TaxTMI 
TaxTMI 
2016 (5) TMI 1168
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....ess of civil construction works. The assessee had availed bank loan from Punjab National Bank (PNB) for the purpose of its business and could not repay the dues to the bank and thereby the said loan account was classified as Non- Performing Assets (NPA) by PNB. The said loan was assigned by PNB in favour of Asset Reconstruction Co. India Ltd (ARCIL) and assessee was directed to settle the dues and have further negotiations with ARCIL. Accordingly, a Memorandum of Understanding (MOU) on 5.7.2006 was entered into between ARCIL represented by its constituted Attorney M/s Usha Martin Finance Limited (UMFL) and the assessee. Mr.Ashok Kumar Sarda, one of the directors of the company, had mortgaged his personal property which was offered as security for the loan given to the assessee company by the bank. This mortgage was also assigned in favour of ARCIL. As against the balance due of Rs. 57.58 lakhs with interest thereon as on 31.3.2002, the assessee agreed to pay Rs. 45 lakhs as full and final settlement to UMFL , lawful attorney of ARCIL pursuant to MOU. The MOU clearly stipulates the conditions for repayment as follows:- a) Rs. 1 lakh in cash at the time of signing of this agreemen....
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....e veracity of this entry and stated that this entry has been passed by the assessee in its books on 13.9.2006 which is prior to the date mentioned in the money receipt by UMFL as 26.9.2006 and accordingly concluded that this receipt transaction on 13.9.2006 is totally separate from the demand drafts handed over to UMFL on 26.9.2006. He further stated that the narration mentioned above appears to be misleading and incorrect and he made an allegation that the assessee had changed the said narration to suit his needs. Based on these observations, he invoked the provisions of section 269SS of the Act for receipt of cash loans exceeding Rs. 20,000/- and show caused the assessee why penalty u/s 271D of the Act should not be levied on the assessee. In response to this, the assessee stated that there was no fresh receipt of cash from its director to the tune of Rs. 17,25,000/- and apart from reiterating the aforesaid facts also stated that the assessee is maintaining a current account with its director Mr Ashok Kumar Sarda and accounting entries passed in the books cannot be termed as 'loan' or 'deposit' and accordingly the provisions of section 269SS of the Act would not be applicable. ....
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....eard the rival submissions and perused the materials available on record including the paper book filed by the assessee. The basic facts of the case remain undisputed are not reiterated herein for the sake of brevity. We find that the assessee was under a bonafide belief that the transaction need to be responded by the assessee in its books on the date of agreement itself which is 13.9.2006 and accordingly passed the receipt entry erroneously in the cash book. The assessee ought to have only responded by passing a journal entry in its books of accounts. There is no doubt that the director's account should be credited for the amounts discharged by him on behalf of the assessee company. Moreover, we find that the transactions of the director with the assessee company, the same is maintained in the form of a current account and it is well established that the transactions in the running current account would not take the character of a loan or deposit. In this regard, we find lot of force in the case laws relied upon by the Learned AR :- a) Decision of Hon'ble Madras High Court in the case of CIT vs Idhayam Publications Ltd reported in 285 ITR 221 (MAD) "4. We heard the ar....
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....tween sister concern does not tantamount to loan or deposit and as such, the transactions do not attract section 269SS of the Act. The Hyderabad Bench of the Tribunal has also considered the similar isseue in the case of Dillu Cine Enterprises (P) Ltd vs Addl CIT (2002) 80 ITD 484 (Hyd) wherein the director of a private limited company maintained current account with the company where he deposited and withdrew funds as per exigencies of the company. It was held that such transactions had nothing to do with evasion of tax or concealment of income and the transactions did not fall within the mischief sought to be remedied by section 269SS of the Act. The Pune bench of the Tribunal in the case of Sun Flower Builders (P) Ltd vs DCIT (1997) 61 ITD 227 (Pune Trib) held that acknowledgement of debt by the assessee company by passing a journal entry in its books of accounts would not come within the ambit of the words 'loan' or 'deposit' as mentioned in section 269SS of the Act. c) Decision of the co-ordinate bench of this tribunal in the case of Orange Securities Pvt Ltd vs DCIT in ITA NO. 1913 & 1914/Kol/2010 dated 24.5.2011, wherein it was held that : 6. After hearing the ri....
