TMI Blog2000 (4) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... director of the company, which is a partner in the assessee firm. These amounts were received in cash between 1-4-1994 and 31-3-1995. According to the Assessing Officer the amounts had been received in contravention of the provisions of section 269SS and therefore attracted penalty under section 271D. He therefore initiated penalty proceedings and called for the assessee s explanation. 4. The assessee explained that it had a running account and a business relationship with VE, that it was the usual practice for the assessee to receive temporary advances from VE, in cash as and when required by the business exigencies and repaid the same in the course of the business, that the amounts under consideration were received for the specific purpose of payment of advance excise duty, that they were repaid either out of the proceeds of the sale of goods or through adjustments, that during the period 1-4-1995 to 31-3-1996 the credit balance in the account of VE had been reduced from 67,06,937 as on 31-3-1995 to ₹ 39,12,790 as on 31-12-1996. The balances in the account of VE as on 31-3-1992, 31-3-1993 and 31-3-1994 were also furnished. It was therefore pointed out that the amounts re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department. In the absence of any justifiable reason to receive the amounts in cash, the CIT(A) was of the view that the assessee was liable to penalty under section 271D not only in respect of the amounts which were not utilised for payment of the excise duty but was liable to penalty in respect of the entire amount received from VE whether utilised for making advance excise duty payments or not. He accordingly held the assessee liable to penalty in the sum of ₹ 38,10,000 and thus enhanced the penalty. 7. The assessee is in further appeal before us. The ld. counsel for the assessee submitted firstly that the amount was received from VE which was a sister concern of the assessee in the sense that both of them were connected through common relationship and therefore was outside the purview of section 269SS. He submitted in this connection that the section is attracted only if a person takes or accepts from any other person any loan or deposit otherwise by than an account payee cheque or account payee draft. Since the proprietary concern of Mrs. Shashi Agarwal was a sister concern, the connection being that she is the wife of one of the directors of the company which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, the ld. Sr. DR pointed out that the constitutional validity of section 269SS has been upheld in the following cases : (i) K. R. M. V. Ponnuswamy Nadar Sons (Firm) v. Union of India [1992] 196 ITR 4311, (Mad.) (ii) Sukhdev Rathi v. Union of India [1995] 211 ITR 1572, (Guj.) (iii) Chamundi Granites (P.) Ltd. v. Dy. CIT [1999] 239 ITR 6943, (Kar.) His contention was that since the constitutional validity of the section has been upheld, if there is a contravention of the provisions of the section, penalty is attracted, however harsh it may be. He next contended that there was no warrant for contending that a sister concern would not fall within the meaning of any other person appearing in section 269SS. According to the ld. Sr. DR, these words included each and every person other than the assessee. Since VE was another entity, it fell squarely under those words, hence the section was attracted. He also submitted relying on the following authorities that neither the fact that VE is a sister concern of the assessee nor the fact that the transactions of receipts and payments have been routed through a current account between the assessee and VE was relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite sufficient time available to it would indicate, in his view, that the assessee was not very keen to comply with the provisions of the section. On the basis of these contentions, the ld. Sr. DR submitted that the penalty as enhanced by the CIT(A) should be confirmed. 10. We have carefully considered the rival contentions. We have also perused the orders of the departmental authorities and the papers in the paperbook to which our attention had been drawn. In our view, there is no merit in the contention of the ld. counsel for the assessee that Vikas Exim being a sister concern, the provisions of section 269SS cannot apply to any amounts received by the assessee from it in contravention of the provisions of the section. Even assuming that VE was a sister concern of the assessee, we do not see how it is excluded from the purview of the words any other person appearing in the section. In our view, these words denote any person other than the assessee because, as rightly pointed out by the ld. Sr. DR, there was no question of the assessee receiving any monies from himself in contravention of the provisions of the section. We therefore reject this contention of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onies. This practice was creating difficulties for the income-tax authorities and to counter this, section 269SS was introduced which debarred persons from taking or accepting after 30-6-1984 from any other person any loan or deposit otherwise than by an account payee cheque or account payee draft, provided the amount exceeded ₹ 10,000 (now increased to ₹ 20,000). While interpreting the provisions of section 269SS, we have to bear in mind the object for which it was introduced. If the assessee is able to lead evidence to show that not only was there reasonable cause for taking the money in cash, but the amounts did not also represent unaccounted monies either of the assessee or of the persons from whom they were taken, normally that should be sufficient to hold that the penalty is not justified. As regards the genuineness of the borrowing in the present case, there does not appear to be any doubt. The income-tax authorities have raised no doubt about the genuineness as is clear from the fact that no addition of the amounts received from VE has been made by invoking section 68 of the Act. Apparently the Assessing Officer was satisfied with the assessee s explanation rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case from VE are temporary advances and there is no evidence that there was any stipulation as to the period or any stipulation for interest. It is therefore matter of grave doubt as to whether the amounts received from VE can be characterised as loans or deposits. In our view, they can be more appropriately referred to as temporary advances. Such temporary advances are outside the purview of section 269SS. 12. The Assessing Officer had held that whatever amounts were not utilised by the assessee for payment of excise duty should be considered as falling under section 269SS and to that extent the assessee would be liable for penalty. We have already seen that it is not always possible for an assessee to predict accurately his requirements of monies for the purpose of effecting payments related to the business. A certain amount of unpredictability will always be there and it is quite possible that in its anxiety to cover the impending payments, the assessee was over-cautious and took more monies from VE than was actually required. This has resulted in an excess of ₹ 9,85,000. Merely because the assessee had not utilised these amounts for making the excise duty payments, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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