TMI Blog2023 (6) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... he considered view that there is no merit in objection raised by the assessee, and thus, the same is rejected. Period of limitation u/s. 275(1)(c) - HELD THAT: - In the present case, the AO sent a proposal for initiation of penalty proceedings on 24.07.2018 and the AO issued notice u/s. 271D 271E of the Act, on 03.08.2018, within less than a month. Therefore, we are of the considered view that the ratio laid down by the Hon ble Delhi High Court Rishikesh Buildcon (P) Ltd., [ 2022 (11) TMI 1038 - DELHI HIGH COURT] is not applicable to the facts of the present case. The assessee had also relied upon the decision of Mahesh Wood Products (P) Ltd [ 2017 (5) TMI 433 - DELHI HIGH COURT] We find that the facts of the case before the Hon ble Delhi High Court are entirely different to the facts of the present case, and thus, we are of the considered view that the case laws relied upon by assessee is not applicable to the facts of the present case. Contravention of provisions of Sec. 269SS 269TT - Accepting and repayment of loans / deposits from the Managing Director of the Company - HELD THAT:- The claim of the assessee that it has received cash for urgent requirement for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d off, by this consolidated order. 2. The assessee has raised the following grounds of appeal in ITA No. 3222/Chny/2019: 1. The order of the CIT(A) is erroneous, opposed to law and facts and liable to be set aside insofar as the same is passed on flawed appreciation of facts. 2. The CIT(A) ought to have cancelled the order levying penalty as barred by limitation. 3.1 The CIT(A) failed to see that the Addl. CIT has arbitrarily assumed jurisdiction to levy penalty u/s. 271D and hence the same is illegal and liable to be quashed ab initio. 3.2 The CIT(A) erred in upholding the penalty levied u/s 271D to the tune of Rs. 57,18,500/-. 3.3 The CIT(A) ought to have seen that the provisions of Section 269SS does not have any application to the facts of the present case and consequently no penalty u/s. 271D can be levied. 3.4 The CIT(A) should have appreciated the submissions of the Appellant that the business exigency of the Appellant Company in operating from the remote town requires only cash and hence was constrained to make payments in cash. 3.5 In any event, the CIT(A) ought to have seen that the Director of the Appellant Company only made payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, Chennai, for initiation of penalty proceedings u/s. 271D 271E of the Act, vide letter dated 24.07.2018. The Addl.CIT, Corporate Range-6, Chennai, initiated penalty proceedings u/s. 271D 271E of the Act, on 03.08.2018 and called upon the assessee to explain as to why penalty shall not be levied for contravention of provisions of Sec. 269SS 269TT of the Act. In response to the notice, Mr.K.Subramaniam, CA, appeared for hearing on 04.09.2018, and contended that the assessee has accepted cash loans from Mr.M.Muruganandam, Managing Director of the company for urgent commitments of cash such as payments for purchases, labour, freight, administrative expenses, and deposits to bank to reduce credit limits and honour cheques given for business. He further contended that cash receipts and payments to Mr.M.Muruganandam is nothing but current account of Director in the ordinary course of business, and the same cannot be considered as loans advances, and invoke provisions of Sec. 271D 271E of the Act. 5. The AO, however, was not convinced with the explanation of the assessee and according to the AO, the assessee could not substantiate its claim that it has received cash from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , because, from the ledger extract furnished by the assessee, it is clearly evident that the assessee has received loans advances in cash and has also re-paid loans advances in cash in contravention of provisions of Sec. 269SS 269TT of the Act, which warrants levy of penalty u/s. 271D 271E of the Act. The Ld.CIT(A) discussed the issue at length in light of nature of the business of the assessee and its place of business and observed that the assessee is well served by commercial bank in their place of business, and thus, the arguments of the assessee that it has received cash loans from Managing Director for urgent requirement of business is devoid of merits. Further, even though, the assessee is having banking facility why it could not avail the facility for transfer of funds between assessee company and Managing Director, was not explained. Therefore, rejected arguments of the assessee and by following the decision of the Hon ble Madras High Court in the case of CIT v. Idhayam Publications Ltd., and also in the case of Vasan Healthcare (P) Ltd. v. ACIT reported in [2019] 103 taxmann.com 26 (Madras) sustained penalty levied by the AO u/s. 271D 271E of the Act. