TaxTMI 
TaxTMI 
2009 (2) TMI 279
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....------------------------------------------------------------ 1. 28-10-2004 2 crores M/s Annapoorneshwari Investment ------------------------------------------------------------ 2. 16-11-2004 2 crores -do- ------------------------------------------------------------ 3. 21-12-2004 2 crores -do- ------------------------------------------------------------ 4. 12-02-2005 2 crores -do- ------------------------------------------------------------ 5. 28-02-2005 2 crores -do- ------------------------------------------------------------ 6. 22-03-2005 60 lakhs -do- ---------------------------....
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....tails such as the names and addresses of contractors along with the work done by them, details of TDS while making the payments, their PANs, etc. These details were furnished by the assessee under cover of letter dt. 18th March, 2008. Both the letters have been reproduced in the penalty order. As regards the query raised by the Addl. CIT regarding the nature of the project and the work done by the contractors, it was explained by the assessee that AI was a group concern and Ramakrishna was a common partner in the assessee firm and AI. He identified a property in Bangalore North to the extent of 189 acres under various survey numbers. AI secured rights on this property which were assigned to Manipal Academy of Higher Education (MAHE). The firm undertook to comply with certain obligations on fast track, remove encroachments and also to make the land useful for construction/development. Contracts were entered into with various contractors to remove the ridges, trees, plants and wild bushes, levelling the earth, earth filling, making the ground level, removal of unauthorized occupants by making settlements with them, obtaining vacant possession of the land, constructing compound wall a....
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....wn as 'other advances' in the liability side. They cannot, therefore, be treated as amounts received in current account. (b) There is no reference in the balance sheet to Ramakrishna who is stated to be the common partner between the assessee and AI. Therefore, the assessee's claim that the transactions were put through by the common partner was not correct. (c) The definition of a loan or deposit in the Expln. (iii) below s. 269T includes loan or deposit of any nature and not merely a loan or deposit of money which is repayable after notice or after a specific period, if the person repaying is a person other than a company. The assessee is a partnership firm and, therefore, the extended meaning of loan or deposit is applicable. Accordingly, even though the loan or deposit taken from AI was not repayable after notice or after a specific period still it is taken in by the section as a loan or deposit "of any nature". (d) Transactions between group concerns are not exempted under s. 269T. In any case, the assessee and AI had only one common partner, namely, Ramakrishna. In the case of the assessee and AE, there was only one common partner, namely, Satish Pai. The existence o....
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....) had indicated his mind lo the assessee, the assessee, would have filed all the documents in its possession to show that AI was its sister concern and supported its argument that transactions between sister concerns are not hit by the provisions of s. 269T. 7. The application for admission of additional evidence was opposed by the CIT-Departmental Representative who submitted that even the Addl. CIT had raised the question regarding AI being the assessee's sister concern but the assessee failed to contest the same before the CIT(A) by adducing the above evidence. She contended that the assessee was not denied any opportunity of adducing the above evidence before the Departmental authorities who had clearly contested the assessee's stand that AI was its sister concern and, therefore, s. 269T was not applicable. 8. On a careful consideration of the matter, we are of the view that the additional evidence should be admitted. It is true that both before the AO and the CIT(A) the assessee had raised the plea that transactions between the sister concerns were not hit by s. 269T. The AO held that transactions between sister concerns are not exempt from the section. From this it is p....
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....se into consideration, it seems to us that in the interests of justice, there is reason to admit the additional evidence. We do so. 9. Turning to the merits of the penalty levied, it is seen that s. 269T prohibits a person from repaying any loan or deposit made with it otherwise than by an account payee cheque or account payee draft drawn in the name of the person who has made the loan or deposit if the aggregate amount of the loan or deposit together with interest is Rs. 20,000 or more. Clause (iii) of the Explanation below the section defines loan or deposit as meaning "any loan or deposit of money which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes loan or deposit of any nature". Under s. 271E if a person repays any loan or deposit referred to in s. 269T otherwise than in accordance with that section, he shall be liable to pay penalty of a sum equal to the amount of the loan or deposit so repaid. The power to levy the penalty is with the Jt. CIT. We may clarify that though in the present case the penalty order was passed by the Addl. CIT, the assessee has not taken any ground that the penalty order is invalid....
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....ion being that the losses would be borne exclusively by Ramakrishna and not by the assessee firm. Similarly, the profits would also be enjoyed by Ramakrishna only. Clause (5) of the preamble to the MoU states that AI had entered into an agreement with MAHE to sell 189 acres of land on 5th Oct., 2004. Clause (6) says that the amounts received by AI from MAHE for the sale of land shall, as and when received, be handed over and kept at the disposal of the assessee firm to ensure that AI discharged its obligations to MAHE. It further stated that the contractual obligations under the entire arrangement were to be supervised and controlled by the assessee firm until the entire work is executed and the assessee firm for this purpose was to have management control of the operations and the funds obtained by AI from MAHE so that its own credibility and standing were not impaired. The main terms of the agreement provided that the funds received by AI from MAHE shall be made over and advanced to the assessee to ensure that they are not diverted away by AI [cl. (5)]. According to cl. (6), the funds were not to carry any interest and after the entire obligations were discharged, they were to be....
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....we have referred shows that the assessee was merely acting as a conduit between AI and the contractors by receiving money from AI for the purpose of paying the contractors and thus enabling them to carry on the work on the 189 acres of land purchased by MAHE from AI. The amounts cannot, therefore, be considered as loans or deposits from AI even in the general sense. In fact. c1. (7) of the main terms of the MoU to which we have already referred makes it clear that the assessee firm shall be entitled to supervise the work of the contractors and make payments to them on behalf of and for the account of AI and render accounts from time to time. The same clause authorized the assessee to approve the selection of the civil contractors and the terms of the contract between AI and the contractors in all matters relating to rates, type of work and timeframe for completion of the development and layout work. It thus appears to us to be an arrangement whereby the responsibility for supervising the contract work is entrusted to the assessee firm whose responsibility it will also be to make payments to the contractors out of the amounts received from AI. Both the receipts from AI and payments ....
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....transactions between sister concerns in cash are hit by s. 269T. The section does not expressly confer any exemption for transactions between connected parties or sister concerns. A perusal of the decided cases on this point shows that there is a cleavage of judicial opinion. The assessee has relied on the order of the Cochin Bench of the Tribunal in the case of Muthoot M. George Brothers in which it was held that cash transactions between sister concerns are not affected by the section. However, the Mumbai Bench of the Tribunal in the case of Karnataka Ginning & Pressing Factory vs. Jt. CIT (2001) 72 TTJ (Mumbai) 307 : (2007) 77 ITD 478 (Mumbai), to which one of us was party (the Vice President), has held that there is no exemption from s. 269T even if the parties are connected with each other or they are sister concerns. In the case of Supreme Investments vs. Jt. CIT in ITA No. 76/Bang/2006, dt. 3rd Aug., 2007, for the asst. yr. 2001-02, the Bangalore Bench did not record a definite conclusion that transactions between sister concerns are not hit by s. 269T, though the penalty was cancelled on other grounds. For the limited purpose of imposing penalty under s. 271E, it is perhaps....