2016 (9) TMI 546

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.... proceedings, noticed that the assessee has received loan/deposits from its director named Shri K.L.Jain on several occasions by way of cash and also repaid them by way of cash. Since those transactions were in violation of the provisions of sec. 269SS & 269T of the Act, the AO sent the proposal to the Addl. CIT for initiating penalty proceedings u/s 271D and 271E of the Act. Accordingly, the addl. CIT initiated the proceedings and levied penalty under both the sections. It is pertinent to note that the aggregate amount of loan/deposits received by the assessee by way of cash was Rs. 2,52,000/- and a sum of Rs. 2,12,000/- was repaid by way of cash. Hence the Addl. CIT levied penalty of Rs. 2,52,000/- u/s 271D and Rs. 2,12,000/- 271E of the ....

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....ing officer during the course of assessment proceedings and the said assessment order was passed to the best of his judgement u/s 144 of the Act. The said exparte order was set aside by Ld CIT(A) and the AO was directed to frame the assessment de-nova. However, the AO passed penalty order u/s 271D of the Act on the basis of observations made in the original assessment order. The Hon'ble High Court took the view that the proceedings u/s 271D are not independent proceedings and the penalty order would practically submerge, in view of the order passed by the Commissioner of Income tax (Appeals), vide which the original assessment order was set aside and the case was remanded for de nova assessment. Since the AO did not refer to the violation o....

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....nt in order to understand the ratio of the decision. The following observations made by Hon'ble Supreme Court in the case of Sun Engineering works (198 ITR 297) explains this position of law:- "It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment." 6. In the instant case, the original assessment proceedings has not been set aside and the penalty proceedings have been initiated on the basis of facts noted by the AO in the said proceedings. Accordingly, we are of the view that the assessee cannot take support of the decision rendered by Hon'....

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....pany and day to day administration was run by him. He used to keep some cash with him so that any emergency arises then he used to give this cash to company to run the operations smoothly. The cash loan given was every time for emergency purposes like dispatch of goods, worker falling sick and is required to be treated or such similar grounds. As per the requirement of the Act cash loan in emergency can be given as such the penalty levied is not justified." However, this explanation appears to have not been addressed by the tax authorities. The various case laws have held that the loan/deposit received by way of cash to meet the urgent business requirements can be considered to be a reasonable cause and in that kind of situation the penalt....