TaxTMI 
TaxTMI 
2016 (5) TMI 1030
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....alments. Once the repayment of 10 monthly instalments are over, again the same person took further loan. He charged interest on the loan at 1% per month. The whole transaction was done by cash only i.e. no cheques or drafts came into play. Hence, the persons who had taken and repaid the loans violated both the provisions of 269SS & 269T of the IT Act for which they were liable for penalty u/s & 271E of the IT Act. During the course of survey it was noticed that M/s Vadamalayan Finance (Prop. Sri A.Kannan) had advanced the following loans to the assessee in cash on various dates and also received the cash on various dates from the assessee: A.Y. 2006-07 Cash loan: 11.12.2005 20 lakhs Cash repayment: Rs. 2 lakhs A.Y. 2007-08 Cash loan: 06.12.2006 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2008-09 Cash loan: 06.10.2007 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2009-10 Cash loan: 07.08.2008 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2010-11 Cash loan: 06.06.2009 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2011-12 Cash loan: 07.04.2010 20 lakhs Cash repayment: Rs. 24 l....
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....ing on this issue, more so, the Tribunal deleted the penalty u/s.271E by observing as follows: "15. We heard Shri S. Sridhar, the learned counsel appearing for the assessees and Shri T.N. Betgiri, the learned Joint Commissioner of Income Tax, appearing for the Revenue. 16. It is to be seen that the particulars of loans taken by the assessees and repayments of loans made by the assessees, were collected in the course of survey conducted in the premises of Shri A. Kannan, who is carrying on the business of money lending under the name and style of "Vadamalayan Finance". It is seen from the records, as observed by the Assessing Officer, that Shri A. Kannan had no licence to carry on money lending business, but, still he was carrying on the said business. The details available in the record show that Shri A. Kannan had been advancing loans to the parties in cash, against pronotes. The pronotes are cancelled when the loans are repaid. The nature of the business carried on by Shri A. Kannan shows that the transactions of money lending were, by and large, made by way of cash transactions. When the assessees were accepting loans from Shri A. Kannan and repaying loans to him, it is obvio....
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....has acted against the principle declared by Hon'ble Supreme Court in the above judgment of Hindustan Steel Ltd. v. State of Orissa. 22. In the case of Assistant Director of Inspection (Investigation) v. Kum. A.B. Shanthi, the Hon'ble Supreme Court has examined the object of introducing Section 269SS in the Income-tax Act, 1961. The Court held that it is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. The Court observed that during search and seizures, unaccounted money was unearthed and they would usually give the explanation that he had borrowed or received deposits from his relatives or friends that it is easy for the so-called lender also to manipulate his records later to suit the plea of the taxpayer. The Hon'ble Apex Court observed that the main object of Section 269SS was to curb this menace. 23. In the present case, no adverse circumstances existed against these assessees as apprehended by Hon'ble Supreme Court in the above decision. In the present case, all the transactions have been duly recorded in the book....
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....as follows: A.Y. 2006-07 Cash loan: 11.12.2005 20 lakhs Cash repayment: Rs. 2 lakhs A.Y. 2007-08 Cash loan: 06.12.2006 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2008-09 Cash loan: 06.10.2007 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2009-10 Cash loan: 07.08.2008 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2010-11 Cash loan: 06.06.2009 20 lakhs Cash repayment: Rs. 24 lakhs A.Y. 2011-12 Cash loan: 07.04.2010 20 lakhs Cash repayment: Rs. 24 lakhs 19.08.2010 50 lakhs 5.1 The assessee has taken a plea before the AO that the loan taken by the assessee was used as a capital contribution in a firm, where he was a partner and has taken support of the provisions of sec.273B of the Act to say that on account of business expediency, the amount was borrowed in cash and repaid in cash. The assessee is liable to audit u/s.44AB of the Act and the assessee is aware of provisions of sec.269SS of the Act. Cash borrowal by the assessee is not a single occasion but the assessee continuously borrowing money from same persons in cash. It is also on record that the as....
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....gislative competence. It cannot be said that section 269SS deals with a subject outside the scope of the Incometax Act or that it relates to a topic not within the competence of Parliament. Nor are the provisions of section 269SS or section 271D or section 276DD unconstitutional on the ground that the provisions are draconion or expropriatory. The object of introducing section 269SS is to ensure that a 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 search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records to suit the plea of the taxpayer. The main object of section 269SS was to curb this menace of making false entries in the account books and later giving an explanation for the same. The undue hardship of the provisions of section 271D , which replaced section 276DD providing for a penalty, is substantially mitigated by the inclusion of section 273B providing tha....
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....ntire transactions took place in Pondicherry, a major city and there was no reason why the assessee should not have repaid the amount by cheque or demand draft through the bank, assuming he had received the loan in cash. The entire transaction between the assessee, a financier and the financier who was also financing a large number of persons, was apparently to evade tax, which came to light after a survey was conducted and some documents and records were seized. Therefore, it was a case of infraction of law and could not be said to be a mere technical or venial breach. Indeed, it was a clear case of prejudice caused to the Revenue because the nature of transactions conducted by the financier with the assessee and third parties were clearly not in accordance with the provisions of the Act. In one statement the financier clearly stated that he used to conduct money-lending business in the names of third parties. The assessee on his part had repeatedly, for every assessment year, conducted the business in the same manner receiving and repaying the loan amount in cash. Hence, these could not be called bona fide transactions and there was no reasonable cause. The conduct of the parties....