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2016 (2) TMI 238 - ITAT VISAKHAPATNAM

2016 (2) TMI 238 - ITAT VISAKHAPATNAM - TMI - Penalty u/s 271D - whether the loan accepted by the assessee is a loan or deposit within the meaning of sec. 269SS - Held that:- Assessing Officer issued show-cause notice to levy penalty under sec. 271E of the Act, but finally levied penalty under sec. 271D of the Act. Sec. 271E deals with levy of penalty for violation of the provisions of sec. 269TT of the Act. In the present case on hand, the Assessing Officer initiated the penalty under sec. 271E .....

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ng the facts and circumstances of the case and also applying the ratio of Gururaj Mini Roller Flour Mills ( 2015 (2) TMI 362 - ANDHRA PRADESH HIGH COURT ), we are of the opinion that the assessee has not accepted the loan or deposit in contravention of the provisions of sec. 269SS of the Act so as to levy penalty under sec. 271D of the Act. Therefore, we direct the Assessing Officer to delete the penalty levied under sec. 271D of the Act. - Decided in favour of assessee. - I.T.A.No.116/VIZ/2013 .....

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not have delete the penalty u/s. 271E amounting to ₹ 21,73,162/- as the assessee did not substantiate his claim of merging of accounts in the name of Smt. T.V. Narasayamma, wife of the assessee and her business concerns. c. The ld. CIT(A) ought to have considered that mere explanation is not sufficient to taken out transaction from the ambit of section 271E but the transaction should be proved as genuine with supporting evidences. d. The ld. CIT(A) ought not have considered the reliance p .....

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,37,439/-, besides agricultural income of ₹ 1,70,000/-. The Addl. CIT, Range-2, Vijayawada initiated penalty proceedings under sec. 271E of the Act, for contravention of the provisions of sec. 269SS of the Act. The Assessing Officer was of the opinion that the assessee has violated the provisions of sec. 269SS by accepting the loan in excess of the specified amount as per sec. 269SS, hence, issued a show-cause notice as to why penalty under sec. 271D shall not be levied for the said violat .....

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ri Vinayaka Traders, owned by himself and another propriety concern M/s.Sri Venkata Vinayaka Paper Logistics owned by his wife. There is a transfer of fund between two firms, as and when fund required by each other for urgent business necessity. The assessee further submitted that all the transactions have been made through account payee cheques or through bank transfers and Nowhere cash has been paid or received between the two concerns, therefore, the question of violation of sec. 269SS and le .....

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ssing Officer further was of the opinion that as per the audit report issued by the Tax Auditor in Form No. 3CD, the Auditor mentioned that the assessee has accepted the loan in contravention of the provisions of sec. 269SS of the Act. Therefore, it is a fit case for levy of penalty, hence, levied penalty of ₹ 21,73,162/- under sec. 271D of the Act. 3. Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contended that the Asse .....

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The assessee further submitted that the said loan amount of ₹ 21,73,162/- is consisting of ₹ 15,47,287/- which is the opening balance brought forward from the earlier years and the balance amount of ₹ 6,25,875/- was the loan accepted during the year by way of account payee cheque or bank transfer. The assessee further submitted that the transactions taken place between husband and wife and also the transactions are made through banking channel by way of money transfer from one .....

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of loan or deposit by way of book adjustment in the form of journal entry in the books of accounts of the assessee would not attract the provisions of sec. 269SS, consequently, penalty under sec. 271D is not leviable. In support of his claim, the CIT(A) relied upon the Hon'ble Delhi High Court s judgment in the case of CIT vs. Noida Toll Bridge Co. Ltd. (2003) 262 ITR 260 (Del.) and also the Hon'ble Madras High Court s judgment in the case of CIT vs. Ratna Agencies (2006) 284 ITR 609 (Ma .....

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No. 3CD has clearly mentioned that the assessee has accepted the loan in excess of ₹ 20,000/- otherwise than by way of account payee cheque or demand draft. Therefore, based on the information from the Tax Auditor s report, the Assessing Officer levied penalty under sec. 271D of the Act. The D.R. further submitted that the assessee has failed to furnish the details before the A.O. to substantiate his case, which is evident from the penalty order. Now, he has come with a explanation stating .....

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ive of the assessee further submitted that the assessee has accepted loan from sister concern that too by way of a book adjustments, which cannot be termed as loan or deposit as contemplated under sec. 269SS. The Authorized Representative of the assessee further submitted that the assessee has accepted two loans from his wife, one in her individual capacity and another in the capacity of proprietor of a firm and both the amounts were transferred by way of account payee cheques or bank transfer. .....

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sisting of ₹ 15,47,287/- which is the opening balance brought forward from the earlier years and the balance amount of ₹ 6,25,875/- was the loan accepted during the year by way of account payee cheque or bank transfer, which was misread by the A.O. The assessee has not accepted any loan or deposit in excess of the limits specified under sec. 269SS, so as to levy penalty under sec. 271D of the Act. In support of his contentions, the Authorized Representative of the assessee relied upo .....

