TMI Blog2000 (1) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... project work during the two years under consideration. During the course of assessment proceedings it was noticed by AO that the balance sheet of the company indicated unsecured loan from Mr. Goyal at Rs. 1,60,70,138, out of which Rs. 79,78,368 was brought by Mr. Goyal in cash during asst. yr. 1992-93 violating the provisions of s. 269SS, thus the proceedings under s. 271D were initiated and ultimately a penalty of Rs. 79,78,368 was levied. Similarly, in asst. yr. 1993-94, it was observed by the AO that Shri Goyal brought the amount of Rs. 1,98,55,171 in cash which was credited in the books of the appellant company. For this year also penalty under s. 271D was levied equivalent to the amount alleged to be in default of s. 269SS of the Act. The appellant preferred appeals in both the years before the first appellate authority who confirmed penalty in both the years by rejecting the plea of the appellant and hence these appeals. Since both the appeals involve similar issue, they are disposed of through this common order and common discussion. During the course of hearing, oral arguments as well as written submissions were made on behalf of both the parties which are considered while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deposit given in CIT vs. Bazpur Cooperative Sugar Factory Ltd. (1988) 70 CTR (SC) 94 : (1988) 172 ITR 321 (SC) was also referred to, to contend that it is a liability to return to the depositor on fulfillment of certain conditions. It was thus claimed that monies brought and spent by Mr. Goyal was neither loan nor deposit. The amount was brought to meet the need of a situation and to save the project cost and time overrun. Reliance was placed on various decisions to support the contention that every receipt of money need not necessarily be in the character of loan or deposit. Our specific attention was invited to s. 69 of the Indian Contract Act, 1972. It was explained that Chapter V of Indian Contract Act, 1872, deals with "certain relations resembling those created by contracts", which are not in fact contracts. Sec. 69 falling within said Chapter V contains one of the situations in which such peculiar relationship is created otherwise than by a contract. According to this section, if any person pays the money which is due by another, in payment of which he is indirectly interested, then such a person even in absence of any bilateral agreement is entitled to have the reimburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding quantum of penalty. It was also submitted that there was at least a reasonable course in the present case arising out of a bona fide belief and ignorance of law, particularly in the facts and nature of transactions undertaken as also the circumstances during which they undertaken. On the basis of all these arguments, the learned authorised representative of the assessee submitted that in the facts, the penalty in both the years deserves to be deleted. 5. Elaborate arguments were made on behalf of the Department to support the allegation of violation of the provisions of s. 269SS and the levy of penalty under s. 271D. At the outset, it was submitted that the company has borrowing powers and it acts through its directors, who are the agents of the company. In asst. yr. 1992-93, the entire amount was credited in the name of Shri R.P. Goyal reflected as unsecured loan in the balance sheet. However, in asst. yr. 1993-94, the method of passing entries was changed and they were passed through journal. Merely by saying that credits represent reimbursement of expenses, the appellant cannot be absolved of penalty. A part of loans were received through cheques/drafts also. The liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rry such huge cash from Delhi to Paniyala. The assessee had a bank account at Nangal (Haryana) which is not very far from Kotputli (Rajasthan). Reliance was placed on various decisions including Unique Constructions vs. Dy. CIT (1995) 52 TTJ (Bom) 96, Sukh Dev Rathi vs. Union of India Ors. (1994) 116 CTR (Guj) 620 : (1995) 211 ITR 157 (Guj), K.R.M.V. Ponnuswamy Nadar Sons (Firm) vs. Union of India (1992) 196 ITR 431 (Mad), C.A. Baloo Anr. vs. Union of India Ors. (1992) 197 ITR 545 (Mad) : 126 Taxman 328 (sic), Sir Kikabhai Prem Chand vs. CIT (1953) 24 ITR 506 (SC), Narsingh Ram Ashok Kumar vs. Union of India Anr. (1999) 153 CTR (Pat) 502 : (1998) 234 ITR 414 (Pat), Mehta Vegetables (P) Ltd. vs. Union of India Anr. (1999) 154 CTR (Raj) 124 : (1998) 234 ITR 425 (Raj), Bhushan Chemicals vs. CIT (1995) 54 ITD 5 (Pune) and some unreported judgments. Reliance was also placed on an unreported decision to contend that non-charging of interest by Shri R.P. Goyal was a part of tax planning and merely because no interest was charged, it cannot be said that the amounts were neither loans nor deposits. It was also submitted that the said deposits/loans were not utilised by the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyal, the chairman-cum-managing director, was the promoter-director of the appellant company, who supervised entire project of the company and who remained actively engaged in looking after the construction and other activities of the company. It is equally undisputed that it was he who managed and arranged resources for the construction activity during the period when company was awaiting disbursement from financial institutions Mr. R.P. Goyal provided financial assistance to the company by bringing in requisite money from time to time in piecemeal during the construction period. The money was not brought in one, two or three instalments but was brought in a number of instalments. It appears that the bringing of money every time was a response to the immediate requirement in the project activity. On going through the details of amounts brought in and spent, it is evident that the (sic) period. For this purpose, we perused the utilisation of the money brought on p. 13 to 30 of the paper-book for Financial year 1991-92. First two receipts of Rs. 10,000 and Rs. 1,270 are for expenditure for the incorporation of the company. The next one on 31st July, 1991, is for the purchase of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r V thereof, reads as follows: "CHAPTER V OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT Sec. 69: A person who is interested in the payment of money which is bound by law to pay, and who, therefore, pays it, is entitled to be reimbursed by the other." The transactions under consideration are evidently of the nature referred to in s. 69 of the Indian Contract Act, 1872. The company was bound to pay for the construction expenditure. The director Shri R.P. Goyal paid it because he was interested in the capacity as promoter and also because his personal guarantees are involved in the finances to the company. Thus, he paid the amount and became entitled for the reimbursement by the company. 11. It is thus, neither a loan which is a bilateral transaction at the instance of borrower having predetermined repayment period, nor a deposit which is at the instance of depositor and is repayable on fulfilment of certain conditions. Mr. R.P. Goyal, the director and the agent of the company suo motu spent his own money for his principal, i.e., the company, who by way of incorporation the transaction in its books, undertook the obligation to repay. 12. Let us also consider as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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