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2009 (11) TMI 578 - AT - Income TaxPenalties under s. 271D and s. 271E - The AO initiated penalty proceedings under s. 271D on the ground that there was a contravention of s. 269SS of the Act in as much as the assessee took a loan in cash in a sum exceeding Rs. 20,000 - The assessee was given the dealership of IOC gas agency in the name and style of M/s Tina Gas Service in the reserved category, that in order to augment the capital he accepted Rs. 8 lakhs from one Praful Patel who was the proprietor of Mahindra Traders as capital for the partnership which was proposed to be constituted under a MoU. The definition of a loan or deposit in s. 269SS merely says that it means a loan or deposit of money [as per Expln. (iii)] - Under Expln. (iii) of s. 269T it is defined as money which is repayable after notice or after a period and in the case of a person other than a company includes loan or deposit of any nature - The popular meaning of a loan or deposit involves the idea of charging interest and in ordinary parlance it would be difficult to conceive of a loan or deposit of money without any provision for payment of interest - In the case of a capital contribution to a partnership firm, there can be a contract amongst the partners that the capital contribution would carry interest - In the present case however it was provided that if the partnership does not materialise, the money would be returned without interest - The idea of a loan or deposit within the meaning of ss. 269SS and 269T is therefore ruled out - the assessee bona fide thought that he could take the capital contribution in cash since it did not carry any interest and cannot be considered as a loan or deposit - Thus, there was bona fide belief which also constitutes reasonable cause within the meaning of s. 273B. No motive of evade tax - Praful Patel was already assessed to tax. Though he advanced the monies to the assessee in cash, the assessee immediately deposited the same in his bank account - Thus, the amount was brought on record and into the accounts of the assessee -The Hon'ble Gujarat High Court has held in the judgment cited supra, on behalf of the assessee, that it is necessary to show the motive to evade tax in order to justify the levy of penalty under s. 271D and s. 271E - Hence, cancel the penalties of Rs. 8 lakhs each imposed under ss. 271D and 271E and allow the appeals of the assessee with no order as to costs.
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