TMI Blog2018 (11) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... as levied by the Addl. Commissioner and as confirmed by the CIT(A) stands confirmed. The decision in the case of M/s.Idhayam Publications Ltd. [2006 (1) TMI 97 - MADRAS HIGH COURT] has no application on the facts of the present case and the principles laid down by the Hon’ble Jurisdictional High Court in the case of Shri P.Muthukaruppan [2015 (7) TMI 848 - MADRAS HIGH COURT] and Nandhi Dhall Mills [2015 (3) TMI 19 - MADRAS HIGH COURT] have been rightly applied by the Addl. Commissioner and the Ld.CIT(A). Levy of penalty u/s 271E - Held that:- The assesses herein has been used as the custodian of the unaccounted cash of J. Dinakaran by depositing it in the bank accounts of the assesses herein by their shareholder and director Dr.A. M. Arun. The assessee have not been able to give any explanation to substantiate with evidence for the repayment of the deposits to Dr.A.M.Arun in cash. As and when J. Dinakaran required the cash the cash seems to have been withdrawn by Dr. A. M. Arun from the bank accounts of the assesses herein and paid to J. Dinakaran. The question that has been raised that the moneys given by the shareholder and Director to the Private Ltd. Company is not a loan o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer. 3. Shri S.Sridhar represented on behalf of the Assessee, and Dr.Srinivasa Rao represented on behalf of the Revenue. 4. The facts in all the appeals are identical and consequently, it was submitted by ld.A.R that in regard to levy of penalty u/s.271D of the Act, the appeal in ITA No.2198/Chny/2018 can be taken as a sample and in regard to levy of penalty u/s.271E of the Act, the appeal in ITA No.2199/Chny/2018 can be taken as a sample. ITA No.2198/Chny/2018 Sec.271D 5. Ld. Counsel for the assessee submitted that the assessee is a company. It was a submission that there was a search conducted at the premises of one Shri J. Dinakaran, who was doing the business of finance. Consequent to the search in the case of Shri J. Dinakaran, a search was conducted in the case of assessees and Dr. A.M Arun, who is one of the promoter shareholders and Director of the assessee companies and who had received loans in cash from Shri J. Dinakaran and given the same to the assessee company. It was submitted by ld.A.R that the ld. Assessing Officer had held that there was a violation of provisions of the section 269SS of the Act in so far as the cash loans had been received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s current bank account and repay the same to Shri J. Dinakaran. It was a submission that the assessee being a company, could not take a loan from Shri J. Dinakaran directly as taking of the loan was specifically barred from individuals. It was a submission that the assessee had shown reasonable cause for taking of the cash from Dr. A.M Arun and in view of the provisions of the section 273B of the Act, penalty levied u/s.271D was not exigible and the same was liable to be deleted. 5.1 It was an alternate prayer that the total of the transactions in cash between the assessee and Dr. A.M Arun, the Director of the assessee company was to meet the expenditure of G143.25 cores, but the peak of the cash deposits was only G22.2 crores, being the maximum amount outstanding at any point of time for the three years. It was a submission that if the assessee s prayer for its reasonable cause is not acceptable, then the penalty may be restricted to the peak of the cash deposits. It was a further submission by the ld.A.R that monies had been taken on loan by Dr. A.M Arun from Shri J. Dinakaran and given to the assessee. In the same manner on the repayment of the loan by Dr. A.M Arun to Shri J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y u/s.271D of the Act. It was a submission that provisions of the section 271D clearly shows that the same was for contravention to provisions of the section 269SS and perusal of the provisions of the section 269SS showed that it was under Chapter-XXB of the Income Tax Act, 1961, which was for the purpose of counteracting evasion of tax . It was a submission that there was no unaccounted transactions in the present case and in fact, no additions on account of unaccounted transactions have been made in the case of assessee-companies, or in the case of Dr. A.M Arun. It