TMI Blog2023 (6) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... s upheld by ld.CIT(A). The appeal filed by the assessee stand dismissed. - ITA No.46/Alld./2019 - - - Dated:- 13-12-2022 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For the Appellant : Shri Praveen Godbole, C.A. For the Respondent : Shri Ramendra Kumar Viswakarma,CIT D.R. ORDER PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed by assessee, being ITA No.46/Alld./2019, is directed against an appellate order dated 19.03.2019 in Appeal No.55/ACIT/CC/Alld. /CIT(A)-III/Lko./17-18 passed by learned Commissioner of Income Tax (Appeals)- III, Lucknow (hereinafter called theCIT(A) ), for assessment year(ay):2012-13, the appellate proceedings had arisen before learned CIT(A) from Penalty order dated 12th December, 2017 passed by learned Joint Commissioner of Income-tax, Varanasi (hereinafter called the JCIt ) under Section 271D of the Income-tax Act,1961(hereinafter called the Act ) .We have heard both the parties through physical hearing mode in Open Court proceedings. 2. The grounds of appeal raised by assessee in ITA No. 46/Alld./2019 for assessment year 2012-13, in memo of appeal filed with Income-Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice explanation was offered requesting thereby to provide 10 days time to furnished further explanation but the lower authority failed in it and moreso the transaction is recorded in books and in whole of the transaction there was no rotation or movement of any unaccounted money in any manner, hence on that count the penalty so made maintained is wrong, therefore the same is liable to be deleted in the facts and circumstances of the case. 8- That in any view of the matter imposition maintenance of the such penalty is totally incorrect and injustice in the facts circumstances of the case and the appellant reserves his right to take any further ground before hearing of the appeal. 3. The brief facts of the case are that during the course of assessment proceedings conducted by the AO under Section 143(3) read with Section 143(2) of the 1961 Act for the impugned assessment year in the case of the assessee, it was observed by the AO that the assessee had accepted cash loan of Rs. 1,10,00,000/- from Shri Hemant Kumar Sindhi, Allahabad on various dates, in contravention of provisions of Section 269SS of the 1961 Act, and for such default the assessee is liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee is reproduced hereinunder: - The Ld. JCIT waited for the response of the assessee for more than 15 days, as requested by the assessee vide letter dated 25.11.2017 wherein the assessee submitted that reply explaining the issues will be filed within next 10 days, but, however, no further reply was filed by the assessee, and Ld. JCIT confirmed/upheld penalty of Rs. 1,10,02,000/- by rejecting the contentions of the assessee that it had not taken any cash loan from the Director, but the Director has deposited cash in the bank account of the assessee company and also paid amount in cash for purchase of stamp paper. The ld. JCIT observed that the assessee has not filed any judicial pronouncement to support its claim, and there is no such exemption to the Director u/s 269SS that payments may be made by Director, on behalf of the company from his own cash. The ld. JCIT also rejected the argument of the assessee that cash was not increased in cash book of the assessee, which contention of the assessee was held by ld. JCIT to be against the principles of accountancy. The ld. JCIT observed that when the amount was paid in cash by the Director and the same was deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause the transaction between the Company and director does not fall under the category of Loan or Deposit' and there was no element of any interest. In this regard even in the observation in the appellate order dated 26-03-2018 at para no. 3 to 6 are relevant and copy of the said order is already enclosed in the paper book. There is no material whatsoever on record giving any inkling of the transaction being of the dubious nature. The urgency about the business necessity or commercial exigencies are solely within the domiman of the trade. The provision of Rule 2(b) (ix) of the company (acceptance of deposit) Rule 1975 provides that Deposit does not include any amount received from a Director or Share holder of a Private Limited Company. Accordingly the cash transaction directly deposited by the Director in Company's Bank account cannot be called Loan or Deposit as such there was no violation of the provision of Section 269SS of the IT Act. That from the above facts, submission (already made in earlier book) and cited case laws it is clear that the transaction between the Company and Director is genuine and has no tax effect, hence the penalty u/s 271D of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal to the amount of cash loan was imposed. 