPLAIN A REASONABLE CAUS E THEN, THERE WILL BE NO PENALTY U/S 271D OF THE ACT. IN THIS CASE, THE ASSESSEE HAS FAILED TO PROVE THAT HE HAD ACCEPTED THE LOANS WITH A REASONA BLE CAUSE. IN THE CASE OF ITO VS. SUNIL M. KASLIWAL (2005) 94 ITR 281 , IT WAS HELD BY THE TRIBUNAL THAT SINCE THE URGENT REQUIREMENT WAS NOT KNOWN THE ASSESSEE COULD HAVE COMPLIED WITH THE REQUIREMENT OF SECTION 269SS OF THE ACT WITHOUT MUCH DIFFICULTY AND AS SUCH PENALTY IN RESP ECT OF LOAN WAS JUSTIFIED. SINCE THE ASSESSEE FAILED TO PROVE THAT HE HAS ACCEPTED THE CASH LOANS WITH A REASONABLE CAUSE AND ALSO BASED O N THE JUDICIAL PRONOUNCEMENTS IN THE CASE OF THENAMAL CHHAJJER VS. CIT (2005) 96 ITD 210 (CHENNAI), ITO VS. SUNIL M. KHASLIWAL (2005 ) 94 ITR 281 (PUNE), IT CAN BE CONCLUDED THAT THE ASSESSEE HAS V IOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT AND HENCE, IS LIABLE FO R PENALTY U/S 271D OF THE ACT. ACCORDINGLY LEVIED PENALTY U/S 271D OF TH E ACT FOR RS.59,03,725/- AND RS.10,00,000/- RESPECTIVELY FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08. 5. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURT HER SUBMITTED THAT THE A.O. WAS ERRED IN LEVYING PENALTY OF RS.59,03,7 25/- IGNORING THE FACT ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 6 THAT THE A.O. HAS MADE ADDITIONS OF RS.5,47,800/- O UT OF THE TOTAL CREDITS OF RS.59,03,725/- AS UNEXPLAINED CASH CREDITS. ONC E ADDITIONS MADE AS UNEXPLAINED CASH CREDITS, IT IS DEEMED AS ASSESSEE S OWN INCOME, THERE COULD BE NO PENALTY ON THE ADDITIONS SUSTAINED BY T HE A.O. AS REGARDS REMAINING AMOUNT OF RS.53,55,925/-, THE ASSESSEE SU BMITTED THAT OUT OF THE TOTAL CREDITS OF RS.53,55,925/-, A SUM OF RS.31 ,51,000/- WERE ROUTED THROUGH BANKING CHANNEL BY MEANS OF BEARER CHEQUES AND THAT TOO MOST OF THEM WERE UNDERTAKEN WITH CLOSE RELATIVES AND AS SOCIATES. THE BALANCE AMOUNT OF RS.22,40,925/- WERE RAISED BY MEA NS OF CASH, HOWEVER, THE FACTS REMAINS THAT THESE LOANS WERE AC CEPTED AS GENUINE BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDI NGS, THEREFORE, THE A.O. WAS INCORRECT IN LEVYING PENALTY ON THE GENUIN E TRANSACTIONS. 6. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, HELD THAT OUT OF TOTAL CREDITS OF RS.59,03,725/-, T HE A.O. DISALLOWED A SUM OF RS.5,47,800/- ACCEPTED FROM SHRI E. VENKATES WARA RAO, SHRI P. EASWAR REDDY AND V. BALAJI, AS THE ASSESSEE HAS NOT DISCHARGED THE BURDEN AS REQUIRED U/S 68 OF THE ACT. ONCE THE LOA NS ARE TREATED AS NOT GENUINE AND CONSEQUENTIALLY DEEMED AS ASSESSEES OW N INCOME, THERE COULD NOT BE ANY PENALTY FOR VIOLATION OF SECTION 2 69SS OF THE ACT, ACCORDINGLY, DIRECTED THE A.O. TO DELETE THE PENALT Y LEVIED OF ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 7 RS.5,47,800/-. AS REGARDS THE REMAINING AMOUNT TO RS.53,55,925/- THE CIT(A) HELD THAT THE ASSESSEE FAILS TO PROVE THE RE ASONABLE CAUSE WHICH PREVENTS THE ASSESSEE FROM ACCEPTING LOANS BY ACCOU NT PAYEE CHEQUES OR DEMAND DRAFTS. THOUGH, THE ASSESSEE CLAIMS TO H AVE REASONABLE CAUSE BECAUSE OF WHICH HE HAD ACCEPTED LOANS IN CAS H/BEARER CHEQUES, THE REASON GIVEN BY THE ASSESSEE CANNOT BE ACCEPTAB LE FOR THE REASON THAT THE ASSESSEE CLAIMS TO HAVE REQUIRED FUNDS FOR THE PURPOSE OF URGENT FINANCIAL NEEDS TO MAKE THE PAYMENT TO M/S. SITA RAMA HOUSING PRIVATE LTD., HOWEVER, THE FACT REMAINS THAT THE LO ANS WERE ACCEPTED FROM THE PERSONS WHO ARE RESIDING IN AND AROUND GUD IVADA, WHEREAS THE TRANSACTION WITH THE COMPANY HAD BEEN TAKEN PLACE I N HYDERABAD. