TaxTMI 
TaxTMI 
2016 (5) TMI 335
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....S of the Act. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has reiterated the submissions made before the A.O.. The assessee further submitted that, A.O. was not correct in levying the penalty u/s 271D of the Act, as the deposits accepted by the company are from the close relatives of the Directors and few deposits were renewal of the existing deposits held by the company. Accordingly, the assessee has classified deposits in to 3 parts -(1) deposit accepted from friends and relatives of Directors (2) Renewal of existing deposits held by the company and (3) fresh deposits accepted during the financial year. In respect of deposit accepted from relatives of the Director, it was submitted that the assessee has accepted cash deposits from great grand children of Managing Director and the depositors have directly deposited the cash into the bank account of the Company. The assessee further submitted that the identity of the depositors and genuineness of the transaction has been proved. Therefore, the A.O. cannot levy penalty u/s 271D of the Act. Similarly, in respect of renewal of deposits, the assessee submi....
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....of section 269SS of the Act. Though, assessee has received cash deposits of Rs. 20,000/- and more, the reasonableness of the explanations offered by the assessee to be considered. The assessee has explained that once, the genuineness of the transaction is not doubted, just because cash deposit has been accepted, penalty cannot be levied. The assessee further submitted that in respect of fresh deposits, the depositors have insisted for cash payments, therefore, the assessee was obliged to accept the deposits in cash. Since, the depositors have insisted for cash payment, it cannot be held that there was a violation of the provisions of section 269SS of the Act. The A.R. further submitted that in case penalty is leviable, the upper limit provided u/s 269SS of the Act should be excluded for levying the penalty u/s 271D of the Act. In support of his arguments relied upon the judgement of Hon'ble High Court of Bombay, in the case of CIT Vs. Madhukar B. Pawar 319 ITR 255 and also ITAT Kolkata Bench decision, in the case of Sri Pintu Karmakar Vs. JCIT ITA No.1911/Kolkata/2012 and submitted that penalty u/s 271D of the Act is to be computed on the amount of loan which exceeds Rs. 20,000/- a....
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....ming to the alternative arguments of the assessee. The assessee submitted that penalty u/s 271D of the Act, can be levied on the amount which is in excess of Rs. 20,000/-. In other words, no penalty can be levied for the amount up to Rs. 20,000/-. In case, each loan amount exceeds Rs. 20,000/-, the permissible amount of Rs. 20,000/- has to be adjusted while levying penalty u/s 271D of the Act. In support of its arguments, relied upon the judgement of Hon'ble High Court of Bombay, in the case of CIT Vs. Madhukar B. Pawar reported in 319 ITR 255 (2009). We have gone through the case law relied upon by the assessee, in the light of facts of the present case and finds that the Hon'ble Bombay High Court has considered the issue of levy of penalty u/s 271D of the Act and held that the penalty is leviable only in respect of amount in excess of Rs. 20,000/-. The relevant portion is reproduced hereunder: "It is now well settled that circulars issued by CBDT are statutory in character and are binding on the Departmental authorities. The authorities including AO and other consequently would be bound by that circular. In that instant case, CBDT for the purpose of attracting s. 271D ha....
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....sessee received cash loan from relatives, who are neither income tax assessee nor havmg any bank account. Hence, he has no other alternative except to receive loans in cash for an amount of Rs. 20,000/- from each of them. These facts are undisputed but before us Ld. Counsel for the assessee relied on CBDT Circular No572 dated 0308.1990 reported in (1999) 87 CTR (St.) 1, and stated that this circular has clearly brought out the provision of section 269SS explaining that for taking or accepting any loan or deposit in excess of Rs. 20,000/-" Ld. Counsel for the assessee stated that the word in excess of amounts exceeding Rs. 20,000/-. He also relid on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Madhukar B. Pawar (2008) 218 CTR 59, wherein Hon'ble Bombay High Court vide pan 4 considered the issue as under: "4. It is now well settled that circulars issued by CBDT are statutory character and are binding on the Departmental authorities. The authorities including AO and other consequently would be bound by that circular. In the instant case, CBDT for the purpose of attracting GBP 271D has set out that the loan or deposit should be in excess of Rs. 2000....
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....enalties for certain defaults. Penalty under s. 271C was levied for failure to deduct tax at source. Penalty under s. 271D may be levied for failure to comply with the provisions of s. 269SS i.e. for taking or accepting any, loan or deposit in excess of Rs. 20,000 otherwise than by an account payee cheque or bank draft. Penalty7 under s. 271E may be levied for failure to comply with the provisions of s. 269T relating to repayment by a company, including a banking company, a cooperative society or a firm, of deposits, including interest, exceeding Rs. 10,000/- the aggregate otherwise than by an account payee cheque or bank draft." 10. The assessee relied upon Hon'ble Rajasthan High Court, judgement, in case of CIT Vs. Ajanta Dying & Printing Mills (2003) 264 ITR 505. The Hon'ble High Court, after considering the relevant facts held that penalty u/s 271D of the Act is to be computed on the amount of loan which exceeds Rs. 20,000/- as permissible u/s 269SS of the Act. 11. Considering the facts and circumstances of the case and also respectfully following the decision of coordinate bench, we are of the opinion that penalty can be levied on the amounts of loan which exceeds the am....