9. The assessee has raised following issues in the written submission: i. From the assessment order it will appear that there was no satisfaction recorded regarding penalty proceeding u/s 271D of the Act, hence no penalty could be levied. ii. The assessee has contended there is no violation u/s 269SS since a director of the company had deposited the amount directly in the company's bank account with ING Vysya Bank by withdrawing the amount from his personal books The transaction of Rs 60,00,000/-added by the AO as para 4(ii) of the assessment order has been treated as genuine by First Appellate Authority. iii. That apart from 60 lacs a further sum of Rs. 50 Lacs has been deposited in bank account due to urgent need of funds in the company regarding purpose of property. Thus the transaction of Rs. 1.10,02,000/- is through books and banking channels is a genuine transaction. iv. The assessee was not aware about the provisions of section 269SS of I.T.Act. 10. On perusal of the assessment order, I find the AO has noted that bank statement of account no. 300 with ING Vyasya Bank ledger account of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal books is found to devoid of merit and is found unacceptable. 15. Further assessee's contention that the assessee was not aware of the provisions of section 269SS of the Act, cannot be accepted, since ignorance of law cannot be accepted as a reason for non compliance with the provisions of section 269SS of the Act, as held in the case of Motilal Padmapat Sugar Mills Co. Ltd. Vs State of UP (118 ITR 326)(SC), and further the appellant is assisted by professional C.A. on tax matters. 16. Considering the facts circumstances of the case I find the assessee has accepted cash loan of Rs. 1,10,02,000/- from Shri Hemant Kumar Sindhi, Allahabad on various dates, which is in contravention of the provisions of section 269SS of the Act. Accordingly penalty imposed by the AO equal to the amount of cash loan of Rs. 1,10,02,000/- is held to be justified and is hereby upheld. Ground No.5 is routine and general in nature hence not adjudicated. 17.. In the result, the appeal is dismissed. 7. Aggrieved by the appellate order dated 19th March, 2019 passed by ld. CIT(A), the assessee filed second appeal with tribunal. The Ld. Counsel for the assessee opened argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- and Rs. 50,00,000/- by Mr. Hemant Kumar Sindhi, Director, on 26.09.2011 and 04.10.2011 respectively. The assessment order passed by the AO framing quantum assessment against the assessee for the impugned assessment year is placed in paper book filed by the assessee, at page 99-106. Our attention was also drawn to Page No. 78-83 of the Paper-book filed by the assessee, wherein in the appellate order passed by ld. CIT(A) against quantum assessment is placed (page 71-98/pb), wherein ld. CIT(A) deleted the additions of Rs. 60,00,000/- made by the AO in the hands of the assessee as income with respect to cash deposited by Mr. Hemant Kumar Sindhi, Director in the bank account of the assessee. It was also submitted that Rs. 50,00,000/- and Rs. 2,000/- which was paid in cash by Mr. Hemant Kumar Sindhi, Director of the assessee company on 04.11.2011, for purchase of stamp paper on behalf of the assessee for registration of the property purchased by the assessee company, was never added by AO as income in the quantum assessment. The ld. Counsel for the assessee relied upon following judicial pronouncements to support its contentions: a) Judgment and Order passed by Hon ble Allahaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h on 26.09.2011 and Rs. 50 lacs cash on 04.10.2011. It was submitted that even Rs. 60 lacs deposited cash in bank account was utilized for purchase of property situated at 17 Stanley Road, Civil Lines, Allahabad, from Sindhu Sahkari Avas Samiti. It was submitted that there was an exigency and hence cash was received from the Director of the company namely Mr. Hemant Kumar Sindhi. The ld. Counsel for the assessee drew our attention to the affidavit dated 31.01.2017 executed by Mr. Hemant Kumar Sindhi, Director, which is placed in paper book at page 34-37, in which averments are made by Mr. Hemant Kumar Sindhi confirming, inter-alia, deposit of Rs. 60 lacs in cash by him in the bank account of the assessee company. Our attention was also drawn to paper book/page 38, wherein letter dated 20.01.2017 written by Mr. Hemant Kumar Sindhi to ld. CIT(A)-III, Lucknow is placed, wherein he reiterated that Rs. 60 lacs in cash was deposited by him in the bank account of the assessee company. Our attention was also drawn to page 39-40/paper book, wherein Balance Sheet as at 31.03.2012 of Mr. Hemant Kumar Sindhi is placed, wherein an advance of Rs. 2,04,02,000/- paid by Mr. Hemant Kumar Sindhi