TMI Blog2011 (6) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory report in form 3(1). Relief claimed in appeal. The order of the CIT(A) on the issues raised in the aforesaid grounds be set aside and that the order of the AO be restored. [1] On the facts and in the circumstances of the case the Ld. CIT(A) has erred in canceling the order levying penalty of ₹ 30,92,911/ - under sect ion 271E of the Act without considering the fact that there was no reasonable cause for the assessee to indulge in to cash transact ions in violation of Sect ion 269T of the Act. [2] The Ld. CIT(A) has erred in disregarding the fact that the statutory Auditors in their report in form 3(1) has reported these transact ions as loan / deposits whereas CIT(A) has termed them as transact ions in cur rent account. Relief claimed in appeal. The order of the CIT(A) on the issues raised in the aforesaid grounds be set aside and that the order of the AO be restored. 2. None appeared on behalf of the assesse; instead wr it ten submissions have been filed . We, therefore, decided to dispose of the appeal in the light of these written submissions, after hearing the learned Departmental Representative. 3 Adverting to ground nos. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by way of cash. Accordingly, while relying on the decisions in Muthoot M George Bros V/s ACIT, 74 Taxman 290 (Coch.) (Mag) , Asst . Director of Inspect ion (Investigation) v. Kum. A. B. Shanthi and Chamundi Granites Pvt . Ltd. v. Deputy Commissioner of Income-tax (2002), 255 ITR 258 (SC) and Rakesh Kumar Shaw v. Commissioner of Income-tax (2002), 257 ITR 268 (Cal), the assessee pleaded that there was no contravention of the provisions of sect ion 269SS 269T of the Act and therefore, they were not liable for any penal ty u/s 271D 271E of the Act. However, the Addl. CIT did not accept the submissions of the assessee on the ground the transact ions were reported in the statutory Audit Report and the assessee did not establish with reference to each of the transaction that Shri Suryakant R Shah acted as a custodian only, holding the money for brief period, and that the same were deposited in the hostel's bank account at the earliest opportunity. Accordingly, the Addl. CIT imposed a penalty of ₹ 24,52,740/- ₹ 30,92,911/- u/s 27ID 271E of the Act respectively. 4. On appeal, the learned CIT(A) cancel led the penalty levied u/s 271D of the Act in the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ambe Vidyalaya does not represent loan or deposit received form Ambe Vidyalaya but represents receipt of fees from students on their behalf, credited to their account. These amounts so levied on that basis. Such transactions are actually transactions on current account in which fees of other institution are collected by assessee and thereafter accounts are settled by payment or receipt. These are not transactions in the nature of loans or deposits and no interest is charged or received. 4.1 It is further submitted without prejudice that even if the transactions are construed as loans or deposit, penalty is not leviable as the transactions are bona fide and there is no tax evasion. 4.2 The arguments are summarized as under: 4.2.1 That the transactions in this case are in the nature of current account and not in the nature of loan or deposit in as much as no interest is paid. Hence, provisions of section 269SS are not applicable. - 4.2.2 Without prejudice, even if provisions of section 269SS are applicable, no penalty is leviable in view of the following: 4.2.2.3 It may be noted that the circumstances for receipt of these amounts are already explained. That amounts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, the AR had furnished certain evidences relating to the penalty initiated under sect ion 27IE of the Act for contravention of provisions of Sec.269 T of the Act. The same were forwarded to the AO for his comments which in turn, the AO vide his remand report dated 12.09.2008 submitted his comments. The gist of the AO's comments is as under: 3.4 The AO on verification reported the factual details of the case by classifying the various amounts as under:- A. Payments in cash 1203155 B. Payments by cheque 210000 C. Debits by journal entries 1036756 D. Amounts incorrectly considered as repayments 643000 3.5 In the light of above, no penalty is apparently leviable as regards amounts as per B and D for the reason that there is no contravention of the provisions of sect ion 269T. Also regarding amounts as per C, the amounts represent journal entries and not actual acceptance or repayment of any amount and hence in these cases also there was no violation of sect ion 269T (This view accords with the decision of Delhi High Court in the case of CIT vs. Noida Toll Bridge Co. Ltd. (262 ITR 260) . 3.6 Regarding the other amounts, paid in cash, the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of sect ion 269T, the violation is at the most of technical or venial in nature with no tax implication or tax evasion. Considering the above, I have no hesitation in deleting the penalty in this case. 6 The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the Addl. CIT. On the other hand, the assessee contended in their writ ten submissions that the transactions between the different sections of the school and the hostel and through journal entries or cheque, were neither loan nor deposit, accepted or repaid by the assessee. Relying upon the decision in Muthoot M George Bros V/s. ACIT 74 Taxman 290(Coch.)(Mag.)., the assessee supported the findings of the ld. CIT(A). 7. We have heard the ld. DR and gone through the facts of the case as also the aforesaid writ ten submissions. Before proceeding further, we may have a look at the relevant provisions of sec. 269SS of the Act, which read as under: No person shall , after the 30th day of June, 1984, take or accept from any other person (hereafter in this sect ion referred to as the depositor), any loan or deposit otherwise than by an account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (PE) - ₹ 1,10,565/-, Ambe Vidyalaya (PG) -Rs.1,75,770/-Ambe Vidyalaya (SEC) -Rs.4,62,230/-, Jay Ambe Vidyalaya (HS)-Rs.2,25,000/- and Ambe Vidyalaya (KG)-Rs.21,175/ - was credited through journal entries on account of fees while the transactions with Ambay Day School-Rs.7,58,000/- and Om Education Trust Rs.7,00,000/- were through cheques. 7.3. Likewise ,while cancel ling the penalty u/s 271E of the Act , the ld. CIT(A) found that repayments in cash were only ₹ 12,03,155/ - while ₹ 2,10,000 was repaid by cheque and ₹ 10,36,756/ - through journal entries besides ₹ 6,43,000/ - incorrectly considered as repayments of loan/deposit. There is nothing on record to show that these transactions were attached with certain conditions or stipulation as to period of repayment, rate of interest, manner of repayment, etc. so as to treat the said transact ions as loans or deposits. The Revenue have not placed before us any material suggesting that the transactions were actually in the nature of loans or deposits. Since there is nothing on record to suggest that the transact ions are in the nature of loans or deposits, apparently, the provisions of sect ion 269SS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of Chapter XXB of the Act which reads REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX . The Legislative intent ion in bringing sect ions 269SS 269T in the Act was to avoid certain circumstances of tax evasion, whereby huge transact ions are made outside the books of account by way of cash. As far as these appeals before us are concerned, there is no case against the assessee that these transact ions had anything to do with evasion of tax or concealment of income. In the instant case, as is apparent from the penalty orders, there were number of transact ions between the assessee and the parties referred to above. As regards amount stated to have accepted through journal entries, there is no violation of provisions of sec. 269SS of the Act as held by the Hon ble Delhi High Court in the case of CIT vs. Noida Toll Bridge Co. Ltd.,262 ITR 260. 7.5 Hon ble Madras High Court in CIT V Idhayam Publications Limited 285 ITR 221 (Mad) held that deposits and withdrawals of money from current account could not be considered as loan or advance. . 7.6 There is another aspect of the matter. In the case of Bombay Conductors Electr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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