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE LOANS ACCEPTED FOR PURCHASE OF LANDED PROPERTY FROM M/S. SITA RAMA HOU SING PRIVATE LTD. CANNOT BE TREATED AS AN URGENCY SO AS TO BRING WITH IN THE AMBIT OF REASONABLE CAUSE AS STIPULATED IN SECTION 273B OF T HE ACT. WITH THESE OBSERVATIONS, CONFIRMED PENALTY LEVIED BY THE A.O. U/S 271D OF THE ACT, TO THE EXTENT OF RS.53,55,925/- AND RS. 10,00,000/- FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08 RESPECTIVELY. AGGRIEVED B Y THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 8 7. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE A.O. WAS ERRED IN LEVYING PENALTY U/S 271D OF THE ACT, FOR THE FINANC IAL TRANSACTION TOOK PLACE BETWEEN THE ASSESSEE AND HIS CLOSE RELATIVES, AS THE PROVISIONS OF SECTION 269SS R.W.S. 271D OF THE ACT ARE NOT APPLIC ABLE TO THE FACTS OF THE CASE. THE A.R. FURTHER SUBMITTED THAT THE PURP OSE OF INSERTION OF SECTION 269SS OF THE ACT TO THE STATUTE BOOK IS TO CURB THE FLOW UNACCOUNTED MONEY IN THE FORM OF PURPORTED UNSECURE D LOANS TO EXPLAIN THE UNACCOUNTED ASSETS OR MONEY AT THE TIME OF SEAR CH, HOWEVER, THE GENUINE TRANSACTIONS ARE NOT COMING UNDER THE RIGOR S OF THE PROVISIONS OF SECTION 271D OF THE ACT. THE ASSESSEE HAS EXPLA INED WITH NECESSARY EVIDENCES THAT HE HAD A BUSINESS EXIGENCY IN AS MUC H HE NEEDS TO MAKE URGENT PAYMENTS TO M/S. SITA RAMA HOUSING PRIVATE L TD. TOWARDS PURCHASE OF LANDED PROPERTY AS THE COMPANY HAS PUT PRESSURE FOR THE PAYMENT. IT WAS FURTHER SUBMITTED THAT THE ASSESSE E HAS ACCEPTED THE LOANS IN THE FORM OF CASH/BEARER CHEQUES UNDER THE CIRCUMSTANCES BEYOND HIS CONTROL AS EXPLAINED TO THE ADDITIONAL C IT AND THE ASSESSING OFFICER OUGHT TO HAVE NOTICED THAT THE CASE IS COVE RED BY SECTION 273B OF THE ACT AND HENCE THE IMPUGNED PENALTY MAY BE DEVOI D OF ANY MERIT AND MAY NOT BE IN CONFORMITY WITH THE PROVISIONS OF LAW. WITHOUT PREJUDICE TO THE PRAYER THAT IMPUGNED PENALTY OF RS .53,55,925/- IS NOT SUSTAINABLE IN LAW, THE ASSESSEE PRAYS THAT THE PEN ALTY U/S 271D OF THE ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 9 ACT IS NOT LEVIABLE TO THE EXTENT OF RS.31,15,000/- TAKING NOTE OF THE FACT THAT THE TRANSACTION TO THIS EXTENT WAS ROUTED THRO UGH BANKING CHANNELS IN THE FORM OF BEARER CHEQUES AS PER THE DETAILS RE CORDED IN THE RELEVANT ASSESSMENT ORDER. