2014 (3) TMI 218

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....relating to the contribution made by 12 persons amounting to Rs. 51,20,000/- during the assessment year 2005-2006. The assessing officer found that the assessee has accepted the aforesaid amount contravening the provisions of Section 269SS of the Income-tax Act (for short `the Act') and initiated proceedings to impose penalty under Section 271DD of the Act. The assessee tried to explain the said allegation by contending that the aforesaid amounts were collected from promoters who are not aware of the provisions of the Income-tax Act for the purpose of establishing a business unit. They were supposed to be partners in the above business activity conducted by the assessee and in so far as the amount is utilised for the purpose of business....

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....sessing officer for imposing penalty was that the assessee-firm had received cash in excess of Rs. 20,000/- in violation of Section 269SS. The contention is that the persons who had paid the cash were promoters of the firm who are supposed to be partners and since contribution was made in the first year of business of the firm, the funds for the business was mobilised in the form of capital contribution. According to the appellant, the investment made by the partners in their respective capital account is genuine and there is no violation of Section 269SS. The main contention raised is that no penalty could have been imposed on the assessee, if reasonable cause for the failure for not receiving the loan by way of account payee cheque can be....