TaxTMI 
TaxTMI 
2015 (2) TMI 245
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..... 2007-08 A.O. noticed that assessee has accepted loans which were quantified at Rs. 14,93,000 in cash from Mr. K.V. Sreerama Murthy, Managing Director of the company. A.O. opined that assessee has accepted the loans exceeding Rs. 20,000 otherwise than account payee cheque or demand draft, therefore, there was violation of provisions of section 269SS of the I.T. Act. Proposals were sent to Addl. Commissioner who issued notice under section 274 read with section 271 of the I.T. Act on 29.12.2009. 2.1. In reply to the notice, assessee vide its letter dated 12.06.2010 submitted that assessee was incurring losses since its incorporation due to lack of business and therefore, Mr. K.V. Sreerama Murthy, Managing Director of the company, a softwar....
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....o.456/Hyd/2004 dated 31.05.2005 wherein it was observed that assessee had not been able to establish that the loans taken in cash are for urgent business needs inasmuch as there was sufficient cash balance on the dates when the loans were taken. 4. Ld. CIT(A) considered assessee's submissions that the amounts are transferred by way of book entries to share application money account and there was business exigencies. However, he did not accept the same and confirmed the penalty by stating as under : "6. I have gone through the facts of the case and the submissions of the appellant. Admittedly, the appellant had received the total amount of Rs. 14,93,000/- in cash from its MD, Sri K. V. Sriramarnurthy. It is also an undisputed that the tota....
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.... cash had been taken for meeting the urgent needs of the appellant company, which was in a bad financial shape, the appellant has never been able to substantiate its contention by specifying and establishing such exigencies. Besides, it is not the case that the cash loan/deposit in the appellant's case was a solitary transaction. Admittedly, the amounts had been taken on a regular basis. Therefore, I do not find any merit in the contention regarding exigencies of the business of the appellant company. 6.2. Moreover, in the instant case, the loan/deposit has been taken from the MD of the appellant company itself. It cannot be said that the MD himself was not aware of the financial requirements of the appellant from time to time. Therefo....
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.....R. however, relied on the orders of A.O. 7. At our instance, Ld. Counsel placed on record the ledger account copy of Mr. Mr. K.V. Sreerama Murthy from 1st April, 2006 to 31st March, 2007 which indicated the entries on the basis of which A.O. considered the amounts as loans in cash. As far as legal principles are concerned, there is no dispute with reference to the fact that even though loans are genuine, if they are accepted in cash. Provisions of section 269SS are attracted, thereby, attracting penalty under section 271D. Provisions of section 273B however, gives an opportunity to assessee to explain the reasonable cause so as to avoid the penalty. It was assessee's explanation that Managing Director has discharged the salary payments ev....
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....on 19.02.2007 pertaining to the expenses. Thus, as seen from the ledger account, assessee was receiving funds from Mr. K.V. Sreerama Murthy as and when it has necessary and mostly by way of journal entries, having spent by Mr. K.V. Sreerama Murthy towards deposits or payments for salaries or expenditure. In these circumstances, it cannot be stated that there is no business exigency in advancing the funds. As seen from the balance sheet also assessee has accumulated losses to an extent of Rs. 28,92,742. 9. The so-called share application money transferred to share application money account is a net amount after repaying certain amounts to the said Mr. K.V. Sreerama Murthy on 02.03.2007, 03.03.2007, 05.03.2007 and 06.03.2007 to an extent of ....