TMI Blog2016 (4) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 29-2-2016 - SHRI H.L.KARWA, HON'BLE VICE PRESIDENT For The Appel lant : Sh. Sudhir Sehgal For The Respondent : Sh. S.S.Mittal This appeal filed by the assessee is directed against the order of CIT(A), Patiala dated 3.9.2015 in confirming the penalty of ₹ 5 lakhs imposed u/s 271D of the Income-tax Act, 1961 (in short 'the Act') for the assessment year 2008-09. 2. Briefly stated, the facts of the case are that the assessee is a Private Limited Company running a cold storage at Chandigarh Road, Rajpura having three directors namely Sh. Madan Lal Chawla, Shri Rakesh Chawla and Mrs. Reeva Chawla. The assessee submitted its return of income for the assessment year under consideration on 29.9.2008 declaring a loss of ₹ 4,98,400/-. Subsequently, the assessee revised the return on 27.2.2009. The return was processed u/s 143(1) of the Act on 30th March 2010. However, the case was selected for scrutiny as per CASS. Statutory notices were issued to the assessee and in response to the notice, the assessee submitted the requisite information with relevant documentary evidence. The Assessing officer while examining the balance sheet as on 31.3.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty u/s 271D of the Act. In response to the show cause notice issued for levy of penalty u/s 271D of the Act, the assessee submitted that at the time of accepting share application money, there was no intention of the company to take the amount of ₹ 5 lakhs as unexplained deposits as the company was already in huge losses and was not in a position to bear the burden of interest. It was stated that at the relevant time, the assessee received subsidy from the Government and it was decided that no further shares should be allotted by increasing the authorized capital of the company and the amount in question was returned to the parties through account payee cheuqes in the subsequent years. Alternatively, it was contended on behalf of the assessee that the transactions in question were just family transactions between the independent assessees, and such genuine transaction does not attract penalty u/s 271D of the Act . For this proposition the assessee he relied on the decision of the Hon'ble Punjab Haryana High Court in the case of CIT v. Sunil Kumar Goel [2009] 315 ITR 163/183 Taxman 53. The assessee also referred to the provisions of Rule 2 (b)(ix) of the Companies (Acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan or deposit in cash. Accordingly, the CIT(A) dismissed the appeal of the assessee. 4. Now the assessee is in appeal against the order of CIT(A) before this Bench of the Tribunal. I have heard Shri Sudhir Sengal, Ld. Counsel for the assessee and Shri S.K. Mittal the Ld. DR at length and have also perused the materials available on record. Shri Sudhir Sehgal Ld. Counsel for the assessee reiterated the submissions made before the lower authorities. It is apparent from the records that the Revenue authorities did not accept the contention of the assessee that the amount of ₹ 5 lakhs received by the assessee from its director and share holders was towards share application money. It is an admitted fact that Smt. Reeva Chawala is one of the directors of the assessee company. Shri Anju Chawla is the wife of Shri Rakesh Chawla, Director of the company, who contributed ₹ 2 lakhs as a share holder of the assessee company. It is also an admitted fact that Smt. Asha Chawla is wife of Sh. Madan Chawla, who is director of the company is also a share holder of the assessee company. At this stage, I may refer to the decision of Hon'ble Jharkhand High Court in the case of Bha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empowers the Jt. CIT to impose penalty to any person who takes or accept any loan or deposit in contravention of the provisions of section 269 SS of the Act. The penalty under this section is leviable in a sum equal to the amount or loan or deposit so taken or accepted. The Hon'ble Supreme Court in the case of Asst . Director of Inspect ion ( Investigation) Vs. Kum. A.B. Shanthi (2002) 255 ITR 258 (SC) has observed the object of introducing of sect ion 269 SS of the Act, which reads as under :- The object of introducing section 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he makes some false entries, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records to suit the plea of the taxpayer. The main object of section 269SS was to curb this menace of making false entries in the account books and later giving an explanation for the same. 6. The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lal Chawla another Director of the company. It is also relevant to state here that Smt. Anju Chawla and Smt. Asha Chawla are share holders of the assessee company. The amount of ₹ 5 lakhs introduced by the above three persons has not been treated as cash credits u/s 68 of the Act. In other words, it is not the case of the Revenue that the amount of ₹ 5 lakhs represented the income of the assessee from some undisclosed sources. From the facts of the present case, it is clear that the transactions made between the company and its director and share holders cannot be doubted by any stretch of imagination. In other words, the transactions are genuine. In the case of Sunil Kumar Goel (supra), it has been held by the Hon'ble High Court that cash transactions with sister concerns which had no tax effect, established 'reasonable cause' u/s 273B of the Act. Therefore, no penalty u/s 271D and 271E is leviable. The relevant observations made by the Hon'ble Punjab Haryana High Court in the above case are as under:- Furthermore, there is no dispute about the fact that the instant cash transactions of the respondent assessee were with the sister concern and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in the name of Mr. S. V. S. Manian. Mr. S. V. S. Manian used to pay the money in the current account and used to withdraw the money also from the current account. The Revenue should establish that what was received by the assessee is a loan or deposit within the meaning of section 269SS. The deposit and the withdrawal of the money from the current account could not be considered as a loan 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 unsecured 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 transaction between the appellant and the director-cum-shareholder is not a loan or deposit and it is only a current account in nature and no interest is being charged for the above transaction. 5. In the foregoing conclusions, we are of the view that since the said transaction does not fall within the meaning of loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, the transactions in question were through bank and were deposited by some of the directors/promoters of the assessee-company. Therefore, we see no illegality or impropriety in the impugned order dated November 25, 1999 passed by the Tribunal. Thus, no substantial question of law is involved in this appeal. The appeal is therefore dismissed. 10. In view of the above discussion, I hold that the cash transactions of the assessee were with the directors and share holders of the company due to business expediency. Nobody has doubted the genuineness of the transactions. In my opinion, the assessee has proved throughout without any shadow of doubt that the transactions are genuine and there is a reasonable cause within the meaning of section 273B of the Act, which provides that no penalty shall be imposed on person or assessee as the case may be for any failure referred to in section 269SS of the Act, if he proves that there was reasonable cause for failure to take a 'loan' or 'deposit' otherwise than by account payee cheque or account payee bank draft, then the penalty should not be levied. Accordingly, I do not see any reason to sustain the penalty le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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