to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in his balance sheet, while the assessee company has shown the same in its books of accounts as loan from Director. Our attention was drawn to page 39-43 of paper book. The ld. CIT-DR relied upon judgment and order of Hon ble Supreme Court in the case of Attar Singh Gurumukh Singh v. ITO, reported in (1991) 191 ITR 667(SC). The ld. CIT-DR would also rely on judgment and order of Hon ble Delhi High Court in the case of CIT v. Samora Hotels Private Limited, reported in (2012) 211 Taxman 189(Delhi). It was submitted by ld. CITDR that Director of the company is covered under the provisions of Section 269SS read with Section 271D, and if contravention of Section 269SS takes place, then penalty u/s 271D is leviable. The ld. CIT DR relied upon order passed by ITAT, Chennai in the case of Thenamal Chhajar v. JCIT, reported in (2005) 96 ITD 210(Chennai), and it was submitted that the assessee in the instant case before us is not able to demonstrate urgency/reasonable cause for accepting cash loan of Rs. 1,10,02,000/-, and prayers were made to confirm the same. It was submitted that cash loan of Rs. 60 lacs was taken one month earlier than when the property purchased by the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. c) Smt Meera Devi Kumawat(supra)- It was submitted by ld. CIT-DR that in this case, the transaction was between husband and wife, and there was pooling of family funds. It was submitted that the facts in the instant case before the Bench are entirely different. d) Surender Engg. Corpn.(supra)- It was submitted by ld. CIT-DR that in this case, urgency was shown as payments were required to be made urgently to creditors, while in the instant case before Bench, no such urgency is shown, and the funds remained with the assessee for more than one month. 7c. The ld. Counsel for the assessee in rejoinder submitted that the contention of ld. CIT-DR that funds remained with assessee for one month is not correct. It was submitted that cash received by assessee from Mr. Hemant Kumar Sindhi to the tune of Rs. 1,10,00,000/- was used immediately for the purchase of property. Our attention was drawn to page 106 of the paper book, which is in fact the last page of assessment order for the impugned year, and it is submitted that at the end of the assessment order, no such satisfaction is recorded by AO as to invocation of Section 271D read with Section 269SS. It was submitted that all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by AO from bank statement of the assessee vide account number 300 with ING Vysya Bank and ledger account of Hemant Sindhi, Director of the assessee company filed by assessee, that the assessee has taken cash loan of Rs. 10 lacs on 26.09.2011, Rs. 50 lacs on 04.10.2011, Rs. 50 lacs on 04.11.2011 and also Rs. 2000/- on 04.11.2011, which as per AO was in contravention of provisions of Section 269SS. The AO confronted the assessee about the same, and the assessee submitted vide reply dated 27.01.2016 that Mr. Hemant Kumar Sindhi, Director deposited money in cash with assessee company as the assessee needed money urgently, and as per information of the assessee Mr. Hemant Kumar Sindhi is Director of the assessee and Section 269SS is not applicable, and prayers were made not to impose penalty u/s 271D. The AO after considering aforesaid reply of the assessee at para 4(i), page 2 of the assessment order, recorded satisfaction as under: The reply of the assessee is not acceptable and the matter will be separately referred to the JCIT, Central Range, Varanasi for initiation of penal action as per Act. Thus, the contentions of the assessee that no satisfaction was recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was held by ld. JCIT to be against principles of accountancy. The ld. JCIT observed that when the amount was paid in cash by the Director and the same was deposited in the bank account of the assessee company, it is clear case of cash loan accepted/ taken by the assessee company. It was observed by Ld. JCIT that since cash was deposited in the bank account of the assessee company, it is required to be entered in cash book otherwise there will be shortage or negative cash balance in the cash book, which is against the principles of accountancy. It was also observed by the Ld. JCIT that similarly the liability of the assessee company, paid by the Director, in cash, from own sources is also a cash loan accepted/taken by the assessee company. The ld. JCIT observed that its entry is also required to be appropriately entered in the cash book. The ld. JCIT observed that the assessee has not denied these loans, and rather the assessee has shown these transactions under the head unsecured loans in its books of account. The relevant copy of the ledger account of Shri Hemant Kumar Sindhi in the books of the assessee company were reproduced by ld. JCIT in his penalty order dated 12.12.