TMI Blog2016 (9) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... count of assessee as having been received from R.P. Goyal and found credited as an “unsecured loan”, proves that it was in the nature of a loan and certainly such loan having been received by cash, falls within the ambit of Section 269-SS. We are not impressed by the argument raised by the learned counsel for the assessee that R.P. Goyal being a semi literate and educated upto only 9th class, & earlier engaged in Kirana; entered in the field of Cement Trading and Distributorship, promoted this company and became Chairman-cum-Managing Director of the company, was not aware of the provisions of law, in our view such an argument is worth rejection primarily since the instant appeals arose in a case of Limited Company and not R.P. Goyal. Provisions were brought into force from 1.4.1984 and such provisions were in force for almost 8 years and we cannot loose sight of the fact that over the years R.P. Goyal being in the business for years together, was not aware of the provisions of law although the presumption to know the law is to the contrary. Equally important is the fact that a Limited Company right from being formed is assisted by Chartered Accountant and Company Secretary, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 269-SS of the Act as the assessee was precluded from accepting any amount over and above ₹ 20,000/-. 3. Accordingly, a show-cause notice was issued, the assessee respondent, however, submitted reply, inter alia, contending that there was no banking facility in the radius of 25 km. of the site of Village Paniyala, where the Cement Plant was being set up, of which the project cost was of ₹ 1.60 crore and that there was a delay in getting sanction from the financial institutions of the term loan and, therefore, the Promoter-Director decided to give funds from his own resources. Further, no money had been accepted by the assessee company in cash and the money had been directly disbursed for the sake of payments towards constructional activities or/and setting up of the Plant and that it was neither a loan nor a deposit. However, the AO did not agree to the contentions raised by the assessee and while imposing penalty, the AO observed that the company as well as Managing Director (R.P. Goyal) who had deposited by cash, were having account in the same bank and when R.P. Goyal can withdraw money from his own account by cash, there was no reason not to transfer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared to the CIT(A) that it was made afresh. The CIT(A) also noticed that there were contradictory explanation of R.P. Goyal vis-a-vis the assessee and doubted the very deposits and upheld the penalty imposed. 7. Further, appeal was preferred by the assessee before the learned Income Tax Appellate Tribunal. The Tribunal, however, was satisfied with the explanation offered by the assessee and held that there was a reasonable cause and bona fide belief in the entire transaction of deposit of the so-called money from R.P. Goyal to the Company. The Tribunal also noticed that the amount advanced by R.P. Goyal to the assessee Company was merely for the purposes of incurring of expenses on construction/setting up of Plant. The Tribunal noticed that R.P. Goyal, the Chairman-cum- Managing Director was the Promoter-Director of the Company and was looking after the entire set up of the Plant, since the assessee applied for term loan to the financial institution and the funds were delayed, therefore, there was no harm in the amount having been deposited by R.P. Goyal. The Tribunal also held that it was a unilateral act of R.P. Goyal to involve and utilise his own money by withdrawing from h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ething from the Department. For the assessment year 1993-94, ld. counsel contended that a cash book was produced and the CIT(A) after appreciation clearly observed that it appears that the cash book produced was a later creation. He also contended that both in facts and in law the Tribunal erred in deleting the penalties under Section 271-D. 9. Per contra, learned counsel for the assessee contended that R.P. Goyal, earlier was engaged in a small Kirana Shop and had a self styled business, gradually shifted to business of cement manufacturing and was in the process to establish a Mini Cement Plant and it was submitted before the Authorities that since there was delay in approval of the loan by financial institutions, to avoid increase in cost and the Plant is not delayed, R.P. Goyal provided funds to the assessee only towards constructional activities as well as setting up of the Plant. He stressed the point that whenever the amount was received by the assessee from R.P. Goyal, either the same was spent immediately through the person who was rendering services or within a gap of few days but ultimately the money which was infused in by R.P. Goyal, was towards incurring of the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gregate amount of such loan and deposit; or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is [twenty] thousand rupees or more : Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,- xxxx xxxx xxxx xxxx Explanation.