TMI Blog2010 (1) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the CIT(Appeals)-XIV, Mumbai dated 24th August, 2007, wherein he confirmed the levy of penalty u/s 271D as well as u/s 271E of the Act for violations of section 269SS and section 269T of the Income Tax Act, 1961 respectively. 2. Facts in brief:- The assessee is engaged in the manufacturing and marketing of Ayurvedic and Allopathic medicines, chemical raw materials, shares as well as into the business of financing, investment and consultancy services. During the course of assessment proceedings, the AO recorded that on going through the cash book and ledger of the assessee, it is seen that on a number of occasions, the assessee has shown receipts and repayments in cash from 4 persons, including a company. Show cause notice was issued as to why penalty u/s 271D and penalty u/s 271E of the Act should not be levied as loans were accepted and also repaid in amounts exceeding Rs.20,000/- in aggregate in cash. The assessee replied that cash was received from various parties as advance on account of purchase of shares of various companies for them, but due to price disagreement, the shares could not be brought for them and hence the money received from them was returned to them. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us. 3. The learned counsel for the assessee Mr. Pradip Kedia submitted that the AO in the show cause notice dated 30-3-2004 at para 2 stated that certain instances have been brought out where the assessee has accepted loans/advances. He contended that the loans are different from advances and the AO himself is not clear as to whether it is a loan or advance. As per Mr. Kedia, the AO was clear that what was received in cash by the assessee was only an advance and hence there is no violation of either the provisions of section 269SS or the provisions of section 269T for the proposition that a loan or a deposit is different from an advance received. The learned counsel relied on the following case laws:- CIT vs. Karaitilal and Others 270 ITR 445 (P and H). CIT vs. K. Srinivasan and Others 50 ITR 788 (Mad.) 3.1 He further relied on the decision of Baidyanath Plastic Industries (P) Ltd. reported in 230 ITR 522 (Del.) for the proposition that loans are different from deposits. He further submitted that in the case of CIT vs. Rugmini Ram Raghav Spinning Pvt. Ltd. 304 ITR 417 (Mad.) the Hon'ble Madras High Court held that if the intention is to receive the money as loan or de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its books of account. He pointed out that the cash amount received was immediately deposited in the bank account, which suggest that the assessee required the same for meeting certain immediate obligations. He further submits that the assessee is neither a broker nor a sub broker in share trading business and hence the assessee is not authorised to sell shares. He submitted that the assessee has not sold any shares nor he authorised to sell any share. He submitted that the theory flouted by the assessee, that it had received advances for the purchase, is only an after thought. He pointed out that there was a mark deviation in the assessee's stand as pointed out by the CIT(Appeals). On the issue of show cause notice, he submitted that just because the AO alternatively used the term "Loan or Advance", it does not make the notice invalid. For the same, he relied on section 292B. He submitted that the intent and decision of the AO, was that this was a loan and as the assessee has not shown any reasonable cause, penalty in question was rightly levied and confirmed. He further pointed out that the assessee had no reason to return the amounts in cash. Thus he argued that the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It is surprising that no question was asked regarding the transactions from the four parties. In case the Revenue wanted to dispute the factual position as stated by the assessee, the minimum requirement was to put the issue to the assessee. This has not been done. The four parties have not been examined. On the other hand, the assessee filed confirmation letters from all the four parties. These parties from whom the assessee had received certain advances, confirmed to the AO that they have given this money as advance for the purchase of shares. If these confirmations have to be rejected, the Revenue should have collected evidences or at least investigated the matter. No such exercise has been done. In the show cause notice the Addl. Commissioner of Income Tax is not clear whether the assessee has accepted the loan or an advance. The two terms Loan and Advance are not the same and connote different nature of transactions. The amount received as an advance for the purchase of shares and declared as such in the books of account is different from a loan transaction. Third party evidences cannot be rejected without verification or further enquiry. Mere rejection of submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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