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account payee bank draft oruse of electronic clearing system through a bank account, if- (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum 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: 13. A plain reading of the provisions of section 269SS of the Act makes it clear that section 269SS prescribes all modes of transaction and transactions other than through account payee cheque/draft is violative of section 269SS, if the amount of loan or deposit is twenty thousand or more. 14. Therefore appellant's contention that there is no violation of section 269SS of the Act since a director of the company had deposited the amount directly in the company's bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for purchase of property situated at 17, Stanley Road, Civil Lines, Allahabad. Further, Rs. 50 lacs and also Rs. 2,000/- in cash was paid by Mr. Hemant Kumar Sindhi, Director of the assessee company for purchase of stamp paper on 04.11.2011 on behalf of the assessee company, which stamp papers were used by assessee company for registering the purchased property situated at 17, Stanley Road, Civil Lines, Allahabad, U.P., in its favour on 04th November 2011 itself . The aforesaid property is claimed by assessee to have been purchased for Rs. 1,50,00,000/- from M/s Sindhu Sahkari Awas Samiti, vide registered sale deed executed on 04.11.2011, and it is claimed by assessee that the entire amount of Rs. 1,50,00,000/- was paid to M/s Sindhu Sahkari Awas Samiti through banking channel. Incidentally, during the aforesaid search conducted by Revenue u/s 132(1), a document Annexure LP-5 Page 124 was seized from the residence of Mr. Dinesh Kumar Pahuja, which is the ledger account of M/s Sindhu Sahkari Awas Samiti in the books of the assessee company from 01.04.2011 to 31.03.2014, which is reproduced by AO in its assessment order dated 28.03.2016, which reflect that total payment of Rs. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhi, Director as loan payable to said Mr. Hemant Kumar Sindhi as at 31.03.2012, while Mr. Hemant Kumar Sindhi, Director has shown the said amount as Advances outstanding to be recoverable from assessee company as at 31.03.2012, as are discernible from the Balance Sheets of Mr. Hemant Kumar Sindhi as well of the assessee for the year ended 31.03.2012, filed in paper book/page 39-43. It is pertinent to mention that AO also made additions to the tune of Rs. 60,00,000/- with respect to cash deposited by Mr. Hemant Kumar Sindhi, Director in the bank account no.300 of the assessee maintained with ING Vysya Bank, being Rs. 10 lacs on 26.09.2011 and Rs. 50 lacs on 04.10.2011, as income in the hands of the assessee vide assessment order in quantum. This addition of Rs. 60 lacs as was made by the AO, stood deleted by ld. CIT(A), and we are informed by both the rival parties that this deletion of Rs. 60 lacs by ld. CIT(A) has attained finality, as Revenue has not filed any appeal against the aforesaid relief granted by ld. CIT(A). The proceeds of these cash loans/deposits were used by the assessee company for purchasing/registering the property situated at 17, Stanley Road, Civil Lines, All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writing, notify in this behalf in the Official Gazette : [Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.] 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.] [Penalty for failure to comply with the provisions of section 269SS. 271D . [(1)] If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS , he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted.] [(2) Any penalty imposable under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount or the aggregate amount remaining unpaid is Rs. 10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken, is Rs. 10,000 or more. 32.3 The prohibition will, however, not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by, the following, namely : (a) Government ; (b) any banking company, post office savings bank or any co-operative bank ; (c) any corporation established by a Central, State or Provincial Act ; (d) any Government company as defined in section 617 of the Companies Act, 1956 ; (e) such other institution, association or body or class or institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. If we analyze the aforesaid statutory provision, the title of Chapter XXB stipulates requirements as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax. Thus, these statutory provisions were intro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repayment has fallen due or not), and the amount or the aggregate amount remaining unpaid is Rs. 10,000 or more (in the relevant year limit was Rs. 20000 or more). The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken, is Rs. 10,000 