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of account payee cheque or demand draft, therefore, there is a contravention of sec. 269SS which attracts penalty under sec. 271D of the Act. The assessee contention is that he has not accepted the loan in contravention of sec. 269SS and the loan was accepted by book adjustment from sister concern belonging to his wife, therefore, it cannot be termed as loan or deposit as contemplated under sec. 269SS, so as to levy penalty under sec. 271D. 8. The question before us, is whether the loan accepte .....

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icer was of the opinion that the assessee has violated the provisions of sec. 269SS, therefore, penalty is leviable under sec. 271D. The Assessing Officer has taken a clue from the Tax Audit report issued by the Auditor in Form No. 3CD, wherein the Tax Auditor reported that the assessee has accepted loan otherwise than by way of account payee cheque or demand draft. The Assessing Officer, based on audit report come to the conclusion that the assessee has accepted the loan by cash. During the cou .....

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money transfer from Indian Overseas Bank. The balance amount of ₹ 20,875/- was accepted by book adjustment. The assessee explained that an amount of ₹ 20,875/- was transferred from his wife account towards amount paid to third party by way of cheque on behalf of the assessee. On going through the details submitted by the assessee, we find that the assessee has not accepted any loans or deposit by cash in contravention of sec. 269SS of the Act. The Assessing Officer without examining .....

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aced before the concerned authority. The levy of penalty under sec. 271D of the Act is not automatic. Before levying penalty, the concerned officer is required to find out that even there was any violation referred to in the said provisions and the same was without a reasonable cause. The initial burden is on the assessee to show that there exists a reasonable cause, which was the reason for the failure referred to in the concerned provisions. Therefore, the Assessing Officer dealing with the ma .....

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we find that the loan was accepted by bank transfers. The Assessing Officer without examining the details furnished by the assessee on suspicious and surmises, come to the conclusion that all the transactions have been done in cash. The very fact that the assessee has furnished the ledger extract before the Assessing Officer, wherein it was found that the transfer of money is through bank transfers. On further verification of the ledger account, at the end of the financial year, the remaining un .....

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t. Just because, it is mentioned that otherwise than by way of account payee cheque or demand draft, it does not mean that the loan was accepted in cash. Even in the cases, where the loan has been accepted by way of book adjustments through journal entries, the auditor needs to record the reasons that it should be otherwise than by way of account payee cheque or demand draft. Therefore, we are of the opinion, that the assessee has not accepted the loan or deposit in contravention of sec. 269SS o .....

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t said to be violation or contravention of sec. 269SS and 269T of the Act. The relevant portion is reproduced hereinunder:- 8. The cash transactions by the assessees or the public in general were treated as one of the devices to create black or unaccounted money since it becomes difficult to verify the same. As a step to curb this, Parliament amended section 40A of the Act by introducing sub-section (3). It mandates that where an individual incurs expenditure exceeding a sum of ₹ 20,000, p .....

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hibits any person from accepting loan or deposit, otherwise than by an account payee cheque or draft, if the aggregate of the amount exceeds ₹ 20,000. The Government banking companies established by the State or Central Government, etc., are kept outside this prohibition. The provision reads : "269SS. Mode of taking or accepting certain loans and deposits. - No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to a .....

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ount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), twenty thousand rupees or more." 10. Section 271D prohibits a company or co-operative society from repaying to any person, any deposit, otherwise than through account payee cheque or account payee bank draft, if the amount exceeds ₹ 10,000. Here again, certain exceptions are provided. Penal provisions corresponding to section 269SS and section 269T are sections 271D and 271E. The .....

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person repays any deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the deposit so repaid. (2) Any penalty imposable under sub-section (1) shall be imposed by the Deputy Commissioner." 11. The allegation against the appellant is that it received two deposits in contravention of section 269SS and made two payments in contravention of section 269T of the Act in a spa .....

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er section 143(3) of the Act these contentions were accepted, they were disbelieved, at a later stage. 12. Receipt of ₹ 20,000 or more, in cash, or payment of the same to a depositor, in a sum, exceeding ₹ 10,000, is not only prohibited but also visits the assessee with penal consequences. The assessee accused of violating it would be exposed to the penalty of equal amounts. The other general penalties in the Act may also be in store. Therefore, it is only when the ingredients of the .....

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notices, the Assessing Officer did not indicate the method of payment. It was simply mentioned that everything was done in cash. The very fact that from the same agencies, amounts were said to have been received and repaid, as reflected in the books, discloses that it was nothing but book adjustment. Further, he did not give any specific finding that the so-called receipts are in the form of loan or deposit or the repayment was made thereof. All the three orders passed by the Assessing Officer .....

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and other analogous provisions may take place, Parliament introduced section 273B. It reads. "273B. Penalty not to be imposed in certain cases.- Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271B, section 271BB, section 271C, section 271D, section 271E, section 271F, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or sub-section (1) of section 272BB .....

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n assessee bona fidely took a particular step and that in turn, resulted in contravention of section 269SS or section 269T of the Act penalty cannot be imposed, as a matter of course. 16. Making book adjustment of the funds, by a firm vis-a-vis its sister concern, can by no means be said to be the one taken in clear violation or contravention of the said provisions. It is only when an assessee has taken a decision to mobilise loans or deposits and in the process it has received amounts exceeding .....

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