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2016 (3) TMI 860 - ITAT AHMEDABAD

2016 (3) TMI 860 - ITAT AHMEDABAD - TMI - Penalty proceedings u/s 271E - Company has directly repaid the loan taken from Director to Dakor Nagarik Sahakari Bank - violation of section 269T - Held that:- The assessee has demonstrated that under the compulsion the payment was directly credited in the bank account of the Director. Strictly it was not paid in cash. On due consideration of these facts in the light of case of Mahmood Associates (P) Ltd. vs. Joint Commissioner of Income-tax [2015 (4) T .....

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the learned Commissioner of Income-tax (Appeals)-I, Baroda, dated 11.05.2011 passed for Assessment Year 2004-05. 2. The solitary grievance of the assessee is that the learned CIT(A) has erred in confirming the penalty of ₹ 3,73,620/- which was imposed u/s. 271E of the Income-tax Act. 3. The brief facts of the case are that M/s. Amarshiv Construction Pvt Ltd had borrowed a sum of ₹ 3,93,618/- from Shri Hasmukhbhai Manibhai Patel. Shri Hasmukhbhai Manibhai Patel had borrowed the money .....

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ld. Assessing Officer initiated penalty proceedings u/s 271E of the Income-tax Act. He imposed a penalty of ₹ 3,93,618/-. 4. Appeal to the CIT(A) did not bring any relief to the assessee. 5. The ld. Counsel for the assessee at the very outset submitted that loan was taken by the assessee from a Director under compelling circumstances. It was credited in the account of the Director, maintained with a Cooperative Bank. Strictly it was not paid in cash; rather it was deposited in the account .....

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. In this case, the assessee-company took loan from the Director in cash, amounting to ₹ 3,98,719/-. The Assessing Officer has imposed a penalty equivalent to this amount u/s 271D of the Act. The Tribunal, after referring to the decision of Hon ble Madras High Court, held that the loan taken from a Director does not fall within the ambit of expression "deposit" and therefore, if some loan was taken from the Director, then it cannot constituted that the assessee has violated secti .....

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269T and therefore, no penalty is imposable. On the other hand, ld. Departmental Representative relied upon the order of the Assessing Officer. 6. We have duly considered the rival contentions and gone through the record carefully. Similar issue was considered by the ITAT, Kolkata Bench (supra). The observations, including taking cognizance of the facts by the ITAT, Kolkata Bench, are worth to refer. They read as under:- "5. At the outset, Ld. Counsel for the assessee Shri Subhas Agarwal co .....

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in the case of CIT Vs. Indore Plastics P. Ltd. (2003) 262 ITR 163 (MP), where Hon ble High Court has observed that (from head notes) "the assessee was a private limited company. One RCK was its promoter and director during the period relevant to assessment year 1990-91. During that year, the assesseecompany accepted deposits in cash from the promoter from time to time aggregating in all ₹ 2,31,320. According to the Assessing officer as also the Commissioner (Appeals), the said paymen .....

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finding of fact and, therefore, did not give rise to any question of law to be answered by the court." 6. He also referred to the decision of Hon ble Madras High court in the case of CIT Vs. Idhayam Publications Ltd. (2006) 285 ITR 221 (Mad), wherein the Hon ble High court has held as under: "We heard the arguments of learned counsel for the Revenue. We have perused the materials available in record. Admittedly Mr. S. V. S. Manian was one of the directors. Therefore the order of the lo .....

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or advance. Further it was also found that the assessee filed a letter dated September 29, 1997, and in that letter he explained that the amount received from Mr. S. V. S. Manian had been shown as "secured loan from directors" in the balance-sheet. As per the Companies Act, under the Companies (Acceptance of Deposits) Rules, 1975, under rule 2 (b) (ix), deposit does not include any amount received from a director or a shareholder of a private limited company. Therefore, the transactio .....

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law arises for consideration of the court. Accordingly, we dismiss the above tax case." 7. Ld. Counsel for the assessee also referred to the decision of Hon ble Gujarat High Court in the case of CIT Vs. Natvarlal Purshottamdas Pareekh (2008)303 ITR 5 (Guj), wherein Hon ble High Court has reproduced para 18 of Tribunal s order and confirmed the issue as under: "18. As discussed above, the annexure attached to the penalty order goes to show that each of the family members of the assessee .....

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ther. These amounts were not received by the assessee in cash as these were mere book entries. These amounts cannot be equated with any of the amounts involved in the cases relied on by both the parties as in those cases, the amounts were received by the assessee as deposits in cash and that is not the position here because these were book entries except the amounts of NSCs and other cash loan of ₹ 11,910. In the same breath, the amount of ₹ 1,920 credited on account of rent and S .....

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