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of LPG cylinders is having manufacturing facility located in Cheyyar Town, Tiruvannamalai District, which is not well connected by banking facilities. Further, the assessee company had received cash from Managing Director for urgent requirement like payment of salaries, purchase of raw materials, transportation charges and cash deposit into bank account to reduce over draft limit or to clear cheques issued in the course of business. Unless the assessee received cash, the business of the assessee would hamper. Therefore, the assessee has received cash for urgent requirement of business needs and also repaid cash received from the Managing Director as and when the cash available with the assessee. Therefore, the transactions between the assessee company and its Managing Director, cannot be treated as loans advances u/s. 269SS 269TT of the Act. In this regard, he relied upon the decision of the Hon ble Madras High Court in the case of CIT v. Idhayam Publications Ltd., (supra). The Ld.Counsel for the assessee had also distinguished the decision of the Hon ble Madras High Court in the case of Vasan Healthcare (P) Ltd. v. ACIT, and argued that in Vasan Healthcare (P) Ltd. v. ACIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld.CIT(A) should be upheld. 10. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The first and foremost objection of the Ld.Counsel for the assessee in light of notice u/s. 274 r.w.s.271D 271E of the Act, dated 04.03.2019 that the notice has been issued after the date of the order imposing penalty. We find that the notice referred to by the Ld.Counsel for the assessee is only system generated notice while uploading the order imposing penalty u/s. 271D 271E of the Act, in ITBA portal as required under the law, which is clearly evident from the records that the ITBA portal has generated notice u/s. 274 r.w.s.271D 271E of the Act, on 04.03.2019 and also order imposing penalty u/s. 271D 271E of the Act, also dated 04.03.2019. From the above, it is clear that it is only a system generated notice when the orders have been uploaded in ITBA portal only. On the other hand, from the orders imposing penalty u/s. 271D 271E of the Act, it is very clear that the AO initiated penalty proceedings by issuance of notice u/s. 271D 271E of the Act, on 03.08.2018 and passed order imposing penalty on 26.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is very clear from the provisions of Sec. 275(1)(c) of the Act, that no order imposing penalty under this chapter shall be made, unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, we are of the considered view that there is no merits in the arguments of the Ld.Counsel for the assessee that the limitation as provide u/s. 275(1)(c) of the Act, commence the moment, the AO sent a proposal to the Joint / Addl. CIT for imposition of penalty. We further noted that the AO who is competent to initiate and levy penalty u/s. 271D 271E of the Act, is the Joint / Addl. CIT is concerned range, but not the AO. Therefore, the date of proposal sent by the AO to the Joint / Addl. CIT for initiation of penalty proceedings is not relevant, because, the satisfaction of the AO who is competent to initiate penalty proceedings u/s. 271D 271E of the Act, is necessary and important to decide whether penalty proceedings can be initiated or not. Therefore, the actual date that needs to be reckoned for the purpose of limitation as prescribed u/s. 275(1)(c) of the Act, is the date of notice issued u/s. 274 r.w.s.271D 271E of the Act, but not the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of provisions of Sec. 269SS 269TT of the Act, for accepting and re-paid loans advances in cash. The assessee has accepted loans advances from its Managing Director in cash in contravention of provisions of Sec. 269SS repaid in contravention of Sec. 269TT of the Act. The arguments of the assessee that amount received and paid to its Managing Director is not loans advances within the meaning of Sec. 269SS 269TT of the Act, is unsubstantiated, because, the assessee claims to have received cash from its Managing Director in the ordinary course of business for urgent requirement of day to day running of business, including purchase of raw materials, payment of salaries, transportation charges, and to deposit to bank to clear cheques issued in the course of business. But, on perusal of ledger extract of Mr.M.Muruganandam, in the books of accounts of the assessee, it is very clear that the assessee has received cash from its Managing Director on various dates in huge amounts and also repaid in cash in huge amount without there being any explanation as to why loans advances have been received in cash. We further noted that the claim of the assessee that it has received ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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