9911796707
TMI Blog2015 (2) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,875/- otherwise than account payee cheque or account payee draft. The details of such loan accepted otherwise than account payee cheque/bank draft are as under:- Name of the lender Date of entry Amount of loan or deposit taken or accepted otherwise than by an account payee cheques or an account payee bank draft GMS Real Estate (P) Ltd. 4/2/2008 190000 Godsons Shoes 4/2/2008 970000 Godsons Bros. 4/2/2008 3900000 M.S. Appreal Pvt. Ltd. 1/4/2007 4000000 Vardaan Fashion 14/11/2007 250000 Vardaan Fashion 19/11/2007 612175 Vardaan Fashion 18/3/2008 612175 Vardaan Fashion 18/1/2008 612175 Vardaan Fashion 18/2/2008 612175 Vardaan Fashion 1/2/2008 2100000 Vardaan Fashion 1/2/2008 140000 Vardaan Fashion 7/12/2007 3000000 Vardaan Fashion 2/2/2008 1300000 Vardaan Fashion 1/2/2008 10000000 Vardaan Fashion 15/3/2008 27050000 Total 58570875 4. During penalty proceedings, it was explained by the learned counsel that all the above credit entries in the assessee's books of account are only by journal entry and no monetary transaction had actually taken place between the assessee and the above mentioned lenders. Since the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein GMS Real Estate's account has been credited dated 4.2.2008 by Rs. 1,90,000/-. Thus it is quite clear that the assessee's contention has no force in it." 6. Accordingly, the Assessing Officer levied the penalty of Rs. 5,85,70,875/- which is deleted by the learned CIT(A). Hence, this appeal by the Revenue. 7. At the time of hearing before us, it is stated by the learned DR that there is no dispute that there is a credit entry in the assessee's books of account in the name of above mentioned persons. As per Section 269SS, the assessee is supposed to accept loan or deposit either by account payee cheque or by account payee bank draft. Admittedly, the above credit entries by the assessee were accepted neither by account payee cheque nor by bank draft and therefore, there is clear violation of Section 269SS and Assessing Officer rightly levied penalty under Section 271D. The CIT(A) cancelled the penalty without properly appreciating the facts. Therefore, his order should be reversed and that of the Assessing Officer may be restored. 8. Learned counsel for the assessee, on the other hand, stated that the assessee is a partnership of M/s DNK. M/s DNK received/paid cheques from/to GM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership firm in which assessee is a partner and Godsons Bros. and in the books of the assessee, there was only a journal entry. In the case of M.S. Appreal Pvt.Ltd., the journal entry was passed only as a rectification entry. These facts were duly stated before the Assessing Officer during penalty proceedings and the assessee's submission which is reproduced by the Assessing Officer in the penalty order is reproduced below for ready reference:- "(v) The assessee has wrongly credited the cheque received from M.S. Appreal Pvt.Ltd. in the ledger of Mr. Manjinder Singh, who is a director of M.S. Appreal Pvt.Ltd. dated 16/1/2007. When mistake became known a rectification entry has been made in the year under consideration. The assessee has not received loan/advance amounting to Rs. 40,00,000/- from M.S. Appreal Pvt.Ltd. during the financial year 2007-08. All loan/advances amounts were received through account payee cheque only. The assessee has wrongly by mistake reduced the loan/advance amount of G.S. Batra during the financial year 2006-07 by wrongly entering a cheque received from M.S. Appreal Pvt.Ltd. copy of ledger account of M.S. Appreal Pvt.Ltd. and Sh. Majinder Singh in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, State or Provincial Act; (d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette : [Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.] Explanation. - For the purposes of this section, - [(i) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act;] (ii) "co-operative bank" shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (iii) "loan or deposit" means loan or deposit of money.]." 11. As per Section 269SS, no person is supposed to take or accept from any other person any loan or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in currency. This is also clearly explicit from clause (iii) of the Explanation to section 269SS of the Act which defines loan or deposit to mean "loan or deposit of money". The liability recorded in the books of account by way of journal entries, i.e., crediting the account of a party to whom monies are payable or debiting the account of a party from whom moneys are receivable in the books of account, is clearly outside the ambit of the provisions of section 269SS of the Act because passing such entries does not involve acceptance of any loan or deposit of money." 