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2015 (8) TMI 832 - ITAT HYDERABAD

2015 (8) TMI 832 - ITAT HYDERABAD - TMI - Penalty u/s. 271D - Payment made by the Directors to the creditors to save the company from litigation - Violation of Section 269S and 269T - Transaction is reflected in the books of accounts through Journal Entries - CIT(A) deleted penalty levy - Held that:- From the perusal of ledger copy furnished by the Ld. AR, no cash entries in the ledger account of Shri K. Anil Kumar were passed. It is only through journal entries the transactions between the resp .....

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702 - CHHATTISGARH HIGH COURT ] had held that when the transactions in question went through bank and were deposited by some other Directors, the provisions of Section 269SS are not applicable. Case of Gururaj Mini Roller Flour Mills Vs. Additional Commissioner of Income Tax [2015 (2) TMI 362 - ANDHRA PRADESH HIGH COURT] held that, "Mere book adjustment of funds by the assessee vis--vis its sister concern can by no means be said to be violation of Section 269SS/269T so as to attract penalty u/s .....

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rder of the Commissioner of Income Tax(Appeals)-V, Hyderabad, dated 13-12-2013 on the following grounds: "i. The order of the CIT(A) is erroneous both in law and in facts of the case. ii. The CIT(A) ought to have appreciated the fact that the provisions of section 269SS doesn't discuss anything regarding business exigency and talks only about the mode of receipt of loans and deposits ie. Either by way of account payee cheque or account payee bank draft. iii. The CIT(A) ought to have app .....

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t;. 2. The brief facts of the case are as under: The respondent is a company incorporated under the provisions of the Companies Act, 1956. The assessee-company is engaged in the business of pharmaceutical formulations, filed the return of income for the Assessment Year (AY) 2005-06 on 01-11-2005 admitting income of ₹ 6,57,378/- before set-off of the brought forward losses. Against the said return of income, the assessment was completed u/s. 143(3) of the Income Tax Act, 1961 [Act] vide ord .....

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penalty proceedings u/s. 271D and 271E of the Act and finally, a penalty of ₹ 16,69,117/- u/s. 271D of the Act was levied by the Addl. Commissioner of Income Tax, Range-16, Hyderabad vide order dt. 22-08- 2008. Being aggrieved, an appeal was filed before CIT(A)-V, Hyderabad vide ITA No. 0327/DC-16(2)/CIT(A)-V/2008-09 dt. 17-09-2010, who after admitting the additional evidence remanded the matter to the file of AO. The AO consequent to the said order, passed the impugned order dt. 07-12-201 .....

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in order to save the company from Securitisation Act and calling of advances by the financial institutions and to meet the legal cases filed by the creditors and other outside agencies against the company. It is further observed that such funds are arranged by the directors of the company to save the company against the above situation. I find force in the contentions of the appellant that since the payments were made for the business exigencies, the provisions of Section 269SS are not applicab .....

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e levy of penalty is not justified on the facts and circumstances of the case. Therefore, I delete the penalty of ₹ 16,69,117/- levied u/s. 271D". Aggrieved, the Revenue had come up with the present appeal. 4. The Ld. DR argued that the respondent assessee-company had clearly violated the provisions of Section 269SS and therefore, penalty clearly exigible. It was further argued that the CIT(A) without complying with the provisions of Rule 46A(3) of Income Tax Rules, admitted the addit .....

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al entries. The respondent-company had not received any cash deposits directly from the Managing Director. In any event, it was submitted that the transactions in question were undertaken only to meet the urgent business needs of the respondent, assessee-company. Where there is a reasonable cause for accepting the cash, penalty cannot be levied and in support of this proposition, he relied upon the following decisions: i. CIT Vs. Manoj Lalwani (2003) 260 ITR 590 (Raj); ii. CIT Vs. Parma nand (20 .....

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