was a submission that all the transactions were genuine and accounted transactions, the details have also been produced before the ld. Assessing Officer also and it was only under exigency circumstances and on account of commercial expediency, which required cash for meeting the immediate and emergency short fall of funds in the case of assessee-company, the loans had been taken in cash by the Director of the assessee-company from Shri J. Dinakaran and deposited in the current account. It was a submission that the assessee company was unable to draw any further loan towards its working capital as all its resources wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e director of the assessee company, Dr. A.M Arun has been penalized for the same amount, and therefore, the assessee company should not be penalized, would not be acceptable in so far as the company is a different entity from Dr. A.M Arun, who is an assessee in his individual capacity. It was a submission that nothing has been brought on record to show that Dr. A.M Arun had taken the loan from Shri J. Dinakaran on behalf of the assessee company, or that Dr. A.M Arun acted on behalf of the assessee company. The Revenue was absolutely correct in levying the penalty under sections 271D and 271E of the Act in respect of the assessee for having taken the loans and repaid the loans from and to Dr. A.M Arun respectively and Dr. A.M Arun for having levied penalty u/s.271D u/s.271E of the Act in respect of taking loan in cash, and repaying the loan in cash to Shri J. Dinakaran respectively. It was a submission that offence of both the assessee company and Dr. A.M Arun was separate and independent and was to considered independently. It was a submission that the penalty has not been levied for the same offence, but has been levied on the same amount. The ld.D.R drew our attention to the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions were fully accounted and had been done only on account of commercial exigencies. It was a submission that as the amounts had been taken in cash by Dr. A.M Arun from Shri J. Dinakaran, the same had to be repaid in cash itself, as that was the condition under which the loans had been taken by Dr. A.M Arun from Shri J. Dinakaran. It was a submission that consequently the funds had been withdrawn from assessee s bank account for the repayment of the loan by Dr. A.M Arun to Shri J. Dinakaran. 9. In reply, the ld.D.R submitted that nothing has been brought on record to justify the repayment of the loan in cash. It was a submission that the prayer of the ld.A.R that the penalties under sections 271D 271E of the Act was liable to be deleted and it was replied by ld.D.R that the penalties as levied by the ld. Assessing Officer and confirmed by the Ld.CIT(A), were liable to confirmed. 10. To examine as to whether there has been any additions in the course of assessments on account of the alleged unaccounted transactions in respect of the said funds deposited in the assessee s bank account by Dr. A.M Arun, or in respect of the transactions wherein Dr. A.M Arun has withdrawn fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount received by Dr.AM Arun Banks/NBFC- loan repayments Vasan Denta l Hospi tal salary Employees salary Doctor s Professional fees Critical Vendor s payments Hospital rent payment Statutory payment Total Opening Bank Balance including Operational Cash Balance Amount received from JD Total all Bank Balance Total payments 1 2 3 4 5 6 7 8 9 10 11 12 13 14 3-Jan.12 1,200,000 - - -- - - - - - 15,943,936 1,200,000 17,143,936 17,048,320 4.Jan.12 700,000 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 15,548,912 13,491,099 1,500,000 14,991,099 29,017,357 18.Jan.12 4,882,519 6,775,000 - - - - - - 6,775,008 19,194,663 4,882,519 24,077,182 23,274,832 19.Jan.12 10,951,511 10,800,000 - - - - - - 10,800,00-9 23,661,823 10,951,511 34,613,334 29,177,941 19.Jan.12 - -- - - - - - - - - -- - - 20.Jan.12 - 5,400,000 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,047,512 14.Jul.12 - - - - - - - - - - - - - 16.Jul.12 4,600,000 - - - - 3,663,498 - - 3,663,514 35,001,845 4,600,000 39,601,845 40,959,307 17.Jul.12 16,700,00 - - - 3,926,657 - - 331,231 4,257,905 24,709,560 16,700,000 41,409,560 38,571,855 18 Jul 12 - - - - 3,793,938 - - 214,067 4,008,025 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - - 