TaxTMI 
TaxTMI 
2016 (9) TMI 336
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....ng up a Mini Cement Plant in Village Paniyala, Tehsil Kotputli, District Jaipur. It was noticed by the Assessing Officer during the course of scrutiny that balance-sheet of the respondent company indicated "unsecured loans" from the Chairman-cum-Managing Director, namely R.P. Goyal and on further verification of the accounts it transpired that the respondent had received cash through the said Managing Director on various occasions and majority of the cash deposits was exceeding Rs. 20,000/- and certain amounts were even to the extent of Rs. 4,05,960/-, Rs. 2,50,000/-, Rs. 1,75,000/-, Rs. 2,70,000/-, Rs. 3,00,000/- etc. The AO was of the, prima facie, view that the said cash deposits were in violation of provision of Section 269-SS of the Act as the assessee was precluded from accepting any amount over and above Rs. 20,000/-. 3. Accordingly, a show-cause notice was issued, the assessee respondent, however, submitted reply, inter alia, contending that there was no banking facility in the radius of 25 km. of the site of Village Paniyala, where the Cement Plant was being set up, of which the project cost was of Rs. 1.60 crore and that there was a delay in getting sanction from the f....
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....ssions of the respondent and also doubted the veracity of the fact about the non production of the books of account of M/s. Chintpurni Enterprises. The CIT(A) also wanted to go through the books of account of M/s. Chintpurni Enterprises, however, before him the claim was made that the books of account are lying in the Sales Tax Department but neither the seizure memo of the books of account having been seized nor any evidence about the seizure of the books of account was produced. In the assessment year 1993-94, before the CIT(A) one handwritten cash book, between 1.4.1992 and December 1992, was produced and the CIT(A) noticed that the said so-called cash book is in a good condition, which appeared to the CIT(A) that it was made afresh. The CIT(A) also noticed that there were contradictory explanation of R.P. Goyal vis-a-vis the assessee and doubted the very deposits and upheld the penalty imposed. 7. Further, appeal was preferred by the assessee before the learned Income Tax Appellate Tribunal. The Tribunal, however, was satisfied with the explanation offered by the assessee and held that there was a reasonable cause and bona fide belief in the entire transaction of deposit of ....
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....Bhasker v. Commissioner of Income Tax (2012) 340 ITR 560 (Mad.), Commissioner of Income Tax v. Navjeevan Roller And Pules Mills (2001) 251 ITR 661, and Mehta Vegetables P. Ltd. v. Union of India and Others (1998) 234 ITR 425 (Raj.), and contended that in identical circumstances the Courts have expressed that deposit by Director of a Limited Company, is in the nature of loan or deposit. 8.2 Learned counsel also contended that even R.P. Goyal was unable to prove as to how he had such huge cash of more than 2.80 crore, which he had brought into the books of assessee and despite several opportunities, the books having not been produced, adverse inference was drawn that R.P. Goyal was hiding something from the Department. For the assessment year 1993-94, ld. counsel contended that a cash book was produced and the CIT(A) after appreciation clearly observed that it appears that the cash book produced was a later creation. He also contended that both in facts and in law the Tribunal erred in deleting the penalties under Section 271-D. 9. Per contra, learned counsel for the assessee contended that R.P. Goyal, earlier was engaged in a small Kirana Shop and had a self styled business, g....
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....visions are not attracted and rightly held by Tribunal. 10. We have heard the arguments advanced by the learned counsel for the parties and perused the material on record. 11. It would be appropriate to quote Sections 269- SS, Section 271-D and 273-B of the Act, which are the bone of contention in between the rival parties :- "269SS. Mode of taking or accepting certain loans and deposits. No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,- (a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or (b) 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), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is [twenty] thousand ru....
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....credited in the books of account of the assessee company as having been received from time to time from R.P. Goyal who is said to be Chairman-cum- Managing Director of the assessee company. 14. The main thrust of argument of the learned counsel for the Revenue and which appeals to us has been that admittedly when the amount has been found credited in the books of account of the assessee, that too by cash on various dates with no satisfactory explanation tendered, leaves no manner of doubt that the amounts which were received by the assessee from R.P. Goyal and shown as "unsecured loan from R.P. Goyal" are in the nature of deposit of money and once loan or deposit has been received by way of cash, it invokes Sec.269-SS and it has been rightly invoked by the AO in the instant case. Though the Tribunal has found that the company has a separate status and entity and when the Tribunal itself finds that there are two separate entities, the subsequent observation of the Tribunal ad-infra :- "there were neither compelling reason nor a compelling force by the so called artificial person-company to bring in the money, it appears that it was merely a suo moto decision of....
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....ch an argument is worth rejection primarily since the instant appeals arose in a case of Limited Company and not R.P. Goyal. Provisions were brought into force from 1.4.1984 and such provisions were in force for almost 8 years and we cannot loose sight of the fact that over the years R.P. Goyal being in the business for years together, was not aware of the provisions of law although the presumption to know the law is to the contrary. Equally important is the fact that a Limited Company right from being formed is assisted by Chartered Accountant and Company Secretary, who are well qualified professionals & the justification tendered that R.P. Goyal being less literate, deserves no indulgence and it goes without saying that ignorance of law is no excuse. 17. This finding of fact that the assessee as well as R.P. Goyal had common bank account in the same bank, remained unrebutted by the assessee as well, and if there is any direct nexus proved by the assessee that the amount as received from the Director was utilised towards payment to various labourers/contractors spent for constructional activities that does not improve the case of the assessee at all in these proceedings. 18.....
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....posed by the AO. The CIT(A) also confirmed the penalty imposed by the AO, however, the Tribunal accepted the contention of the assessee and deleted the penalty. The Delhi High Court, after having gone into the facts in detail and considering the judgment of the Apex Court in the case of Kum. A.B. Shanthi (supra), reversed the finding of the Tribunal and upheld the penalty imposed by holding that loan or deposit by the assessee from the three Directors, is covered by the provisions of Section 269-SS. 21. The judgment in the case of Builtec Engineers and Builders v. Deputy Commissioner of Income Tax (supra) is also a case where the assessee was engaged in the business of construction and the finding recorded by the Revenue was that one M.T. Nair agreed to provide financial support which was to the tune of Rs. 6,51,000/- and the said amount was paid in cash on various dates commencing from April 1993 and the AO having noticed that there was contravention of Section 269-SS, imposed penalty under Section 271-D at Rs. 7,35,475/- after noticing other credits also, and the High Court after analysing the provisions came to the conclusion that neither reasonable cause was found nor the ex....
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....oney had his bank account. The statement of Shri R.P. Goyal was recorded u/s 131 and he could not give a reasonable cause that why the money was not transferred to the assessee company by way of account payee's cheque. It may be further highlighted that the sources of advances by Shri R.P. Goyal to the assessee company were also examined. Shri R.P. Goyal stated to have advanced the amounts from his proprietorship concern M/s. Chintpurni Enterprises. Shri R.P. Goyal was specifically asked to produce the books of account of the said concern, but these were not produced. The A/R of the assessee company was again given opportunity on 5.8.1994 that the books of accounts of M/s. Chintpurni Enterprises should be produced, but such books were never produced. In the light of this conduct of Shri R.P. Goyal, it is very difficult to say the cash transactions by him with the assessee company were genuine. The earlier A.O. while completing the assessment has already intimated to the Assessing Officer of Shri R.P. Goyal to examine the loan at his level." 25. The CIT(A) also noticed as a vital factor that neither the assessee nor R.P. Goyal were interested in producing the books of account....