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3. After considering the submission of assessee and the evidences filed, the Assessing Officer accepted part of the loan availed as explained while treating an amount of Rs.4,40,000/- as AY: 2010-11 unexplained loan. Accordingly, he added back the said amount to the income of the assessee while determining the total income at Rs.9,26,220/-. Since, the assessee had availed cash loan exceeding the threshold limit in violation of provisions contained under section 269SS of the Act, the Assessing Officer separately initiated proceeding for imposition of penalty under section 271D of the Act and ultimately passed an order imposing penalty of Rs.12,40,000/- under the said provision. Though, the assessee challenged the order imposing penalty under section 271D before learned first appellate authority, however, he was unsuccessful.

4. Before us, Dr. Rakesh Gupta, learned counsel appearing for the assessee submitted, while deciding the quantum appeal of the assessee, learned Commissioner (Appeals) has deleted the addition of Rs.4,40,500/- representing a part of the loan taken in cash. He submitted, as per second proviso to section 269SS of the Act, if the lender and borrower, both, are having agricultural income and neither of them has any income chargeable to tax under the Act, this provision of section 269SS of the Act would not be applicable. He submitted, neither the assessee, nor the lenders have any income chargeable to tax under the Act. Further, he submitted, in course of assessment proceeding, the Assessing Officer has not AY: 2010-11 initiated proceeding for imposition of penalty under section 271D of the Act. Therefore, the order imposing penalty under section 271D of the Act is invalid. He submitted, the object of introducing section 269SS and 271D of the Act is to curb non-genuine transaction made in cash. He submitted, when the loan transactions have been accepted as genuine, even if, there is technical violation of section 269SS of the Act, no penalty under section 271D can be levied. Finally, he submitted, the assessee has offered reasonable explanation in terms with section 273B of the Act. Thus, the penalty should not have been levied. In support of his submission, he relied upon the following decisions:

22. CIT vs. Sunil Kumar Goel., (2009) 315 ITR 0163 (P&H)

23. DCIT vs. Vignesh Flat Housing Promoters., (2007) 105 1TD 0359 (Chennai)

5. Learned Departmental Representative strongly relied upon the observations of departmental authorities.

6. We have considered rival submissions in the light of the decisions relied upon and perused the materials on record. It is evident, the assesse is an agriculturist. For purchasing some agricultural land jointly, the assessee had availed cash loan from other agriculturists. It is a fact on record that the genuineness of the loan availed by the assessee has been accepted by the departmental authorities. Of course, there is no denial of the fact that the assesse has availed the loan in cash. The issue arising for consideration is, whether there is violation of section 269SS of the Act while availing cash loan. On a reading of second proviso to section 269SS of the Act, it is very much clear that the said AY: 2010-11 provision excludes cash loan availed by a person, if the person borrowing and person lending, both are having agricultural income and do not have any other income chargeable to tax under the Act.

AY: 2010-11

8. Thus, in our considered opinion, assessee's case would be covered under the exceptions provided in the second proviso to section 269SS. Hence, the provision of section 269SS would not be applicable. In view of the aforesaid, we hold that the penalty imposed under section 271D of the Act is unsustainable. Accordingly, we delete it.

9. In the result, the appeal is allowed.

Order pronounced in the open court on 11th August, 2022 Sd/- Sd/-