Short Overview: Since assessee had given reasonable cause for availing loan in cash from his father within the meaning of section 271D, therefore, he would be out of the rigours of levy of penalty under section 271D and no penalty could be levied.

Assessee received loan from his father in cash. Proceedings under section 271D were initiated for the same. Assessee explained that father had closed down his business and the cash available with his father was used by him as he was in urgent need of money. AO, however, observed that father had bank account on his own and the said payment could have very well been made by account payee cheque or account payee draft to assessee. Therefore, he levied penalty under section 271D.

It is held that assessee had given reasonable cause for availing loan in cash from his father within the meaning of section 271D. Hence, he would be out of the rigours of levy of penalty under section 271D. Assessee had placed reliance on decision in case of CIT Smt. M. Yasoda [Appeal No.320 of 2010, dt. 5-2-2013: 2013 TaxPub(DT) 1302 (Mad-HC)] wherein loan received by that assessee from her father-in-law was subjected to levy of penalty under section 271D and High Court ordered cancellation of penalty thereon. Therefore, penalty under section 271D was cancelled.

Decision: In assessee’s favour