Whether provisions of Section 269SS are applicable where both lender of cash and borrower are having agricultural income & neither of them has any taxable income as per I-T Act?

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Whether provisions of Section 269SS are applicable where both lender of cash and borrower are having agricultural income & neither of them has any taxable income as per I-T Act?

Raghuraj Singh Vs JCIT
ITA No. 3570/DEL/2017
Whether provisions of Section 269SS are applicable where both lender of cash and borrower are having agricultural income & neither of them has any taxable income as per I-T Act –
Held : NO by  ITAT
– Assessee’s appeal partly allowed: DELHI ITAT
Case in Short : –
– The assessee is individual.
 During the course of scrutiny assessment proceedings u/s 143 (3) for the A.Y. 2014-15 in the case of assessee, the AO noticed that the assessee had taken loan in cash during the year under consideration of Rs. 7 lakh from Sh. Rahul and Rs. 5 lakh from Sh. Vipin Kumar.
– As the assessee had made contravention of the provisions of Section 269SS for accepting loan exceeding Rs. 20,000/- otherwise than by an account payee cheque or bank draft, a letter stating facts was sent to the Range office by the AO. A show cause notice was sent to the assessee.
–  In response, the assessee furnished a detailed reply.
– The AO held that provisions of Section 269SS are attracted in the instant case since no explanation or reasons were furnished for non-compliance of the statutory provisions of Section 269SS and imposed penalty of Rs. 12 lakh u/s 271D.
–  Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A).
– The CIT(A) dismissed the appeal of the assessee.
On appeal, the question before Tribunal was
“whether the  provisions of Section 269SS are applicable where both lender of cash and borrower are having agricultural income & neither of them has any taxable income as per I-T Act?”
 – Held by  ITAT : No !
++ court have heard both the parties and perused the material available on record.
– It was pertinent to note that 2nd proviso to section 269SS lays down that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum was taken or accepted and the person by whom the loan or deposit or specified sum was taken or accepted, are both having agricultural income and neither of them had any income chargeable to tax under this Act.
– The contention of the assessee that since the creditor had given the loan from their agricultural income and the borrower was also engaged in agricultural activity, the provisions of section 269SS are not attracted, had not been verified by the AO as well as by the CIT(A) from the perusal of the evidences.
– Thus, the Revenue authorities failed to look into the evidences produced before them and did not verify the same in context of Section 269SS.
 Thus, it will be appropriate to remand back this issue to the file of the AO for proper adjudication.
–  Therefore, court are remanding back the matter to the file of the AO for verifying the genuineness of the contentions of the assessee in context of Section 269SS and thereafter decide whether penalty under Section 271D was leviable or not in the present case.
– Needless to say the assessee be given opportunity of hearing by following principles of natural justice.
– The appeal of the assessee was partly allowed for statistical purpose.

 

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