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....271E 4. The only issue to be decided in this appeal is as to whether penalty u/s 271E of the Act could be levied for violation of provisions of section 269T of the Act in the facts and circumstances of the case. 4.1. The brief facts of this issue is that the assessee had made the following payments in cash to its director Mr.Ashok Kumar Sarda on the following dates :- (Rs.) (Rs.) 20.11.2006 4,50,000 23.11.2006 4,00,000 11.12.2006 8,75,000 17,25,000 The assessee had written the following narration for the aforesaid payments :- "cash paid to aks for paying buyer of the agri-land of aks against the land sale agreement kept in abeyance" Here 'aks' refers to 'Ashok Kumar Sarda'. 4.2. The assessee claimed that the said payments were made to its director out of balances payable in the current account of the director as the said monies were to paid back by the director to the buyers of the agricultural lands as the registration of sale deeds were kept in abeyance for removal of certain defects in the said land purchase deed. Ultimately the defects were duly removed and the registration of agricultural lands was executed on....
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....ued that the payments were made out of credit balances lying in the current account of the director and argued that current account transactions would not fall within the ambit of 'loan' or 'deposit'. Thirdly, he argued that the main purpose of introduction of provisions of section 269SS and 269T of the Act is to avoid evasion of tax by way of parties routing their undisclosed income in the garb of loans from various parties and were also able to obtain false confirmation from those parties and escape from taxation. In the instant case, the assessee as well as the director had duly accounted for the cash transactions in their respective books of accounts and the main intention behind introduction of the said provisions fail and hence no penalty could be levied. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 4.5. We have heard the rival submissions and perused the materials available on record. The facts stated hereinabove including the arguments of the Learned AR remain undisputed and hence the same are not reiterated herein for the sake of brevity. We find lot of force in the multiple arguments advanced by the Learned AR. We have a....
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....posits, and, taxpayers are also able to get confirmatory letter from such persons in support of their explanation. With a view to circumventing this device, which enables taxpayers to explain away unaccounted cash or unaccounted deposits, the Bill seeks to make a new provision in the Income Tax Act debarring persons from taking or accepting, after 30-6-1984, from any other person any loan or deposits otherwise than by an account payee cheque or account payee Bank draft if the amount of such loan or the aggregate amount of such loan and deposit is Rs. 10,000 or more. This prohibition will also apply in cases where on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), and the amount or the aggregate amount remaining unpaid is Rs. 10,000 or more. The proposed prohibition would also apply to cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit proposed to be taken, is Rs. 10,000 or more" 8. Keeping the above circular in view, the Hyderab....
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.... is involved. It is well settled that the headings preferred to sections or set of sections in some modern statutes are regarded as 'preambles' to those sections. This view was approved by Farewell I.J. in Fletcher v. Birkenhead Corpn. (1907) 1 KB 205". 10. Keeping in view the intent of the legislature behind enacting the above sections, we hold that the loans/deposits brought in by the assessee were not to explain his unaccounted cash, and, therefore, the question of violating the provisions of section 269SS/269T did not arise. We may mention here that even there is no suggestion from the revenue that by way of accepting loans and deposits in cash, the assessee has introduced his unaccounted cash in the garb of loans. 11. Jabalpur Bench of the Tribunal in the case of Chaudhary Co. Bhujiawala (supra) has adjudicated similar issue. The Tribunal has held that the stand taken by the revenue that the genuineness of the deposits/loans was not the relevant factor to be considered for levy of penalty under Section 271D was not well-founded and while referring to the CBDT Circular No. 387, dated 6- 7-1984 explaining the object of introducing the provisions of sect....