or more (in the relevant year limit was Rs. 20000 or more). Thus, it could be seen that this provision was introduced as an anti tax evasion device. It is also pertinent to mention that Explanation to Section 269SS defines loan or deposit means loan or deposit of money. Thus, the loan or deposit are very widely worded to mean all types of loans or deposits. The assessee has raised an argument that deposits under Companies (Acceptance of Deposits) Rules, 1975 under the Companies Act, 1956 excludes deposits by Directors, and hence cash loan/deposits by Mr. Hemant Kumar Sindhi, Director of Rs. 1,10,02,000/-. We are afraid that this contention of the assessee is fallacious and is rejected. The Companies Act, 1956 was amended by introducing Section 58A and 58B of Companies (Amendment) Act,1974. These provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from others; Explanation.-For the removal of doubts, it is hereby declared that any deposit received or renewed by a company before the commencement of the Companies (Acceptance of Deposits) Amendment Rules, 1978, shall continue to be governed by the rules applicable at the time of such deposit or renewal as the case may be. It is to be understood that both the legislations operate in different filed, while deposits as covered under the Companies Act read with Companies (Acceptance of Deposits) Rules, 1975 are regulatory measures to control and regulate raising of deposits from Public by the Companies as it was observed that the Companies were raising deposits from Public and thereafter defaulting in repayments. The exemption was provided to Private Limited Companies raising deposits from their directors, to relax them from regulatory controls so far as deposits raised from Directors so that they can raise funds for their business purposes from their Directors without any regulatory controls. The Private Limited companies are those companies which do not have broad public participation, and mostly funds are deployed by promoters/directors, and that too most of them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and hence is in contravention of provisions of Section 269SS. Further, this plea cannot be accepted, because otherwise the whole purpose and purport of Section 269SS shall be lost if this plea is accepted, because Section 269SS was introduced as anti tax evasion measure to see that transactions exceeding threshold monetary limits are routed through the banking channel so that there is no camouflaging of the undisclosed income to give colour to it as legitimate money. In the circular no. 387 of 1984, it is, inter-alia, clearly mentioned that unaccounted income is also brought into the books of account in the form of such loans and deposits accepted otherwise than through account payee cheque or account payee bank drafts and taxpayers are also able to get confirmatory letters from such persons in support of their explanation. So, the purpose and purport of introducing Section 269SS was to compulsorily have the transactions exceeding threshold limits through banking channels by way of account payee bank draft or account payee cheque. The assessee as well as Mr. Hemant Kumar Sindhi, Director are based in Allahabad, U.P., which is having all the necessary requisite banking facilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and since the same was advanced in cash in contravention of Section 269SS, penalty provided u/s 271D shall be leviable. Further, the assessee has claimed that the aforesaid transaction s in cash are recorded in the books of the assessee as well Mr. Hemant Kumar Sindhi and these transactions are genuine, and hence Section 269SS has no applicability. We are afraid that this contention is also not acceptable, as that if the transaction would not have been genuine, then obviously the amount shall be treated as undisclosed income in the hands of the assessee and brought to tax, which in fact to the extent of Rs. 60 lacs was added by the AO, which later stood deleted by ld. CIT(A) and such deletion has attained finality. Now, what remains is that these are the loan or deposits made in cash by Mr. Hemant Kumar Sindhi, Director to the assessee company, which as per modes prescribed u/s 269SS ought to have been received by the assessee from Mr. Hemant Kumar Sindhi through prescribed modes viz. account payee cheque or account payee draft, which the assessee contravened as it received Rs. 1,10,02,000/- on four different occasions in cash, and hence consequences as prescribed u/s 271D shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records later to suit the plea of the taxpayer. The main object of section 269SS was to curb this menace. As regards the tax legislations, it is a policy matter, and it is for the Parliament to decide in which manner the legislation should be made. Of course, it should stand the test of constitutional validity. *** *** 12. Another contention urged by the appellant's counsel in Civil Appeal No. 4478 of 2000 is that the Parliament had no legislative competence to enact section 269SS. The source of power for enactment of section 269SS is traceable to Entry 82 in List I of the Seventh Schedule and this according to the appellant's counsel can relate only to tax on income other than agricultural income and the expression 'income' in that Entry has to be interpreted according to its natural and grammatical meaning and if that be so, the union has no legislative power to enact section 269SS. 13. Entry 82 in List I of the 7th Schedule reads as follows : 82. Taxes on income other than agricultural income. 