TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 1347
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....assessing the total income at Rs. 9,80,150. During the year, assessee took temporary loans amounting to Rs. 39,28,236 and assessee was asked to file their postal addresses of the lenders. The required information was filed in respect of 82 persons covering loans amounting to Rs. 31,56,490. The Assessing Officer held balance temporary loans amounting to Rs. 7,71,746 as unexplained. The Assessing Officer also initiated penalty proceedings for violation of section 269SS of the Act. 4. The Assessing Officer issued and served a notice under section 271D on 3-5-2006 asking as to why this penalty for accepting cash loans in contravention of section 269SS should not be levied. The assessee furnished explanation vide letter dated 5-5-2006 and it reads as under: "We bring to your kind notice that during the financial year 2002-03 , our firm faced severe financial crisis. My husband Sri R. Venkateswara Rao, a reputed man in the society used to arrange finances for the firm by contacting closely known people, whenever our firm is in need of finance but unfortunately during the said financial year 2002-03, the firm has not only financial difficulties, but also Sri R. Venkateswara Rao the then....
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.... does not have any connection with the business of the assessee. The Assessing Officer, therefore, levied a penalty of Rs. 31,56,490 under section 271D of the Act. 6. On appeal, the learned CIT(A) confirmed the order of the Assessing Officer. Against this order of the CIT(A), the assessee is in appeal before us. 7. The learned counsel for the assessee submitted that the assessee is in the business of transport and operating from various cities, districts, towns, etc., and nature of its business is such that it has to run the business on cash. The business of the assessee is to hire lorries and transport goods from various places in the country and it necessarily involves cash transactions for which it had to borrow money from its own employees and others to pay to its creditors. The assessee established the genuineness of the cash credits and same was accepted by the Assessing Officer. However, for want of time it could not explain the genuineness for a sum of Rs. 7,71,746 and therefore, the same was offered to tax to buy peace. 8. Sri R. Venkateswara Rao, husband of one of the partners, used to arrange finance when the firm was in need of finance but unfortunately during the fi....
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....first day of accounting year and as such the contention of the assessee that due to the arrest of Mr. R. Venkateswara Rao assessee was forced to take cash loans is not correct. Further, he submitted that the assessee is not able to furnish any documentary evidence to show that the assessee was pressurised by the creditors to discharge the liabilities immediately and that forced the assessee to obtain cash loans. He submitted that the gross receipt of the assessee was increased substantially as compared to the earlier year and this shows that the arrest of Mr. R. Venkateswara Rao did not affect the business of the assessee and as such how it would have affected the cash position or liquidity of the assessee. According to the DR, the assessee held huge cash in hand at Rs. 8,08,760 on 31-3-2003 and borrowing of the cash loans without any hesitation exceeding Rs. 20,000 is gross violation of section 269SS of the Act. He relied on the order of the CIT(A). 13. We have heard both the parties and perused the material on record. The main contention of the assessee's counsel is that the assessee borrowed cash loans from its employees and the provisions of section 269SS cannot be applied to ....
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....ion. There can be some difference between what was anticipated and what was actually required. In assessee's case the partner avoiding the public in view of a problem in a co-operative society where he was a director. The employees are actually involved in the business of the assessee; to save their skin they might have introduced their own cash and this cannot be construed as deliberate attempt by the assessee to introduce unaccounted money in assessee's business. The object of introducing section 269SS is to ensure that the taxpayer is not allowed to give false explanation for his unaccounted money, or if he makes some false entries he shall not escape by giving false explanation for the same. During the search and seizure, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from friends, relatives and it is each for the so called lender also to manipulate his records to suit the plea of the taxpayer. The main objective of section 269SS is to curb this menace of making false entries in account books and later on giving explanation for the same. The provisions of section 271D is substantially mitigated by the....
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....e banking hours or at the close of the banking hours. He submitted that usually the transport vehicles start from a particular place before the banking hours and the assessee has to make payment to the drivers or owners of the vehicles towards hire charges. This is regarding vehicles going out from the assessee's place. The vehicles which are usually coming into assessee's place are usually coming after the banking hours and the assessee has to make payment to the drivers or the owners of the vehicles. In such circumstances the assessee has to make payment and the assessee's partner is not available and the assessee's employees have made the payments. In our opinion this is also a reasonable cause not to levy penalty. 15. Further the assessee contended that the amount received from the employees cannot be termed as loan. The words in Explanation (iii) below section 269SS except saying that "loan" or "deposit" means loan or deposit of money. The terms 'loan' or 'deposit' are not mutually exclusive. There are number of common features between the two. A loan is repayable the moment it is incurred, while it is not so with deposit. In a deposit, unlike a loan, there is no immediate ob....