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS RAISED THE LOANS FOR THE PURPOSE OF ACQUISITION OF LANDED PROPERTIES TO BE USED IN HIS BUSINESS FOR THE PURPOSE OF RE-SALE AND AS SUCH THE SAME WOULD COME WITHIN THE AMBIT OF ADVENTURE IN THE NAT URE OF TRADE AND AS SUCH TRANSACTIONS WOULD NOT ATTRACT THE PROVISIONS OF SECTION 269SS OF THE ACT AND ACCORDINGLY THE A.O. WAS ERRED IN LEVYI NG PENALTY U/S 271D OF THE ACT. ON THE OTHER HAND, THE LD. D.R. STRONG LY SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. LEVIED PENALTY U/S 271D OF THE ACT, FOR ACCEPT ING LOANS IN THE FORM OF CASH/BEARER CHEQUES IN CONTRAVENTION OF THE PROV ISIONS OF SECTION 269SS OF THE ACT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE REASONABLE CAUSE WHICH PREVEN TED THE ASSESSEE FOR NOT ACCEPTING THE LOANS BY WAY OF ACCOUNT PAYEE CHE QUE/DEMAND DRAFTS. THOUGH, THE ASSESSEE CLAIMS TO HAVE ACCEPTED THE LO ANS FOR THE PURPOSE OF MEETING URGENT FINANCIAL NEEDS, THE REASONS GIVE N BY THE ASSESSEE ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 10 THAT HE NEEDS TO MAKE THE PAYMENT TO M/S. SITA RAMA HOUSING PRIVATE LTD. FOR THE PURPOSE OF PURCHASE OF LANDED PROPERTY CANNOT BE ACCEPTABLE FOR THE REASON THAT THE TRANSACTION WITH THE COMPANY HAD BEEN TAKEN PLACE AT HYDERABAD, WHEREAS THE ASSESSEE HAS ACCEPTED THE CASH LOANS FROM THE PERSONS LIVING IN AND AROUND GU DIVADA. THE A.O. FURTHER OBSERVED THAT EVEN GENUINE LOANS OR DEPOSIT S ARE COMING WITHIN THE PURVIEW OF PROVISIONS OF SECTION 271D OF THE AC T, WHEN ASSESSEE FAILS TO EXPLAIN THE REASONS FOR NOT ACCEPTING THE LOANS IN CHEQUES. IT IS THE CONTENTION OF THE ASSESSEE THAT THE LOANS ACCEPTED BY HIM WERE GENUINE TRANSACTIONS AND THE A.O. HAS ACCEPTED THESE LOANS ARE GENUINE IN THE ASSESSMENT PROCEEDINGS U/S 143 R.W.S. 147 OF THE AC T. THE ASSESSEE FURTHER CONTENDED THAT OUT OF TOTAL CREDITS AT RS.5 3,55,925/- A SUM OF RS.41,30,000/- HAS BEEN ACCEPTED FROM CLOSE RELATIV ES LIKE WIFE, BROTHER- IN-LAW AND OTHER RELATIVES. THE CREDITORS HAVE CON FIRMED THE TRANSACTIONS AND ALSO EXPLAINED THE SOURCES FOR ADV ANCING LOANS WHICH WERE NOT DOUBTED BY THE A.O. THE A.O. LEVIED PENAL TY MERELY ON TECHNICAL AND VENIAL BREACH OF PROVISIONS OF SECTIO N 271D OF THE ACT, HOWEVER, THE FACTS REMAIN THAT THE PROVISIONS OF SE CTION 269SS OF THE ACT WAS INSERTED TO THE STATUTE BOOKS TO CURB THE F LOW OF BLACK MONEY IN THE FORM OF PURPORTED UNSECURED LOANS TO EXPLAIN TH E UNACCOUNTED MONEY OR ASSETS AT THE TIME OF SEARCH. THE ASSESSE E HAS EXPLAINED THE ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 11 REASONS FOR ACCEPTING THE CASH LOANS, THEREFORE, TH E A.O. WAS ERRED IN LEVYING PENALTY U/S 271D OF THE ACT. 9. SECTION 271D OF THE ACT, PROVIDES FOR LEVY OF PE NALTY FOR CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. SECTION 269SS OF THE ACT PROHIBITS ACCEPTANCE OF CASH LOANS IN EXCESS OF RS.20,000/-. AS PER THE PROVISIONS OF SECTION 269S S OF THE ACT, ANY PERSON TAKES OR ACCEPTS LOAN OR DEPOSIT OTHER THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT, THEN HE SHALL BE LIAB LE TO PAY, BY WAY OF PENALTY A SUM EQUAL TO THE AMOUNT OF LOAN OR DEPOSI T SO TAKEN OR ACCEPTED. THE OBJECT BEHIND THE INSERTION OF SECTI ON 269SS OF THE ACT IS TO PREVENT THE ASSESSEES FROM EXPLAINING AWAY THE U NACCOUNTED CASH FUND IN THE COURSE OF SEARCH AS REPAYING LOANS OR D EPOSITS TAKEN FROM VARIOUS PERSONS AND ALSO FROM BRINGING INTO THE BOO KS OF ACCOUNTS UNACCOUNTED INCOME IN THE FORM OF LOANS OR DEPOSITS . THEREFORE, IT IS CLEAR FROM THE PROVISIONS OF SECTION 269SS OF THE A CT, THAT THE OBJECTS OF INSERTION