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of <h1>Tribunal confirms penalty for chit fund company accepting cash loans, rejecting share application defense.</h1> The Tribunal upheld the penalty imposed on a chit fund company for accepting cash loans or deposits in violation of section 269SS. The company's argument ... Loans Or Deposits, Mode Of Taking Or Accepting Issues Involved:1. Penalty u/s 271D for infringement of section 269SS by accepting loan or deposit in cash.2. Definition and interpretation of 'loan or deposit' under section 269SS.3. Applicability of section 269SS to temporary accommodations and share application money.4. Validity of affidavits and entries in books of accounts as evidence.5. Relevance of judicial precedents and interpretations in the context of section 269SS and 269T.6. Consideration of exceptional circumstances under section 269SS.Summary:1. Penalty u/s 271D for infringement of section 269SS by accepting loan or deposit in cash:The assessee, a chit fund company, was penalized Rs. 23,71,000 u/s 271D for accepting cash loans or deposits in violation of section 269SS. The company argued that the cash was brought in by directors to meet temporary needs and was intended as share application money, not loans or deposits.2. Definition and interpretation of 'loan or deposit' under section 269SS:The appellant contended that 'loan or deposit' should carry interest and be repayable after a notice or period, as per section 269T. The Tribunal, however, held that the terms 'loan' and 'deposit' in section 269SS cover any money received temporarily or for a specific period, not necessarily involving interest.3. Applicability of section 269SS to temporary accommodations and share application money:The Tribunal found that the repeated receipt and repayment of money from directors, despite being labeled as share application money, indicated a temporary accommodation akin to a loan. The Tribunal rejected the argument that the cash was for share application, as it was repeatedly brought in and repaid, showing it was meant to tide over financial crises.4. Validity of affidavits and entries in books of accounts as evidence:The Tribunal dismissed the affidavits and book entries as self-serving and lacking evidentiary value. The repeated transactions of receipt and repayment of money contradicted the claim that it was share application money.5. Relevance of judicial precedents and interpretations in the context of section 269SS and 269T:The Tribunal did not accept the appellant's reliance on judicial precedents like Banarsi Debi and Mehta Parikh & Co., stating that the definitions in section 269T could not be borrowed for section 269SS. The Tribunal emphasized the clear distinction in the terms 'loan' and 'deposit' and their respective actions 'taken' and 'accepted'.6. Consideration of exceptional circumstances under section 269SS:The Tribunal noted that section 269SS does not recognize exceptional circumstances for accepting cash loans or deposits, unlike Rule 6DDJ for cash payments. The Tribunal found no emergency justifying the cash transactions, as the company and the firm had banking facilities.Conclusion:The Tribunal upheld the penalty, stating that the transactions were in the nature of loans or deposits, violating section 269SS. The Supreme Court's stay on the Madras High Court's decision in Kumari A.B. Shanthi's case allowed penalty proceedings to continue. The penalty was confirmed.
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