IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY FRIDAY, THE 4TH FEBRUARY 2011 / 15TH MAGHA 1932 ITA.No. 237 of 2010() --------------------- AGAINST THE ORDER IN ITA.509/COCH/2009 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ SHRI.P.K.SHAMSUDDIN, PACKWELL, ROOM NO.16, MUNICIPAL SHOPPING ARCADE, CHANGANACHERRY, KOTTAYAM DIST. ADV. SRI.ANIL D. NAIR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04/02/2011 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. .................................................................... ITA No.237 of 2010 .................................................................... Dated this the 4th day of February, 2011. J U D G M E N T 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 2 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 3 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) jg