TaxTMI 
TaxTMI 
2011 (11) TMI 494
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....ed in upholding the levy of penalty of Rs. 11.00 lakh u/s 271D of the Income-tax Act, 1961 ('the Act' for short). 2. The facts of the case are that in the course of assessment proceedings for assessment year 2006-07, the AO noted two credits in the name of Natco Exports Pvt. Ltd. ('Natco' for short) of Rs. 10.00 lakh and Ajay Grover of Rs. 1.00. It was found that Natco made a payment of Rs. 10.00 lakh vide demand draft no. 542527 dated 08.06.2005 to Roaming India Pvt. Ltd. ('Roaming' for short) on behalf of the assessee. This DD was not made account payee as the issuing bank, the Union Bank of India, informed that there was no crossing on the DD. The DD was collected by ING Vysya Bank. Further, Ajay Grover paid a sum of Rs. 1.00 l....
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.... 271D will be justified. It was further mentioned that it is not necessary to prove mens rea before levying of the penalty. Relying on these decisions, it was held that the levy of penalty was justified. 3. Before us, it is submitted that the payments have been made by a sister concern and a director of the company to the third parties on behalf of the assessee. Consequently, journal entries have been made in the books of the assessee. Thereafter, it cannot be said that the assessee has taken any loan or deposit. Thus, there is no violation of the provisions contained in section 269SS of the Act. Further, the assessment was completed u/s 143(3) for this year on 05.11.2008. In this assessment, a sum of Rs. 28.50 lakh was added to t....
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....ditors had paid the amount by way of bearer demand draft and cash. Such transactions are in violation of section 269SS. No satisfactory explanation has been furnished as to why the payments were made on behalf of the assessee by bearer demand draft and in cash. Therefore, penalty is leviable u/s 271D of the Act. 4.1 At this stage, we may discuss the cases relied upon by the rival parties. In the case of ACIT vs. Gujarat Ambuja Proteins Ltd., (2004) 3 SOT 811 (Ahd.), the question before the Bench was- whether, the ld. CIT(Appeals) erred in deleting the penalty of Rs. 13,44,999/- levied u/s 271D of the Act on the plea that transactions entered into by way of book entry do not involve movement of cash? The Tribunal, after considering....
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....n account payee cheque or account payee bank draft after 30.06.1984. The case of the ld. counsel is that since the transactions are disclosed and they are bona fide, the levy of penalty goes against the spirit of the explanatory notes. However, in this case, it has been held that the provision is quite rational and which achieves the objective of curbing black money. The provision is not discriminatory or arbitrary. Therefore, it is in conformity with the constitution. Thus, the question was totally different and, thus, the decision was rendered in a different context. 4.3 In the case of CIT vs. Sunil Kumar Goel, (2009) 315 ITR 163 (P and H), it has been mentioned that under section 273B, the assessee is permitted to show cause an....
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....o take cash loan. In the case of Omec Engineers vs. CIT, (2007) 294 ITR 599, it has been held that where there is no finding that the transaction is not genuine and there is no mala fide, the penalty could not be sustained in law. In the case of CIT vs. Maheshwari Nirman Udyog, (2008) 302 ITR 201, it has been held that where a reasonable explanation is furnished, levy of penalty u/s 271D is not justified. In the case of CIT vs. Eidhayam Publication Ltd., (2006 285 ITR 221, it has been held that the transaction between the assessee and director-cum-shareholder was not a loan or deposit and it was only a current account in nature and no interest was payable, therefore, deletion of penalty was justified. 4.6 In the case of Thenamal C....
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....rd parties at the insistence of the assessee otherwise than by account payee bank draft or account payee cheque. Natco paid a sum of Rs. 10.00 lakh on behalf of the assessee by bearer bank draft. This amount has been assessed as dividend u/s 2(22)(e) by the AO. However, it is not known whether the assessee has accepted this finding or any appeal is filed or pending. Further, Ajay Grover paid a sum of Rs. 1.00 lakh in cash to a third party on behalf of the assessee. Corresponding journal entries were passed in the books of the assessee showing these persons as creditors. There is no evidence on record whether the assessee entered into any agreement with Natco or Ajay Grover regarding terms etc. of repayment of these credits. As a consequence....