TMI Blog2016 (5) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... that the closing cash balance as on 26.9.2006 was only ₹ 13,17,466.11 and it had not increased by ₹ 17,25,000/- as alleged by the Learned AO. We are convinced that there is no case for invoking the provisions of section 269SS of the Act and hence the penalty levied u/s 271D for violation of section 269SS of the Act thereon is quashed herewith - Decided in favour of assessee Penalty u/s 271E - violation of provisions of section 269T - Held that:- assessee was duly necessitated by force to make the payments in cash to its director for onward transmission to the buyers of agricultural lands. - assessee had duly adduced reasonable cause in terms of section 273B of the Act and hence no penalty could be levied u/s 271D of the Act. Further,t here is nothing on record that transactions made by the assessee is not genuine and the amount involved was unaccounted. - There is no case for invoking the provisions of section 269T of the Act and hence the penalty levied u/s 271E for violation of section 269T of the Act thereon is quashed herewith.- Decided in favour of assessee - ITA Nos. 209 & 210/Kol/2013 - - - Dated:- 8-4-2016 - Shri N. V. Vasudevan, Judicial Member And S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to prior consent of ARCIL 3.1. The MOU also stipulates that all payments should be made through Banker s Cheque / Demand Draft drawn in favour of ARCIL-SBPS-004-IV Trust . The assessee company negotiated with UMFL and finally the liability on account of PNB loan was settled at ₹ 38 lakhs. The secured landed property situated at Malda refers to agricultural lands belonging to Mr.Ashok Kumar Sarda, Director of the assessee company. The said lands which were subjected to mortgage were released by ARCIL in order to effect the sale. Mr.Ashok Kumar Sarda sold his agricultural lands and the buyer of the lands issued Pay Orders directly in favour of ARCIL-SBPS-004-IV Trust on behalf of the assessee company and handed over the Pay Orders to assessee company for ₹ 17,25,000/- as pointed out by the Learned AO at page 5 of the order levying penalty. These pay orders for ₹ 17,25,000/- were later on handed over by the assessee company to UMFL as per the MOU, which fact is also pointed out by the Learned AO at page 5 of the order levying penalty. The receipt of monies were duly acknowledged by UMFL vide its Money Receipt dated 26.9.2006. For this transaction, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Learned CIT(A) on first appeal. Aggrieved, the assessee is in appeal before us on the following grounds :- (1) That under the facts circumstances of the case L'd CIT (A) erred in confirming the penalty u/s 271D ignoring the reasonable cause of recording the receipt of sale proceeds on behalf of director in the company cash book against sale of agricultural land belonging to one of the director to payoff company's bank loan. (2) That the JCIT CIT (A) erred in not considering the retention of sale proceeds against sale of agricultural land owned by Ashok Kumar Sarda, director of the company for onward payment to Assets Construction company in satisfaction of bank loan availed by the appellant company. (3) That the CIT (A) erred in not considering the receipt of bank drafts by the Usha Martin Finance Ltd., being Asset Reconstruction company on behalf of Punjab National Bank, (lender) directly from the buyers of agricultural land belonging to director in satisfaction of bank loan granted by the bank to the appellant company. (4) That the CIT (A) was unjustified, arbitrary and unlawful in ignoring the book entry without corresponding receipt of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lower authority clearly shows that there was a running current account in the books of account of the assessee 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 29-9-1997, 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 concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed supra has held as under:- Held, dismissing the appeal, that the transaction between the assessee and the director cum-shareholder was not a loan or deposit and it was only a current account in nature and no interest was being charged for the above transaction. The deletion of penalty was justified. 6.1. Respectfully following the same, we find no justification on the part of the revenue to levy penalty either u/s 271D or 271E of the IT Act in respect of the transactions made by the assessee company with one of the directors. Therefore, we delete the penalty levied by the revenue authorities and allow the appeals of the assessee. 3.6. We find that the assessee instead of merely responding by way of journal entry on 26.9.2006 in its books, had erroneously passed a receipt entry and a payment entry in its cash book. Hence the entire penalty proceedings had been triggered only based on mere book entries of the assessee and there is no categorical finding that the assessee indeed had received cash from the director when the assessee had actually denied the same. We also find that independent examination of the director was made by the Learned AO to ascertain the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.3. The assessee claimed that the assessee was duly necessitated to pay the monies to its director by cash for onward transmission in cash by the director to various persons who had originally agreed to buy the agricultural lands from the director (Mr. Ashok Kumar Sarda). In fact the assessee had duly withdrawn cash from its bank and immediately passed on the same to its director for the purpose stated above. Apart from this, the assessee was also having sufficient cash balance to make payments to its director. The assessee tried to explain that the assessee has got reasonable cause in terms of section 273B of the Act in the aforesaid facts and circumstances and accordingly prayed for dropping the penalty proceedings u/s 271E of the Act. The Learned AO not convinced with the arguments of the assessee proceeded to levy penalty u/s 271E of the Act. On first appeal, the same was even upheld by the Learned CIT(A). Aggrieved, the assessee is in appeal before us on the following grounds:- (1) That under the facts circumstances of the case L'd CIT (A) erred in confirming the penalty u/s 271E despite no loan 1 deposits were repaid in contravention to section 269T. (2) That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions between the assessee and its director are maintained in a current account which would neither be categorized as a loan or deposit. We have already relied on the various decisions in this regard hereinabove in support of this proposition. Hence the provisions of section 269T of the Act cannot be applied in the facts of the instant case. 4.5.1. We also find that the assessee was duly necessitated by force to make the payments in cash to its director for the reasons stated above. Hence we find that the assessee had duly adduced reasonable cause in terms of section 273B of the Act and hence no penalty could be levied u/s 271D of the Act. 4.5.2. We also find that there is nothing on record that transactions made by the assessee is not genuine and the amount involved was unaccounted. The return filed by the assessee was accepted in scrutiny assessment proceedings by the Learned AO u/s 143(3) of the Act and no addition was made to prove that the assessee had routed its undisclosed income in the form of loan transactions. We find that the transactions of the assessee with its director has nothing to do with evasion of tax or concealment of income. In this regard, we place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Industrial Enterprises v. Dy. CIT (2000) 73 ITD 252 (Hyd) in para 17.2 of its order held as under: Provisions of section 269SS were brought in the statute book to counter the evasion of tax in certain cases, as clearly stated in the heading of Chapter XX -B of the Income Tax Act, 1961, which reads requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax legislative. Intention in bringing section 269SS in the Income Tax Act was to avoid certain circumstances to tax evasion, whereby huge transactions are made outside the books of account by way of cash. As far as the case on hand before us is concerned, there is no case against the assessee-firm that these transactions had anything to do with evasion of tax or concealment of income. As rightly pointed out by the Commissioner (Appeals) himself, it may be a case of negligence. But a negligent person does not have any intention or mensrea to purposely violate any provision of law, so as to be visited with stringent punishment of heavy penalty . 9. The same Bench considered this issue in the case of Dillu Line Enterprises (P) Ltd v. Addl. CIT (2002) 80 ITD 484 (Hyd). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was not the intention of the legislature to penalize genuine flow of funds for meeting the urgent business necessities. Tribunal, Pune Bench, in the case of MotiLal J Doshi(supra) has held that where the loan received in cash was from a relative of the partner of the firm, there was a bonajide belief that section 269SS vas not attracted. The Chandigarh Bench of the Tribunal in the case of Income Tax Officer v. Rajendra Trading Co. (1994) 48 ITD 210 (Chd) while cancelling the penalty under Section 271 D had observed as under: An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceedings and penalty will not ordinarily be imposed unless the party is obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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