14. In the case of National Clothing Co. (supra), Hon'ble Jurisdictional High Court reiterated the same view and held as under:- "The issue in question is covered by decision of this Court dated 20.11.2014 in ITA No.33/2002 titled Commissioner of Income Tax vs. M/s Ruchika Commercials and Investment Pvt.Ltd. This decision follows two earlier decisions of this Court in Commissioner of Income Tax vs. Noida Toll Bridge Co.Ltd. [2003] 262 ITR 260 (Delhi) and Commissioner of Income Tax-VI vs. Worldwide Townships Project Ltd. [2014] 367 ITR 433 (Delhi). In the said decisions, in view of the language of Explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed discussion therein, we hold that when there is no monetary transaction between the assessee and the person whose account is credited and there is only journal entry, it cannot be said that there is violation of Section 269T. 20. So far as the payments by pay orders is concerned, we find that the CIT(A) deleted the penalty in respect of payment through pay orders with the following finding:- "6. Penalty of Rs. 1,91,80,000/- on repayment through pay orders (i) That in respect of penalty of Rs. 1,91,80,000/-, the appellant in the written submission dated 25.11.2011 Page 13 has explained that the payments were made through pay order/bank draft in which the name of the payers were mentioned and against each name the word ONLY, were written. It means, the pay order was not transferable/negotiable and such pay orders issued to the parties were account payee only. (ii) That a certificate dated 10.06.2010 issued by the PNB, Punjabi Bagh, New Delhi was enclosed as Annexure-3 of the written submission. On going through the certificate, your goodself will appreciate that the Bank has confirmed that the impugned pay orders were neither negotiable nor transferable by writing the word & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "2. That the learned Lower Court erred in facts and legal aspects of the case in treating amount of Rs. 27,674 paid by Account payee pay order (which is bankers cheque) as cash and disallowing 20% of the same u/s 40A(3)." The assessee is engaged in the business of buying day old chicks, growing them and then producing the chicks. During the course of assessment proceedings, the AO found that the assessee made payment of Rs. 27,674 on 27.10.2004 (pay order) otherwise than account payee cheque/draft to M/s Ram Saran Rakesh Saran. In response to the query, the assessee submitted that no cash payment has been made to party for Rs. 27,674. The AO, therefore disallowed 20% of the same under Section 40A(3) of the Income-tax Act, 1961 (in short 'the Act'). On appeal, the ld.CIT(A) confirmed the addition. We have heard the rival submissions. Shri Prakash Narain, Advocate and Shri S.D. Seth, Advocate, ld. counsels for the assessee submitted that payment made to M/s Ram Saran Rakesh Kumar, as the AO has himself stated, was made by pay order. Shri Prakash Narain, Advocate and Shri S.D. Seth, Advocate, ld.Counsels for the assessee submitted that the authorities below have failed to unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1E also and learned CIT(A), rightly applying the above decision, deleted the penalty. In view of above facts and the decision of the ITAT, Lucknow Bench, we do not find any infirmity in the order of learned CIT(A). The same is upheld and Revenue's appeal is dismissed. ITA No.2253/Del/2013 :- 22. In this appeal by the Revenue, following grounds have been raised:- "1. The CIT(A) has erred in deleting the penalty of Rs. 2,45,59,221/- levied by the AO u/s 271D for violation of provision of Section 269SS of the I.T. Act 1961. 2. The CIT(A) has erred in holding that partner and partnership firm are not different from each other and the provisions of section 269SS cannot be made applicable between the transaction of the partner and the firm. 3. The CIT(A) has erred in admitting additional evidences under Rule 46A which were not produced before the AO despite providing two opportunities." 23. The facts of the case are that the assessee is a partnership firm. The Assessing Officer had levied the penalty of Rs. 2,45,59,221/- for accepting loan or deposit otherwise than through account payee cheque or account payee bank draft. The details of loan or deposit taken or accepted otherwise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. So far as the credit by way of pay orders is concerned, this issue has also been discussed by us while considering penalty in the case of Shri Inderpal Singh Wadhawan. At the time of hearing before us, it was admitted by the parties that the facts in the case of the assessee are identical to the facts in the case of Shri Inderpal Singh Wadhawan. Therefore, our finding in this regard in the case of Shri Inderpal Singh Wadhawan vide paragraph Nos.20 and 21 above would be squarely applicable and for the detailed discussion therein, we find no infirmity in the order of learned CIT(A) wherein he cancelled the penalty under Section 271D levied in respect of credit by way of receipt of pay orders. 