No penalty on co. if cash in excess of Rs. 20,000 was received from directors for meeting business exigency

Facts

a)    Assessee, a private limited company, received share application money of Rs. 5 lakh in cash from its directors.

b)    Assessing Officer (AO) imposed penalty on it under Section 271D for violating the provisions of Section 269SS since the amount had been received in cash exceeding the limit of Rs. 20,000.

c)    Assessee contended that amount was received to meet business exigency warranting immediate discharge of certain liability. Therefore, such genuine transactions would not attract penalty under section 271D as envisaged in section 273B.

d)    Commissioner (Appeals) confirmed the order of the AO. Aggrieved assessee filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-

1)    Section 273B provides that no penalty shall be imposed on assessee for any failure referred to in section 269SS, if he proves that there was reasonable cause for failure to take a 'loan' or 'deposit' otherwise than by account-payee cheque or account-payee bank draft.

2)    It was observed by the ITAT that cash flow position of assessee had been crippled due to losses. Therefore, cash was received from directors to meet business exigency. Further, the revenue had not doubted the sources of deposits made by the directors of the company.

3)    Assessee had proved without any shadow of doubt that the transaction was genuine and there was a reasonable cause for accepting cash from directors. Therefore, there was no reason to sustain the penalty levied under section 271D- [2016] 67 taxmann.com 374 (Chandigarh - Trib.) Commissioner (Appeals) confirmed the order of the AO. Aggrieved assessee filed the instant appeal before the tribunal.