No Penalty on Receiving Cash Loan from Family Members to Meet Business Exigency: ITAT

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the penalty under sections 271D and 271E of the Income Tax Act, 1961 cannot be leviable on receipt of cash loan from family members to meet business exigencies.

The assessee is engaged as a transporter and has not maintained any regular books of account. The assessment has been made on estimations, keeping in mind the transportation receipts earned by the assessee which also includes some of impugned entries towards cash receipts by way of loan.

The assessee contended that the cash has been received by way of temporary loan from family members to meet the business exigency having regard to the nature of business he is involved in.

The Tribunal bench comprising Shri Saktijit Dey, Judicial Member & Shri Pradip Kumar Kedia, Accountant Member observed that the fact of business exigency has not been denied by the Revenue.

The Tribunal further added that the turnover receipts declared by the assessee at Rs.39,61,195/- was enhanced to Rs.1,33,67,162/- for the purposes of estimation of income based on such impounded records.

“Therefore, imposition of penalty separately towards such receipts by way loan is not justified. The impromptu response of the purportedly uneducated assessee at the time of survey, in our view, requires to be seen in its natural perspective and requires to be given credence. The assessee has declared that the money was received from family members to meet the business exigencies. Having regard to the nature of business of the assessee and ground realities, such explanation appears plausible,” the Tribunal added.

Relying on a catena of decisions, the Tribunal observed that the breach of Sections 269SS and 269T for receipt/repayment of cash attributable to business exigencies is a mere technical or venial breach.

“The assessee has shown existence of reasonable cause in accepting/repayment of cash to meet the immediate business requirements. In our view, mitigating circumstances exists to exonerate the assessee from the recourse of penalty under Sections 271D and 271E of the Act. We accordingly set aside the order of the CIT(A) and cancel the penalty imposed under Sections 271D and 271E of the Act by the competent authority,” the Tribunal said.