28. So far as the receipt by way of cash is concerned, it was argued by the learned counsel that the assessee M/s Vardaan Fashion is a partnership firm and Shri Inderpal Singh Wadhawan is the partner of the assessee firm. There was a cash transaction of receipt of money as well as payment between the partnership firm and Shri Inderpal Singh Wadhawan. Money was credited as well as debited to his capital account. Thus, the receipt of money from Shri Inderpal Singh Wadhawan was not by way of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collective of separate persons and not a legal person in itself lends to the further conclusion that the salary stipulated to be paid to a partner from the firm is in reality a mode of division of the firm's profits, no person being his own servant in law since a contract of service postulates two different persons." 32. Thus, their Lordships of the Apex Court clearly held that the partnership firm is only a collective name of separate persons and not a legal person in itself and therefore, a partner cannot be a servant of the firm because no person can be his own servant in law. The ratio of the above decision would be squarely applicable in the case under appeal before us. Similar to the contract for employment where two distinct persons employee and employer are required, for the purpose of giving and acceptance of loan or deposit also, two different persons are required - (i) the lender and (ii) the debtor i.e. the borrower. As per Hon'ble Apex Court, firm and partner are not two different persons, therefore, credit in the books of firm in the account of partner, it cannot be said that firm has taken loan or deposit from partner. Admittedly, in the assessee's books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to Rs. 1,70,70,000/- in respect of the following debit in the assessee's books of account:- Name of lender Date of entry Amount of loan or deposit repaid otherwise than by an account payee cheque or an account payee draft Remarks Rups Craft Inc 03/11/2006 15,45,000/- Cash Inder Pal Singh 07/06/2006 4,00,000/- Cash Inder Pal Singh 08/06/2006 4,00,000/- Cash Inder Pal Singh 17/06/2006 4,00,000/- Cash Inder Pal Singh 02/11/2006 25,00,000/- Journal entry as cheque received from DNK creation Inder Pal Singh 15/12/2006 7,00,000/- Journal entry as cheque received from DNK creation Inder Pal Singh 15/01/2007 50,00,000/- PO 311712 Inder Pal Singh 31/01/2007 24,50,000/- Journal entry as cheque received from DNK Inder Pal Singh 07/02/2007 3,00,000/- Cash Inder Pal Singh 21/02/2007 12,75,000/- Cash Inder Pal Singh 01/03/2007 10,00,000/- Cash Inder Pal Singh 02/03/2007 5,00,000/- Cash Inder Pal Singh 08/03/2007 4,00,000/- Cash Inder Pal Singh 22/03/2007 2,00,000/- Cash Total 1,70,70,000/- 38. Learned CIT(A) cancelled the penalty. Hence, this appeal by the Revenue. 39. We have heard the arguments of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 269T of the Income-tax Act, 1961." 42. At the time of hearing before us, the above factual finding recorded by the CIT(A) has not been controverted. The CIT(A) has clearly recorded the finding that there was the business transaction between the assessee firm and M/s Rups Craft Inc. and all the transactions with the said party were business transactions only and there was no transaction of loan or deposit. It was also observed that in fact there was no cash payment. On the other hand, the payment of Rs. 15,45,000/- was made by account payee cheque No.57308 to M/s Rups Craft Inc. by Shri Inderpal Singh Wadhawan, partner of the firm and consequently, the entry was passed in the assessee's books of account. Therefore, there was no cash transaction. Both these findings recorded by the CIT(A) remained uncontroverted before us. We, therefore, find no justification to interfere with the order of learned CIT(A) in this regard. The same is sustained and the appeal of the Revenue is dismissed. ITA No.3084/Del/2013 :- 43. The only ground raised in this appeal by the Revenue reads as under:- "The CIT(A) has erred in deleting the penalty of Rs. 4,04,79,453/- levied by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness transaction and not a repayment of loan as held by the Addl. CIT. No independent finding was given by the Addl. CIT to state that this is a repayment of loan. Since, the transaction in question is not a repayment of loan the provisions of section 269T read with section 271E are not applicable against this transaction." 47. Thus, the CIT(A) has recorded the finding that the appellant was doing the business of clothes in the proprietary concern named M/s DNK Creations. M/s DNK Creations, proprietary concern of the assessee had the business transactions with M/s Deepak Fabrics. The assessee made the payment of Rs. 19,50,000/- by account payee cheque to M/s Deepak Fabrics on behalf of the proprietary concern M/s DNK Creations. Thus, the CIT(A) has recorded the finding that it was not the repayment of loan within the provisions of Section 269T. The above finding of fact recorded by the CIT(A) has not been controverted before us. From this finding, it is evident that there was a business transaction between M/s DNK Creations, the proprietary concern of the assessee and M/s Deepak Fabrics. The payment was made in furtherance to such business transactions and moreover, the payment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were made by M/s Vardaan Fashion, a partnership firm in which assessee is a partner. All the payments were made by account payee cheque and in the assessee's books of account, there was only a journal entry (book entry). We have already discussed at length in paragraph Nos.10 to 15 above that in respect of book entry, the provisions of Section 269SS/269T cannot be said to have been violated. For the detailed discussion therein, we uphold the order of learned CIT(A) wherein he cancelled the penalty relating to debit in the name of M/s Dewana Dairy, by journal entry (book entry). 