8,000,025 27,631,869 - 27,631,869 1,846,530 3 Apr 13 - - - - - - - - - 73,704,091 - 73,704,091 199,781,524 4 Apr 13 - - - - - - - - - 151,959,631 - 151,959,631 16,827,794 12. A perusal of the cash flow statement produced shows the amount received by Dr.A.M.Arun on various dates and the payments made on the various dates. For example, amounts had been taken on 3rd January, and 4th January of ₹ 12.00 lakhs and ₹ 7.00 lakhs respectively, when the assessee had ₹ 1.59 Cr bank and cash balance on 3rd January. On 5th January anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld.DR that the amounts were taken by Dr.A.M.Arun for the purpose of assessee to meet the unaccounted expenses of the assessee. In fact, in neither of the Assessment Orders, is there any addition on account of unexplained investments or unaccounted funds/expenses. The demands are on account of disallowances of expenditure. However, a perusal of the search assessment order in the case of Shri J.Dinakaran as submitted by the Ld.DR at the behest of the bench shows that certain unaccounted income is being assessed in the hands of Shri J.Dinakaran. The assessment seems to have been made on the basis of re-worked notional balance sheet and statement of affairs prepared from the seized records. The Assessment Order of Shri J.Dinakaran makes a mention of the loan given to Dr.AM.Arun at Page No.4 Para No.4 of the Assessment Order, specifically the Assessment Order in the case of Shri J.Dinakaran for the AY 2015-16. Thus, unaccounted incomes in respect of these loan transactions have been traced as unaccounted income of Shri J.Dinakaran. Thus,what becomes clear from the above facts is that the unaccounted cash of Shri J.Dinakaran has been routed through Dr.A.M.Arun, deposited int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exigencies also has not being supported with evidence and, in fact, the cash flow submitted by the assessee negates the claim of business exigency. 16. A perusal of the decision of the Hon ble jurisdictional High Court in the case of M/s.Idhayam Publications Ltd., reported in 285 ITR 221 (Madras) relied upon by the assessee shows that a Private Ltd. Company had received cash from its Director.Consequently, the Hon ble Jurisdictional High Court had given a finding that deposit/withdrawal of the money from the current account could not be considered as a loan or advance. In the present assessee s case, herein, Dr.A.M.Arun admittedly is one of the promoter shareholder and director of the assessee companies. But the cash which has been deposited in the bank account of the assessee companies, is not that of Dr.A.M.Arun, the shareholder and director. Dr.A.M.Arun allegedly has deposited the cash in the various bank accounts of the assessee companies maintained with the City Union Bank. The cash has been obtained by Dr.A.M.Arun from Shri J.Dinakaran. The fact that Dr.A.M.Arun deposited the cash in the bank account of the two assessee companies herein itself puts into question the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been able to substantiate its claim for receiving amounts in cash from Dr.A.M.Arun in violation of provisions of Sec.269SS, the penalty levied u/s.271D of the Act as levied by the Addl. Commissioner and as confirmed by the Ld.CIT(A) stands confirmed. The decision of the Hon ble jurisdictional High Court in the case of M/s.Idhayam Publications Ltd., referred to supra, has no application on the facts of the present case and the principles laid down by the Hon ble Jurisdictional High Court in the case of Shri P.Muthukaruppan, referred to supra, and Nandhi Dhall Mills, referred to supra, have been rightly applied by the Addl. Commissioner and the Ld.CIT(A). 19. Coming to the penalty levied u/s.271E of the Act, the admitted fact remains that cash has been deposited into the bank account of the assessees herein. The funds having been routed through the bank accounts, why was the same withdrawn in the cash for repayment to Dr.A.M.Arun and subsequently to Shri J.Dinakaran is not explained. What stop the bank transfer of the funds from the assessee s bank account to the bank accounts of Dr.A.M.Arun and consequent transfer to Shri J.Dinakaran. The Assessment Order in the case of Shri J.Di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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