OF THIS SECTION IS TO PROHIBIT PERSONS EX PLAINING THE UNACCOUNTED CASH OR ASSETS BY WAY OF PURPORTED LOAN OR DEPOSIT ACCEPTED IN CASH. A CAREFUL STUDY OF THE PROVISION S OF SECTION 269SS R.W.S. 271D OF THE ACT, MAKES IT CLEAR THAT GENUINE TRANSACTIONS ARE NOT HIT BY THE PROVISIONS OF SECTION 271D OF THE ACT. THEREFORE, ALL GENUINE ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 12 TRANSACTIONS ARE KEPT ONE SIDE OF THE PURVIEW OF RI GOROUS PENAL PROVISIONS OF SECTION 271D OF THE ACT. BUT, IT IS FOR THE ASSESSEE TO EXPLAIN THE REASONABLE CAUSE WHICH PREVENTS THE ASS ESSEE ACCEPTING THE LOANS OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE S OR DEMAND DRAFTS TO THE SATISFACTION OF THE CONCERNED AUTHORI TIES. IF THE ASSESSEE EXPLAINS THE REASONS WHICH ARE COMING WITHIN THE PU RVIEW OF REASONABLE CAUSE AS DEFINED U/S 273B OF THE ACT, THEN THE PENA LTY U/S 271D OF THE ACT CANNOT BE LEVIED. 10. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS ACCEPTED THE LOANS IN CASH/BEARER CHEQUES FROM CLOSE RELATIVES AND FRIENDS. THE ASSE SSEE ALSO EXPLAINED THE CREDITS FROM THE PARTIES BEFORE THE A.O. BY FIL ING NECESSARY EVIDENCES IN THE FORM OF CONFIRMATION LETTERS. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE A.O. HAS ACCEPTED THESE TRANSACTIO NS AS GENUINE, WHICH IS EVIDENT FROM THE FACT THAT THE A.O. HAS MA DE ADDITIONS OF RS.5,47,800/- OUT OF TOTAL CREDITS OF RS.59,03,725/ -. THE ASSESSEE ALSO EXPLAINED THE REASONS FOR ACCEPTING LOANS IN CASH/B EARER CHEQUES. ACCORDING TO THE ASSESSEE, THERE IS A BUSINESS EXIG ENCY IN AS MUCH HE NEEDS TO MAKE URGENT PAYMENTS TO M/S. SITA RAMA HOU SING PRIVATE LTD. FOR THE PURPOSE OF BUYING LANDED PROPERTIES. THE S ELLER M/S. SITA RAMA ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 13 HOUSING PRIVATE LTD. HAS MOUNTED PRESSURE ON THE AS SESSEE FOR MAKING PAYMENT. TO MEET THE URGENT FINANCIAL NECESSITIES, THE ASSESSEE HAS APPROACHED THESE CREDITORS AND THESE CREDITORS ARE KIND ENOUGH TO MAKE THE PAYMENT TO THE ASSESSEE, THEREFORE, IT CANNOT B E CONSIDERED AS LOANS OR DEPOSIT ACCEPTED IN CONTRAVENTION OF THE PROVISI ONS OF SECTION 269SS OF THE ACT. 11. THE ASSESSEE CLAIMS THAT THERE IS A REASONABLE CAUSE FOR NOT COMPLYING THE PROVISIONS OF SECTION 269SS OF THE AC T, IN AS MUCH HE HAD PURCHASED LANDED PROPERTY FOR THE PURPOSE OF COMMER CIAL EXPLOITATION OF PROPERTY, THEREFORE, THE TRANSACTION IS A GENUINE B USINESS TRANSACTION WHICH IS OUTSIDE THE PURVIEW OF LOANS AND DEPOSITS COMING UNDER THE RIGORS OF SECTION 269SS OF THE ACT. THOUGH, THE AS SESSEE CLAIMS TO HAVE RECEIVED LOANS IN CASH/BEARER CHEQUES FOR THE PURPO SE OF URGENT FINANCIAL REQUIREMENTS, FAILS TO PROVE THE REASONS WITH NECESSARY EVIDENCES. THEREFORE, WE ARE OF THE VIEW THAT THE REASONS GIVEN BY THE ASSESSEE THAT HE NEEDS TO MAKE THE PAYMENTS TO M/S. SITA RAMA HOUSING PRIVATE LTD. IS NOT A REASONABLE CAUSE AS D EFINED U/S 273B OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE A. O. IS RIGHT IN INVOKING THE PROVISIONS OF SECTION 271D OF THE ACT. HOWEVER , CONSIDERING THE FACTS THAT THE ASSESSEE HAS ACCEPTED THE LOANS FROM CLOSE FRIENDS AND ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 14 RELATIVES AND ALSO PART OF THE AMOUNT HAS BEEN ACCE PTED THROUGH BANKING CHANNELS BY WAY OF BEARER CHEQUES, WE ARE O F THE VIEW THAT THE GENUINE TRANSACTIONS ACCEPTED FROM CLOSE FRIENDS AN D RELATIVES THROUGH BANKING CHENNAL ARE NOT COMING WITHIN THE RIGORS OF THE PROVISIONS OF SECTION 271D OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT OUT OF THE TOTAL CREDITS OF RS.53,55,925/-, A SUM OF RS.31,15, 000/- HAS BEEN ACCEPTED FROM CLOSE RELATIVES THROUGH BANKING CHANN ELS ARE NOT HIT BY THE PROVISIONS OF SECTION 271D OF THE ACT. ACCORDI NGLY, CONSIDERING THE TOTAL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE O F THE VIEW THAT THE A.O. WAS ERRED IN LEVYING PENALTY U/S 271D OF THE A CT, TO THE EXTENT OF RS.31,15,000/- LOANS ACCEPTED FROM CLOSE RELATIVES THROUGH BANKING CHANNEL. HENCE, WE DIRECT THE A.O. TO EXCLUDE A SU M OF RS.31,15,000/- OUT OF THE TOTAL CREDIT OF RS.53,55,925/- FOR THE P URPOSE OF LEVY OF PENALTY U/S 271D OF THE ACT. ACCORDINGLY, OUT OF T OTAL PENALTY OF RS.53,55,925/- A SUM OF RS.31,15,000/- IS DELETED A ND BALANCE OF RS.22,40,925/- IS CONFIRMED. 12. IN SO FAR AS ASSESSMENT YEARS 2007-08 IS CONCER NED, THE ASSESSEE HAS ACCEPTED CASH LOANS OF RS.10 LAKHS FROM 2 PERSO NS. THOUGH, THE ASSESSEE CLAIMS TO HAVE ACCEPTED CASH LOANS FROM TH E PERSONS AND REPAID WITHIN THE SAME FINANCIAL YEAR, THE FACTS RE MAIN THAT THE ASSESSEE ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 15 HAS ACCEPTED THE LOANS IN CASH IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THE REASONS GIVEN BY THE ASSESSEE THAT THERE IS A BUSINESS EXIGENCY IN AS MUCH HE NEEDS TO MAKE THE PAYMENT FOR PURCHASE OF LANDED PROPERTIES, THE REASONS GIVEN BY THE ASSESSEE IS NOT COMING WITHIN THE PURVIEW OF REASONABLE CAUSE AS DE FINED U/S 273B OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE A. O. WAS RIGHT IN LEVYING PENALTY OF RS.10 LAKHS U/S 271D OF THE ACT, FOR CON TRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. ACCORDINGL Y, CONFIRMED PENALTY LEVIED BY THE A.O. 13. COMING TO THE CASE LAWS RELIED UPON BY THE ASSE SSEE. THE ASSESSEE RELIED UPON PLETHORA OF JUDGEMENTS IN SUPP ORT OF HIS ARGUMENTS. WE HAVE CONSIDERED CASE LAWS RELIED UPON BY THE ASSESSEE, IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND F OUND THAT THE CASE LAW RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE TO T HE FACTS OF THE PRESENT CASE. ACCORDINGLY, WE REJECT THE CASE LAW RELIED UPON BY THE ASSESSEE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.50/VIZAG/2015 FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED AND ITA NOS.50 & 51/VIZAG/2015 Y.V. MURALI KRISHNA, GUDIVADA 16 APPEAL FILED BY THE ASSESSEE IN ITA NO.51/VIZAG/201 5 FOR THE ASSESSMENT YEAR 2007-08 IS CONFIRMED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 TH NOV16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 08.11.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI Y.V. MURALI KRISHNA, PROP. SEETHARAMA RADIO SERVICE, NEAR MUNICIPAL OFFICE, GUDIVADA. 2. / THE RESPONDENT THE ACIT, RANGE-1, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM