- (1.)The above Tax Case (Appeals) are filed by the Revenue as against the order of the Income Tax Appellate Tribunal in the appeal filed by the Revenue as well as the cross objection filed by the assessee, raising the following substantial questions of law:
"1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in upholding the order of CIT(A) who had deleted the penalty of Rs.35,33,242/- levied under Section 271D?

2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in deleting the penalty especially when the cash loans amounting to Rs.35 lakhs was received by the assessee from the Creditors where the banking facilities are available and no reasonable cause for taking the loans in cash or any exceptional circumstances had been stated by the assessee?

3. Whether the genuineness of a loan is not a reasonable cause postulated under Section 271D and therefore levy of penalty under Section 271 D is proper especially in the places where the creditors resided there is banking facility available?"

(2.)The assessment year in this case is 2007-08. The respondent/assessee is engaged in the manufacture of plastic components. The assessee filed returns for the relevant assessment year on 01.04.2008 showing certain amounts as loans. The said return was selected for scrutiny. Besides the loan availed from banks, it was found that there were sundry loans for a sum of Rs.70,54,153/- as on 31.3.2007. The documents submitted by the assessee were verified, more particularly the ledger, which reflected cash loan accepted by the assessee for an amount not less than Rs.18,000/-. The General Ledger Pages 247 to 255 showed loans "by cash". In the course of this proceeding, the Department wanted to verify the genuineness of those transactions and on 01.12.2009, the Authorised Representative of the appellant submitted 24 individuals with address at Kanyakumari District and have claimed that they were agriculturists and they had income out of agriculture and they have lent the amount to the assessee without interest. Consequent to this, the Department completed the assessment under Section 143(3) of the Income Tax Act. However, with regard to the sundry loan, taking note of the balance as on 31.3.2007, the Assessing Officer initiated penalty proceedings under Section 271D of the Income Tax Act for violation of Section 269 SS of the Income Tax Act and the Authority imposed penalty of Rs.35,33,242/-. As against which, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals).
(3.)The Commissioner of Income Tax (Appeals) accepted the contention of the assessee that the penalty proceedings was not sustained on the ground of limitation and also on merits and allowed the appeal filed by the assessee holding as follows:
"Over and above, the legal position as mentioned above, the AR of the appellant submitted confirmation letters from all the loan creditors and also ledger abstract from the books of the accounts for sundry loans received during the year under consideration. The appellant has borrowed loans to the extent of Rs.35,30,978/- as on 31.3.2006 relating to the previous assessment year and during the year has taken cash loans to the tune of Rs.35,35,242/-. All the loan amount as per the ledger extract under the head sundry loans account page No.247 to 255 were below Rs.20,000/- accepted in cash from the agriculturists and have been accepted during the course of assessment proceedings. On verifying the confirmation letters all the loan creditors have mentioned specifically in their confirmation letters that the above amount are given as hand loan basis returnable on short notice without interest since they do not have bank account, they paid the amount in cash to the appellant. Once having accepted the genunity of the loan creditors and also all the loans received are below Rs.20,000/- in cash there is no cash for the assessing officer to invoke the provisions u/s 269SS as can be seen from the notice issued by the Addl. Commissioner of Income Tax vide her letter dated 07.06.2010 in which the appellant was asked to furnish details of persons who have lend money in excess of Rs.20,000/- contravening provision of section 269SS of the IT Act. Since all the loans received in cash are below Rs.20,000/- and accepted all the loans for their genunity during the assessment proceedings therefore there is no case for the either assessing officer or Addl. Commissioner for levying penalty u/s.271D and hence the penalty levied by the Addl. Commissioner u/s.271D imposing a penalty of Rs.35,33,242/- is therefore deleted."