Ramachandran Nair, J.
This appeal is filed by the Revenue challenging the order of
the Tribunal cancelling penalty levied on the respondent assessee
under Section 271D for violation of Section 269SS of the Income Tax
Act (hereinafter referred to as the Act for short).
2. We have heard Shri.P.K.R.Menon, learned Senior counsel
appearing for the Revenue, and Shri.Anil D.Nair, learned counsel
appearing for the respondent assessee.
3. The assessee was employed in a circus company for 25
years, and thereafter he started an industry making packing cases.
In the second year of business, the assessee borrowed substantial
amounts from various persons in cash, which is in violation of
Section 269SS of the Act. The Assessing Officer after collecting
particulars of cash loans taken from these persons levied penalty
under Section 271D, which is an amount equal to the loan amount.
ITA No.237/2010
Even though first appeal was unsuccessful, the Tribunal accepted
the explanation offered by the assessee under Section 273B and
cancelled the penalty, against which this appeal is filed.
4. Before us, learned Senior counsel for the Revenue
contended that the explanation of the assessee, which was accepted
by the Tribunal, that it is on account of ignorance of law that he
borrowed money from individuals, is not tenable. Learned counsel
appearing for the assessee, on the other hand, referred to the
findings of the Assessing Officer in the penalty order itself, wherein
the source of lenders as borrowings from Banks is accepted by the
Officer.
After hearing both sides and after going through the facts on
record, we notice that the assessee used several persons, probably
close relatives and friends, to take loan from Banks for his business
purposes. Borrowers from Bank cannot issue cheques to another
person, which will only prove that borrowed funds are again lend to
other persons. So much so, after availing loans these creditors
withdrew all the money in cash from the Bank accounts and gave it
to the respondent assessee. When factual position of source of
ITA No.237/2010
fund is accepted by the Department, necessarily, the conclusion of
the Tribunal has to be upheld because there is no tax evasion
involved or black money introduced in business in cash. We feel,
furnishing of source of lenders accepted by the Department itself is
reasonable cause against levy of penalty because when source is
provided violation becomes technical. It is also found by the
Tribunal that the assessee was in the second year of business and
on noticing his mistake he discontinued the practice. Considering
the above, we are of the view that the explanation accepted by the
Tribunal under Section 273B based on facts, on which there is no
controversy, does not give rise to any substantial question of law
warranting interference by this Court.
Therefore, this Income Tax Appeal is dismissed.
(C.N.RAMACHANDRAN NAIR, JUDGE)
(BHABANI PRASAD RAY, JUDGE)