TMI Blog2011 (4) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Addl. CIT, the assessee submitted that during the assessment proceedings, while verifying the current account of Rajendra Singh Suryavanshi (HUF) in the books of Rajendra Singh Suravanshi (individual) and vice versa, the genuineness of the transactions was not doubted by the AO; that the account of HUF in the books of individual is current account and the transactions were neither loan nor advance and no interest was paid/charged in the said current account. However, the assessee could not produce the books of account of the two concerns. As per the Addl. CIT, neither the genuineness of transactions was free from doubt nor there was any reasonable cause for borrowing in cash in violation of the provisions of s. 269SS of the Act. Holding that the assessee had breached the provisions of s. 269SS and thus made itself liable for levy of penalty under s. 271D of the Act, the Addl. CIT levied a penalty of ₹ 31,78,500 against which the assessee preferred an appeal before the CIT(A). 3. Before the CIT(A), it was firstly submitted by the assessee that he was assessed in dual capacity viz. in individual capacity as well as in HUF capacity; the cash of individual and HUF were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of s. 271D were rightly invoked by the Addl. CIT. The CIT(A) rejected the assessee s plea regarding infringement of the provisions of s. 269SS out of ignorance of law. In view of the above findings, the CIT(A) ultimately held that the assessee had deliberately and consciously contravened the provisions of s. 269SS of the Act without any reasonable cause and, therefore, the Addl. CIT was justified in levying the impugned penalty under s. 271D of the Act. Aggrieved with the same, assessee is in further appeal before us. 5. Before us, the learned counsel for the assessee vehemently submitted that the impugned cash transactions were between proprietary concern of the assessee and his HUF. It has been pointed out that the assessment in the case of the assessee individual as well as the respective HUF has been completed under s. 143(3) of the Act and the genuineness of the transactions have not been disbelieved. The assessee received cash on various occasions during the year from his HUF entity, which was in violation of the provisions of s. 269SS of the Act. However, no penalty should be imposed since the breach of the provision was only technical in nature because in sum and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions. In this case, the sum and substance of the dispute revolves around the provisions of s. 269SS of the Act, which prohibit an assessee to accept from any other person any loan or deposit exceeding ₹ 20,000 or more otherwise than by an account payee cheque or an account payee bank draft. In the present case, the case made out by the AO is that the proprietary concern of the assessee M/s Parth Enterprises was maintaining a current account of Rajendra Suryavanshi (HUF) in its books. In such current account of the HUF maintained in the books of the assessee individual, assessee was found to have received amounts in cash on several occasions and each time the amount recorded to have been received was below ₹ 20,000, the threshold limit prescribed under s. 269SS of the Act. Be that as it may, the Revenue has inferred that such acceptance of cash was in violation of provisions of s. 269SS of the Act. Sec. 271D of the Act prescribes that if a person accepts any loan or deposit in contravention of the provisions of s. 269SS of the Act, he shall be liable to pay by way of penalty a sum equal to the amount of such loan or deposit so taken or accepted. Invoking the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 46 ITD 10 (Coch.) relied upon by the learned counsel for the assessee. In the said decision it has been held that transfer of funds from one sister concern to another concern will not assume the character of a loan especially when the decision to take out funds and utilize the funds is taken by the same group of individuals. The said decision further lays down that there should be evidence on record to show that such transactions were of the character of a loan. In the present case, the assessee had utilized cash belonging to the sister concerns for its business purposes and the quantum of cash so utilized was in excess of the limits laid down in s. 269SS. According to the assessee, the utilization of cash of sister concern was to meet it business exigency. The case of the assessee is that it is its own Judge as to the existence of the business exigency. The grievance on record shows that the assessee had repaid the amounts utilized by it from sister concerns by cheques. The amount repaid is the actual amount utilized without any payment of interest which is a usual practice in the case of a loan. There is however contrary decision of the Mumbai Bench of Tribunal relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and although such belief turned out to be a mistaken belief in the final analysis, it was based on the possible views arising from the interpretation of the relevant provisions in the light of legislative intention behind enacting the same and in that sense, there was a misconception of law which the authorities below, in our opinion, failed to appreciate in the right perspective. In the case of Faridkot-Bathinda Kshetriya Gramin Bank v. Jt. CIT (supra ), the Amritsar Bench of Tribunal has held that the bona fide belief arising out of ignorance of law coupled with genuineness of transactions would constitute a reasonable cause for not invoking the penal provisions of s. 271E, which are almost identical to the provisions of s. 271D. In the case of CIT v. Eetachi Agencies (supra) the Hon ble Bombay High Court upheld the order of the Tribunal deleting the penalty imposed under s. 271E observing that the assessee acted under the genuine belief that s. 269T has no application to the deposits and it only apply to loans. In the case of Muthoot M. George Brothers v. Asstt. CIT (supra ), the Cochin Bench of Tribunal has held that the action of the assessee firm in accepting the loans/deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment Co. (supra), that the provisions of s. 269T, (which are pari materia with s. 269SS) do not expressly confer any exemption for transactions between connected parties or sister concerns. Without going into the controversy as to whether the transactions with sister concerns are strictly covered by provisions of s. 269SS or not, in our view, it would be enough to see whether the assessee can be said to entertain a bona fide belief that transactions between sister concerns are not hit by the prohibition contained in s. 269SS of the Act. The Bangalore Bench of the Tribunal in Canara Housing Development Co. (supra) observed that a difference of opinion on this point between different orders of the Tribunal, showed that the assessee was justified in having a possible view and if such a belief is entertained in a bona fide manner, it would serve as a mitigating factor to avoid the rigours of s. 271D r/w s. 273B of the Act. In fact, in the case of CIT v. Idhayam Publications Ltd. [2006] 285 ITR 221 (Mad), the Hon ble High Court observed that any payments or repayments made pursuant to a current account maintained between the parties, could not be considered as a violation of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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