-For the purposes of this section,- [(i) banking company means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act;] (ii) co-operative bank shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (iii) loan or deposit means loan or deposit of money.] 271D. Penalty for failure to comply with the provisions of section 269SS.- (1) If a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked by the AO in the instant case. Though the Tribunal has found that the company has a separate status and entity and when the Tribunal itself finds that there are two separate entities, the subsequent observation of the Tribunal ad-infra :- there were neither compelling reason nor a compelling force by the so called artificial person-company to bring in the money, it appears that it was merely a suo moto decision of Mr. Goyal to expose himself to such a huge risk of utilizing his personal money for company's purposes, with the hope that he would take it back when the loans are disbursed to the company. In other words, it is a case where agent utilized his own money in order to fulfill his obligations towards the principal upon which he became entitled to get back the money. This is thus a unilateral transaction on the part of Mr. Goyal to involve and utilize his own money by withdrawing it from his own sources. An unilateral act cannot result in a contract for which existence of two parties is a sine qua non. Whether loan or deposit they both are contracts only, originated from bilateral act.. 15. We are unable to subscribe the view expressed as there is a dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. This finding of fact that the assessee as well as R.P. Goyal had common bank account in the same bank, remained unrebutted by the assessee as well, and if there is any direct nexus proved by the assessee that the amount as received from the Director was utilised towards payment to various labourers/contractors spent for constructional activities that does not improve the case of the assessee at all in these proceedings. 18. We have gone through the Notes and Clauses also which have been introduced from 1.4.1984 and the Circular of the Board, though states that the provision was brought into force taking into consideration that in survey and search proceedings whenever unaccounted cash is found in the premises of the person surveyed or searched, the claim is invariably made that the alleged amount is received from A, or B, or C, etc. and to plug such loopholes this provision was brought but that might be introduced initially taking into consideration claims made in survey and search proceedings but over the years it equally applies to a case in hand as well and may not be restricted to only survey and search proceedings, as prayed. 19. Both the learned counsel have relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reed to provide financial support which was to the tune of ₹ 6,51,000/- and the said amount was paid in cash on various dates commencing from April 1993 and the AO having noticed that there was contravention of Section 269-SS, imposed penalty under Section 271-D at ₹ 7,35,475/- after noticing other credits also, and the High Court after analysing the provisions came to the conclusion that neither reasonable cause was found nor the explanation was bona fide and upheld the penalty imposed by the AO. 22. Taking into consideration the above, the amount received by the assessee from R.P. Goyal was certainly in the nature of loan and we do not approve the manner in which the Tribunal has recorded a finding that it is neither loan nor deposit and it is perverse and contrary to the material on record. Admittedly in the audited accounts as well as the annual report of the assessee duly approved by its general body, indicate the money deposited by R.P. Goyal as unsecured loan . 23. The argument of the learned counsel for the assessee that the amount in any case had to be paid to petty labourers and contractors in a remote place where the company has been established is bey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never produced. In the light of this conduct of Shri R.P. Goyal, it is very difficult to say the cash transactions by him with the assessee company were genuine. The earlier A.O. while completing the assessment has already intimated to the Assessing Officer of Shri R.P. Goyal to examine the loan at his level. 25. The CIT(A) also noticed as a vital factor that neither the assessee nor R.P. Goyal were interested in producing the books of account of M/s. Chintpurni Enterprises and thus raised a serious doubt as to whether R.P. Goyal was in a position to have substantial cash in hand to the tune of almost ₹ 2.80 crore in his books of account. In our view the amount is not petty and one was certainly required to prove the source of the money as having been advanced by R.P. Goyal. Though, before the Tribunal Revenue specifically raised issue about non-production of books of M/s. Chintpurni Enterprises in one year and in subsequent year it was claimed to be fabricated or forged and even doubted the genuineness of such huge deposit of cash and though Tribunal has specifically observed the above argument but surprisingly has not at all commented or give any finding on this vita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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