50. The debit relating to M/s B.K. Bros. is also by way of book entry. Similar is the debit in the name of M/s God Sons Bros. The finding of fact recorded by the learned CIT(A) that the debit in the name of M/s B.K. Bros. and M/s God Sons Bros. were by book entry only has not been controverted by the Revenue before us. Therefore, for the detailed discussion in paragraph Nos.10 to 15 above, we hold that the provisions of Section 269T cannot be said to have been violated in respect of book entry. 51. With regard to debit of Rs. 10,75,000/- in the name of M/s Molycoddle Fashion Pvt.Ltd., the CIT(A) has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) has erred in admitting additional evidences under Rule 46A which were not produced before the AO despite providing two opportunities." 56. The Assessing Officer had levied the penalty under Section 271D amounting to Rs. 95,25,000/- in respect of the following credit entries in the assessee's books of account:- Name of lender Date of entry Amount of loan or deposit taken or accepted otherwise than by an account payee cheque or an account payee draft Remarks Satvinder Singh 15/12/2006 15,00,000/- Journal entry passed and debit 5/83 property account Nirupama Wadhawan 02/06/2006 5,00,000/- Cash Nirupama Wadhawan 12/10/2006 5,00,000/- Cash Nirupama Wadhawan 25/10/2006 5,00,000/- Cash Nirupama Wadhawan 19/01/2007 5,00,000/- Cash Nirupama Wadhawan 19/03/2007 4,00,000/- Cash Nirupama Wadhawan 20/03/2007 6,50,000/- Cash Satvinder Singh 15/11/2006 24,85,000/- Journal entry as payment made to DNK Creation directly God Sons Sales 05/02/2007 24,90,000/- Journal entry passed as payment received by Vardaan Fashion Total 95,25,000/- 57. Learned CIT(A) cancelled the penalty. Hence, this appeal by the Revenue. 58. We have hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Bench of the Hon'ble ITAT have also cancelled the penalties levied u/s 271D even where loans/deposits were taken in cash. a) Shreenathji Corporation vs. ACIT 58 TTJ 611. b) Ganesh Wooden Industries ITA No.1626Ahd/1997, Bench 'SMC' order dated 8.7.2002. 7.12 In view of the facts of the case and the nature of the transactions and also respectfully following the above decisions and the decisions cited by the AR of the appellant I hold that there was a reasonable cause for not complying with the provisions of section 269SS of the Income-tax Act, 1961. The Assessing Officer was therefore not justified in imposing penalty u/s 271D in respect of cash received by the appellant from his wife." 60. After considering the facts of the case and the arguments of both the sides, we do not find any infirmity in the order of learned CIT(A). Smt. Nirupama Wadhawan is the wife of the assessee who had some surplus cash which she gave to the assessee because the assessee and his wife intended to jointly purchase a house property. Smt. Nirupama Wadhawan had given the surplus cash available with her for the purpose of purchase of such house property. However, when the deal for purchase of the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the Commissioner (Appeals) was cancelled." 61. That the ratio of the above decision of ITAT, Amritsar Bench would be squarely applicable to the facts of the assessee's case. Here also, the wife had given the money to the husband for acquisition of a property which was supposed to be purchased jointly. It is a different matter that ultimately the deal could not materialize. However, the claim of the assessee that amount was taken by the assessee from her wife for purchase of the property has not been disputed by the Revenue. Therefore, the ratio of the above decision of ITAT, Amritsar Bench would be squarely applicable to the appeal under consideration before us. 62. In the case of CIT Vs. Sunil Kumar Goel - [2009] 315 ITR 163, Hon'ble Punjab & Haryana High Court held as under:- "A family transaction, between two independent assessees, based on an act of casualness, specially in a case where the disclosure thereof was contained in the compilation of accounts, and which had no tax effect, established "reasonable cause" under section 273B of the Act. Since the assessee had satisfactorily established "reasonable cause" under section 273B of the Act, he must be deemed to h ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