14. The contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. In that view of the matter, we do not think that section 269SS or 271D or the earlier section 276DD is unconstitutional on the ground that it was draconian or expropriatory in nature. Thus, Hon ble Supreme Court observed in the aforesaid judgment and order upheld the constitutional validity of Section 269SS. In the instant case before us, we have already held that there was no valid and reasonable cause for assessee to have received loan or deposit of Rs. 1,10,02,000/- in cash from its Director namely Mr. Hemant Kumar Sindhi, more so Allahabad(Now Prayagraj), U.P. is having all the requisite banking facilities available, and there was no reason and justification for the assessee to have taken loan or deposit of Rs. 1,10,02,000/- in cash from Mr. Hemant Kumar Sindhi and no such urgency was there to receive such a huge amount in cash. Reference is also drawn to judgment and order of Hon ble Madras High Court in the case of Vasan Healthcare Private Limited v. Addl. CIT, reported in (2019) 103 taxmann.com 26(Mad.HC). SLP filed against the above judgment and order, stood dismissed by Hon ble Supreme Court in 125 taxmann.com 266(SC). The Hon ble High Court held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said aspect, we would first like to decide the contention advanced by Mr. A.S. Sriraman regarding multiplicity of penalty proceedings. *** *** 24. Section 271D introduced with effect from 01.04.1989 simultaneously omitted Section 276DD. Section 271D states that if a person takes or accepts any loan or deposit in contravention of the provisions of Section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of loan or deposit so taken or accepted. The answer as to whether there are any multiplicity of penalty proceedings in the cases on hand lies in interpretation of the words a person . We need not labour much to find the answer, as Section 2(31) defines person in the following manner: 'Section 2(31):- Person includes (i) an individual, (ii) a Hindu undivided family (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. [Explanation.- For the purposes of this clause, an association of per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings. Hence, this aspect also goes to show that the assessee cannot raise a plea of multiplicity of proceedings. Therefore, the said contention raised by Mr. A.S. Sriraman stands rejected. 27. The next contention advanced by Mr. A.S. Sriraman was largely based on the decision in Idhayam Publications Ltd. (supra). It is the submission that Section 269SS would not stand attracted, further, the transaction in Idhayam Publications Ltd. (supra) was also identical, where monies were deposited in the current account and though the balance sheet shows the amounts deposited by the Director in cash in the current account as unsecured loan from the Director, the Division Bench held that it is not a loan or an advance. 28. The facts in Idhayam Publications Ltd. (supra) are that one Mr. S.V.S. was the Director of the assessee-company. There was a running current account in the books of accounts of the assessee company in the name of Mr. S.V.S. Mr. S.V.S., used to pay money in the current account and used to withdraw money also from the current account. For the Revenue to sustain the levy of penalty under Section 271D, they had to establish that the amount was received by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is important to note that another provision, namely, section 273B of the Act was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B. If there was a genuine and bona fide transaction and if for any the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power. 32. According to the learned counsel, the account of the Director and the company were genuine and the loans received were utilized to pay the salaries, rents and EMI commitments. The amounts so received by the Director were deposited in the companies bank account on the very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash from Mr. J.D. into the bank account of the company on the very same day. To be entitled to the benefit under Section 273B, the onus is on the person claiming such benefit to show that he could not get a loan by account payee cheque or demand draft and the cause shown by him should be genuine and bona fide. Thus, merely because the Director took cash loans from the Financier, Mr. J.D., and deposited it in the current account of the assessee-company on the very same day, can never be a ground to be taken as a mitigating factor to escape from the rigour of levy of penalty under Section 271D of the Act. Thus, the assessee has been under a thorough misconception. There is a bald statement made that Mr. J.D. will give loans only in cash, however much it may be. To be noted that the loans received by the Director and later by the company is more than Rs.90 Crores. The assessees are Private Limited Companies, not individual assessees, as was examined in several of the decisions cited by Mr. A.S. Sriraman. *** 36. In our considered view, there can be no straight jacket formula to examine the bona fides and genuinity of the plea raised by a person, who states that he was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been used as custodian of the unaccounted cash of Mr. J.D. by depositing it in the bank accounts of the assessee by their Director, Dr. A.M. Further, the assessee was not able to give any explanation to substantiate with evidence for repayment of the deposits to Dr. A.M., Director in cash. Examining the transaction, the Tribunal noted that as and when Mr. J.D. required cash, which appears to have been withdrawn by Dr. A.M., Director from the bank accounts of the assessee and paid to Mr. J.D. Thus, after considering all the factual aspects, the Tribunal confirmed the levy of penalty under Section 271E of the Act. The assessees have not been able to convince us to take a different view. 46. The Revenue placed reliance on the decision in M. Sougoumarin (supra), which is sought to be distinguished by the assessees by contending that the transactions were never accounted for. This objection raised by Mr. A.S. Sriraman is by highlighting the conduct of the Director, Mr. A.M. in depositing the entire cash loan received by him in the assessees' bank account. We fail to understand as to how this conduct of the assessees can be taken into consideration to put them in a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o why the transactions could not be undertaken in compliance with the prescribed modes u/s 269SS. Similar is the case of Dr Rajaram L. Akhani(supra) relied upon by the assessee, the Hon ble Court held that the tax-payer was able to give proper explanation of having received cash of Rs. 2,00,000/- from his son. But, in the instant case before us, we have already held that no reasonable cause or urgency is shown by the assessee for having accepted cash aggregating to Rs. 1,10,02,000/- on different occasions from Mr. Hemant Kumar Sindhi. It could not be shown as to why the transactions could not be undertaken in compliance with the prescribed modes u/s 269SS. In the case of CIT v. Jai Laxmi Rice Mills(supra) relied upon by the assessee, the satisfaction was recorded in the original assessment order which assessment order stood set aside, but in set aside assessment order no satisfaction for invoking provisions of Section 271D was recorded, but in the instant case before us, we have already held that the AO has recorded satisfaction before invoking provisions of Section 271D for contravention of Section 269SS. In the case of Chawla Chentech Private Limited(supra) replied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tners under bonafide belief that transaction between partner and firm are not covered u/s 269SS as they could not be treated as separate entities, and the urgency for taking cash loan was proved. But, in the instant case before us, we have already held that no reasonable cause or urgency is shown by the assessee for having accepted cash aggregating to Rs. 1,10,02,000/- on different occasions from Mr. Hemant Kumar Sindhi, Director. It could not be shown as to why the transactions could not be undertaken in compliance with the prescribed modes u/s 269SS. Further, the Private Limited company and Director are altogether different person under the provisions of Section 2(31), and there could not be two view on this. The ld. CIT-DR has rightly relied upon judicial precedents to support his contentions, which we have reproduced in preceding para s of this order, and the same are not repeated again. Thus, keeping in view our aforesaid discussions as above, we uphold the penalty of Rs. 1,10,02,000/- levied by ld. JCIT and as upheld by ld.CIT(A). The appeal filed by the assessee stand dismissed. We order accordingly. 9. In the result, appeal filed by the Assessee in ITA no. 46/Alld/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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